HSBC, Santander and Nationwide increase and suspend mortgage rates as banks pull deals due to pound crisis

27 September 2022, 10:16 | Updated: 27 September 2022, 17:31

Halifax and Virgin Money are just two firms to pull deals after the Chancellor's mini-budget sent the pound into freefall
Halifax and Virgin Money are just two firms to pull deals after the Chancellor's mini-budget sent the pound into freefall. Picture: Alamy

By Asher McShane

Banks continue to pull mortgage deals over fears the Bank of England will raise interest rates, with warnings repayments could rise by £800 and first time buyers face shelling out £1,100 a month on homes.

Listen to this article

Loading audio...

Property provider Rightmove has said average monthly mortgage payments for new first-time buyers are currently £1,057, or 40% of an average gross salary.

But they warned bills will jump to £1,114 per month if lenders pass on the latest interest rate rise of 0.5%.

Halifax, Santander, and HSBC, three of the UK's biggest mortgage lenders, as well as Nationwide, Virgin Money and Skipton, have all taken the step of pulling some deals after analysts warned the base rate could surge to 6 per cent next spring following market turmoil caused by the government's mini budget.

The news comes after the pound plummeted to a record low of $1.03 in Far East trading overnight, after the Bank of England said it would wait until November before responding to the recent turbulence. It steadied today in early trading in Asian markets, climbing to $1.07 just before 6am.

Which lenders have axed deals?

Halifax has temporarily pulled deals that come with fees.

HSBC has removed new residential and buy-to-let products.

Santander has temporarily pulled some of its mortgage products for new customer.

Nationwide has increased mortgage rates for two, three, five, and 10-year fixed rates by between 0.9% and 1.2%.

Virgin Money has also pulled fixed deals for new customers

Skipton temporarily withdrew mortgage ranges for new customers due to the volatility in Sterling

Smaller lenders including Scottish Building Society, Darlington, and Legal & General's buy-to-let arm CHL Mortgages have withdrawn all their fixed rate mortgages. Bank of Ireland, Clydesdale Bank, Paragon, Leek United Building Society and The Nottingham for Intermediaries are also understood to have pulled fixed mortgages for new customers.

Markets believe that official borrowing costs will need to rise sharply to reverse the drop in the pound, which could lead to soaring mortgage rates for millions of homeowners.

Mortgage lenders temporarily withdrew their products as financial markets predicted the Bank would need to raise interest rates from 2.25% to 6% to restore confidence.

Read more: Chancellor bids to calm markets after pound plunges and Bank says it will raise interest rates 'if necessary'

Read more: From travel to food and mortgages to energy bills, what the plunging pound means for you

Nomura, the Japanese bank, forecast that the pound would end the year below parity against the dollar. Meanwhile Paul Donovan, chief economist at UBS global wealth management, said investors were inclined to see the Conservative party as a “doomsday cult”.

Halifax, the UK's largest mortgage lender, said it had withdrawn its mortgage products offering arrangement fees in return for lower interest rates, saying it was moving to a full-fee range.

"As a result of significant changes in mortgage market pricing we've seen over recent weeks, we're making some changes to our product range," a spokesperson for the bank said.

"There is no change to product rates, and we continue to offer fee-free options for borrowers at all product terms and LTV (loan-to-value) levels, but we've temporarily removed products that come with a fee."

Santander, in an email to brokers, said: "On Wednesday 28 September, we're temporarily removing all 60% and 85% LTV products from the new business range.

"The majority of our new business residential and Buy to Let fixed rates also will increase by up to 0.40% and product transfer fixed rates will increase by up to 0.30%."

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."

It was expected that the Bank of England might undertake an emergency interest rate rise, but Governor Andrew Bailey merely released a short statement in which he said the Bank would change interest rates "by as much as needed" to get inflation back to the 2% target.

An increase in the cost of borrowing would impact house prices, as the property market has been fuelled by cheap mortgage rates.

Speaking earlier this month, the director of Halifax mortgages, Kim Kinnaird, said: "House prices have so far proved to be resilient in the face of growing economic uncertainty."

She added: "Industry surveys point towards cooling expectations across the majority of UK regions, as buyer demand eases, and other forward-looking indicators also imply a likely slowdown in market activity.

