A chaotic financial market has led many mortgage lenders to remove the availability of many mortgage products for new buyers following the Chancellor’s mini-budget announcement, released last week. Although thought to be a temporary measure by lenders, this is bad news for buyers wishing to find good deals when looking for new mortgage products.
The UK’s largest lender, Halifax, has removed all fee-paying products and replaced them with full fee-paying mortgage products. This means that customers can no longer pay an arrangement fee in return for a better (lower) interest rate than was previously available.
In an extreme move, Skipton Building Society and Virgin Money have taken the step of removing their entire range of products with the aim of relaunching new products later in the week.
The announcement from Kwarteng has sent the value of the pound and government bonds into free fall. The mini-budget was said to be created to help the growth of the economy by funding tax cuts with government lending.
“As a result of significant changes in the cost of funding, we’re making some changes to our product range,” a Halifax spokesperson said.
The 5-year government bond yield increased by a whopping 96 basis points on Monday and Friday, signifying the highest rise in borrowing costs since 1987, the year that Refinitiv began.
“Following last week’s (Bank of England) meeting and the government’s subsequent mini-budget, we continue to see the market response unfold,” Skipton Building Society said in an email to brokers.
“In response, we will be temporarily withdrawing our new business product range with immediate effect.”
New customers were advised that Virgin Money was intending to pull its mortgage products at 8 p.m. on the 26th.
“We continue to monitor the situation closely and currently plan to relaunch products for new customers towards the end of the week,” Virgin Money said.
Mortgage brokers advised that the likelihood of lenders making significant changes to mortgage product offerings was high.
“The uncertainty around the risk of an emergency rate rise is likely to see other lenders withdrawing products or increasing rates dramatically until they know the extent of how this all pans out,” said Jamie Lennox, director of Dimora Mortgages, a broker.
The Bank of England has suggested that they will adjust interest rates in order to bring inflation back to target levels.
“That will feed into higher mortgage rates, and, as always, it’ll be the taxpayer left carrying the can,” said Lewis Shaw, founder of broker Shaw Financial Services.