More than 40% of mortgages withdrawn as market falters after mini-budget

Figures show that more than 40% of available mortgages have been withdrawn from the market since the UK government announced its mini-budget on Friday.

Lenders began suspending products on Monday as they struggled to rate them amid uncertainty in financial markets – and volatility and the number of offers removed have increased this week.

The latest data from Moneyfacts, which monitors the sector, showed on Thursday that a further 321 mortgages were withdrawn overnight, bringing the total to 1,621, of which 2,340 are still for sale. 935 parcels have been collected in the past 24 hours, double the previous record of 462 at the start of the pandemic lockdowns.

More than 20 providers have withdrawn their entire range of fixed-rate mortgages, according to financial research firm Defaqto.

Some of the largest lenders said they would revise their offers within days, while others preferred to wait until financial markets calmed down. HSBC, TSB and Kent Reliance were among lenders withdrawing products through Thursday, Moneyfacts said.

Defaqto’s Katie Brain said: “What products are left are changing at a rapid pace, lenders seem really unsure of what to offer and at what price with so much change in money markets at the moment.”

First-time buyers have reported that their plans to buy a home have been shattered by the escalating cost of mortgage financing. Homeowners with fixed income products, most of which last two years, say the cost of remortgaging has doubled interest payments, adding more than £2,000 a year to the typical annual cost.

Mortgage costs soared on Monday after financial traders pushed up borrowing costs for British institutions. Forecasts that the Bank of England’s interest rate will rise to 6% from 0.25% a year ago have meant lenders have had to re-rate their products, in some cases for the fifth or sixth time this year.

Swap rates, used to hedge long-term borrowing, rose on Monday. The two-year swap rate rose to over 5% from 0.45%, prompting lenders to remove two-year mortgages from their product range.

Analysts expect the central bank to hike rates by at least 1% when they meet in early November after chief economist Huw Pill said a sharp hike was needed after a negative reaction to mini-budget tax cuts.

Chancellor Kwasi Kwarteng announced £45 billion in tax cuts, on top of a £150 billion energy price cap. He said further tax cuts should be expected in a full November budget.

Investors were shocked after the Chancellor said the cuts would have to be paid for by additional borrowing. There were also concerns that Kwarteng’s “growth spurt” would increase consumer demand while the Bank of England sought to restrain spending through higher interest rates.

Economists calculated that the central bank would be forced to raise interest rates more than previously expected, raising the cost of mortgages to levels not seen since the 2008 financial crash.

Moneyfacts said the situation has yet to settle and remains “an evolving story,” adding it was likely more products would be withdrawn this week.

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