Britain's biggest lender, others, pull products as Bank of England keeps up rate rise rhetoric
Virgin Money and Skipton Building Society will temporarily withdraw their mortgage offerings, while Halifax has dropped its fee-paying products amid news of hefty tax cuts in the UK.
Their moves follow a mini budget unveiled by chief financial minister of the UK government, Chancellor of the Exchequer Kwasi Kwarteng on Friday, September 23. Hailed by the UK government as a “Growth Plan,” it aimed to tackle high energy costs and inflation and deliver higher productivity and wages.
The mini budget included £45bn of tax cuts, the basic income tax rate of 19% to kick in one year earlier in April 2023, as well as cuts to stamp duty, cancellation of the planned rise in corporation tax and proposed “investment zones” offering temporary and targeted tax cuts for businesses.
Following the sweeping tax cuts, requiring billions of pounds in additional borrowing, British financial markets have been sent into turmoil, the British pound falling to a 37-year low of $1.035 against the US dollar early on Monday morning.
Following market volatility, mortgage lenders said on Monday they would temporarily withdraw and reprice products for new customers, Reuters reported.
Brokers said the moves were likely just the start of a big shift in Britain's mortgage market, the publication reported.
The UK’s biggest mortgage lender Halifax said it was withdrawing its fee-paying mortgage products, where borrowers could pay an arrangement fee in exchange for a lower interest rate, and that would instead move to a full free-fee range.
According to emails sighted by Reuters, Virgin Money and Skipton Building Society temporarily withdrew their entire ranges, with Virgin Money aiming for a relaunch later in the week.
"As a result of significant changes in the cost of funding, we're making some changes to our product range," a Halifax spokesperson said.
"Following last week's (Bank of England) meeting and the government's subsequent mini-budget we continue to see the market response unfold," Skipton Building Society said in an email to brokers.
"In response, we will be temporarily withdrawing our New Business Product Range with immediate effect."
Virgin Money said the withdrawal of its mortgage products for new customers would take effect at 8pm (1900 GMT).
"We continue to monitor the situation closely and currently plan to relaunch products for new customers towards the end of the week," Virgin Money said.
Halifax said there was no change to its product rates, and that it continued to offer fee-free options at all product terms and loan-to-value levels.
Brokers said other lenders were certain to make big changes to their mortgage offerings, Reuters reported.
Director of Dimora Mortgages Jamie Lennox said uncertainty around the risk of an emergency rate rise would likely result in other lenders withdrawing products or increasing rates dramatically, until they knew the extend of how everything would pan out.
Others expected mortgage rates to soar, the Bank of England saying on Thursday it would change interest rates “as much as needed” to return inflation to target.
Following publication of the Growth Plan, UK government bond yields rose by double-digit percentages in some cases on Friday. The 5-year British government bond yield - a benchmark for lenders’ mortgage funding - rose by 96 basis points on Friday and Monday combined.