Banks and building societies have withdrawn more than 900 mortgages since the Bank of England cut the base rate to 0.1% last week.
In the last eight days, the number of available deals has fallen from 5,697 to 4,761 – a drop of 16% – with tracker mortgages the biggest casualty.
Here, Which? explains what these cuts mean for homeowners due to remortgage and first-time buyers hoping to secure a loan later this year.
Lenders cut deals amid coronavirus outbreak
Earlier this week, Barclays and Halifax both announced they were withdrawing their broker-only ranges, and it seems other lenders have followed suit.
Since last week’s emergency base rate reduction, 936 mortgages have been withdrawn from the market, as shown in the graph below.
Which deals are being withdrawn?
Though there have been withdrawals right across the board, the biggest drop has been in the number of tracker mortgages, which has fallen by 47%, from 306 to 163 in eight days.
Why are banks withdrawing deals?
A range of circumstances related to the coronavirus outbreak has resulted in lenders pulling their deals.
First of all, many banks are overwhelmed by calls from homeowners looking to take the three-month mortgage payment holiday offered by the government, and are directing their limited resources towards these customers.
Secondly, many of the withdrawn deals are for buyers with smaller deposits. This suggests lenders are shying away from ‘riskier’ mortgages due to uncertainty about what will happen to the value of homes during a period where few transactions are going through, as well as the logistical issues of conducting valuation surveys during a lockdown.
Finally, the Bank of England’s decision to cut the base rate to an historic low was always likely to impact on the number of tracker mortgages – which follow the base rate plus a specific percentage. You can find out more on what’s happened to trackers in our full story from last week.
Can I still remortgage?
The property market is set to grind to a halt for a while, but existing homeowners will still need to switch deals at the end of their fixed terms.
The good news is that it’s still possible to switch your mortgage, though you may need to be patient as banks are facing huge demand at the moment.
Fortunately, the best rates are still available. The number of two-year fixes has dropped by 24% in a week and the number of five-year deals has fallen by 15%, but the cheapest rates are largely the same, as shown in the chart below.
- Find out more: how to save thousands by remortgaging
How will first-time buyers be affected?
In a time of uncertainty, banks are most likely to withdraw what they consider to be ‘riskier’ products, such as mortgages for first-time buyers with small deposits.
And that’s certainly been the case in the last week. Since the base rate fell, lenders have withdrawn 18% of their 90% mortgages and 24% of their 95% mortgages.
Again, it’s important not to panic, as there are still plenty of cheap deal.
Mortgage offers generally last for six months so you can still apply for an agreement in principle and lock in a good rate now, but in the current climate, it may be best to wait it out for a while and see what happens to the market over the next few months.
Help for existing mortgage holders
In the last couple of weeks, the government has introduced a series of policies to help people with their mortgages if they’ll suffer financial loss as a result of the coronavirus outbreak.
Last week, it announced that homeowners and landlords can apply for a three-month mortgage payment holiday if their income will be affected. You can find out how the payment holiday works and how to apply in our full guide.
And earlier this week it was announced that people in the process of buying a house can benefit from a three-month extension of their mortgage offer if they need to delay their completion date. You can get the full details in our guide on moving home during the lockdown.
- Find out more: how the coronavirus affects mortgages, savings and banking
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