Tesco Bank last week became the latest lender to pull out of the UK mortgage market, blaming “challenging” market conditions.
The bank has more than 23,000 mortgage customers with total lending balances of £3.7bn and has been offering mortgages for the past seven years.
Here, we explain what it means for borrowers when a lender stops offering mortgages.
What will happen to existing mortgage customers?
If a bank announces that it no longer plans to offer mortgages, this won’t have any immediate impact on its existing borrowers.
Banks are obliged to keep to the terms and conditions of their mortgages, so there’s no need for borrowers to panic.
What if the mortgages are sold to a new lender?
When a lender decides to pull out of the mortgage market, it may sell its mortgage book on to a new lender. The new lender must also keep the terms and conditions of any mortgages it buys in place.
However, there are no guarantees that the new lender will offer the same level of service that the previous lender provided, or that ongoing variable rates won’t change in the future. It’s also a possibility that they might not offer any deals for borrowers to switch to.
What can I do to protect myself against any potential changes to my mortgage in future?
The best thing all borrowers can do is to regularly review their mortgage to make sure they’re on the best possible deal.
It’s particularly important to think about what you’ll do when your existing deal ends, as moving onto your lender’s standard variable rate will usually mean a big jump in monthly payments. Check what sort of rates your lender will offer you when your mortgage deal finishes and compare these to other mortgages available from other lenders.
Remember that you can usually secure a new mortgage 3-6 months before your current deal finishes, and with very attractive mortgage rates available at the moment it may make sense to act sooner rather than later.
What happens when your lender pulls out of the mortgage market?