Britain’s bond and currency markets have been in turmoil since Finance Minister Kwasi Kwarteng announced his “small budget” on Friday.
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LONDON – British lenders Virgin Money, Halifax and Skipton Building Society have withdrawn some of their mortgage contracts for customers following turmoil in the UK bond market.
Virgin Money and Skipton Building Society have paused offering mortgages to new customers, while Halifax – owned by Lloyds Banking Group – is planning to stop any mortgage products with fees normally offered lower interest rates.
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A spokesperson for Virgin Money said this was due to “market conditions”, while Halifax attributed the move to “significant changes in mortgage market valuations.”
Skipton Building Society said it had paused its products to “re-pricing according to market reaction in recent days.”
Britain’s bond and currency markets have been in turmoil since Finance Minister Kwasi Kwarteng announced his “small budget” on Friday, which includes substantial tax cuts and a “economic boost”. trickle cell”. The UK’s 10-year gold production spiked to levels not seen since 2008 on Monday, while GBP plummet to one all-time low against the dollar.
Inflation fears are fueled by market moves, which suggest the Bank of England will have to keep raising interest rates to counter rising prices. Central bank said won’t shy away from this as it aims to bring inflation back to 2% and are closely monitoring developments.
Markets have already begun pricing the prime rate up to 6% for next year, from the current 2.25%, raising concerns among mortgage lenders and borrowers.
“The average quote rate for a two-year fixed-rate mortgage is likely to rise to around 6% early next year, if the MPC [Monetary Policy Committee] Bank rate hikes were as quick as the market expected, 400bp higher than two years earlier,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics and his colleague Gabriella Dickens, economist. UK senior, said in a research note.
“Households refinancing a two-year fixed-rate mortgage in the first half of next year will see monthly repayments rise to around £1,490 early next year, from £863 when they take out a two-year mortgage before.”
Changing market conditions have caused some lenders to change their product offerings.
Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, commented in a research note.
Not only does the development mean mortgage prices are set to rise, but borrowers may also have fewer options. A host of smaller lenders are said to have halted sales of mortgage products over the past few months as pressure from rising interest rates shrinks the market.
Rob Gill, chief executive officer of Altura Mortgage Finance, said the problem will only worsen as major lenders suspend the product.
“With borrowers already hit by significantly higher mortgage costs, the reduction in selection caused by larger lenders pulling out of the market will only make the situation worse,” he said. than”.
“We’ve seen smaller lenders pull out of the market fairly steadily in recent months as they struggle to cope with rising interest rates. However, the shift has shifted to lenders. In larger banks like Virgin Money and Halifax, withdrawal rates are very important and a major concern for borrowers’ mortgages.”