UK banks pull mortgage deals as borrowers rush to lock in rates
UK banks are pulling short-term mortgage deals and struggling to process a surge in demand, leaving borrowers frustrated as they rush to lock in rates before they rise again.
Lenders quickly raised the interest rates they charge on mortgages, leaving brokers scrambling to fill customer requests before products were withdrawn or replaced. Moneyfacts, the financial website, said the average shelf life of a mortgage deal fell to a record low last month of 21 days.
Adrian Anderson, director of brokerage Anderson Harris, said: “We are getting applications submitted as quickly as possible as rates are taken off on very short notice and go up quite quickly. It’s an anxious time to be a buyer or mortgage broker now.
Most lenders were taking five or more business days to assess applications from homebuyers and borrowers looking to remortgage, he said — a process that under normal circumstances would take one or two business days. Some banks have warned that the process will take much longer.
Simon Gammon, managing partner at brokerage Knight Frank Finance, said the time between agreeing a rate and withdrawing money had “swelled” over the past fortnight.
“The clamor from borrowers to lock in a mortgage before interest rates rise further is putting enormous pressure on lenders.”
He said banks were pulling swathes of products not only for repricing reasons, but also as a proactive way to stem the flow of requests. “Lenders are. . . re-evaluate or retire pieces of their product lines at a time in an effort to maintain service levels.
Chris Sykes, chief technical officer at brokerage Private Finance, said this week he sent a client seeking a £600,000 loan three quotes from Barclays, HSBC and Accord. Within three hours, the three lenders had emailed to say they were withdrawing relevant mortgage offers and raising rates. “Any rate increase on this loan is actually a lot of money,” Sykes said.
HSBC told brokers this week that applications would be reviewed within 10 business days. Asked about the delays, he said: ‘Current assessment times are within our usual levels, which fluctuate with business volumes.’
Santander said it had developed capacity to handle additional volumes. The average offer time for residential mortgages was 17 days.
Nationwide added that it aims to respond and process requests as quickly as possible. “Our current average lead times are in line with what we expected given the strong demand we are seeing in the market.” On Friday, the average number of working days between asking and offering a standard mortgage loan was 14 days.
Hodge, a specialty lender, gave 16-17 business days as the lead time for “fully packaged applications.” On its web pages for mortgage brokers, it said: “We are currently receiving high volumes of business as well as absences related to Covid-19. Although we make every effort to meet the above deadlines, temporary delays are possible. »
The Bank of England has raised its key rate from 0.1% to 1% since December. Rates on two-year fixed-rate contracts for those with a 25% deposit nearly doubled from 1.2% in September to 2.35% at the end of last month, according to the BoE.
The BoE has warned that inflation could hit 10%, raising hopes for further rate hikes in the coming months.
TwentyCi, a consultancy, said the time between agreeing a sale on a property under contract and completion had fallen from an average of 12 weeks in March 2019 to 22 weeks in March 2022 – more five months to get a sale across the line.
The delays threaten to disrupt housing chains, forcing buyers to push for faster processing lest a deal fall through. Those on-chain are particularly affected, as one failed or delayed mortgage application for one buyer can upset the plans of multiple participants. “Sellers want people to trade faster, but the problem is banks all take longer,” Anderson said.
As a result, cash buyers have become more attractive to sellers because they bypass the mortgage application process and are often free from a real estate buying chain.
“We’re seeing more cash purchases through our agency partners,” Sykes said. “It’s useful because it can break a chain.”