Afternoon summary
Time for a recap…
There’s been more mayhem in the UK mortgage markets, as lenders withdraw offers or lift their rates, as high inflation drives up mortgage costs.
Santander became the latest major lender to temporarily pull its mortgage deals for new borrowers from sale.
Santander told mortgage brokers that it would stop accepting new applications for its “new business” residential and buy-to-let fixed and tracker rates at 7.30pm tonight, with deals not becoming available again until Wednesday.
The move shows that the turmoil in the home loans market shows no signs of abating, coming just days after HSBC temporarily withdrew its offers as borrowers raced to secure a deal.
NatWest announced sweeping increases to its mortgages rates.
It is putting up the rates on selected products for house purchases and remortgages, and some aimed at first-time buyers, by 20 basis points (0.2 percentage points).
But landlords face sharper increases, with two-year fixed deals for Buy to let purchases increasing by up to 157bps.
One mortgage broker said the move could be “the death knell for buy-to-let, at least with NatWest.”
The market has been destabilised by the UK’s higher-than-expected inflation, which is likely to lead to more interest rate increases.
Today, Bank of England policymaker Jonathan Haskel said that “embedded inflation would be worse” than the current high interest rates, which may head higher this year.
Haskel, a professor of economics at Imperial College’s business school, said the Bank of England recognised the pressure households and businesses were under, but warned persistently high inflation had wider economic costs as well.
“As policymakers, we are required to make difficult judgements.
“My own view is that it’s important we continue to lean against the risks of inflation momentum, and therefore that further increases in interest rates cannot be ruled out.”
Wholesale borrowing costs have kept rising today, with the yield (or interest rate) on U two-year debt hitting 4.6% today, the highest since last autumn’s market panic.
That could push mortgages prices higher in coming days, as people warn that rising costs are already unaffordable:
The average rate on a new two-year fixed mortgage has continued to creep up and stood at 5.86% on Monday, according to the financial data provider Moneyfacts, compared with 5.26% at the start of May.
The financial markets indicate the Bank of England is certain to raise interest rates again when it meets later this month. A quarter-point rise is seen as a 75% chance, with a 25% possibility of a half-point hike, to 5%.
Elsewhere today…
Brexit, rising corporate taxes, growth concerns and political turmoil are causing US businesses to lose confidence in the UK as a place to invest, a new report shows.
Strikes by security guards at Heathrow Airport planned for June 24 and 25 have been postponed following an improved pay offer…..
….as storms have led to thousands of easyJet passengers flying to and from Gatwick have had their flights cancelled due to storms in the last 24 hours.
National Grid has asked a coal-fired power station in the east Midlands to warm up to cope with extra electricity demand for air conditioning as much of Britain swelters in the heat.
More than 2,000 workers are set to lose their jobs at delivery giant Tuffnells as the business fell into administration.
Mike Ashley’s Frasers Group has taken an 18.9% stake in the online electricals retailer AO World in a £75m deal involving buying out shares held by crisis-hit Odey Asset Management.
One factor pushing up UK mortgage rates is that UK government bonds are falling in value, pushing up borrowing costs (the yield on the bonds).
NEW
— Faisal Islam (@faisalislam) June 12, 2023
UK 2 year borrowing costs (gilt rate) has gone above US equivalent - pretty rare in past several years… a couple of times in late 22 and 21 - hasn’t really happened in a sustained fashion since end 2014… uk rates anticipated to be higher for longer, given sticky inflation. pic.twitter.com/9eKV0T2mYr
Those two-year gilts, now yielding 4.62% today, are used to price fixed-rate mortgages.
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