Some of the UK’s biggest mortgage lenders have pulled mortgage products in response to the market instability initially triggered by the government’s mini budget on Friday 23rd September.
Following Chancellor Kwasi Kwarteng’s pledge of more tax cuts, on top of Friday’s mini-budget when he announced the biggest tax cuts for 50 years, the pound plunged against the dollar on Monday (26th September), hitting a record low of less than $1.04 – the lowest rate it has been since 1971.
In response to this, The Bank of England said it would "not hesitate" to hike interest rates and it is now predicted by analysists that base rates could rise to as high as 6% next year from the current 2.25%.
As lenders struggle to price loans amidst the interest rate turmoil, many brands have withdrawn mortgage products from their offering – some with immediate effect since Monday, causing several house sales across the UK to suddenly collapse.
HSBC, Santander and Halifax, part of Lloyds Banking Group, are the biggest lenders to have pulled mortgage products. Other UK banks to withdraw mortgage products from the market include Virgin Money, Skipton Building Society, Bank of Ireland, Clydesdale Bank, Post Office Money and building societies including Monmouthshire and Scottish Building Society.
If the base rate does reach 6% in 2023, it is predicted this would add £800 to the monthly cost of a typical mortgage - or £9,600 annually - by the middle of next year, according to the Telegraph, which used an example of someone coming off a two-year fixed mortgage.
It has been predicted that more than 2 million households in the UK face sharp rises in their mortgage over the next two years, significantly increasing the possibility of a property price crash as many are forced to sell.
Analysts have also warned that higher interest rates, rising inflation and the risk of recession could lead to house prices declining by between 10% and 15% next year.
If you’re looking for free advice on the sale of your property, we’re always happy to help. Amongst the interest rate turmoil and unpredictable financial market, auctions remain to offer speed and certainty of sale with exchange on the fall of the hammer and completion within 28 days.
For a free auction valuation or simply a chat with an experienced member of our auction team, please don’t hesitate to get in touch on 0141 339 4466 or send us an email to info@auctionhousescotland.com
Original sources:
https://www.telegraph.co.uk/personal-banking/mortgages/banks-pull-mortgages-sale-amid-interest-rate-chaos/
https://www.telegraph.co.uk/money/consumer-affairs/mortgages-face-100-month-expensive-friday/
https://www.bbc.co.uk/news/business-63041679
https://www.heraldscotland.com/news/homenews/22788781.house-prices-may-slump-much-15-interest-rates-rise/
https://www.ft.com/content/ca2c6745-a4c0-4bdf-9d15-3923d8ccb56d
