Following Monday morning, where the pound fell to its lowest ever level against the US dollar, three lenders have temporarily pulled mortgages that come with fees for new customers. Halifax, followed by Virgin Money and Skipton, are withdrawing their products due to market volatility. Ultimately, these lenders cannot afford to place fixed loans due to the uncertainty of borrowing.
So what’s happening to mortgage rates?
At the moment, mortgage rates are already rising due to increasing inflation. The fall of the
pound on Monday, lead to concerns and anticipation of inflation. So, the expectation that the Bank of England would hike rates to bring it down again has arisen. This news will impact those borrowers who are taking out a new deal- so, this means first time buyers, home movers or those remortgaging. For these people, there will be fewer mortgages
from which you can choose, but also rates will be rising. In context, someone who fixed for 2% two years ago could be looking at a remortgage rate at 5% by next week.
How will this affect the housing market?
With soaring mortgage rates there will naturally be an impact to the housing market, and many have been suggesting the falling pound and subsequent mortgage withdrawal might lead to a housing market crash. A rise in mortgage interest rates could prove disastrous for the property market as people simply won’t be able to afford their mortgage payments. This could cause a wave of properties to come to market just when demand is drying up. House prices would fall if this occurs.
But, we are still suffering a severe lack of stock in the market and an ever increasing population of renters wanting to buy, means house prices are unlikely to see a severe crash. Furthermore, the stamp duty cut will also help keep demand in the market. So, if you are looking to sell your home, don’t let this mortgage pulling put you off. It is unlikely to cause any substantial market crash, particularly when looking at a long term scale. Property, particularly in the Dorset area, is always in high demand from consumers in the property market.