Mortgage rate panic causes home purchases to fall through as HSBC pulls loans

 ( Evening Standard)
( Evening Standard)

Home purchases are starting to fall through as a direct result of the extraordinary spate of turmoil in the mortgage market, brokers warned today.

Major lenders have withdrawn hundreds of deals over the past fortnight, often at short notice, as a result of soaring bond yields on expectations that interest rates will have to go higher to rein in inflation.

Yesterday afternoon HSBC became the latest top player to pull its loans, telling brokers at lunchtime that it would remove all its mortgage deals by 5pm.

However, following a stampede of demand it withdrew all its products at 3.45pm with nothing available until Monday. Meanwhile Britain’s second biggest mortgage lender Nationwide said it would reprice most of its fixed rate deals today with increases of up to 0.25%. Brokers spoke of panic among clients as they scrambled to secure mortgages.

Craig Fish, director at Docklands-based brokers Lodestone Mortgages & Protection, said: “I’ve just had two clients pull out because of this. Client one had their application going through nicely and had an offer accepted on their property, but due to increased interest rates their buyer pulled out as they could no longer afford the mortgage and so my client’s purchase is also back to the drawing board.

“Client two had to pull out of a purchase as they couldn’t afford the mortgage that they required. Slightly different scenario as they were sticking with their current lender and porting, but the extra they needed was just too expensive.”

Gaurav Shukla, CEO at Whitechapel based brokers, home me, said: “I’ve had a few clients this week decide to back out from purchasing a property shortly after they’ve had an offer accepted due to rates being taken off the market with little or no notice. We’ve seen a couple of mainstream lenders pull rates with no notice at all and this creates urgency with brokers and panic among customers to an extent.

“Customers don’t have much time at all to think about the recommended products as they need to apply ASAP for it to be secured and unfortunately, the mortgage market isn’t in a position to offer this to the clients at the moment.”

“We will undoubtedly see more purchases being put on hold as mortgage rates have increased by anywhere from 0.50% to 0.77%.”

The worst instability in the market since the aftermath of the mini-Budget last September was triggered by worse than expected inflation figures for April.

The rate fell only to 8.7% raising fears that the Bank of England will have to hike rates to as high as 5.5%.

Data from analysts Moneyfact suggests that market rates are starting to level out. The average two year fix rate went up only marginally from 5.82% to 5.83% while the average cost of a five year deal fell from 5.49% to 5.48%.