Halifax drops products while some building societies have stopped lending entirely in wake of market turmoil

Shares in housebuilding firms have continued to fall following the news that major mortgage lenders, including the Halifax, have started withdrawing mortgage products in the wake of turmoil on the foreign exchange markets.

Major housebuilder share prices dropped by more than 3% in early trading, following on from large losses yesterday, as a raft of lenders pulled products and others stopped lending entirely.

The Halifax, part of the Lloyds Banking Group and one of the UK’s biggest lenders, said it had decided to temporarily stop offering all of its mortgage products which charge a fee for borrowers, though it will continue to offer all of its fee-free mortgages at current rates. Mortgages which charge fees tend to have lower rates.

mortgage application

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The number of mortgage products available to would-be buyers has dropped by 300 in the past 24 hours

According to data compiled by personal finance service Moneyfacts.co.uk, mortgage lenders including Virgin Money, Vida Home Loans, Skipton Building Society, the Bank of Ireland and Post Office Money have stopped lending entirely.

Others, such as Monmouthshire Building Society, Bath Building Society and Furness Building Society, have stopped offering fixed rate mortgages, while others, such as the Coventry Building Society, have increased their fixed rate products.

Moneyfacts said nearly 300 mortgage deals have been pulled in the last 24 hours by banks and building societies after the fall in the pound fuelled forecasts of a jump in interest rates.

The news comes amid widespread expectations in the market that the Bank of England will have to raise interest rates further and faster than previously planned in order to counteract the impact of the government’s mini-budget on the value of the pound.

Ray Boulger, analyst at mortgage broker John Charcol told the Financial Times that the big re-pricing of government borrowing meant that lenders will have to “reprice mortgages very significantly”. He said: “By next week there will be very few mortgage deals available with rates under 5%.”

Early trading saw shares in Barratt fall back 3.5% this morning, with Taylor Wimpey dropping 3.1% and Persimmon 2.9%. The sector has now on average lost around a tenth of its value since chancellor Kwasi Kwarteng delivered his mini budget on Friday morning.

Vadim Toader, CEO & co-founder of new mortgage lending firm, Proportunity, said the situation was leaving first time buyers “high and dry”.

“The weakening of the pound and increasing interest rates has put lenders in a tough position, where it is not viable for them to offer the mortgage rate deals, we were seeing only last week. This means, to access a decent rate, home buyers will need significantly higher deposits.”

Privately, housebuilders are expressing frustration that the government’s handling of last week’s mini-budget is now likely to lead to sharp additional rises in mortgage costs for potential buyers, which could impact the market.

In recent updates to the City, housebuilders had already indicated that the market had weakened from the post-covid highs seen in the last 18 months.

One housebuilder said: “It’s pretty frustrating. Interest is still high but uncertainty doesn’t help people make a decision to buy.”

A spokesperson for the Home Builders Federation said: “Lenders should ensure that they are properly assessing households but continuing to provide products to people who can afford to buy, and helping purchasers get a foot on the ladder.

“If we are to build the homes the country needs, and deliver the associated social and economic benefits, the industry needs confidence in the supply of mortgages.”