Hundreds of mortgage deals have vanished from the market in recent days amid wider economic turmoil.
Analysis of the market by Moneyfacts.co.uk found that on Friday last week, the day of the mini-budget, 3,961 residential mortgage products were available.
By Monday this week, the total had fallen to 3,880.
By Tuesday, it had shrunk further to 3,596 deals – a reduction of 365 compared to Friday, the analysis for PA news agency found.
The overall choice of mortgage deals remains significantly higher than it was during the depths of the coronavirus pandemic, which also caused significant economic uncertainty.
A particular low point was in October 2020, when 2,259 mortgage deals were available.
The market remains considerably volatile
Rachel Springall, Moneyfacts.co.uk
During the pandemic, low-deposit mortgage deals, often used by first-time buyers, were particularly at risk of being pulled as lenders were concerned about “riskier” lending.
But this time around, the mortgage withdrawals appear to be more evenly spread across different loan-to-value (LTV) brackets.
Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “The upheaval in the mortgage market may cause frustration amongst both borrowers and brokers as they see deals disappear overnight.
“The market remains considerably volatile so it’s vital consumers seek independent advice to assess what their best options are right now.”
David Hollingworth, associate director communications at broker L&C Mortgages, said those who already have a deal agreed with their lender do not need to worry.
He also said that he did not think it would be too long before lenders come back with new deals.
Mr Hollingworth said that while it is not unusual for lenders to withdraw deals, what has happened in recent days has been “incredibly fast-paced”.
He said that “lenders are having to rethink”, which may be due to cost changes, as swap rates, which lenders use to price their mortgages, have increased.
Lenders will also have an eye on what others in the market are doing and will want to price in a way which protects their own service levels, he added.
I don't think it will be too long before you see lenders coming back
David Hollingworth, L&C Mortgages
Mr Hollingworth said he expects them to “relaunch once the dust settles” — which could generally be at higher rates than previously.
He added: “The more it (withdrawing deals) happens, the more you reduce the choice for borrowers, but I don’t think it will be too long before you see lenders coming back.”
On Monday, Virgin Money said: “Given market conditions we have temporarily withdrawn Virgin Money mortgage products for new business customers.
“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.”
Halifax also said on Monday that it was withdrawing mortgages that come with a fee.
“As a result of significant changes in mortgage market pricing we’ve seen over recent weeks, we’re making some changes to our product range,” it said.
“There is no change to product rates, and we continue to offer fee-free options for borrowers at all product terms and LTV levels, but we’ve temporarily removed products that come with a fee.”
The Skipton Building Society said on Monday that it had also withdrawn its offers for new customers, in order to “reprice” given the market movement in recent days.
The decisions were taken after markets started predicting massive jumps in interest rates this year and next.
The Bank of England is expected to hike its base rate by another two percentage points by the end of the year, and rates could top six per cent next year according to market expectations.
The Resolution Foundation think tank said on Monday that for a homeowner with a £140,000 mortgage, rates rising to five per cent could mean monthly payments increasing by around £190, relative to rates remaining at 2.25 per cent.
Interest rates of six per cent would push this typical mortgage payment up by around a further £80 a month, or roughly £1,000 a year, the foundation said.