284 deals pulled in mortgage panic
Lenders remove top offers as bank websites crash and homeowners brace for another interest rate hike
The mortgage market was in disarray yesterday after lenders including hSBC and Santander pulled hundreds of deals amid fears the Bank of england could hike its interest rate to 6 per cent next year.
In just 24 hours, 284 products were withdrawn, according to analyst Moneyfacts.
Leading provider Nationwide announced big hikes on its mortgages, raising its two-year fixed rate to 5.59 per cent.
Phone lines to lenders and brokers rang off the hook as desperate homeowners attempted to lock in fixed-rate deals now before they rise still further.
Some faced waiting times of up to an hour and a half, while banking websites crashed under the huge demand.
The Bank of england’s base rate currently stands at 2.25 per cent – but financial traders are forecasting it could reach 6 per cent by next spring, the highest level since 2000. Such a huge increase would cost families thousands of pounds extra per year in payments.
Richard Campo, chief executive of mortgage broker Rose Capital, said: ‘Due to the instability of the UK economy and the volatility in money markets, we’re seeing mortgage lenders hiking up rates at a pace we haven’t seen since 2008. It’s little wonder that borrowers are confused.’ From today,
Nationwide will increase its two, three, five and ten-year fixed-rate deals by between 0.9 and 1.2 percentage points.
The building society’s two and three-year fixed rates now start from 5.59 per cent with a £999 fee. For a family with a £400,000 mortgage, a 1.2 percentage point increase in the rate would add £3,216 a year to their bills.
This time last year Nationwide was offering borrowers 0.89 per cent with a £999 fee, according to broker London & Country. Twelve months ago, the top-ten mortgage lenders were all offering rates of below 1 per cent.
Santander and Yorkshire Building Society suspended mortgage deals for new customers yesterday in response to the increasing market turbulence. The nation’s largest lender halifax also withdrew all of its mortgages with fees.
Meanwhile, hSBC temporarily suspended its new residential and buy-to-let mortgages yesterday. They will become available again today – but there is expected to be huge demand.
Meanwhile Virgin Money, Skipton Building Society and Post Office Money withdrew their entire mortgage ranges.
There were only 3,596 mortgages on offer yesterday, almost 1,800 fewer than were available in December, when the Bank of england began increasing its interest rates, according to Moneyfacts.
The average two-year fixed rate mortgage is now 4.78 per cent – and experts warn it could be higher than 5 per cent within a week. Five-year fixes are currently at an average of 4.79 per cent.
Some lenders’ systems crashed
‘2.5million people are in arrears’
yesterday as borrowers and advisers tried to lock in fixed-rate deals now ahead of further spiralling rate rises. Many mortgage holders were put in virtual queues as websites were unable to keep up.
Brokers say some homeowners are considering paying early repayment charges, typically between 1 and 5 per cent of the mortgage balance, in order to leave their current fixes and lock in a new deal now to avoid uncertainty later.
But as panic hits fever pitch, experts have warned against being taken in by the frenzy.
Jane King, mortgage adviser at asset management firm AshRidge, said: ‘We all knew that interest rates were going to go up at some point.
‘At the moment there’s a lot of speculation about how high rates will go, but you can’t predict the future. If you’re concerned then seek advice.’
The turmoil was illustrated by ‘swap rates’ changing every 20 minutes, according to industry publication Mortgage Solutions. These are the price at which banks exchange money to have enough cash to offer borrowers products such as loans or mortgages.
The spiralling cost of living has become an increasing worry for Britons, with a fifth of UK adults suffering sleepless nights, according to a survey published today by investment service Charles Stanley. Of 2,000 adults surveyed, 9 per cent also reported hair loss.
Around 5 per cent of UK adults are behind on their mortgage, equivalent to 2.5million people in arrears, according to debt charity the Money Advice Trust.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: ‘events this week have wreaked havoc on the mortgage marketplace, with lenders pulling competitive home loans in anticipation of a higher interest rate environment, which could come sooner than expected.’