Fixed rate mortgages withdrawn over interest rate fears

The move follows a shock rise in the cost of living which is widely expected to lead to higher interest rates.

First-time buyers and homeowners remortgaging have been scrambling to secure fixed-rate deals since the inflation figure was announced on Tuesday.

But thousands are thought to have missed out including customers of Halifax Bank of Scotland which has pulled all but one of its fixed-rate offers.

The Alliance and Leicester bank and Skipton, Kent Reliance, Newcastle and Newbury building societies have also withdrawn fixed-rate deals.

Northern Rock and Portman have warned that theirs are on 'withdrawal watch'.

John Charcol, a mortgage broking firm, said Tuesday's inflation report

had prompted a flood of calls. Spokesman Katie Tucker said: "There has been a surge of people asking for fixed rates - even though tracker deals, where payments rise in line with interest rate increases, can be better value because recent fixed rates haven't been that good.

"All the lenders' current fixed-rate deals will eventually run out - and when they replace them with new deals the interest rates will be higher, in expectation of higher Bank of England rate rises.

"We're urging borrowers to act quickly, although if you think interest rates will come down in the longer run you could put yourself on a tracker with no early repayment charges, and get ready to switch when Bank of England rates eventually start to fall.

"We think they'll come down within the next year."

Nick Gardner, of Chase De Vere, said his mortgage broking firm had seen a "huge rise" in inquiries from customers trying to protect themselves against interest-rate rises.

Lenders insist popular fixed-rate products are being withdrawn because the funds allocated to them are running out.

'Rate tarts' - borrowers who switch between lenders to secure better deals - are increasingly being hit by costly mortgage arrangement fees.

Three years ago, the average fee for a fixed-rate mortgage was £334 - but by this March it had risen to £611. Some lenders demand more than £2,000.

Nearly 90 per cent of first-time buyers in February opted for a fixed-rate mortgage, according to the Council of Mortgage Lenders.

This is the highest number since records began and evidence that homeowners want the security of knowing what they will have to pay each month.

The monetary policy committee of the Bank of England is expected to raise interest rates next month - the fourth hike in less than a year.

The would take rates to 5.5 per cent with some analysts predicting they might rise to 6 per cent in the coming months.

The official 3.1 per cent inflation figure forced Mervyn King, the bank's governor, to write to Chancellor Gordon Brown promising to use interest rates to control spiralling prices.

In his letter, the first needed since 1997, Mr King insisted he believes that inflation will begin to fall back this summer.

The Consumer Prices Index, which measures the cost of a variety of everyday goods has risen from 1.8 per cent in March last year. It does not take into account mortgages or council taxes. The Government's current target is 2 per cent.