The Financial Conduct Authority (FCA) reached out to banks after the withdrawal of over 1,600 mortgage products by high street lenders.
Britain’s banks pulled a record 935 mortgage products overnight on Tuesday, according to Moneyfacts, after chancellor Kwasi Kwarteng’s fiscal plan plunged UK financial markets into chaos.
The FCA asked lenders exactly what options borrowers have when their fixed-rate mortgage terms end, the Financial Times reported, with around 3.2mln customers expected to have to renew their deals within two years.
The financial watchdog is reportedly concerned that borrowers will struggle severely to pay interest rates of above 5-6%.
"We are monitoring developments closely and will be working with industry to ensure that consumers are treated fairly during this period,” Sheldon Mills, FCA head of competition and consumers, commented.
Lloyds-owned Halifax, which is the country’s largest lender, confirmed it would withdraw its fee-paying mortgage products, while Virgin Money and Skipton Building Society temporarily paused the sale of their whole ranges.
Fee-paying mortgages let borrowers pay a sum to decrease the interest rate on their repayment.
Kwarteng unveiled the most extensive programme of tax cuts for 50 years, but the scale of the borrowing necessary to fund it has sent the pound sinking and sparked speculation the Bank of England will have to intervene heavily to support the currency.
Analysts have said the Bank of England will hike rates to 6%, up from 2.25% following the latest rate rise on 22 September.
Despite the widespread criticism, prime minister Liz Truss insisted on Thursday she would stick to the plan to reignite economic growth, while the chancellor thinks it will be essential in helping reset the debate around growth.