Britain’s banks had pulled a record 1,000 home loans from the market on Tuesday, more than double the 462 products removed during the pandemic in April 2020, according to Moneyfacts. By Thursday, 1,621 deals had disappeared from the market in the days since the mini-Budget.
Virgin Money pulled its entire product range on Monday and came back into the market on Thursday with rates of between 5.24pc and 5.5pc. Many other lenders have adjusted their prices without removing products.
Capital Economics now expects mortgage rates to average 6pc by January next year, up from around 3.6pc in August.
If mortgage rates go up by that amount, the average household refinancing a two-year deal would see monthly repayments jump over 70pc from £863 to £1,490.
These new rates will all affect the borrowers on the 600,000 fixed-rate deals due to expire in the second half of this year, and 1.8 million deals ending next year.
Ray Boulger of mortgage brokers John Charcol says: “When we saw gilt yields go up by 50 basis points on Friday it was clear we were going to see lenders push rates up.
“I was actually surprised that most of them didn’t make that announcement until Monday or Tuesday. The writing was clearly on the wall on Friday, and there was another similar move on Monday that just made things look even worse.”
Borrowers coming off fixed rate deals rushed to remortgage before a rapid upswing in prices. The banks were overwhelmed with phone calls as borrowers sat on hold to secure a new deal. Disgruntled policyholders took to social media to vent their frustrations over call wait times, which in some cases appear to have stretched for between 2-3 hours. Some people have spent several days trying to get through to a mortgage advisor.
Barclays reached its daily booking limit by 10am on Wednesday and Santander was forced to draft in new customer service personnel to deal with the deluge in inquiries. The Spanish bank started redeploying colleagues from other parts of the bank to handle the surge in calls and its operators have been calling back customers in the evening to get through the backlog of queries.
‘It’s not something we’ve had to think about for 13 years’
Helen McIntyre, a marketing manager from Daventry, Northamptonshire, spent 3 hours and 15 minutes on Wednesday in a queue to speak with Santander. She has been on a variable rate mortgage since 2009, but now wants to switch to a five-year fixed rate product.
McIntyre says: “It’s not something we’ve had to think about for 13 years. But in the last week it’s massively accelerated from something that was practically running on autopilot, to something that’s consuming all our attention.”
When she finally got through to a mortgage advisor, McIntyre was told she could stay on her 20-year lifetime tracker mortgage or move to a fixed-term mortgage.
She says: “The best fixed rate they could offer for 4.14pc over five years, and there was a £999 fee to arrange it.
“At the moment, we’re paying 2.75pc, and before that it was 0.75pc. So it’s already gone up by 2pc from earlier this year. For us, it’s trying to weigh up whether switching to a fixed-rate mortgage is worth it — particularly if interest rates do eventually go up to 6pc.”
The danger of staying on her current mortgage is that her family may end up feeling the brunt of higher interest rates, when they could have locked in a lower rate earlier.
Pryor says it is reasonable for buyers to look for a discount given the current conditions.
He says: “I don’t begrudge them for a moment, it’s a nervous time, particularly if you are taking that first step onto the property ladder. You want to feel confident that you are doing the right thing.”
Pryor’s five property chain deal that faced uncertainty last week ultimately went through, as all the participants in the chain were able to spread the cost of the price cut. But there is no guarantee that other transactions will enjoy the same fate.
“We are all acutely aware that these are uncertain times and we are all wondering where the market will be in six months,” he says.
“It’s not an easy thing to predict and if I knew the answer to that I probably wouldn’t be here speaking to you. I’d be on a yacht in the Mediterranean laughing into a Martini.”