Nearly 300 mortgage deals pulled in a day
Nearly 300 mortgage deals were pulled by banks and building societies in the last 24 hours after a fall in the pound fuelled forecasts of a jump in interest rates to nearly 6%.
Post Office Money, the Bank of Ireland, the Bank of Ireland, and building societies such as Monmouthshire, Furness and Darlington are some of the names to have withdrawn products.
Bank of Ireland said that they don't currently have any new rates available for new or existing customers due to changes in the financial market. We will launch a new range of mortgage rates as soon as possible. Virgin Money and Skipton building society were among the lenders that said they were pulling their mortgage deals on Monday.
The country's largest mortgage lender, Halifax, said it was withdrawing its fee-paying mortgage products in which borrowers pay an arrangement fee to secure a lower fixed interest rate and moving to a full fee-free range from Wednesday.
As a result of significant changes in the cost of funding, we are making some changes to our product range, a Halifax spokeswoman said.
There were 3,596 residential mortgage deals available on Tuesday, 284 fewer than before the sharp fall in the value of the pound on Monday morning, according to data firm Moneyfacts. At the end of last year, would-be borrowers had 5,315 products to choose from.
Rachel Springall, a finance expert at Moneyfacts, said the market was extremely volatile and advised borrowers to seek independent advice to assess their best option. She said that the upheaval in the mortgage market may cause frustration among borrowers and brokers as they see deals disappear overnight.
After last week s mini-budget sent the pound and government bonds plunging, the overnight reduction in deals is the equivalent of a 7% drop.
Lenders price their mortgage interest rates against the Bank of England base rate, which was increased to 2.25% on Thursday. Financial markets were forecasting that the base rate would rise to 4.5% by the year next spring, as the BoE tried to control inflation.
After Monday's fall in sterling, that projected figure is now 5.8%, because markets believe that the extra inflationary pressure arising from the higher cost of imported fuel, food and consumer goods will require the Bank to increase the base rate more sharply.
According to Moneyfacts, other companies that have withdrawn their products are Vida Homeloans and the West Brom, Cambridge and Bath building societies.
One in five households have a variable rate that is either a tracker mortgage, where the rate is directly linked to the Bank base rate, or their lender's standard variable rate SVR, and there is bad news for them.
Both Halifax and Scottish Widows Bank have announced that theirs is going up by 0.5% to 5.74% and that theirs will go up by 0.5% to 5.74% at the lender's discretion.
Major mortgage players are bringing in the sails after the wind changes, said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown. The cost of doing business has gone up as a result of the overnight hike in market expectations for future rates, and lenders are taking a break to reassess and reprice.