Mortgage lenders have withdrawn hundreds of products overnight, following the pound’s crash yesterday and a notice from the Bank of England which said it will “not hesitate to change interest rates”.
As of this afternoon (September 27), at least 28 lenders had withdrawn products since the end of last week, with around half of these lenders having withdrawn all their fixed rate products.
Many have taken the action to withdraw as they try to grapple with how to price them against the backdrop of base rate uncertainty and volatile swap rate markets.
Santander and HSBC are the latest big lenders to enter the fray. Santander has pulled 28 fixed rate deals. While HSBC has removed all new residential and buy-to-let products “with immediate effect”, intending to return to the market tomorrow (September 28).
Nationwide has also warned brokers of rate hikes to the tune of 1.2 per cent from tomorrow, taking first-time buyer rates to 5.69 per cent with a product fee, and 5.99 per cent without one.
“It’s all gone crazy,” said Trinity Financial’s director, Aaron Strutt. “These rates are expensive.
“The difficulty is people are going to be quoted 5.5 per cent rates. Are they going to take them? And for people who were on 1.5 and 2 per cent rates before, how are they going to afford this?
“With the sheer number of people on full capital repayment mortgages, your monthly is large at 2 per cent, let alone 6.”
Strutt said the only comparison he could make with the last few days was when the pandemic hit.
“It’s got a striking resemblance. When the pandemic hit, lenders pulled out of the market because they didn’t know what to do.”
He argued that it won't be long before other major lenders either withdraw products, up their rates, or both.
Yesterday (September 26), there were 3,880 residential mortgage products, according to Moneyfacts. This morning, there were 3,596.
Since Friday (September 23), the day UK chancellor Kwasi Kwarteng announced a sweep of tax cuts, 365 mortgage products have been withdrawn.
Some lenders which were offering fixed rate mortgages earlier today, such as HSBC, have had to withdraw products following a high level of demand, with some brokers waiting over an hour in queues to try and apply for deals on behalf of clients. One adviser coined it a “mortgage meltdown”.
Of those which have withdrawn products, eight of them sit in the top 20 lenders according to UK Finance’s gross lending table. These are Santander, HSBC, Halifax (part of Lloyds Banking Group), Virgin Money, Skipton, Leeds and Coventry building societies, as well as the Bank of Ireland all having withdrawn products so far.
Property transaction fallout
After seeing yields dwindle as some lenders relaunch with higher rates, some brokers have said they are already starting to see buy-to-let investors drop out of property deals.
Managing partner at Helix Financial Partners, Adam Stiles, said shrinking profit margins were driving an uptick in deal fallouts.