Fear of Severe Temporary Shutdown of Mortgage Market in UK

BY Realty Plus

British lenders including nationwide scrambled to raise mortgage rates and smaller players temporarily withdraw products in response to soaring market interest following unexpectedly strong inflation data. 

The moves had echoes of a more severe temporary shutdown of the mortgage market in late September and early October sparked by investor reaction to former PM Liz Truss’ economic agenda known as the mini-budget.

Nationwide Building Society said it would raise its rates on selected and tracker products by upto 0.45 percentage point. Goodbody banking analyist John Cronin said Nationwide’s move was likely to be emulated in the coming days and weeks.

One way or the other, loan customers are going to suffer higher pricing as far as I see which will adversely impact on credit demand,” Cronin added. Until recently mortgage rates in Britain had eased over the course of 2023 after spiking in October and November during the mini-budget aftermath.

In the current economic environment swap rates have continued to fluctuate and more recently increase, leading to the rate rises across the market. This change our mortgage rates remain sustainable.  Atleast seven smaller lenders, mostly focused on the buy-to-let market, have pulled or repriced products this week. Its feeling rather eerily like the post mini-budget period last year said Jamie Lennox, Director Mortgage Broker Dimora.

He added that in a normal market lender would typically reprice once a month. Nationwide had already announced a re-pricing in response to this month’s increase in BoE interest rates. Britain’s high inflation rates cooled by much less than expected in April prompting investors to ramp up bets on more Bank of England interest rates increases this year. Government bond yields have soared representing a sharp tightening of financial conditions in Britain which will be a concern to BoE officials.  The two-year British swap rate which underpines many lenders own financing costs and montages pricing for two-year deals has shot up around 50 basis points. 

Tags : British lenders nationwide mortgage rates players market interest inflation data shutdown Nationwide Building Society economic environment swap rates Jamie Lennox Director Mortgage Broker Dimora