There are fresh fears of a property market slowdown this morning amid reports that borrowers could have to prove that they can afford interest rates of up to 7% to qualify for a mortgage.
Major lenders have pulled deals from sale at a record pace following the continued financial fallout from Friday’s multibillion-pound tax giveaway which has rocked financial markets.
The Bank of England is facing having put up interest rates further and faster, with the base rate expected to peak at 5.5% next spring.
The Times reports today that this has knock-on effects for would-be homeowners because affordability rules require banks to test whether borrowers can afford a mortgage at one percentage point above future expectations of the base rate, or their lender’s standard variable rate.
This means borrowers could have to prove they can afford mortgage rates of 6.5 or 7%, where they are fixing for up to five years. Halifax, Britain’s largest mortgage lender, now has a standard variable rate of 5.74%
Lenders pull deals
Moneyfacts, an analyst, said 935 deals were withdrawn by spooked lenders. This is more than double the previous record daily fall, which was 462 withdrawals on April 1 2020, during the first Covid lockdown.
On Wednesday TSB confirmed it was pulling six deals for both residential buyers and landlords with immediate effect and competitor Barclays said it would withdraw seven fixed deals for new borrowers overnight.
The latter was not able to confirm when these mortgages might return to the market.
FTSE 100
The Bank of England’s intervention in financial markets helped the FTSE 100 to claw back losses and close up 20 points yesterday at 7,005.39.
Meanwhile, the FTSE 250 recovered to close broadly flat, up 16 points at 17,320.97.
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