In any league table of institutions with the keenest view of what’s happening in a local economy, banks should be ahead of the pack. So the fact British lenders are starting to exhibit a lack of faith in the UK housing market is a worrying barometer of how fragile the economic outlook is becoming.
The prospect of the end to the government’s furlough support in October means unemployment will worsen, making it harder for people to pay their bonds and other household bills. To defend themselves, mortgage providers are cranking up the rates they charge on home loans. Lenders are seeking to protect themselves from a worsening economic downturn in other ways as well. The overall number of bond products on offer has contracted by a staggering 54% since March, Moneyfacts estimates, while the average fee charged for arranging a home loan has risen to its highest level since February 2013.This trend had nothing to do with market participants anticipating higher interest rates from the Bank of England as might usually be the case without a global pandemic.