Finanze® Daily Digest - 27/09/2022

The Brief: Some of UK’s largest lenders have temporarily withdrawn new mortgage products in response to the market rout that began last week. The swift reaction came after UK two-year gilt yields rose to 3.87% and 10-year gilts to 3.72% when chancellor Kwasi Kwarteng delivered his mini-Budget speech on Friday.

Why It Matters: The rise in gilt yields impact swap rates that are used by lenders to influence their mortgage prices. New fixed-rate loans are withdrawn from the market to protect their service levels.

Finanze® Foresights: This reaction is a result of a combination of several factors: the Bank of England’s interest recent rate hike, Kwarteng’s growth plans that has been met with scrutiny, the pound’s plunge, and the massive government debt sell-off. However, this was already expected last week since in times of greater market uncertainty, lenders usually pull out their deals until the bond market returns to stability. Take note that this is temporary. Kwarteng will be meeting with British banks, asset companies and insurance firms today to discuss his fiscal measures together with City minister Andrew Griffith. This will somehow restore a bit of market confidence in the coming days as we await the full details of the Medium-Term Fiscal Plan on November 23rd.

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