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Wednesday, November 30, 2022

Mortgage market goes crazy in the United Kingdom: Financial chaos causes banks to withdraw offers for new customers

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The financial chaos initiated by the new government of Liz Truss has caused many banks to halt mortgage activity due to the instability of financial conditions. Virgin Money and Skipton Building Society have withdrawn mortgages for new customers and Lloyds-owned Halifax has suspended loans with commissions linked to lower interest rates.

The collapse of the pound and the British debt is having a major impact on the UK mortgage market. Within a few days, the financial situation in the country has changed radically, although the tension has already escalated., Truss’s tax cut package and investors’ distrust of his finance minister Quasi Quarteng have sparked financial turmoil, which is already being felt down the road.

Many financial institutions are pointing to the volatility of interest in the markets to withdraw mortgage offers to new customers. Lloyds acknowledged in a statement that its Halifax subsidiary withdraws some products to change terms, “As a result of significant changes in mortgage market prices.” In theory, your new offer will come out next Wednesday.

The entity is specialized in offering low interest rates in exchange for higher links or higher commissions. for its part, Virgin Money and Skipton Building Society They have temporarily withdrawn mortgages directly from their product catalogs. And they explain that it is because of “volatile market conditions” that have led to “significant changes in mortgage market prices”.

Market interests are skyrocketing for everything that smells like a pound, in less than two months, Required interest on two-year British bonds increased from 1.8% to 4.3%, And what’s even more shocking is that the two-year debt rate is higher than the ten-year bond, which is trading below 4.2%. The interest rates used by banks are not immune to this volatility and have also become more expensive, but the rates have gained such momentum that it is difficult for banks to determine suitable terms.

Official rates are at 2.25% now, but the market discount increases to 6%. The pressure yesterday became unbearable for the Bank of England to hold an extraordinary meeting to raise rates in a jiffy. In practical terms, there is talk of promoting 200 original hit points. ,I think fixed rate mortgages below 5% will be available by next week.“, explains Ray Boulger, mortgage broker at John Charcoal. The Bank of England and the Treasury limited themselves to issuing two statements to try to calm the market.

As is the case with Euribor, reference mortgage rates in the UK are rising in line with market expectations.

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