Some smaller UK lenders pull mortgage products as markets churn: brokers

LONDON (Reuters) – Some smaller British mortgage lenders temporarily withdrew and repriced products for new customers on Thursday, a consequence of a spike in British market interest rates following unexpectedly strong inflation data this week.

The moves had echoes of a more severe temporary shutdown of the mortgage market in late September and early October last year, sparked by investor reaction to former Prime Minister Liz Truss’s economic agenda, known as the “mini-budget”.

At least seven small lenders, mostly focused on the buy-to-let market, have pulled products or announced a repricing this week, according to mortgage brokers contacted by Reuters.

None of the major high street banks, which are better able to weather turbulent markets, have withdrawn or repriced products this week as a result of the market conditions, unlike last September.

Britain’s high inflation rate cooled by much less than expected in April, according to data published on Wednesday, prompting investors to ramp up bets on more Bank of England interest rate increases this year.

Government bond yields have soared, representing a sharp tightening of financial conditions in Britain which will be a concern to BoE officials.

The two-year British swap rate, which underpins mortgage pricing for two-year deals, has shot up some 51 basis points so far this week.

If sustained into Friday, it would mark the biggest weekly jump since September 1989, excluding the period around the mini-budget.

Mortgage lenders regularly reprice products in response to conditions in their funding markets, although it is relatively rare to temporarily withdraw or reprice en masse.

(Reporting by Andy Bruce; Editing by William Schomberg)