Following the mini budget put forward by chancellor Kwasi Kwarteng on Friday 23rd September 2022, hundreds of mortgage deals have been pulled from the market by lenders. In this blog we explore the reasons behind why this has happened and what happens next for those seeking mortgages.
As well as providing the highest level of tax cuts seen in 50 years, the measures sparked panic in financial markets, with the Bank of England’s base rate expected to increase to 6% by next summer.
On 29th September 2022, In the space of a few hours, thousands of lenders withdrew mortgage products from the market. According to the Guardian in the last few days, a total of 1,621 residential mortgage products have been withdrawn. Whilst Defaqto, reports that more than 20 providers have withdrawn their entire fixed rate mortgage range.
Although these figures appear alarming, that leaves over 2,000 mortgage deals still currently available, however, this is rapidly fluctuating.
Why Mortgage Deals Have Been Pulled?
With a lot of uncertainty around the Bank of England base rate and with the knowledge it’s likely to continue rising, but not yet knowing how quickly that will happen, lenders are behaving in a cautious manner.
In short, the outlook for interest rates has changed and lenders need to make sure that the mortgage products they provide are both profitable and affordable for their customers.
Mortgage lenders set their mortgage interest rates against the Bank of England base rate. The base rate increased to 2.25% last week but this is expected to continue rising. This makes it necessary for mortgage lenders to reassess their range of mortgage products, so pulling existing deals at far lower interest rates is seen as a necessary step.
What Does This Really Mean?
Those already on fixed deals will be somewhat protected from what’s currently going on, though for those coming to the end of fixed rate deals or those looking to remortgage or obtain their first mortgage, snapping up any deals remaining could require some quick decision-making.
If you’re on a fixed rate that’s due to come to an end in the next few months then, now could be a good time to start looking for the best deals available to you.
For those looking for a first-time mortgage, it’s important to remember that these product withdrawals are expected to be temporary. Whilst there are still currently plenty of mortgage deals available, the choice of deals has certainly decreased and the mortgage products that do remain could be subject to rapid changes.
With changes happening so quickly, if you do find a mortgage deal that works for you, it could be advisable to snap it up whilst you can, otherwise, be patient and wait for the dust to settle and more mortgage products to appear back on the market could be the prudent choice.