UK banks have begun withdrawing mortgage products due to rapidly rising interest rates, and that has triggered a steady decline in home sales.
According to data compiled by Moneyfacts Group, there was a 9% drop in residential mortgage products on the UK market between Friday morning and Tuesday morning, as the number of products declined from 3,961 to 3596.
Amid signs in the markets that the Bank of England may be sending interest rates as high as 6%, major financial institutions such as Santander, HSBC and Nationwide, as well as the smaller lenders, are all concluding the era of cheap mortgage products is coming to an end.
The largest mortgage provider in the UK, Lloyds, announced on Monday it was halting some offers, as Virgin Money UK ceased offering home loans to new customers. Smaller lenders like Kensington, Accord Mortgages and Hodge also announced they too were withdrawing products.
On Tuesday, HSBC announced they were removing new mortgage products for the rest of the day, while Nationwide Building Society announced it was raising rates across its range of mortgage products as of Wednesday. Banco Santander announced it would remove some products and raise rates across others.
This comes on the heels of the Bank of England announcing it was raising interest rates from 0.5% to 2.25%, the highest level seen in 14 years. It marked the seventh consecutive rise by the central bank.
Experts predict the central bank will raise its key interest rate to 5.9% by September of next year. One year ago the rate sat at 0.1%. Those increases will raise mortgage rates and drive loan costs up for the 1.8 million people in the UK who will have to remortgage in 2023.
Analysts at Credit Suisse told Bloomberg that as a result of this, house prices, “could easily fall 10% to 15%.”
Ray Boulger, a manager at loan broker John Charcol told Bloomberg that another factor is that “chains” of home sales, where each homebuyer requires the sale of their existing home before they can close on a new home, may also begin to collapse, putting further downward pressures on the market.
The Daily Financial Trends
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience in implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor in this space. Stuart has led the “Total Corporate Digital Integration” platform at Sandstone and works with Sandstone clients to help integrate all aspects of modern digital business. He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage and is the Co-Host of the energy news video and Podcast Energy News Beat.
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