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Market chaos forces UK lenders to pull mortgage products

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A realtor’s For Sale and Rent sign mounted on the railing outside an apartment building in London, South England, 23 September 2021. REUTERS/Hannah McKay

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LONDON (Reuters) – Turmoil in Britain’s financial markets forced mortgage lenders to temporarily pull back on Monday and repricing their products for new customers. This is the real result of the market volatility caused by Finance Minister Kwasi Kwarten’s mini-budget last week.

Brokers say the move is likely just the beginning of a big shift in the UK mortgage market.

Halifax, the country’s largest mortgage lender, said it was withdrawing a fee-based mortgage product that allows borrowers to pay an arrangement fee in exchange for lower interest rates and moving to a completely fee-free range.

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Virgin Money and Skipton Building Society have temporarily withdrawn all ranges, with the former aiming to reopen later this week, according to emails sent to brokers seen by Reuters.

Kwarteng sent the pound and government bonds plummeting on Friday with a so-called mini-budget aimed at boosting the economy by boosting government borrowing to fund tax cuts.

A spokeswoman for Halifax said, “We are making several changes to our product range as a result of the significant changes in our funding costs.

UK five-year government bond yields, a key benchmark for lenders’ mortgage financing, surged 96 basis points on Monday and Friday combined, marking the highest borrowing cost since Refinitiv began recording in 1987. increased.

The Skipton Building Society said in an email to brokers that it “continues to see the market reaction clear following last week’s (Bank of England) meeting and the government’s ensuing mini-budget.” .

“In response, we are temporarily withdrawing our new business product portfolio, effective immediately.”

Virgin Money said withdrawals of mortgage products for new customers will take place at 8pm (1900 GMT).

“We are continuing to monitor the situation closely and are currently planning to relaunch the product for new customers over the weekend,” Virgin Money said in a statement.

Halifax, part of the Lloyds Banking Group (LLOY.L)said it has not changed its product rates and continues to offer commission-free options across all product terms and loan-to-value levels.

Brokers said they were sure other lenders would make big changes to their mortgage offerings.

“Uncertainty around the risk of an emergency rate hike will likely cause other lenders to withdraw products or raise rates significantly,” said Jamie Lennox, director of broker Dimora Mortgage. rice field.

Others said mortgage borrowing rates are likely to rise sharply, with the Bank of England saying it will on Thursday Don’t hesitate to change interest rates “as much as you need” Return inflation to target.

“That will lead to higher mortgage rates and, as always, it will be the taxpayers who carry the cans,” said Louis Shaw, founder of broker Shaw Financial Services.

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Reporting by Andy Bruce Editing by William James and Mark Potter

Our criteria: Thomson Reuters Trust Principles.

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