Halifax, Virgin Money and Skipton Building Society withdraw mortgages from sale in wake of mini budget

Banks and building societies are withdrawing some of their mortgages from sale after the government’s tax-cutting mini-budget sparked massive market turmoil.

Three lenders have so far withdrawn some of their products amid the uncertainty that saw the pound plummet to a historic low, prompting predictions of spiralling interest rates.

Virgin Money and Skipton Building Society have temporarily withdrawn their entire mortgage product range, while Halifax - the country’s largest mortgage lender - has said it is withdrawing all mortgages that come with a fee. Fee-paying mortgages allow borrowers to pay a fee in exchange for a lower interest rate.

Virgin Money said: “Given market conditions we have temporarily withdrawn Virgin Money mortgage products for new business customers.

“Existing applications already submitted will be processed as normal and we’ll continue to offer our product transfer range for existing customers. We expect to launch a new product range later this week.”

Halifax’s changes are due to take effect on Wednesday (28 September), while the Virgin Money and Skipton Building Society decisions have already taken effect.

Halifax said: ““As a result of significant changes in mortgage market pricing we’ve seen over recent weeks, we’re making some changes to our product range.

“There is no change to product rates, and we continue to offer fee-free options for borrowers at all product terms and LTV levels, but we’ve temporarily removed products that come with a fee.”

Skipton Building Society said it has withdrawn its offers for new customers, in order to “reprice” given the market movement in recent days.

A spokeswoman said: “We have temporarily withdrawn our mortgage range to new customers. This is so we can reprice following the market response over recent days. A new range will shortly be back on sale.

“Customers with applications in progress are not affected by this and our existing customer range still remains available.”

Huge rise in interest rates expected

The decisions from mortgage lenders were taken after markets started predicting massive rises in interest rates this and next year.

The Bank of England is expected to hike its base rate by another two percentage points by the end of the year, and rates could top 6% next year according to market expectations.

The slump of the pound to its lowest level against the dollar since decimalisation in 1971 on Monday even raised the prospect of an emergency rate hike from the Bank.

However, Governor Andrew Bailey later released a short statement that said the Bank would change interest rates “by as much as needed” to get inflation back to its 2% target.

Consumer Prices Index inflation is currently sitting at around 10% and is expected to peak higher later this year.

The markets have been in turmoil since Chancellor Kwasi Kwarteng announced his and Prime Minister Liz Truss’s plan for the economy last week, which included major tax tax cuts and high-borrowing.

Mr Kwarteng claimed on Sunday that the tax cuts, which include abolishing the top rate of income tax for the highest earners, “favour people right across the income scale” amid accusations they mainly help the rich.

He and Ms Truss have defended the package, despite analysis suggesting the measures will see only the incomes of the wealthiest households grow while most people will be worse off.

Three days after his fiscal statement, the Chancellor also indicated his announcements were just the beginning with possible further reductions in income tax and the loosening of immigration rules in the New Year.

Mr Kwarteng, who has launched a review of all tax rates ahead of a formal Budget, is reportedly considering abolishing a charge for parents who earn more than £50,000 and claim child benefit, increasing the annual allowances on pension pots and a tax break for people who stay at home to care for children or loved ones.