Tuesday 27 September 2022 06:17 PM Mortgage market turmoil continues: HSBC and Santander suspend new deals and ... trends now

HSBC and Santander have suspended new mortgage deals and Nationwide had increased its rates amid fears homeowners could be forced into selling their homes or take up a second job to combat 'catastrophic' rises in their monthly repayments.

The three banking giants, along with Lloyds, which today also paused some of its products, account for around half of the mortgage market in Britain.

Lenders have taken the step after analysts warned the base rate could surge to six per cent next spring, after the UK's Sterling plunged in response to Chancellor Kwasi Kwarteng's mini-Budget announcement last Friday, in which he revealed a historic £45billion in tax cuts. 

It comes amid fears the Bank of England will further raise interest rates to counter the plunging pound - increasing repayments for the average household by up to £800 per month, or £9,600 annually, by the middle of next year. 

Others to have pulled or amended deals include Clydesdale Bank, Scottish Building Society, Leek United Building Society, Nottingham Building Society, Bank of Ireland and Paragon Bank.

And banks that were still offering new mortgages this morning, including the likes of Barclays, HSBC and NatWest, were being overwhelmed with demand, The FT reports.   

Aaron Strutt, a broker at Trinity Financial, told the newspaper: 'One of our brokers is in an online queue to submit an application to HSBC and there are 683 others in front of him trying to do the same thing. 

'For the moment, there are options for borrowers, but we need the other lenders to come back into the market otherwise they will receive too many applications and pull out.'

In total, nearly 300 mortgage products were taken down from the market last night, according to data website Moneyfacts.

There are fears it could take banks as long as a week to reprice mortgage deals - leaving buyers in the dark. 

Mark Mullen, chief executive of retail bank Atom, also told the FT: 'The markets are very turbulent and being able to price them appropriately is very difficult, so we’re better off not guessing and waiting until things settle down a bit.'

It comes as a family-of-four have been forced to abandon their years-long plan to buy a suitably-sized home as they become the latest victims of surging interest rates. 

Sales executive Verity Blair, 35, said she and her fiancé Alex 'just can't afford to buy anymore' after the Bank of England upped the rate to 2.25 per cent last Thursday - meaning their monthly mortgage repayments would have been £4,000, double the price they were quoted in February of this year. 

The couple, who share twin daughters Penelope and Sofia, are now 'stuck' renting in the expensive London market after 'spending years' getting themselves in a position to buy a family home, branding the situation 'scary'. 

Meanwhile, HSBC and Nationwide reported no plans to change or withdraw mortgage offers, although the latter, alongside NatWest, said it would keep the market 'under review.' Lloyds TSB has yet to comment on its mortgages. 

Ms Blair told MailOnline:  'We are finally in a position to buy a family home outside of London, but the price point we were looking at in February of this year, just six months later would mean our monthly mortgage payments would double - from approximately £2,000 per month to £4,000 per month. 

'It's scary, because that is only set to increase. Everyone is talking about the energy price crisis but for most people their mortgage is the biggest bill they pay every month. I am not sure how people will cope when this comes to affect them when current fixed rates run out. 

'After several years of trying to get in a position where we can buy a family home, we continue to be stuck renting because we cannot afford to buy owing to rate hikes.'

The couple have another flat in London but are unable to sell as it is worth 15 per cent less than when it was purchased seven years ago. 

The climbing mortgage rates could spell disaster for millions of other families who are already struggling with the cost-of-living crisis, while first time buyers face monthly repayments upwards of £1,100, a third more than they were paying in January, according to property portal RightMove. 

Another homeowner, who only gave his name as Matthew H, said his social worker wife is now having to look for extra part time work to cover the rising mortgage costs. 

The couple's fixed rate at 1.34 per cent with Skipton will expire in January. 

He told MailOnline: 'An increased rate of 4.5 per cent (currently the best fixed) will no doubt be closer to 6 per cent when I am free to review options. On a mortgage of £340,000 this is going to add £500-plus to our monthly payments.

'The limited tax cuts afforded to middle class workers will not even scratch the surface. We are in times of deep worry, incompetent government policies and deafly silence from the treasury.'

He added: 'We can't sit here like chickens waiting to be plucked, so my wife is looking for a part time additional job to supplement family income.' 

A mother, who asked to remain anonymous, said she and her partner's mortgage payments were set to double under the new interest hike.

She said: 'I'm terrified, we both have good salaries and work full time. We have a daughter.

'This will push us into poverty.'

One landlord warned the 'banks will make people homeless and there will be empty houses which won't sell' after she and her partner's mortgage payments have soared by 89 per cent. 

Amanda Osborne, who owns five buy-to-let properties on variable rate mortgages, told MailOnline: 'Our income hasn't increased by that much. And obviously we cannot increase our tenants rent by 89 per cent to match these increases and certainly not as rapidly as the interest rates have gone up. It's simply unaffordable on incomes as they are.

'More interest rate increases, which seem inevitable given the BofE approach to this mess, is simply not affordable.

'So we are in a situation where we could sell but no one can afford to buy or we increase tenants rent so that it is unaffordable and they can't pay?

'Either way the banks will make people homeless and there will be empty houses which won't sell.'

Gary Sanders, 53, said the successive increases in mortgage rates so far this year alone have forced him to put his home back on the market. 

He told MailOnline: 'People are suffering now because of the seven increases since the end of last year. My mortgage has already risen from just over £500 a month to £1200 a month. I know they are going to go higher. I have put my property on the market as I have no choice but to sell.

