Almost 1,000 bundles of mortgages were pulled from the UK market overnight as panic seeps into the property market in the wake of Kwasi Kwarteng’s mini-budget.
Moneyfacts, which monitors the sector, said 935 of the 3,596 mortgage products had disappeared between Tuesday and Wednesday, double the previous record of 462 at the start of the pandemic lockdowns.
The sudden change threatens to bring the housing market to a halt, with borrowers saying they have been unable to get loans or have had provisional offers withdrawn, while others are paying huge financial penalties for breaking their existing agreements and for lock in fixed rates for longer. .
From first-time shared property mortgagees to people with multi-million pound home loans, there is a palpable sense of a personal finance time bomb, with markets predicting that interest rates will almost they will triple from 2.25% to 6% next spring.
James Lindon-Travers, of mortgage broker Lindon-Travers Associates in Surrey, said he had a wealthy client willing to pay £95,000 in a penalty for breaking a fixed-rate deal.
“He has 21 months left on a five-year contract at 1.89% and, unfortunately for him, the early repayment charge is 5%. He is preparing to pay an early repayment charge of £95,000 in order to secure a new rate of 3.49% over seven years,” the broker said.
At the other end of the scale is Glen Robinson, who tried to remortgage his home to help finance the final stages of his divorce. He had agreed a fee of £160 a month but has now collapsed.
“Now I will probably be forced into a distressed sale to raise the money for the courts,” he said. “I am 68 years old and facing almost certain tax ruin as a result of the chain of events unfolding.”
A 42-year-old software engineer looking for a house in Cambridge, who asked not to be named, said she had signed her application for a two-year fixed mortgage at 4.32% on Monday evening , less than 12 hours after receiving the memorandum of sale for a two-bed property.
He spent Tuesday “panicking and refreshing Gmail” while reading articles about mortgage foreclosures. “At 4 in the afternoon I received an email asking me to sign the mortgage documents. A minute later I got another email from my broker saying that he had just been informed that my lender was throwing their rates tonight so if I wanted to secure my rate I had less than an hour to do it.
If the deal falls through, it says it will be priced “100%” out of the market at current interest rates. “It all boils down to that.”
New mortgage lender Jeff, who is paying £600 a month on a shared flat in London, said: “I’m already panicking, wondering if I have to get a new job. My mum told me not to scares, but you start thinking about all your costs, not just the energy bills but the ground rent, bringing packed lunches, showering at work instead of at home.”
Another young professional, Henry Langford, 31, said he chose shared ownership because it was the only way he could afford a flat on his own in an area of London where he wanted to live.
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“I’m very worried about this. Conservative policies probably protect people like me. I wouldn’t vote for them, but this has become a big trap. Will I have to sell? Will I be able to sell, or will I cough and try to weather the storm? He said .
“I think it’s the first time the middle classes are going to be pushed into this,” he said, referring to the broader cost-of-living crisis. “This is a bit of a wake-up call.”
Karen Noye, mortgage expert at wealth management firm Quilter, said: “Lenders’ systems have crashed with long virtual queues for borrowers and advisers trying to get them or their clients a deal on current rates”.
“It’s absolutely crazy out there. We’re getting lenders pulling offers with little or no notice. Normally they would give 48 hours,” Lindon-Travers added.
He says it was important for consumers to remember that banks were not withdrawing “deals” but only shop window offers. Mortgagees can still lock in rates six months before fixed offers expire and delay a decision on options until later.
“It’s not like the financial crash of 2008,” Lindon-Travers said. “The banks have money. The loan is still available and interest rates are still very low. It’s just that millennials are in a whirlwind and they’re not used to seeing higher rates.”