More than 40% of available mortgages have been taken off the market since the UK government announced its mini budget on Friday, figures show.
Lenders began suspending the products on Monday as they struggled to price them amid uncertainty in financial markets – and volatility and the number of deals removed have snowballed this week.
The latest data from Moneyfacts, which monitors the sector, revealed on Thursday that another 321 mortgages had been withdrawn overnight, bringing the total to 1,621, with 2,340 remaining on sale. In the previous 24-hour period, 935 packages were removed, double the previous record of 462 at the start of the pandemic shutdowns.
According to financial research firm Defaqto, more than 20 providers have withdrawn their entire range of fixed rate mortgages.
Some of the biggest lenders said they would revise their offers in a few days, while others preferred to wait until financial markets calmed down. HSBC, TSB and Kent Reliance were among the lenders to withdraw products on Thursday, Moneyfacts said.
Katie Brain from Defaqto said: “Remaining products are changing at a rapid pace, lenders really seem to be at a loss as to what to offer and at what price with so much change in the money markets at the moment.”
First-time home buyers said their home buying plans had been dashed by the escalating cost of mortgage financing. Homeowners with fixed rate products, most of them for two years, say the cost of remortgage has doubled interest payments, adding more than £2,000 a year to the typical annual cost .
The cost of mortgages soared on Monday after financial operators raised the cost of borrowing from UK institutions. Forecasts that the Bank of England’s base rate is set to rise to 6% from 0.25% just a year ago meant that lenders had to reassess their products, in some cases for the fifth or sixth time this year.
Swap rates used to insure borrowing over a long period rose on Monday. The two-year swap rate jumped from 0.45% to over 5%, leading lenders to drop two-year mortgages from their product lineup.
Analysts expect the central bank to raise rates by at least 1% at their meeting in early November after chief economist Huw Pill said a significant hike was needed after an adverse reaction to the cuts taxes in the mini-budget.
Chancellor Kwasi Kwarteng announced £45bn in tax cuts, in addition to an energy price cap costing £150bn. He said further tax cuts should be expected in a full budget in November.
Investors spooked after the Chancellor said the cuts would have to be paid for with additional borrowing. There were also fears that Kwarteng’s “race to growth” could increase consumer demand at a time when the Bank of England was trying to cool spending with higher interest rates.
Economists have calculated that the central bank would be forced to raise interest rates more than expected, pushing the cost of interest rate mortgages to levels not seen since before the financial crash of 2008.
Moneyfacts said the situation had not yet stabilized and remained “a developing story”, adding that it was likely more products would be pulled this week.