'I am a 53 year old man who has worked hard his whole life and I find myself being forced to move back with my parents.'

He added: 'I am a staunch conservative but what a sorry state this country is in after 12 years of conservative leadership.'

It comes as other homeowners took to social media today to say they are 'terrified' of the rising interest rates, as one wrote on Twitter: 'I think we may end up homeless.' 

Another said he 'laid awake at night' worrying about how he would afford the hike in repayments, branding it 'anxiety on steroids', while a single mother pleaded for help, adding: 'I am so scared.' 

Others said they were 'so glad' that they had been locked into longer fixed deals, meaning they won't be affected by the rate rises until their terms end. 

'I'm VERY thankful for my fixed rate mortgage at the moment,' one wrote, 'things look pretty dicey for folks whose deals will expire soon.'  

Meanwhile, lenders like Halifax reported 'extremely busy' phone lines as homeowners scrambled to remortgage or chat with a mortgage advisor. 

The base rate is currently at 2.25 per cent after the seventh consecutive increase last Thursday – up from a record-low of 0.1 per cent in December.

An increase to as high as 6 per cent next year would be a major blow for around two million homeowners who have variable loans, which move in line with the base rate. 

There are also a further 1.8million borrowers who are currently locked into cheap fixed deals which are due expire over the next year.

They now face paying thousands of pounds more a year when they come to remortgage as lenders frantically hike rates to reflect analysts' predictions. 

Someone who took out a £200,000 two-year fixed mortgage in March 2021, when the average rate was 1.5 per cent, would see their annual bill leap by £7,000 if rates rise to 6 per cent, according to figures from investment firm AJ Bell.

In another setback for borrowers desperately seeking to lock into an affordable fixed deal, many lenders have responded to interest rate uncertainty by temporarily quitting the market altogether. 

As many as 20 lenders moved to withdraw dozens of loans yesterday, according to mortgage broker L&C.

The pound steadied in early trading in Asian markets on Tuesday as it recovered ground slightly. 

Sterling sat around around 1.08 dollars by 7am, but economists have warned it could still fall to parity with the dollar this year for the first time.

Senior Tory MP Huw Merriman - who backed former chancellor Rishi Sunak for Conservative leader - warned Liz Truss may be losing voters 'with policies we warned against', as a new YouGov survey put Labour 17 points ahead, the party's greatest lead since the firm started polling in 2001.

Mortgage giant Halifax pulled all its products for homebuyers that charge a fee 'as a result of significant changes in mortgage market pricing' in recent weeks.

A string of smaller lenders followed in its footsteps.  

Halifax stressed that it had not changed its mortgage rates and that it continued to offer arrangement fee-free options for borrowers. 

Meanwhile, Virgin Money removed its entire range for new customers. Applications for mortgages which have already been submitted will be processed as normal and existing borrowers will still be able to transfer to a different deal. 

Among other lenders, HSBC said it had no plans to change mortgage offers while NatWest said its rates were under 'continual review in line with market conditions'.

David Hollingworth, of mortgage brokers L&C, said: 'Volatile funding costs are forcing lenders to re-price their loans. That's been true all year but that volatility received a turbo-boost as markets react to last week's events. As a result, more are taking the decision to step back until the dust settles.' 

He added: 'Strong demand for fixed deals as borrowers look to batten down the hatches poses another issue as if they get the pricing wrong they could be swamped with applications which they are not able to process efficiently.'

Experts have warned that middle-class homeowners who stretched themselves to buy bigger homes could be among the worst-hit by soaring mortgage costs. 

Mortgage broker Rachel Dixon said: 'Middle-income families, who don't always benefit from financial help from the Government, will be the most impacted.

'These families are already squeezed with the cost of living, so this will just be another added burden for them.'

Mortgage companies are also now factoring in higher household bills when calculating how much homeowners can afford to borrow – which could make it even harder to find a competitive deal. 

And they are becoming increasingly cautious about lending to those individuals they deem riskier, such as first-time buyers with small deposits and the self-employed.

Aneisha Beveridge, head of research at estate agent Hamptons, said: 'First-time buyers will be amongst the hardest hit by rising rates. Not only is inflation eroding their ability to save, but higher interest rates are also affecting how much they can afford to borrow.'

Sarah Coles, a senior analyst with the Hargreaves Lansdown financial services company, said: 'Rate prediction is a notoriously difficult business. 

'But what's not in any doubt is that rates are on their way up and the more that inflationary forces build, the higher they are likely to go.'

The Pound fell dramatically in the wake of Kwasi Kwarteng's mini-Budget, but the Bank of England stopped short of an emergency interest rate hike.

Governor Andrew Bailey issued a statement insisting Threadneedle Street 'will not hesitate to act', but did not pull the trigger on an increase that markets had anticipated.

The move came after Mr Kwarteng tried to calm market fears by announcing he will lay out fiscal rules on government debt as part of an Autumn Statement on November 23 - alongside a full independent assessment of the state's books.

But economists fear Sterling could slump to parity with the US dollar this year for the first time. It sat at about 1.08 US dollars on Tuesday.

Shai Weiss, chief executive of Virgin Atlantic, today urged Prime Minister Liz Truss to take a 'difficult decision' which will boost the currency's value.

Speaking at a press conference in central London, he said: 'The weakness of the pound is hurting, not Virgin Atlantic, it's hurting the economy and it's hurting consumers because it's actually fulfilling or fuelling the inflation vicious cycle that we're in...