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UK lenders suspend new mortgages amid market turmoil

Some of the UK’s biggest mortgage lenders, including Virgin Money and Skipton Building Society, have stopped offering new mortgages in response to market volatility caused by the government’s mini-budget.

Halifax, owned by Lloyd’s Banking Group mortgage A British lender is also withdrawing a series of new mortgages, he told brokers.

The moratorium on new lending comes after UK bond yields surged following tax cuts announced by the prime minister on Friday. Kwasi Kwarten.

“This is the first time since the global financial crisis that we have seen a significant product withdrawal and repricing in the mainstream market,” said Ray Bolger, an analyst at mortgage broker John Chacol.

“A significant rise in gilt yields means lenders will have to repricing their mortgages significantly. Lenders that haven’t pulled out yet will almost certainly do so on Tuesday.”

He said there are other lenders that have withdrawn new mortgage products, including Nottingham Building Society, Bank of Ireland, Leeds Building Society and Paragon Bank.

Paragon CEO Nigel Terrington told the FT:

Virgin Money is expected to return to the market later in the week when the market stabilizes, according to people familiar with the situation.

Halifax said it will withdraw a range of mortgage products with lower interest rates starting Wednesday. The lender said the measure was temporary, but did not give a timeline for when it would be reversed.

Lenders use swap rates to mitigate interest rate risk on fixed rate mortgages. “Swap rates are determined by the yield on gold coins that have just spiked,” Bolger said. “So it just increased costs for lenders.”

Real estate economists have warned that rising interest rates and turmoil in the mortgage market could trigger a deeper correction in house prices than those following the financial crisis.

Andrew Wishart, senior economist at Capital Economics, said the housing market was in uncharted territory after the Kwarten announcement.

Prior to the Prime Minister’s statement, a consulting firm had expected the Bank of England’s benchmark interest rate to peak at 2.25% to 4%, with mortgage rates at around 5%. sudden approach.

In that scenario, Capital Economics expects house prices to fall to levels close to those seen during the financial crisis. But prices could fall further if the base rate rises, Wishart said.

“At the moment, [forecast] A correction of 20% in real terms and 7% in nominal terms, which is close to financial crisis levels. . . At current house price levels, the mortgage rate is 6.6% [would] Affordability has deteriorated to levels not seen since 1990, with adjustments of almost 35% in real terms and 20% in cash terms. ”

A reduction in stamp duty, also announced in the budget, may soften some of the price declines, but is unlikely to have a significant impact, Wishart added.

“London’s depreciation may stall for a few months, but it’s already where prices stretch the most,” he said.

Interest rates of 6% are historically low, less than half of their peak in the late 1980s, but high house prices mean that affordability has been pushed to the limit, with many homeowners means that you have little room to cope if you are forced to refinance.

“It’s affordable. People are in a lot of debt, 6% [mortgage rates] It becomes difficult for everyone. People will spend less money and prices will soften,” said Henry Pryor, an independent realtor.

“Since Friday, 30% of the deals I have been involved in have already been restructured because someone is upset. prize.”

https://www.ft.com/content/a549fabb-da75-4935-a567-7128b7b04b76 UK lenders suspend new mortgages amid market turmoil

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