Lenders pull new mortgages from market due to market chaos following Budget
Proactive Investors
Published Sep 27, 2022 08:52
Updated Sep 27, 2022 09:10
Lenders pull new mortgages from market due to market chaos following Budget
Lenders are pulling mortgage deals for new customers in the wake of the chaos in the currency and gilt markets sparked by the mini-Budget last week.
Virgin Money (LON:VM) and Skipton Building Society temporarily withdrew offers and said they hope to reprice them soon.
Halifax, the UK's largest mortgage lender, withdrew products offering lower interest rates in return for arrangement fees.
And the repricing could be brutal, according to analysts at Bank of America (NYSE:BAC), perhaps at 6-7%.
The Bank of England governor Andrew Bailey made a statement yesterday saying the Bank is monitoring financial markets “very closely" and that its monetary policy committee plans to “make a full assessment at its next scheduled meeting”.
As this is not til November, it did not seem to reassure the pound and gilts markets, which continued to sell off.
As fixed-rate mortgages depend on expected future rates, when rates expectations rise, gilt yields rise too and feed through into the institutional swap rates that drive the fixed-rate mortgage market.
“The dramatic overnight hike in market expectations of future rates has ramped up the cost of doing business, and lenders are taking a break to reassess and reprice," explained Sarah Coles, senior personal finance analyst at Hargreaves Lansdown (LON:HRGV).
“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."
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