UK banks are pulling mortgage deals at short notice and struggling to process a surge of applications, leaving borrowers frustrated as they rush to lock in rates before they rise again.
Lenders have been rapidly increasing the interest rates they charge on mortgages, leaving brokers scrambling to complete clients’ applications before products are withdrawn or replaced. Moneyfacts, the finance website, said the average shelf life of a mortgage deal fell to a record low last month of 21 days.
Adrian Anderson, director at broker Anderson Harris, said: “We are getting applications submitted as quickly as we can, because rates are being pulled at very short notice and are increasing quite quickly. It’s an anxious time to be a buyer or a mortgage intermediary now.”
Most lenders were taking five working days or more to assess applications from homebuyers and borrowers looking to remortgage, he said — a process that under normal circumstances would take one or two working days. Some banks have warned that the process will take much longer.
Simon Gammon, managing partner at broker Knight Frank Finance, said the time taken between agreeing a rate and drawing down the money had “ballooned” in the past fortnight.
“The clamour among borrowers to lock in a mortgage before interest rates rise further is putting a huge amount of strain on the lenders.”
He said banks were withdrawing swaths of products not only for reasons of repricing but as a proactive way of staunching the flow of applications. “Lenders are . . . repricing or withdrawing chunks of their product ranges at a time in an attempt to maintain service levels.”
Chris Sykes, technical director at broker Private Finance, said this week he had sent a client seeking a £600,000 loan three quotations from Barclays, HSBC and Accord. Within the space of three hours, all three lenders had emailed to say they were withdrawing the relevant mortgage deals and increasing rates. “Any rate increase on that loan is actually quite a chunk of money,” Sykes said.
HSBC told brokers this week that applications would be reviewed within 10 working days. Asked about the delays, it said: “Current assessment times are within our usual levels, which fluctuate in line with business volumes.”
Santander said it had built up a capacity to manage additional volumes. The average time to offer for residential mortgages was 17 days.
Nationwide added that it aimed to respond to and process applications as quickly as possible. “Our current average timescales are what we’d expect given the high demand we’re seeing in the market.” As of Friday, the average number of working days from application to offer on a standard mortgage was 14 days.
Hodge, a specialist lender, gave 16-17 working days as the time taken for “fully packaged applications”. On its web pages for mortgage brokers, it said: “We are currently receiving high volumes of business along with Covid-19 related absences. While we are doing everything we can to meet the above timescales, temporary delays are possible.”
The Bank of England has put up its main interest rate from 0.1 per cent to 1 per cent since December. Rates on two-year fixed-rate deals for those with a 25 per cent deposit have nearly doubled from 1.2 per cent in September to 2.35 per cent at the end of last month, according to the BoE.
The BoE has warned that inflation could reach 10 per cent, raising expectations of further rate rises in coming months.
TwentyCi, a consultancy, said the time between agreeing a sale on a property subject to contract and completion had risen from an average of 12 weeks in March 2019 to 22 weeks in March 2022 — or more than five months to get a sale across the line.
The delays threaten to disrupt housing chains, causing buyers to push for faster processing for fear of a deal falling through. Those in a chain are particularly affected, since a failed or delayed mortgage application for one buyer can upset the plans of multiple participants. “Sellers are wanting people to exchange quicker, but the problem is that banks are all taking longer,” said Anderson.
As a result, cash buyers have become more attractive to sellers because they avoid the mortgage application process and are often free of a property-buying chain.
“We are seeing more cash purchases through our agency partners,” said Sykes. “That is helpful because it can break a chain.”
Source: Financial Times