Hundreds of mortgage deals have been pulled from the market in the midst of financial panic after the UK government's 'mini budget'. It's bad news for house movers and those looking for re-mortgage deals.
Consumer champion and money saving expert Martin Lewis says it is "no surprise the mortgage market is in turmoil". He adds: "The situation is nearly unprecedented, what's happening is changing very fast, and is extremely uncertain."
The Bank of England raised the base rate by half a percentage point last week to 2.25%. And while it was the highest rate since 2008, this wasn't the catalyst for deals to be withdrawn. It was actually the announcement of tax cuts and massive government borrowing which spooked the markets.
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Lenders pulling mortgage deals and not replacing them or replacing them with less attractive deals means less choice for borrowers. Martin Lewis, writing on the MoneySavingExpert website, says: "All this pushed Bank of England governor Andrew Bailey to say on Monday [September 26] that more rate hikes are on the way. The markets are now working on the fact that the base rate could rise to nearly 6% by next spring.
"If those rate predictions ring true (and the markets are not always right), without any further measures, that would likely push millions renewing when their fixes end into 'can't pay my mortgage' territory, with its own knock-on effects for the economy." Explaining further, he said: "For each 1 percentage point your mortgage rate increases, expect to pay roughly £50 more a month (£600/year) per £100,000 of mortgage debt."
On Tuesday, September 28, the Mirror reported that eleven banks and building societies were pulling or tweaking mortgages due to the economic fallout of the 'mini-budget'.
The full list of lenders as of Tuesday included the county's own Nottingham Building Society as well as household names Halifax, Santander, Virgin Money, Skipton Building Society, Clydesdale Bank, Scottish Building Society, Leek United Building Society, Bank of Ireland, Paragon Bank and Darlington Building Society.
Martin offer advice to borrowers via the MoneySavingExpert website but warned: "We'll do our best to guide you through some sensible moves, but no one really knows what's coming next."
Advice varied depending upon the type of mortgage held and when asked, 'should I act now?' he said: "It's a tough call. Normally we'd caution against knee-jerk reactions on the back of what's happening in the financial markets.
"However, with rates being repriced constantly, if you are in the position where you are free to get a new mortgage (such as those coming to the end of a fix, or already on a standard variable rate), it's worth checking, and doing so immediately." Martin Lewis' guide can be read in full on the MoneySavingExpert website that he founded.
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