Homebuyers Beware: The Case of the Vanishing Mortgages

The UK mortgage market is currently experiencing a significant downturn, with hundreds of mortgage deals disappearing from the market within the space of a week. Finance data website Moneyfactscompare.co.uk reports that the number of deals had shrunk by more than 370 since the start of last week, and several providers have withdrawn selected fixed mortgage products in recent days. Some have even pulled their entire fixed rate range. This fresh chill blowing through the mortgage market comes amid concern about further interest rate hikes, inflation, and Brexit-related uncertainties.

On May 11, the Bank of England hiked the interest rate to 4.5% in the 12th successive rise in a row, which has contributed to several rate increases. Consumers looking to refinance will find rates averaging 5%, compared to 3% a year ago. As a result, product choice has started to fall, and average fixed mortgage rates are on the rise. This volatility is down to the concerns surrounding future interest rate hikes, and lenders are reassessing their propositions, said Rachel Springall, a finance expert at Moneyfactscompare.co.uk.

David Pett, director at MJP Conveyancing, said: “It is vital borrowers seek advice to assess the situation and to find a mortgage that suits their circumstances.” With fewer mortgage deals available, it is essential to assess all options to ensure you get the best deal suited to your financial situation.

Experts predict that the current state of the UK mortgage market is set to continue for some time. The ongoing uncertainty around Brexit negotiations, coupled with rising inflation and interest rates, means that lenders will remain cautious. However, there are also opportunities for the market to recover and thrive. In this article, we will explore the various factors affecting the UK mortgage market, including the recent drop in available mortgage products, and what borrowers and lenders can do to navigate these challenging times.

Reasons for the Recent Drop in Available Mortgage Products

The current state of the UK mortgage market can be attributed to a combination of factors, including increasing interest rates, inflation, and Brexit-related uncertainties. The Bank of England’s 12th successive interest rate hike has been a significant contributing factor to the drop in available mortgage products. Since May 2017, the base rate has risen from 0.25% to 0.50%, adding to the cost of borrowing.

This increase in interest rates has led to several rate increases by lenders, with borrowers looking to refinance now finding rates averaging 5%, compared to 3% a year ago. This has resulted in many lenders reassessing their propositions, with some pulling their entire fixed-rate range. Others have withdrawn selected fixed mortgage products, leaving borrowers with fewer options to choose from.

Brexit-related uncertainties have also played a significant role in the downturn of the UK mortgage market. With the ongoing negotiations between the UK and the EU, lenders have become increasingly cautious, closely monitoring market conditions. This has resulted in fewer mortgage deals being offered, with lenders concerned about the potential risks associated with lending.

The Impact on the Property Market as a Whole

The current state of the UK mortgage market is having a significant impact on the property market as a whole. With fewer mortgage deals available, buyers are finding it increasingly difficult to secure financing for their property purchases. This has resulted in a slowdown in the housing market, with sales volumes falling to their lowest level in five years.

The Royal Institute of Chartered Surveyors (RICS) has reported that house prices are expected to remain flat over the next few months, with levels of sales remaining relatively subdued. The slowdown in the property market is also affecting the construction industry, with house building activity falling to its lowest level in six months.

Furthermore, the lack of mortgage products available has made it more challenging for first-time buyers to enter the market. This group often relies heavily on mortgage deals, especially those with lower interest rates or more flexible terms. With fewer options available, first-time buyers are finding it increasingly challenging to secure financing, which is limiting their ability to purchase a home.

Mortgage Providers and How They Have Reacted to Market Fluctuations

Several mortgage providers have reacted to the recent market fluctuations by increasing their rates or withdrawing products altogether. Nationwide Building Society, for example, made rate increases of up to 0.45 percentage points on its mortgages, which only affects customers taking out a new mortgage deal. This move was in response to the Bank of England’s increase in the base rate, and several other lenders have followed suit.

Other lenders have withdrawn their entire fixed-rate range, citing concerns over future interest rate hikes and Brexit-related uncertainties. Lloyds Banking Group, for example, removed its entire range of 90% loan-to-value (LTV) fixed-rate mortgages from the market, leaving many borrowers with limited options.

Despite the challenges facing the UK mortgage market, some lenders are still offering competitive deals. HSBC, for example, recently launched a two-year fixed-rate mortgage at 1.34