Banks withdraw mortgages amid rush to lock in deals at rising rates
HSBC pulled all its mortgages following a rush by customers to lock in deals before rates increase.
Bank withdrew on Thursday all residential, business and buy-to let mortgages in order to “stay within our operational capacity”. HSBC said that it will relaunch their products on Monday. The bank, which controls almost a quarter the market for home loans, has announced this move.
This is the first time that the bank has pulled out of the mortgage market after the mini-Budget in September, when the turmoil on the government debt markets roiled the lenders.
In recent weeks, the yields on government bonds have again risen sharply after shock inflation figures prompted investors to increase their forecasts for the peak interest rates.
Mortgage lenders have been forced to re-price some deals and remove others entirely due to market fluctuations. Homeowners and potential buyers are rushing to grab deals before they disappear, or get more expensive.
Existing HSBC customers can still refinance, but rates have increased on all 36 deals.
On Thursday, a number of major lenders such as Nationwide and Lloyds increased their mortgage rates.
Halifax has increased its fixed-rate deals by as much as 0.82 percentage points. This increases the cost of an average £200,000 loan per year by £1,640.
After a day of fluctuations, the average rate for a two-year fixed was 5.82pc on Thursday evening. This is up from just 5.33pc after only 16 days.
Aaron Strutt of Trinity Financial, a mortgage broker, said, “I thought that the rate changes would slow down this week, but they have been quite intense.” There is a good chance that there will be many more.
Capital Economics expects that mortgage rates will surpass the record highs set last autumn in the wake of Liz Truss’ mini-Budget.
Analysts warned that a massive shock to mortgage rates is imminent as 700,000 homeowners will see their monthly payments increase by at least 50% between now and the end of February.
Refinancing can result in the highest increases for homeowners who have secured two-year fixed rates during the pandemic when interest rates were record low.
If a buyer refinances with rates between 5.5pc and 6pc, their monthly mortgage payment will jump from £700 up to £1,080.
Bank Rate is currently 4.5pc, but economists expect it to reach 5.5pc.
Andrew Wishart of Capital Economics’ Housing Service warned that homeowners may fall further behind on their mortgage payments.
Mr Wishart stated: “There’s a growing danger that inflation pressure and the increase in payments to those nearing the end of their two-year fix could cause financial stress to happen earlier than it has in the past.”
The rating agency Moody’s predicted that the rise in mortgage rates coupled with the persistently high inflation rate would cause house prices to drop by 10pc within the next two-years.
In Britain, more people than in other countries have variable-rate or short-term fixed mortgages.
Interest rates are expected to peak at 5.5 PC
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Moody’s says that if interest rates stay at the same level as they are, mortgage holders will lose 5pc in their disposable income.
In the face of a bleak outlook for household finances in Britain, MPs have renewed their criticisms of Britain’s largest lenders for not passing on the benefits from high interest rates to saving.
The Treasury Select Committee found US banks had passed on more of the benefits of higher interest rates to customers than UK banks.
Harriett BALDER, Conservative Chair of the Cross-Party Group of MPs said: “It is clearer than ever before that the country’s largest banks need to step up their game and promote saving.”
HSBC spokesman: “To make sure we stay within our operational capacities and meet our commitments to our customers, we sometimes need to limit the number of new business that we accept each day. Our broker products will once again be available on Monday, June 12th.