Lending giants hiking mortgage rates and withdrawing products

Lending giants are hiking their mortgage rates and withdrawing products following the market turmoil prompted by Friday’s mini-budget.

HSBC UK said it has removed its “new business” residential and buy-to-let products from sale, but all its products and rates for existing customers remain available.

An HSBC UK spokesperson said: “In order to ensure that we stay within our operational capacity, from time to time we need to limit the amount of business we can take each day, which means that once certain daily limits are reached, we will need to limit our range for the rest of that day.

“Our broker products will be available again tomorrow, Wednesday September 28. We continue to review the situation regularly.”

Britain’s biggest building society, Nationwide, said that from Wednesday, it will increase its two, three, five and 10-year fixed-rates by between 0.90 and 1.20 percentage points.

Existing members looking to switch to a new deal or borrow more will see lower increases of between 0.55 and 0.85 percentage points, while tracker rates will increase by 0.50 percentage points, in line with the recent increase in the Bank of England base rate.

Nationwide said in a statement that in recent days, swap rates, which mortgage pricing is based on, have increased at unprecedented levels in response to the current economic conditions as the market factors in further predicted rises in the bank of England base rate.

The Society said it is making the increases to ensure its mortgage pricing remains sustainable and the increases are lower than the rise it has seen in swap rates.

The rates for new customers moving home and first-time buyers include two-year fixed rates starting from 5.59% with a £999 fee.

Henry Jordan, Nationwide’s director of mortgages, said: “The changes made to our new business range are reflective of the current interest rate environment, which has seen mortgage rates increase across the market in line with a rapidly changing economic environment.

“Swap rates, on which mortgage pricing is based, have spiked as the market factors in expected future bank rate rises. These latest changes will ensure we are able to continue lending in a way that is sustainable to borrowers of all types.”

Santander UK said it will be removing its 60% and 85% LTV (loan-to-value) products for new customers and increasing other rates for new and existing customers from 10pm on Tuesday.

It said: “Customers who have already applied by this time will not be impacted. We continually review the products we offer in light of market conditions.”

A NatWest spokesperson said on Tuesday: “We keep our rates under continual review in line with market conditions.”

Analysis of the market by Moneyfacts.co.uk found that on Friday last week, the day of the mini-budget, 3,961 residential mortgage products were available.

By Monday this week, the total had fallen to 3,880.

By Tuesday morning, it had shrunk further to 3,596 deals – a reduction of 365 compared with Friday, the analysis for the PA news agency found.

The overall choice of mortgage deals remains significantly higher than it was during the depths of the coronavirus pandemic, which also caused significant economic uncertainty.

A particular low point was in October 2020, when 2,259 mortgage deals were available.

During the pandemic, low-deposit mortgage deals, often used by first-time buyers, were particularly at risk of being pulled as lenders were concerned about “riskier” lending.

But this time around, the mortgage withdrawals appear to be more evenly spread across different LTV brackets.

Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “The upheaval in the mortgage market may cause frustration amongst both borrowers and brokers as they see deals disappear overnight.

“The market remains considerably volatile so it’s vital consumers seek independent advice to assess what their best options are right now.”

David Hollingworth, associate director communications at broker L&C Mortgages, said those who already have a deal agreed with their lender do not need to worry.

He also said that he did not think it would be too long before lenders come back with new deals.

Mr Hollingworth said that while it is not unusual for lenders to withdraw deals, what has happened in recent days has been “incredibly fast-paced”.

He said that “lenders are having to rethink”, which may be due to cost changes.

Lenders will also have an eye on what others in the market are doing and will want to price in a way which protects their own service levels, he added.

Mr Hollingworth said he expects them to “relaunch once the dust settles” – which could generally be at higher rates than previously.

He added: “The more it (withdrawing deals) happens, the more you reduce the choice for borrowers, but I don’t think it will be too long before you see lenders coming back.”

On Monday, Virgin Money said: “Given market conditions we have temporarily withdrawn Virgin Money mortgage products for new business customers.

“Existing applications already submitted will be processed as normal and we’ll continue to offer our product transfer range for existing customers.

“We expect to launch a new product range later this week.”

Halifax also said on Monday that it was withdrawing mortgages that come with a fee.

The Skipton Building Society said on Monday that it had also withdrawn its offers for new customers, in order to “reprice” given the market movement in recent days.

The decisions were taken after markets started predicting massive jumps in interest rates this year and next.

The Bank of England is expected to hike its base rate by another two percentage points by the end of the year, and rates could top 6% next year according to market expectations.