Two UK lenders temporarily pull new mortgage
deals amid volatile market
Virgin Money and Skipton building society withdraw
deals for new customers as drop in pound leaves banks unable to price products
Virgin Money notified brokers it would temporarily
withdraw mortgage products for new customers by 8pm on Monday.
Kalyeena
Makortoff Banking correspondent
@kalyeena
Mon 26 Sep
2022 19.22 BST
UK lenders
Virgin Money and Skipton Building Society temporarily withdrew mortgage deals
for new customers on Monday, reacting to financial market volatility prompted
by the government’s mini-budget.
Lenders
were struggling to accurately price their products, after the pound fell to new
lows and sent the interest rate on government debts to a 12-year high, in what
brokers predicted is just the start of a major shift in the UK mortgage market.
Virgin
Money sent an alert to brokers notifying them that it would temporarily
withdraw its mortgage products for new customers by 8pm on Monday. Similar
notifications were sent by Skipton Building Society, which said it would pull
its own products immediately.
“Following
last week’s [Bank of England base rate hike to 2.25%] and the government’s
subsequent mini-budget, we continue to see the market response unfold,” Skipton
said in an email to brokers. “In response, we will be temporarily withdrawing
our new business product range with immediate effect.”
“We haven’t
taken this decision lightly but have done so in order to avoid further
disruption for you and your clients,” Skipton added.
A
spokesperson for the building society said it was hoping to reprice its
mortgages and assured that “a new range will shortly be on sale”. “Customers
with applications in progress are not affected by this and our existing
customer range still remains available,” they added.
Earlier on
Monday, Halifax, the UK’s largest mortage lender, said it had withdrawn its
mortgage products offering arrangement fees in return for lower interest rates
and was moving to a full fee-free range.
It was the
latest fallout from the government’s mini-budget on Friday, with investors
concerned over the long-term impact of sweeping tax cuts and a huge rise in
government borrowing.
Nicholas
Mendes, of the mortgage broker John Charcol, said that the markets were so
unpredictable that lenders were unable to price their products, a process which
usually only involves forecasting economic conditions, including interest
rates, two weeks in advance.
It was
causing a chain reaction in the market where no lender wanted to be the last one
standing with mortgages on offer, for fear of being swamped with applications.
Mendes said it was “uncharted territory” for borrowers.
A
spokesperson at Virgin Money confirmed that the lender would continue to serve
existing borrowers hoping to remortgage at the end of their terms, and would
review its products for new customers by the end of the week, assuming markets
stabilise.
“Given
market conditions, we have temporarily withdrawn Virgin Money mortgage products
for new customers,” a Virgin Money spokesperson said. “Existing applications
already submitted will be processed as normal and we’ll continue to offer our
product transfer range for existing customers. We expect to launch a new
product range later this week.”
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