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Lenders pull fixed rate deals amid economic uncertainty with more to follow

  • 26/09/2022
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Lenders pull fixed rate deals amid economic uncertainty with more to follow
Mortgage lenders have been removing their fixed rate deals from the market as the pound has fallen to a new low.

The pound fell to $1.03 when trading opened in Asia this morning, which is a low not seen since 1971. It has rebounded slightly to $1.07 as of 16:51 UK time.

The fall comes after a range of tax-cutting measures were announced by Chancellor Kwasi Kwarteng last week, which resulted in a pound sell-off.

There are fears that the pound could reach parity with the dollar, and there are hints of further tax cuts later this year.

Swap rates have also risen dramatically, with two and five-year swap rising by nearly one per cent in a week.

The base rate was also increased by the Bank of England last week to 2.25 per cent, and the Bank of England is expected to make an emergency base rate rise


Selection of withdrawals

Halifax said that it would withdraw all products with a product fee by the end of tomorrow.

The Nottingham confirmed that it would reprice its residential, buy-to-let, holiday let, retirement interest-only and self-build products from 6pm and would take down 14 additional products.

The Nottingham released some new two and five-year fixed rates with two-year fixed rate start from 6.04 per cent and five-year fixed rates beginning from 5.98 per cent.

BM Solutions said that it would be removing all products with a product fee by close of business tomorrow.

Paragon added that it would be taking down the fixed rate products in its portfolio, non-portfolio and product transfer buy-to-let range from 5pm today.

Keystone Property Finance are also reported to be withdrawing their rates today.

West One Loans is removing its buy-to-let fixed rate with immediate effect and said new products would be announced once “market fluctuations stabilise”.

Clydesdale Bank is also taking down select two and five-year capital and interest rates between 75 and 90 per cent loan to value (LTV) with £999 fee and five-year fixed rate buy-to-let product at 75 per cent LTC with £1,999 fee from 8pm today.

Virgin Money will temporarily remove all its products for new customers by 8pm tonight.

Bank of Ireland is also withdrawing all buy-to-let and residential rates from 5pm today and said that it would be relaunching new residential and buy-to-let ranges as soon as possible.

Foundation Home Loans is removing all its products in its residential range and will replace them by tomorrow.

Skipton Building Society added that it would temporarily withdrawing its new business product range with immediate effect. It said it was working hard on a new range which would launch in due course.

Leeds Building Society said it would take down selected fixed rate deals.


Further lender product withdrawals and repricing expected

Brokers said that other lenders were likely to follow suit, especially as it is expected that the Bank of England may make an emergency intervention with another base rate rise.

Imran Hussain, director at Harmony Financial Services, said: “Many lenders will follow suit given that another rate rise, potentially this week, is looking imminent. Products will get chopped and changed quicker than we can all keep up.

“The mortgage market was already hectic and now it’s going haywire. Swap rates for two-year products are now above five per cent. Compared to where we were a year or so ago, that’s frankly insane.”

Swap rates are an agreement between two parties where they agree to exchange one stream of future interest payments for another, based on a specified principal amount. They are used by mortgage lenders to mitigate the interest rate risk in a fixed rate mortgage.

Rising swap rates mean that cost of funding for lenders has increased, with two-year Sonia swaps standing at 5.56 per cent, up from 4.3 per cent last week. Five-year Sonia swaps stand at 4.99 per cent, up from 4.04 per cent last week.

Lewis Shaw, founder and mortgage expert at Shaw Financial Services, added that mortgage lenders were “already sending rate changes out, hiking fixed deals, despite the flurry of moves last week”.

“We’ve even just been told of the first six per cent plus clean credit mortgage rate, which is the highest rate for a mainstream lender I’ve seen in over seven years. Is this the sign they know something we don’t? The writing is on the wall.”

He added that the Bank of England would likely be “forced to step in with another base rate hike to try and calm spooked markets”.

“That will feed into higher mortgage rates and, as always, it’ll be the taxpayer left carrying the can,” Shaw concluded.

Jamie Lennox, director at Dimora Mortgages, continued: “The future is certainly looking bleak when the biggest lender in the UK pulls a big selection of their products on offer.

“The uncertainty around the risk of an emergency rate rise is likely to see other lenders withdrawing products or increasing rates dramatically until they know the extent of how this all pans out.”

He added: “The UK economy is on red alert and lenders and borrowers alike are having to keep a keen eye on what is a rapidly changing rate environment.”

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