UK lenders pull mortgages at record rate as market chaos worsens

LONDON, United Kingdom – A record 935 mortgage products were pulled in Britain overnight, financial services provider Moneyfacts said on Wednesday, September 28, as deepening turmoil in financial markets pushed more lenders to temporarily withdraw products for new customers.

The volatility comes after the new UK government announced huge tax cuts funded by borrowing, leading to a plunge in sterling and a surge in government bond yields as concerns mounted over its ability to fund the plan.

Government bond yields influence the cost lenders have to pay to borrow money.

“[Lenders] just don’t know where that is going to go, how higher it is going to go, where it’s going to stop, so it makes it very difficult to know where to price their mortgages,” mortgage expert Ray Boulger from broker John Charcol told BBC Radio, adding there would be a big impact on the housing market.

“I think we can expect to see a significant fall in house prices – I’m suggesting perhaps around 10% next year,” he said.

Crashing systems

Moneyfacts, which monitors mortgages, savings, loans, and investment products in the UK, said the 935 figure was more than double the previous record of 462 at the start of the pandemic lockdowns.

“We are seeing lenders across the market withdraw rates as headlines around interest rates soaring to 6% have spooked both lenders and borrowers,” said Karen Noye, mortgage expert at wealth management firm Quilter.

Virgin Money and Skipton Building Society temporarily withdrew their entire ranges at one point this week, according to emails sent to brokers seen by Reuters.

The crisis in the bond market deepened on Wednesday, with the Bank of England intervening to say it would buy as much government debt as needed to restore financial stability.

Finance minister Kwasi Kwarteng‘s plans drew criticism from the International Monetary Fund, which said the proposals would add to a crisis of credibility.

“Lenders’ systems have been crashing with long virtual queues for borrowers and advisers trying to get them or their clients a deal at current rates,” Quilter’s Noye said.

“Rates that were available one hour are gone the next which is making it a tricky time for buyers.” – Rappler.com