Turbulence continues to rock the mortgage market as HSBC unexpectedly withdraws products for new borrowers, and Nationwide decides to increase its rates. This latest development has left homeowners and buyers feeling unsettled, raising concerns about the impact on their home loans and the wider property market.
HSBC, one of the UK’s top 10 lenders, made the announcement yesterday, surprising the market with its decision to pull new residential and buy-to-let mortgages by 5 pm, citing the need to “maintain service levels.” They further added that no products would be available until Monday, June 12.
Simultaneously, Nationwide revealed its plan to raise selected fixed rates by up to 0.25% while reducing selected tracker rates by up to 0.85% effective from June 9.
These sudden announcements have caused headaches for brokers, particularly those with clients ready to secure deals impacted by these changes. Brokers recently joined forces to advocate for lenders to provide more notice when removing mortgages or altering rates.
Dimora Mortgages’ director, Jamie Lennox, highlighted that brokers had demanded a minimum of 24 hours’ notice to allow consumers sufficient time to consider their options. He warned that shorter notice periods would result in a surge of poorly packaged cases, leading to increased work hours for underwriters who would have to assess the same case multiple times while waiting for documents. There is also a risk of fraudulent cases slipping through the cracks as brokers scramble to submit applications without conducting proper due diligence.
Paul Neal, a mortgages and equity release adviser at Missing Element Mortgage Services, expressed frustration at lenders abruptly withdrawing from the market without any warning. He questioned how brokers could provide the best value to clients when lenders pull rates with zero notice, emphasizing the importance of a minimum withdrawal period.
Mortgage rates have been steadily increasing due to Bank of England rate hikes and the aftermath of the September 2022 mini-budget. The Bank of England has been raising rates to curb inflation. However, despite raising the base rate to 4.5%, inflation remains well above the 2% target. The latest figures showed inflation at 8.7%.
These developments indicate that further base rate hikes are likely, prompting lenders to adjust their pricing accordingly. Many have either raised rates immediately or withdrawn products temporarily to assess their pricing strategies.
Pete Mugleston, mortgage expert and Managing Director at onlinemortgageadvisor.co.uk, revealed that HSBC’s sudden decision to close its doors earlier than anticipated was due to borrowers rushing to refinance before rates climbed even higher. The overwhelming demand put a strain on HSBC’s capacity.
Kate Davies from the Intermediary Mortgage Lenders Association (IMLA), representing lenders, explained that product withdrawals and repricing decisions were made only when absolutely necessary. The current volatility in the swaps market, combined with speculation about further rises in the Bank of England’s base rate, was cited as the root cause.
The swaps market plays a crucial role in setting pricing for lenders. Davies clarified that different lenders have varying funding strategies, which may require them to act swiftly to maintain prudence and profitability when faced with sudden and significant funding increases.
If you are a customer affected by these developments, preparing to sign up for one of the affected deals, it is important to stay in touch with your broker for updates. While the product withdrawals are expected to be temporary, rate hikes are likely to continue.
Data from Moneyfactscompare.co.uk revealed a substantial increase in average two-year fixed rates from 5.38% to 5.75% within a week. Similarly, five-year fixed rates rose from 5.05% to 5.44% in just seven days.
Alice Haine, a personal finance analyst at Bestinvest, warned that buyers must brace themselves as lenders rush to reprice products to align with market expectations, signaling further interest rate increases. She expressed hope that the upcoming rate hikes would bring an end to the Bank of England’s monetary tightening cycle. Since December 2021, interest rates have risen 12 times, and it is hoped that additional base rate increases will help bring inflation closer to the Bank of England’s 2% target.