Perfect storm as lenders pull mortgages and sales collapse
HOUSe sales were collapsing yesterday as vanishing mortgage deals sparked further chaos in the market.
estate agents and brokers were seeing property chains fall apart amid predictions that the Bank of england could hike interest rates to 6 per cent next year.
Lenders have now pulled nearly 2,000 mortgage products in under a week in scenes reminiscent of the 2008 crash.
Meanwhile borrowers were warned they may soon have to prove they can afford interest rates of up to 7 per cent to qualify for a home loan.
Many of the fixed-rate deals on offer yesterday from mainstream lenders hovered at around 6 per cent. experts said borrowers faced a ‘perfect storm’ of rising interest rates, energy bills and fears house prices will plummet by as much as 15 per cent.
The chaos has hit first-time buyers hardest as lenders are mostly withdrawing higher loan-to-value deals – favoured by those getting onto the property ladder – while products remain available to those looking to remortgage.
But this has had a stark knockon effect on property chains.
north Wales estate agent Ian Wyn-Jones said: ‘In just a couple of days we have had between 15 and 20 house sales fall through. A lot of those were because of first-time buyers who cannot find a mortgage.’
emma Jones, who runs mortgage consultancy When The Bank Says no, added: ‘We had two chains collapse yesterday both because of first-time buyers who are really struggling to find mortgages.’
Borrowers often reach an ‘agreement in principle’ months before buying or mortgaging their home. But this does not guarantee a secured rate and many see their agreements expire before they have completed their application.
Yesterday brokers said many had seen their offers in principle expire and are returning to lenders to find there are no rates available. Other first-time buyers have simply been spooked by rising rates and pulled out of transactions.
A further 321 residential mortgage products were withdrawn on Wednesday night. Lenders pulled a record 935 deals on Tuesday, more than double the amount that disappeared on April 1 2020 due to the pandemic. It means 1,621 deals vanished between last Friday and yesterday. HSBC cautiously returned some products to market yesterday, offering above 6 per cent rates on most of its two-year fixed rate deals.
Meanwhile nationwide increased its rates for the second time in three days. The building society’s cheapest twoyear fixed rate rose to 5.89 per cent, up from 5.59 per cent.
This is more than double the 2.54 per cent rate it was offering three months ago.
According to Bank of england data, more than two million homeowners with fixed-term mortgages will remortgage between now and the end of 2024. They face paying thousands more when budgets have already been battered.
The situation is exacerbated by the fact that interest rates had been historically low over the past decade – sitting at just
‘Spooked by rising rates’ ‘It’s only going to get worse’
0.1 per cent in December – allowing scores of buyers to borrow increasingly larger sums.
estate agents said they were already fielding enquiries from families desperate to sell up or downsize their homes because they were worried they couldn’t afford their mortgages – on top of soaring energy bills.
Joel edgerton, of Wigan agency Regan and Hallworth, said: ‘Some people are already talking about downsizing and selling up while they can and that’s only going to get worse over the next six months.’
It came after brokers warned the stress-test rate for mortgages could rise to 7 per cent.
Repayments at 7 per cent interest on a £200,000 mortgage would be £1,331 a month, assuming a 30-year term.
Dominik Lipnicki, of Your Mortgage Decisions, said: ‘Families are facing a perfect storm of inflation, higher mortgage costs and energy bills.’