“With house price to income affordability ratios already historically high, a more challenging period for house prices should be expected.”

Earlier this month, Sarah Coles, senior personal finance analyst at the investment firm Hargreaves Lansdown warned the rising rates and house prices coupled with high energy bills would "push property out of reach for desperate buyers".

Lewis Shaw, founder of broker Shaw Financial Services said that further interest rate rises would "feed into higher mortgage rates and, as always, it'll be the taxpayer left carrying the can".

Further rate rises next year will also coincide with more than a million homeowners coming to the end of their fixed-rate deal, meaning they will have to remortgage as interest rates are peaking.

Around 300,000 borrowers will reach the end of their fixed rate in each quarter of 2023, peaking at 375,000 between April and June, according to analyst Built Place.

Jiten Varsani, founder of FortyOne Money said: “I usually don't worry about such things, as it is what it is, but even I'm concerned about the current situation. It's nuts and I've never known anything like it.”

In a tweet, he featured a GIF from the movie The Big Short, the film that explores how a few traders predicted the collapse of the 2008 housing market crash over a year before it happened, and then bet against the housing market.

Imran Hussain of Harmony Financial Services said: “Sadly this is just the start... The mortgage market was already hectic and now it's going haywire.”

Nicholas Mendes, of the mortgage broker John Charcol, said markets were so unpredictable that lenders were unable to price their products - a process which usually only involves forecasting economic conditions, including interest rates, two weeks in advance.

Mendes said it was “uncharted territory” for borrowers.

More Latest News

See more More Latest News

Former President Donald Trump speaks at a campaign rally in Reading, Pennsylvania

Trump threatens Mexico with 100% tariffs unless it cracks down on border crossings

Bridget Phillipson told Tonight with Andrew Marr that the fee hike was necessary to secure the future of universities.

‘Universities must reform’ says education secretary after first hike in tuition fees in 8 years

Two more cases of a new strain of mpox have been detected in the UK, officials say

Two more cases of new mpox strain detected in UK

Anya Taylor-Joy and her musician husband were the victims of a terrifying robbery

Anya Taylor-Joy and musician husband victims of burglary at London mansion

Exclusive
Nigel Farage speaking to LBC's Nick Ferrari about new Tory leader Kemi Badenoch

'The Remainers are back in town': Nigel Farage says Kemi Badenoch will bring 'no change whatsoever' to Tories

Amy Dowden

Strictly Come Dancing star Amy Dowden will not return to show this year following 'medical emergency'

Scott Paterson murdered his landlady Annette Smith

Tenant murdered and dismembered elderly landlady before posing as her by sending Christmas cards to family

Robert Jenrick, Priti Patel and Mel Stride will all serve in Kemi Badenoch's Shadow Cabinet

Kemi Badenoch names former leadership rivals Robert Jenrick and Priti Patel to Tory Shadow Cabinet team

Bridget Phillipson has confirmed the tuition fee rise

University tuition fees to rise for first time in eight years, as Tories accuse Labour of 'declaring war on students'

Sara Sharif had suffered dozens of injuries in the weeks leading up to her death, a court has heard

Video of Sara Sharif smiling and dancing 'days before murder' shown to court

Transport for London (TfL) has warned passengers that no Tube services are expected on Thursday 7 November

November Tube strikes to bring London to a halt this week despite RMT calling off action

Stuart Gogg during the Six Nations rugby match between France and Scotland in Saint-Denis, 26 February 2023

Former Scotland rugby captain pleads guilty to domestic abuse over five-year period against former partner

Kie Joyce, 21, was sentenced for his role in at least 35 phone thefts.

WATCH: Moment phone snatchers are arrested in London chicken shop after spree of thefts

One of two assassination attempts made towards the former President was carried out in Pennsylvania

Trump says he would not 'mind' if journalists were shot at Pennsylvania rally

A 10-year-old girl who was mauled to death by her family's dog had a 'close, loving relationship' with the pet that killed her, police have said.

'Devastated' family pay tribute to 'wonderful' 10-year-old girl mauled to death by pet dog

Trump has been fixated on crowd sizes throughout this election cycle

Trump's latest crowd size brag backfires as camera pans to reveal sea of empty seats