HSBC, one of the biggest mortgage lenders in the UK, has withdrawn mortgage deals for new borrowers in the latest twist for the market.
Yesterday, the bank told brokers it would withdraw all its loans at 5pm – but ended up pulling them earlier than this – with deals being available again from the start of next week.
HSBC follows many other major lenders in withdrawing deals or upping rates since the most recent inflation figures were published late last month.
Why is HSBC pulling mortgage deals?
HSBC has said it is withdrawing its deals so it can stay within “operational capacity” and meet “customer service commitments”.
Brokers have explained that this is because of surge in applications.
Nick Mendes, mortgage technical manager at broker John Charcol said: “While we have seen many lenders follow a similar path, the recent volatility and surge in clients looking to secure a rate before potential further rate rises has clearly had an impact on their service levels”.
He added: “This is often the last move a lender wants to do, but a necessary measure to protect the lender taking on to many applications in a period when rates are rising”.
Banks started to increase mortgage rates two weeks ago, after the latest Office for National Statistics (ONS) figures showed inflation had only fallen to 8.7 per cent in the year to April.
This was a higher inflation figure than expected, and fed speculation that the Bank of England would raise interest rates – the rate it charges banks to borrow – and has led to swap rates rising.
“These changes are causing havoc for lenders and pricing”, said Mr Mendes.
The average two year fixed rate mortgage rate was 5.82 per cent on Thursday, according to financial analytics company Moneyfacts, up from 5.49 per cent at the start of the month.
On a £200,000 mortgage over a 25 year term, this could mean repayments of £1,267 per month – £40 per month up from £1,227.
I am a homeowner – what does this mean for me?
If you are currently on a fixed rate mortgage, the current havoc in the market does not affect you for now. You will continue to pay the rate you currently pay until your mortgage term ends.
But those on variable rates, which follow the base rate, will likely see an immediate hike to their bills – many by hundreds of pounds. If you are looking to get a new mortgage deal soon, you will also end up paying more than you expected with many having to decide between a costly fix, that will at least protect them from further hikes, or a volatile variable rate that could rise or fall.
HSBC is not the only lender pulling its deals – last week, i revealed that 30 lenders had hiked or pulled rates since the inflation figures were released, with more doing so since.
Mr Mendes explained: “Those that are currently coming out of a fixed or on a lenders variable rate will unfortunately be facing a difficult decision of whether to sit on a variable or fix for a short period.
“Fixed rates aren’t expected to come down to reasonable levels of 3.5 per cent for at least 12-18 months, this is assuming inflation comes closer the 2 per cent target.
Others have also said that the next inflation figure, and the Bank of England’s interest rate decision – both coming later this month, will be key to determining the direction of the mortgage market.
Ashley Thomas, director at Magni Finance, a London-based brokers, said earlier this week that the market was “volatile”, but added: “If the inflation data is positive, we will see fixed rates come down again”.
