House sales collapse as UK lenders withdraw mortgage offers

Some hopeful house buyers have had their mortgage offers fall through. PHOTO: BLOOMBERG

LONDON - Deals for house purchases are collapsing in Britain after lenders pulled mortgage offers as concerns rise that the Bank of England (BOE) will have to hike interest rates to support the pound.

The Guardian reported on Tuesday that nearly 300 mortgage deals have been pulled in the last 24 hours by banks and building societies, after a fall in the pound fuelled forecasts of a jump in interest rates to nearly 6 per cent.

Smaller lenders such as Kensington, Accord Mortgages and Hodge were among those to say they were withdrawing products on Tuesday. That follows the decision by Lloyds Banking Group - Britain's biggest mortgage provider - on Monday to halt some offers, while Virgin Money UK temporarily stopped offering home loans to new customers.

Major firms weighed in later on Tuesday. HSBC Holdings told brokers it was removing new mortgage products for the rest of the day, while Nationwide Building Society announced it was increasing rates across product ranges starting on Wednesday. Banco Santander said it was removing some products and increasing rates on many others.

Ms Jessica Anderson, a 33-year-old who works in publishing, was set to buy a house in Walthamstow, east London, with her husband until the seller pulled out last week.

"We're in an uncertain position where we're not sure whether it still stands," she said, regarding the couple's mortgage offer. "Since the approval, there have been two interest rate increases."

Traders are betting the BOE will raise its key interest rate to 5.9 per cent by September next year, compared with 0.1 per cent a year ago, sending home loan costs spiralling for the 1.8 million people who need to remortgage next year.

A series of unfunded tax cuts from new Chancellor of the Exchequer Kwasi Kwarteng has rocked the pound and British government bonds, and forced the BOE to issue an emergency statement pledging to lift rates "as much as needed" to control inflation.

Analysts at Credit Suisse said in a note that house prices "could easily fall 10 per cent to 15 per cent".

Some hopeful house buyers have had their mortgage offers fall through, according to Ms Loubie Vaughan, founder of estate agent FG Consultants. She said one buyer had £900,000 (S$1.4 million) in cash to buy a £1.4 million house in Camden, north London, but that the deal is now in doubt.

"I told him to sit tight and see how it plays out," she said. "There's no point running around like headless chickens when we don't know what's going to happen."

Ms Vaughan added that she expects house prices to fall despite Mr Kwarteng cutting stamp duty, a tax on housing transactions, last week. Property Log, an extension that tracks home price changes on portal Rightmove, said Monday saw the biggest number of price cuts it has recorded since it began tracking them more than four years ago.

"There will obviously be people who are left stranded," said Mr Ray Boulger, a manager at loan broker John Charcol. "Some lenders have given no notice, and with some we are getting e-mails during the day saying rates are being pulled at 5pm. There will undoubtedly be people in the process of securing their mortgage who will miss the boat."

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, he added.

Between Friday morning and Tuesday morning, the number of residential mortgage products on the British market fell 9 per cent to 3,596 from 3,961, according to data compiled by Moneyfacts Group. Atom Bank has lifted its rates by 1 per cent on some mortgage offers and withdrawn others.

The systems at some lenders are unable to cope with a flood of applications because everyone is trying to fix in at current rates, said Mr Andrew Montlake, managing director at mortgage broker Coreco. Bigger lenders are now being overwhelmed as other firms temporarily withdraw from the market.

"My nerves are shot," said Ms Hannah Fearn, 40, a freelance writer in south London and another hopeful house buyer. "Our mortgage offer lasts until mid-January and we have just put in another best and final offer, but if we don't get this particular house I'm not sure what we'll do." BLOOMBERG

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