Mortgage deals shrink by a fifth since outbreak of Iran war
The number of mortgage deals on offer for homeowners have shrunk by nearly a fifth since war broke out in Iran just over three weeks ago.
Just shy of 1,500 fewer residential mortgages were available on Monday morning, compared with March 9, amounting to a contraction of 19.5 per cent.
According to financial information platform Moneyfacts, 744 deals have vanished since last Thursday.
Adam French, head of consumer finance at Moneyfacts, told Morning Wire last week hopes that affordability was “back on track” to 2021 levels had “collapsed” in the wake of the war in Iran.
It comes as markets are pricing in an elevated interest rate path after a hawkish hold from the Bank of England last week.
Bank governor Andrew Bailey suggested interest rate cuts were “not on the horizon” after the monetary policy committee flagged concerns around inflation.
JP Morgan economist Allan Monks has forecast that the Bank’s to raise interest rates at least twice this year.
Fears have spiked that the Bank’s two per cent target for inflation may be stretched further out of reach following the soaring price of gas and oil as a consequence of brewing tensions in the Gulf.
‘Misery for mortgage holders’
The move has left swap rates, which are used by lenders to price mortgages and reflect market expectations of future central bank base rates, surging causing banks to withdraw deals amid rapidly changing conditions.
At the start of March, Moneyfacts sid the average two-year fixed-rate mortgage was 4.83 per cent, but has since risen to 5.43 per cent. On the five-year deal, rates have risen to 5.45 per cent from 4.95 per cent.
Justin Moy, managing director at EHF Mortgages, said: “If the conflict in the Middle East doesn’t end soon, this could become reality for UK homeowners, as rates will inevitably need to increase to balance inflationary pressures, bringing misery to mortgage holders and businesses, and the economy as a whole.
“The government has a tricky see-saw of fiscal policy to balance now as there is little headroom in the chancellor’s figures, and this could trigger another explosion of public spending.”
Earlier this week, Moneyfacts revealed nearly 500 homeowner mortgages had disappeared from the market in mere days – marking the fastest rate of lenders pulling deals since Liz Truss’ mini-budget.
Barclays slapped a 0.1 per cent increase on rates on a selection of its productions including residential purchase and remortgage ranges at the beginning of the month as the conflict escalated..
A number of building societies – including Nationwide, Coventry Building Society, Yorkshire Building Society and Nottingham Building Society – all adjusted its pricing on fixed deals.