UK mortgage deals disappear from market

The number of home loan products fell by 3% last weekend, as interest rate predictions change

The number of available mortgage deals in the UK fell after predictions of higher interest rates. EPA

The number of available mortgage deals is shrinking in the wake of last week's inflation figures and the correspondingly revised forecasts for interest rates.

Since last week, the number of residential home loan products available in the UK dropped by 390, or more than 7 per cent, to 4,995 by Wednesday, according to data company Moneyfacts.

Saturday was the biggest one-day decline so far this year, with the number of products now at its lowest since March.

West Bromwich Building Society, Darlington Building Society, Clydesdale Bank, Furness Building Society and Accord Mortgages all reportedly withdrew selected products from the market.

The disappearing mortgage deals are a direct consequence of April's inflation figures, released last week, which showed while headline inflation had fallen, core inflation increased.

The Consumer Prices Index (CPI) rose by 8.7 per cent in the year to April, down from 10.1 per cent in March. But annual core inflation, which strips out food and fuel costs, rose by 6.8 per cent in April, up from 6.2 per cent in the previous month. and the highest rate since March 1992.

This has led analysts to forecast that interest rates will rise by more and for longer than had previously been predicted. Most economists see interest rates now peaking at 5.5 per cent this year, up from the current 4.5 per cent.

Last week, former member of the Bank of England's rate-setting Monetary Policy Committee, Willem Buiter, said that 4.5 per cent would “not do the job”, while predicting a peak of “no less than 6 per cent”.

There had been some concern in the mortgage market even before the inflation data was released last Wednesday – swap rates, which effectively set the price of borrowing that lenders use to fund mortgages, crept up by almost 1 per cent in April.

Not only did mortgage lenders begin increasing the rates on their new products, they also started to remove others from the market.

“Over the past few days, we have seen a few lenders withdraw selected fixed products, with some pulling out of the market,” said Rachel Springall, a finance expert at Moneyfacts.

“Product choice has started to fall, and as may be expected, average fixed mortgage rates are on the rise.”

An estate agent in London. The number of mortgage deals on the market dropped last weekend. Getty Images

Nonetheless, while the UK mortgage market is experiencing a drop in the number of deals, there are still more and cheaper deals than there were following the ill-fated mini budget of the Truss government last October.

The interest rates on mortgage products that are available have risen as well.

The average rate on a two-year fixed deal is now 5.45 per cent and the average rate on a five-year fixed is 5.12 per cent.

A year ago, those rates were 3.03 per cent and 3.17 per cent respectively.

Home sales falling

Meanwhile, figures released from HM Revenue and Customs showed that home sales plunged by a quarter in April, compared with the same month last year.

An estimated 82,120 transactions took place in April, down 25 per cent on the same month in 2022.

In addition, residential property sales were 8 per cent lower in April when compared to the previous month, a drop the HMRC referred to as “particularly large”.

Part of the drop was put down to March being the final month for purchases to be completed under the government's Help To Buy equity loan scheme.

“This disappointing number, combined with the recent equally disappointing inflation figures and the resulting increases in market expectations for interest rates, mean that the housing market slowdown is likely to be longer and deeper than we originally anticipated.” Mike Scott, chief analyst at estate agency Yopa.

While spring and summer months are traditionally busy times in the residential real estate market, analysts say this year is different.

“While inflation has finally started its descent, high mortgage rates could continue to put a dampener on transactions as moving home or taking the first step on to the property ladder becomes increasingly unaffordable,” said Karen Noye, a mortgage expert at Quilter.