Full list of banks and building societies pulling mortgages due to pound and tax cut chaos
MAJOR mortgage lenders have pulled their fixed deals after the value of the pound against the dollar collapsed to $1.03 yesterday.
Several lenders including Halifax, Virgin Money and Skipton Building Society have pulled fixed deals for new customers.
Sterling hit a record low against the dollar yesterday - the lowest since decimalisation in 1971.
The value of the pound fell by more than 4% to just $1.03 in early trading in Asia, before recovering to $1.06 yesterday afternoon.
It prompted the Bank of England to say it "won't hesitate to change interest rates".
A raft of tax cuts unveiled on Friday last week and growing concerns for the impact on inflation prompted the fall.
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Last night the Bank of England promised that it will not hesitate to increase rates again and that it was watching falls in the pound closely.
The former deputy governor for the bank's monetary policy has this morning said that it should consider an emergency meeting in light of the UK economy’s current state.
Professor Sir Charlie Bean told BBC Radio 4’s Today Programme the Bank was "rightly reluctant to have emergency meetings."
He said: "I think on this occasion if I had still been at the Bank in my role as deputy governor, I certainly would have been counselling the Governor that I think this is one of the occasions where it might have made sense."
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The BoE already increased interest rates by half a percentage point to 2.25% last Thursday.
But the pound steadied in early trading in Asian markets this morning as it recovered ground slightly from the record low of $1.03 against the US dollar.
Sterling sat around around $1.08 at 12pm on Tuesday, but economists have warned it could still fall to parity with the dollar this year for the first time.
But a number of major lenders have now pulled fixed loans due to uncertainty around borrowing following the raft of tax cuts last week.
Much of this was unfunded and needs to re financed through issuing gilts. Changes to the gilt market impact swap rates, which lenders use to make pricing decisions.
Mortgage brokers say they
Analysis of the market by found that on Friday last week, the day of the mini-budget, 3,961 residential mortgage products were available.
By Monday this week, the total had fallen to 3,880.
By Tuesday, it had shrunk further to 3,596 deals – a reduction of 365 compared to Friday.
What's happening to mortgage rates?
Mortgage rates are already rising partly due to soaring inflation.
The string of Bank of England base rate increases which have already taken place in recent months mean that a tracker mortgage is now about £210 per month more expensive, on average.
A standard variable rate (SVR) mortgage is now about £132 more expensive per month, according to the figures from UK Finance.
While first time buyers face monthly repayments upwards of £1,100, a third more than they were paying in January, according to property portal RightMove.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said: "Fixed rate mortgages don’t just depend on the rate today, they also depend on rate expectations.
"The key for the mortgage market is gilt yields. When rates rise, gilt yields also rise, and these feed through into the swap rates that drive the fixed rate market.
The dramatic fall in the pound on Monday led to fears of inflation – because the price of anything that’s imported will rise. As a result, it led to expectations that the Bank of England would hike rates to try to bring it back down again."
While the majority of mortgage holders are on fixed-rate deals, 1.8million fixed deals are scheduled to end next year – meaning some homeowners could be in for a bill shock when they do eventually come to take out a new mortgage.
Someone who took out a £200,000 two-year fixed mortgage in March 2021, when the average rate was 1.5 per cent, would see their annual bill leap by £7,000 if rates rise to 6 per cent, according to figures from investment firm AJ Bell.
There are now fewer fixed mortgages to choose from, and rates will rise.
Someone who fixed for 2% two years ago could be looking at a remortgage rate at 5% by next week.
If they had a £200,000 mortgage over 25 years, that’s a rise in monthly payments from £848 to £1,169 – or £321.
Borrowers are rushing to lock in fixed deals as early as possible to avoid future rate hikes.
It comes as experts are warning that the plummeting pound and soaring interest rates could create a mortgage ticking time bomb crisis and house price could drop considerably.
But Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "When fixed-rate mortgages return, they could well be priced significantly higher as lenders build in more headroom."
Nearly a third of homeowners soon coming to the end of their fixed rate mortgage will consider remortgaging to a long-term fix, according to new research from Comparethemarket.
Richard Campo, mortgage adviser and chief executive of Rose Capital believes that discounted mortgages may be the solution for many borrowers.
A discount mortgage is a standard variable rate mortgage with a discount for a fixed period of time, typically a couple of years.
Richard says: "With money markets in such a state of flux, it is very hard to tell the best path forward at present.
"The prevailing logic will be – fix for as long as you can. But with such disparities in pricing, some discounted rates look exceptional value, as they are as low at 2% cheaper than a longer term fixed rate.
Which means even if rates go up by 4% you would only pay the same level of interest, so that is your opportunity cost."
Richard then said the added factor that lenders may not increase the margins on their standard variable rates as much as the Bank of England, as they have not done so this year, does mitigate this risk, but this strategy is not for everyone.
We list the major lenders who have already pulled their fixed mortgages deals below.
Halifax and Lloyds Bank
Halifax, the UK's biggest lender for mortgages said it has temporarily withdrawn mortgage products that come with fees.
The bank said it has withdrawn all products that come with a fee “as a result of significant changes in the cost of funding”.
A spokesperson for Halifax, which is part of the Lloyds Banking Group, said: "As a result of significant changes in the cost of funding, we're making some changes to our product range."
"There is no change to product rates, and we continue to offer fee-free options for borrowers at all product terms and LTV levels, but we've temporarily removed products that come with a fee."
Virgin Money
Virgin Money has also pulled its fixed mortgage deals to all new customers.
Virgin Money said its withdrawal of mortgage products for new customers would took place yesterday evening (August 26) at 7pm.
A spokesperson for the bank said: "We continue to monitor the situation closely and currently plan to relaunch products for new customers towards the end of the week."
Skipton Building Society
Skipton Building Society temporarily withdrew their mortgage ranges for new customers because of the volatility in sterling funding markets.
"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."
Other lenders
HSBC, Santander and Nationwide have also suspended new fixed mortgage deals, .
Smaller lenders including Scottish Building Society, Darlington, and CHL Mortgages have withdrawn all their fixed rate mortgages.
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Bank of Ireland, Clydesdale Bank, Paragon, Leek United Building Society and The Nottingham for Intermediaries are also understood to have pulled fixed mortgages for new customers.
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TSB confirmed that it has made no changes to its mortgage offerings.