UK Mortgage Market Changes Announced By Metro Bank and Principality
In a fast-moving mortgage market, the latest developments from Principality Intermediaries and Metro Bank signal yet more turbulence for borrowers and brokers alike. Principality’s decision to withdraw several residential mortgage products and Metro Bank’s upcoming repricing across its ranges are indicative of the pressure lenders face as swap rates continue to climb. It really is anyone’s guess at the moment as to what lenders in the UK are going to do. However, we can certainly try to make sense of the fluctuations and perhaps offer some insights. In this article I will run through the latest updates from Principality and Metro, and offer my own thoughts and opinions.
Principality’s Bold Move Amid UK Mortgage Market Changes
Principality Intermediaries’ announcement to withdraw all two-year fixed products at 65% and 75% loan-to-value (LTV) this evening at 5:30pm is not entirely surprising to me to be honest, given the current economic climate. While the lender has kept tight-lipped about its motivations, the rising swap rates (up 10 basis points for two-year terms in just a month), are undoubtedly a major factor.
Increased swap rates directly impact lenders’ funding costs, making it more expensive for them to offer competitive fixed-rate deals. Principality’s move appears to be a pre-emptive strike to avoid offering unprofitable rates. Because, after all, lenders need to make money! Rather than waiting for market conditions to force their hand, they’re choosing to pause, recalibrate, and likely reintroduce products at higher rates, unfortunately for potential borrowers in 2025.
Why Metro Bank Is Repricing Its Mortgage Range
Metro Bank, on the other hand, is taking a different approach. Instead of withdrawing products, they’ve opted to reprice their residential range, including near-prime, large loans, and professional mortgages, from today. While the lender hasn’t explicitly linked their decision to rising swap rates, the timing is no coincidence. So I think that it is safe to say this is the main reason.
What’s clear is that Metro Bank is aiming to remain competitive while protecting its margins. The rising costs of securing funds in the market mean that lenders must balance affordability for borrowers with sustainability for their business. This repricing exercise might cushion Metro Bank against potential losses, but it also sets a precedent for higher borrowing costs in the months to come.
Rising Swap Rates And Their Impact On Lenders
Last week, myself and some of my colleagues from Oportfolio Mortgages attended a talk given by Chris Hare, economist at HSBC. Among his points about economic growth slowing in 2024 and the impact of the US economy on the UK markets, Hare also spoke about bond markets and swap rates. The backdrop to these moves from Principality and Metro is the relentless rise in swap rates, driven by turbulence in the bond markets. Over the past two weeks, economic uncertainty has sent yields soaring, with two-year swap rates jumping to 4.245% and five-year rates to 4.117%. For borrowers, this spells higher rates across the board, with two-year fixes particularly vulnerable. Something that Hare also predicts.
In my opinion, Principality’s withdrawal of short-term fixes could be seen as a red flag. It hints at a lack of confidence in offering competitive deals in this volatile environment. For Metro Bank, the repricing is a necessary adjustment to market realities, but it still underscores the challenges lenders face.
What These UK Mortgage Market Changes Mean For Borrowers
For borrowers, the message is clear: act quickly. If you’ve found a deal you’re happy with, secure it now before rates rise further or products are pulled altogether. For brokers like us at Oportfolio, these changes demand even greater vigilance and adaptability. Staying on top of product updates and communicating promptly with clients has never been more important.
Speak To A Mortgage Advisor
It’s worth remembering that these are not isolated incidents. Swap rates are a barometer of lender sentiment, and their upward trajectory suggests further market tightening. As lenders adjust to protect their bottom line, borrowers need to be prepared for fewer options and higher rates in the near future. For now, the key is staying proactive. The market may be turbulent, but opportunities remain for those ready to move swiftly. At Oportfolio Mortgages, we’re here to navigate these challenges with our clients and ensure they secure the best deals available, even in uncertain times. If you’d like tailored advice on how these changes might affect your mortgage plans, don’t hesitate to get in touch with us. The market may be shifting, but with expert guidance, you can still find the right path forward.
