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28 Sep, 2022 14:39

Soaring interest rates take toll on UK property market – Bloomberg

House purchases have dropped as British banks withdraw mortgage offers amid rising borrowing costs, the outlet reports
Soaring interest rates take toll on UK property market – Bloomberg

House sales in the UK are in steady decline after the country’s banks started actively pulling mortgage products in response to mounting interest rates, Bloomberg reported on Tuesday.

Between Friday morning and Tuesday morning, the number of residential mortgage products on the UK market dropped by 9% to 3,596 from 3,961, according to data compiled by Moneyfacts Group, as cited by the agency.

As the financial markets are clearly signaling that the Bank of England might need to raise interest rates as high as 6%, the country’s major financial institutions like Santander, HSBC and Nationwide, as well as smaller lenders, are indicating that the end of cheap mortgages is coming to an end.

On Monday, Lloyds, biggest mortgage provider in the UK, halted some offers, while Virgin Money UK temporarily stopped offering home loans to new customers. Meanwhile, smaller lenders like Kensington, Accord Mortgages and Hodge followed suit by saying on Tuesday that they were withdrawing products.

HSBC removed new mortgage products for the rest of the day on Tuesday, while Nationwide Building Society said it was increasing rates across product ranges from Wednesday. Banco Santander said it was removing some products and increasing rates on many others.

Last week, the Bank of England raised interest rates from 0.5% to 2.25% – the highest level in 14 years. It was a seventh consecutive rise by the regulator.

Traders expect the central bank to hike its key interest rate to 5.9% by September next year versus 0.1% a year ago. The increase will inevitably send home-loan costs soaring for the 1.8 million people who need to remortgage in 2023.

House prices “could easily fall 10% to 15%,” according to analysts at Credit Suisse, as quoted by Bloomberg.

Meanwhile, so-called “chains” of multiple house purchases, where each buyer is dependent on the sale of their existing home, may start collapsing when any one of the deals falls through, Ray Boulger, a manager at loan broker John Charcol told the agency.

For more stories on economy & finance visit RT's business section

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