Banks cut mortgage offers amid economic panic

Home buyers will hit a bottleneck taking out new loans as lenders pull mortgages at the fastest rate since the pandemic-induced housing market shut down.

Banks have responded to intensifying fears of major house price falls by reducing options for homeowners. The number of deals fell by 17pc between May and the end of July, according to Twenty7tec, a mortgage website. This was the largest drop since spring 2020 when house moves were effectively banned.

Lenders removed even more offers after the Bank of England announced the largest rise in the Bank Rate for 27 years on Thursday, taking the rate to a 14-year high of 1.75pc. The number of deals is expected to shrink further in the coming weeks, Twenty7tec warned.

James Tucker, of the firm, said lenders were cutting deals with smaller margins and focusing on less risky homebuyers, because of the darkening economic outlook. This could include offering fewer lower deposit deals as lending to such buyers is less appealing if house prices fall.

He added: “Some products make less economic sense when rates are higher, some buyers will have seen their risk profile change due to inflation, the changing jobs market, mortgage defaults and other macroeconomic conditions.”

Twelve major high street lenders have withdrawn deals since the Bank Rate rise was announced, according to Moneyfacts, an analyst.

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