Mortgage mayhem: NatWest increases rates as Santander temporarily pulls some deals – as it happened

Time for a recap…

There’s been more mayhem in the UK mortgage markets, as lenders withdraw offers or lift their rates, as high inflation drives up mortgage costs.

Santander became the latest major lender to temporarily pull its mortgage deals for new borrowers from sale.

Santander told mortgage brokers that it would stop accepting new applications for its “new business” residential and buy-to-let fixed and tracker rates at 7.30pm tonight, with deals not becoming available again until Wednesday.

The move shows that the turmoil in the home loans market shows no signs of abating, coming just days after HSBC temporarily withdrew its offers as borrowers raced to secure a deal.

NatWest announced sweeping increases to its mortgages rates.

It is putting up the rates on selected products for house purchases and remortgages, and some aimed at first-time buyers, by 20 basis points (0.2 percentage points).

But landlords face sharper increases, with two-year fixed deals for Buy to let purchases increasing by up to 157bps.

One mortgage broker said the move could be “the death knell for buy-to-let, at least with NatWest.”

The market has been destabilised by the UK’s higher-than-expected inflation, which is likely to lead to more interest rate increases.

Today, Bank of England policymaker Jonathan Haskel said that “embedded inflation would be worse” than the current high interest rates, which may head higher this year.

Haskel, a professor of economics at Imperial College’s business school, said the Bank of England recognised the pressure households and businesses were under, but warned persistently high inflation had wider economic costs as well.

He wrote in The Scotsman:

“As policymakers, we are required to make difficult judgements.

“My own view is that it’s important we continue to lean against the risks of inflation momentum, and therefore that further increases in interest rates cannot be ruled out.”

Wholesale borrowing costs have kept rising today, with the yield (or interest rate) on U two-year debt hitting 4.6% today, the highest since last autumn’s market panic.

That could push mortgages prices higher in coming days, as people warn that rising costs are already unaffordable:

The average rate on a new two-year fixed mortgage has continued to creep up and stood at 5.86% on Monday, according to the financial data provider Moneyfacts, compared with 5.26% at the start of May.

The financial markets indicate the Bank of England is certain to raise interest rates again when it meets later this month. A quarter-point rise is seen as a 75% chance, with a 25% possibility of a half-point hike, to 5%.

Elsewhere today…

Brexit, rising corporate taxes, growth concerns and political turmoil are causing US businesses to lose confidence in the UK as a place to invest, a new report shows.

Strikes by security guards at Heathrow Airport planned for June 24 and 25 have been postponed following an improved pay offer…..

….as storms have led to thousands of easyJet passengers flying to and from Gatwick have had their flights cancelled due to storms in the last 24 hours.

National Grid has asked a coal-fired power station in the east Midlands to warm up to cope with extra electricity demand for air conditioning as much of Britain swelters in the heat.

More than 2,000 workers are set to lose their jobs at delivery giant Tuffnells as the business fell into administration.

Mike Ashley’s Frasers Group has taken an 18.9% stake in the online electricals retailer AO World in a £75m deal involving buying out shares held by crisis-hit Odey Asset Management.

UK mortgage brokers are concerned by NatWest’s mortgage rate increases, which they say will hurt the buy-to-let market in particular.

Lewis Shaw of Riverside Mortgages, says:

I’m no longer sure what level of reality I’m meant to be operating on. This could sound the death knell for buy-to-let, at least with NatWest.

Something has clearly spooked the money markets around 2pm today, and the 2-year gilt yield has shot above its peak following the mini-Budget in September. This is extremely worrying and I don’t know where it ends.

Riz Malik of R3 Mortgages warns that landlords face more ‘hardship and pain’:

The considerable rise in mortgage rates on buy-to-let properties underlines the flux in the market at present and introduces yet more hardship and pain for numerous landlords.

With each passing day, the financial calculations seem to make less sense. This a significant blow for the entire UK buy-to-let market.

Last autumn, we warned that amateur landlords face a financial cliff edge from rising borrowing costs….

NatWest are also adjusting their mortgage rates, upwards, joining the rush by lenders to reprice their loans amid the turbulence in the market.

The bank says:

“Effective 13th June we’re making changes to our end dates and rate changes to our new and existing customer product ranges”

The changes include some large increases for buy-to-let loans, with products increasing by up to 1.57 percentage points – a really hefty rise, which will hit landlords looking to remortgage.

There are also smaller increases for other mortgage products.

This shows that the increase in wholesale borrowing costs today (see earlier post) is having a ripple impact on mortgages, on top of Bank of England policymaker Jonathan Haskel warning that further interest rate increases can’t be ruled out….

Here are the details of NatWest’s changes.

New Business Rate Changes

• Purchase: Rate increase of 20bps on selected 2 year and 5 year deals.

• Remortgage: Rate increase of 20bps on selected 2 year and 5 year deals.

• First time buyer: Rate increase of 20bps on selected 2 year and 5 year deals.

• Shared equity – purchase: Rate increase of 75bps on selected 2 and 5 year deals.

• Buy to let – purchase: Rate increase of up to 157bps and 122bps on selected 2 and 5 year deals.

• Buy to let – remortgage: Rate increase of up to 124bps and 114bps on selected 2 and 5 year deals.

• Help to Buy shared equity – remortgage: Rate increase of 20bps on selected 2 and 5 year deals.

• Green – purchase: Rate increase of up to 20bps on selected 2 and 5 year deals.

• Green – remortgage: Rate increase of up to 20bps on selected 2 and 5 year deals.

• Buy to Let green – purchase: Rate increase of up to 138bps and 115bps on selected 2 and 5 year deals.

• Buy to Let green – remortgage: Rate increase of up to 107bps and 110bps on selected 2 and 5 year deals.

Existing Customer Rate Changes

• Switcher: Rate increase of up to 35bps and 30bps on selected 2 and 5 year deals.

• Switcher – tracker: Rate increase of up to 55bps on selected 2 year deals.

• Buy to Let – switcher: Rate increase of up to 42bps and 26bps on selected 2 and 5 year deals.

Newsflash: The first summer strikes at Heathrow Airport, involving over 2,000 security officers, have been postponed.

Security officers at Terminal Three and Five as well as campus security workers were due to walk out on Saturday 24 June and Sunday 25 June.

But the Unite union has announced the industral action has been frozen, after Heathrow Airports Ltd (HAL) made an improved pay offer.

This follows “extensive talks” with Unite last week, says the union.

Unite regional co-ordinating officer Wayne King said:

“Following extensive negotiations last week a new offer was put forward by HAL. Members will now be balloted on the latest offer and they will decide whether or not it meets their expectations.”

As we reported earlier, Heathrow chief executive John Holland-Kaye had said this morning that strikes were unlikely to cause flight cancellations.

Wholesale borrowing costs are continuing to rise today, putting more pressure on the mortgage market.

The yield, or interest rate, on UK two-year government bonds has risen to 4.6%, for the first time since last September, when the mini-budget chaos was rocking the markets.

These two-year gilts are used to price fixed-term mortgages, so this could lead more lenders to temporarily withdraw their deals and reprice them, higher….