Rate of mortgage product withdrawals more than double pandemic

Rate of mortgage product withdrawals more than double pandemic

Mortgage lenders have pulled 935 products since yesterday as many struggle to re-price interest rates amidst short-term market uncertainty.

This figure is the highest daily fall in residential mortgage products recorded since 2011, when Moneyfacts' data began.

It is also more than double the previous record fall of 462 products, which happened on April 1, 2020 - a week after the Covid-19 lockdowns began.

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Compared to yesterday, when there were 3,596 products, today there are 2,661.

At least 30 lenders have pulled products since Friday (September 23), following the government’s tax cuts announcement, a subsequent crash of the pound and a volatile swap rate market. These include some of the UK's largest lenders, such as Barclays, Santander, Halifax and HSBC.

Lenders who were still fully operating in the market this morning reached capacity just hours into the day.

At 10:02am, Barclays emailed brokers saying: “Please be advised that as a result of the significantly increased demand we are currently experiencing, we have just reached our daily booking limit for today, Wednesday 28 September.

“This means if your application doesn’t already have a booking, you will receive an error message within our application system and you will be unable to proceed with submission until the booking limit has been refreshed overnight tonight.”

The bank has now withdrawn some products from its existing residential purchase and remortgage ranges. The Mortgage Works has also pulled all its fixed rates today, and Leeds Building Society has pulled all but two new mortgage deals.

Meanwhile, the Bank of England has said it is taking action to avoid “material risk to UK financial stability”. It confirmed today (September 28) that it will purchase long-dated UK government bonds to prop up the gilt market and “restore orderly market conditions”.

Changes to the gilt market tend to impact swap rates, which lenders use to guide their mortgage pricing decisions.

Currently, SONIA swaps sit at 5.512 per cent for two years, and 5.150 per cent for five years. In just one day, the former rate has climbed 0.149 percentage points, whilst the latter has climbed an even greater 0.27 percentage points.

“The worst thing about this is there isn’t a liquidity crisis, it’s that no-one knows how to price mortgages anymore,” said Mansfield-based broker Lewis Shaw. 

“The real danger lies in whether you give your clients advice or if you don’t. If you say ‘sit tight’, what if things don’t calm down? It’s a catch 22.

“I don’t want to recommend someone to take out a mortgage now if rates are going to go down. How bad will I look if I put a first-time buyer on a 6 per cent mortgage and next month it’s back down to 3.5 per cent?”