Private Finance’s Mortgage Memo

is our take on what is currently happening in the mortgage market. Our views
are often cited in several national publications, including; The
Times, Telegraph, Financial Times, FT Adviser and Daily Mail, as well as a number of
key trade publications, so this should keep you ahead of the curve. If you have
any questions on any of these stories, or would like further information,
please do not hesitate to get in touch.

  • Conveyancing delays risk borrowers losing mortgage offers with lower rates
  • Increase in declines – are lenders getting stricter or are borrowers getting more desperate?
  • Mortgage market needs to concentrate on vulnerable clients
  • The mortgage market following the mini-budget

Conveyancing delays risk borrowers losing mortgage offers with lower rates

Delays in the conveyancing process risk borrower’ mortgage offers expiring and thus losing their locked in lower mortgage rates, leading clients to have to choose either a higher mortgage rate if rates have increased since they last submitted their application, or seek alternative options including abandoning the property purchase altogether.

Should borrowers be concerned?

Borrowers who have not yet completed may be holding onto their current mortgage offers dearly. Most high street lender’ offer lengths are typically six months, although some smaller lenders such as building societies only have offer lengths of three months. While we don’t want to cause further panic for those who have transactions on the go, however this factor should be considered in light of rapidly rising interest rates and longer than normal transaction periods.

For example, one of our clients has locked in their mortgage rate at 1.8% as the mortgage application was placed in March. However, we worked out that if that client wasn’t able to complete in time, the current rate they would achieve based on their income and circumstances would be close to 5.4%. Borrowers would have to lock in at much higher rates and pay more in their monthly repayments.

We may see an increase in the number of chain collapse or borrowers abandoning purchases as they lose their lower mortgage rate and do not want or cannot proceed with the higher rate.

Increase in declines – are lenders getting stricter or are borrowers getting more desperate?

Recently, we have noticed an abnormal amount of credit score declines from lenders, and we wonder whether this is a result of lender or borrower activity, or alternatively, a mixture of the two. 

In light of rising interest rates and soaring inflation, it could be the case that the increase in declines is due to lenders being stricter with credit scores and ensuring borrowers can repay their loans. Alternatively, we wonder if there is also a correlation between the rush to secure mortgages quickly and borrowers attempting to hide certain factors which may slow down their application. 

Borrowers need to be careful in tough times as something as small as getting a CCJ by refusing to pay a £60 parking fine, or missing payments on utility bills after moving out of a property can affect the lenders at a borrowers disposal and affect their interest rates if these were recent and they have little other credit presence.

Why does the mortgage market need to concentrate more on vulnerable clients? 

With affordability declining while the cost-of-living rises, and mortgage rates increase too, there is going to be a larger number of vulnerable clients, whether this be a borrower on an interest-only mortgage who is going to see their mortgage payments go up significantly, or perhaps rising interest rates has had an impact on people’s affordability or job security. 

Mortgage brokers need to be more attentive than ever with regards to vulnerability of clients and helping clients identify and secure the best mortgage deal for their specific circumstances. This could include extending the mortgage term to make sure the mortgage is affordable or being forced to take some debt on interest only to make things affordable, albeit these option would likely increase the total interest payable over the mortgage term.   

The mortgage market following the mini-budget

We would like to reassure everyone that the recent activity in the mortgage market is not a mortgage crisis. There is nothing structurally wrong with the mortgage market, instead the recent activity from lenders is in response to a fall in the value of sterling and the volatility in the swap rate market. Mortgage rates follow swap rates to price their products and hedge interest rate risk. Lenders have been withdrawing and pausing fixed rate products because it is incredibly hard to price these products at the moment due to swap rate market volatility.

  • What’s happening with current mortgage offers?

There’s no need to panic about the current situation with regards to cases which have had an offer accepted as long as the mortgage application is in place. There has been a lot in the press about lenders pulling offers, however this is not the case for normal residential transactions, which will be the vast majority.

  • Are rates secure if you have applied for the mortgage?

Yes, the rate is secure. There have been very few examples of lenders pulling rates for clients post application. The only examples of this are in unregulated commercial and BTL lending situations.

  • Will lenders pull rates if the mortgage offer is in place?

Provided there have been no changes to a borrower’s circumstances and the offer is within its validity period, the residential offer should be secure.  We have seen offers being pulled from a small number of buy to let lenders.

  • What happens if I want to purchase property now?

There are still mortgage products available in the market right now. A lot of lenders are repricing and pausing products while they do so. That said, it is making it trickier to find a mortgage now and a mortgage broker can help source available products. Lenders are still willing to lend, however the cost of borrowing has increased, and rates are likely to be higher.

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