Mortgage lenders pull deals at fastest pace since mini-Budget
Mortgage lenders are pulling deals at the fastest rate since Liz Truss infamous mini-Budget amid growing agitation around the economic consequences of the Iran war.
Nearly 500 homeowner mortgages have disappeared from the market in mere days, according to finanical information platform Moneyfacts, as average mortgage rates breeze past the five per cent mark.
Moneyfacts said on Wednesday that 472 residential mortgages – which make up 6.5 per cent of the market – had been withdrawn in 48 hours.
The panic come amid a spike in swap rates, which serve as a primary benchmark for pricing fixed-rate mortgages and reflect market expectations for future interest rates over 2, 5, or 10-year terms.
The average two-year fixed mortgage rate flew to 5.01 per cent on Wednesday morning, compared to 4.84 per cent at the end of last week. Meanwhile, the five-year fixed rate shot to 5.09 per cent, up from last week’s 4.96 per cent.
Omer Mehmet, managing director at Trinity Finance, said: “High fives are the last thing borrowers will be giving lenders as rates climb above five per cent.
“To say events are moving at speed with no clear direction is probably an understatement right now.”
An interest rate hike ‘cannot be ruled out’
Markets have began to price in an environment where interest rates remain elevated for longer following the inflationary consequences of volatile oil prices.
The UK’s five-year gilt shot up, which tracks the Bank of England’s base rate closely, shot up by 17 basis points by midday on Wednesday to 4.16 per cent. Meanwhile the 10-year gilt yield – a key benchmark for the government’s cost to borrow – spiked by seven basis points to 4.6 per cent.
Kathleen Brooks, research director at XTB, said: “Although a rate hike from the BOE is not expected this year, there are only 5bps of cuts priced in by the interest rate futures market, so a hike cannot be ruled out if the oi price remains elevated for long.”
TSB became the latest high street lender to kick up its mortgage rates on Tuesday with a 0.5 per cent across the board, which followed a 0.15 per cent increase on its fixed-rate residential and buy-to-let-mortgages on Monday.
Barclays has also slapped a 0.1 per cent increase on rates on a selection of its productions including residential purchase and remortgage ranges from Tuesday.
A number of building societies – including Coventry Building Society, Yorkshire Building Society and Nottingham Building Society – kicked off the week by adjusting its pricing on fixed deals whilst Cumberland Building Society withdrew products whilst repricing its mortgages.
Jack Tutton, director at SJ Mortgages, said: “Lenders are petrified that history will repeat itself and the cost of borrowing increases sharply like it did in 2022, when Russia invaded Ukraine and the impact on energy prices that this had.”
The price of oil – which has served as the main benchmark of volatility throughout the conflict in the Middle East – has yet to reach the 2022 peak of higher nearly $130 per barrel.
At the beginning of the week Brent crude clocked its fastest one-day gain in six years, rising to $118, before giving up gains to now trade around the $90 mark.