There has been more turbulence in the mortgage market this week after HSBC pulled products for new borrowers at short notice and Nationwide increased its rates.
For homeowners or buyers, this latest activity may seem unsettling and you might be wondering how it will influence your home loan and the wider property market.
So, we’ve put together a short guide to keep you informed about what this means for you and your mortgage.
What’s going on with mortgages today?
The latest story to hit the headlines is concerning HSBC and Nationwide – which are among the top 10 biggest lenders in the UK.
HSBC announced yesterday, at lunchtime, it was pulling new residential and buy-to-let mortgages from the market at 5pm in order to ‘maintain service levels’. It said there would be no products available until Monday 12 June.
Meanwhile, Nationwide said it would be hiking selected fixed rates by up to 0.25% and was reducing selected tracker rates by up to 0.85% as of 9 June.
These announcements were made with short notice and this has caused difficulties for brokers, especially those with clients poised to take out the deals effected by the changes.
Only this week several brokers had joined forces to campaign for lenders to provide more notice when removing mortgages or changing rates.
Jamie Lennox, director at Dimora Mortgages explained brokers had called on lenders to give a minimum of 24 hours to allow reasonable time for consumers to consider their options.
“Shorter notice periods will lead to an influx of poorly packaged cases that will result in more hours being lost by underwriters having to assess the case multiple times while they wait for documents to come in,” he explained.
“With these short windows to submit, there is a real risk that more fraudulent cases slip through the net as brokers scramble to get apps submitted without completing proper due diligence.”
Meanwhile, Paul Neal, mortgages &equity release adviser at Missing Element Mortgage Services said: “Yet again we find ourselves with another lender dropping out of the market until they release new products. This time with no warning.
“How are we supposed to give our clients best value when a lender pulls rates with zero notice? This just highlights the importance of a minimum withdrawal period.”
Why are lenders pulling products and hiking rates?
Mortgage rates have been increasing for some time as a consequence of Bank of England rate hikes and the fallout from the mini-budget back in September 2022.
The BoE has been raising rates in an attempt to bring down inflation. Yet, despite raising the base rate to 4.5% inflation still remains much higher than it’s 2% target. When the last inflation figures were released it was 8.7%.
This indicated there were likely to be more base rate hikes and lenders began pricing this into their products. It prompted many to either hike rates immediately or pull products whilst they assessed what do with the pricing.
But there are other factors at play too.
Pete Mugleston, MD mortgage expert at www.onlinemortgageadvisor.co.uk,explained that borrowers rushing to refinance before rates got even higher had overwhelmed HSBC and forced it to close its doors earlier than anticipated.
“This abrupt decision not only leaves potential customers in the lurch but also highlights the urgency with which borrowers are trying to secure deals amidst the ongoing turmoil.”
Kate Davies of the Intermediary Mortgage Lenders Association (IMLA) which represents lenders said decisions to withdraw products and re-price were taken only when absolutely necessary.
“The root cause is the current volatility in the swaps market, combined with the continuing speculation about further rises in Bank of England base rate,” she explained.
The swaps market is what lenders use to set their pricing. Davies explained different lenders have different strategies for funding and some would require them to move quickly in order to remain prudent and profitable when there were large and sudden increased to funding.
What does all this mean for borrowers?
If you are a customer about to sign up for one of the deals affected by this news, it’s clearly very frustrating and you should remain in touch with your broker for updates.
It is understood these product withdrawals will be temporary but rate hikes look likely to continue. Data from Moneyfactscompare.co.uk this week revealed average two-year fixed rates had climbed from 5.38% to 5.75% in a week. Meanwhile, five-year fixed rates were averaging 5.44% up from 5.05% just seven days earlier.
Alice Haine, personal finance analyst at Bestinvest said: “As lenders frantically reprice products to reflect current market expectations that interest rates still have some way to go before they peak, buyers need a strong stomach if they want to plough into the market right now.
“The only hope is that the next round of rate rises will bring an end to the Bank of England’s monetary tightening cycle.
“Interest rates have risen 12 times since December 2021, but there is hope that further base rate rises do the job they are designed to do and finally bring inflation closer to the BoE’s target of 2%.”
What to do if you are about to remortgage
The best advice for anyone due to remortgage now is to speak to a broker.
Mugleston added: “The limited availability of competitive deals and the potential for further rate hikes puts borrowers in a difficult position.
“Given the ongoing uncertainty, it’s crucial for individuals to work closely with experienced mortgage brokers to navigate this complex market and explore all available options.”
You can find out more about how rising interest rates will impact your mortgage – whether you are in the middle of a fixed rate deal, about to remortgage or preparing to by a home here.
