Mortgage products dropped in record numbers as fears grow of fall in house prices

Moneyfacts counted 2,661 mortgage products on the market on Wednesday, down from 3,596 the previous day

Lending giants have been raising mortgage rates and withdrawing products amid the market turmoil. Bloomberg
Beta V.1.0 - Powered by automated translation

A record number of mortgage products have been pulled as the UK economy comes under fire and industry leaders warn of drops in house prices into next year.

Higher interest rates, the risk of recession and inflation could force house prices down by between 10 per cent and 15 per cent in the next year, analysts said.

The Bank of England stepped in on Wednesday to try to ease pressure on the British economy after the pound dipped and the stock markets tumbled.

The financial meltdown is also a political controversy for the new UK Prime Minister, Liz Truss, who had ordered her chancellor, Kwasi Kwarteng, to deliver a mini-budget to tackle rampant inflation.

His tax cuts and borrowing plan helped light the fire that forced the pound and markets into freefall and prompted a warning from the International Monetary Fund., a financial services organisation, said 935 fewer residential mortgage products were on the market on Wednesday compared with Tuesday – the highest fall on its records going back to November 2011.

Moneyfacts counted 2,661 mortgage products on the market on Wednesday, down from 3,596 on Tuesday. EPA

It is also around double the previous record, when the choice fell by 462 on April 1, 2020, in the early days of the UK's coronavirus pandemic lockdowns.

"Borrowers would be wise to keep calm over the current volatility in the mortgage market and seek the advice from an independent broker Moneyfacts finance expert Rachel Springall said.

"Borrowers who are currently locked into a fixed rate may be better off coming out of their deal early to refinance before rates climb higher, but this entirely depends on their current situation and the costs to do so,” she added.

"Those looking to remortgage may find they have more equity in their home amid rising house prices, but first-time buyers may be struggling to find a property they can afford."

Moneyfacts counted 2,661 mortgage products on the market on Wednesday, down from 3,596 on Tuesday.

House prices

But it could also be just the start of bigger problems in the housing sector.

“I think we can expect to see a significant fall in house prices, perhaps around 10% next year,” said Ray Boulger, a senior mortgage technical manager, told BBC Radio 4’s Today programme.

“The key factor in house prices is how much people can afford on their monthly mortgage. The biggest issue is the monthly cost.

“With the cost shooting up so far a lot of people thinking of buying are going to rethink those plans. They may not buy at all. If they are going to buy they will buy at a lower level.”

Lending giants have been hiking mortgage rates and withdrawing products amid the market turmoil that followed last Friday's mini-budget.

HSBC, Santander and Yorkshire Building Society have all removed or reduced mortgage options.

Price sensitivity is showing signs of returning to the housing market as house hunters' buying power takes a hit, according to the Zoopla property website.

Zoopla said 6 per cent of homes listed for sale have seen the asking price adjusted downwards by 5 per cent or more – the highest level since before the coronavirus pandemic.

The website said that given the economic backdrop and factors including rising energy prices and rising interest rates, this is a clear sign of a return to more of a buyers' market, after two years of a market that favoured sellers.

Updated: September 28, 2022, 4:09 PM