UK lenders halt mortgage deals to customers after market chaos

The British bond and currency markets have been in turmoil since Finance Minister Kwasi Kwarteng announced his “mini-budget” on Friday.

The turmoil in British bond markets caused some U.K. lenders to pull some of their mortgage deals.

Virgin Money and Skipton Building Society temporarily paused mortgage offers for new customers while Halifax is planning to halt any mortgage products with fees where lower interest rates are usually offered

A spokesman for Virgin Money said the move was due to market conditions.

The Skipton Building Society said they had paused their products in order to get a better price.

The British bond and currency markets have been in turmoil since the finance minister announced his mini-budget on Friday. The British pound fell to an all-time low against the dollar on Monday as the yield on the U.K. 10-year gilt soared to levels not seen since 2008.

The market moves indicated that the Bank of England would have to keep raising interest rates. The central bank wanted to bring inflation back to 2% and was keeping a close eye on developments.

Markets have begun pricing in a base rate rise to as high as 6% for next year, from 2% currently, raising concerns among mortgage lender and borrowers

If the Monetary Policy Committee increased Bank Rate as quickly as markets expect, the average quoted rate for a two-year fixed rate mortgage would rise to about 6 percent early next year.

The monthly repayments on a two-year fixed rate mortgage will increase from £863 in the first half of next year to £1,490 in the second half.

Some lenders have changed their product offerings due to market conditions.

After the wind changed, major mortgage players hauled in the sails. Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, commented in a research note that the cost of doing business has increased due to the hike in market expectations.

The developments mean that mortgage prices are going to increase and that borrowers are going to have less options. Over the last few months, a number of smaller lenders have stopped selling mortgage products due to rising rates.

Rob Gill is the managing director at Altura Mortgage Finance.

He said that the reduction in choice caused by larger lenders withdrawing from the market will only make the situation worse.

Smaller banks have been withdrawing from the market frequently in recent months as they struggle with rising interest rates. Mortgage borrowers are concerned about the shift to larger lenders such as Virgin Money.