Banks Yank Mortgage Deals as Borrowers Scramble to Lock in Rates

18

May 2022
Banks Yank Mortgage Deals as Borrowers Scramble to Lock in Rates (1)

Banks Yank Mortgage Deals as Borrowers Scramble to Lock in Rates

Banks and building societies are keeping their best mortgage deals on offer for just weeks, leaving borrowers rushing to lock in interest rates ahead of further rises in the Bank of England’s base rate.

Held at a historic low of 0.1% during the pandemic, the base rate now stands at 1%, having been lifted four times since December, most recently in early May. With the Bank of England trying to keep inflation in check, the base rate is scheduled to rise again, perhaps to as much as 2.75% by 2023.

As the base rate rises, lenders are launching and withdrawing mortgage products in just days and replacing them with more expensive deals. According to the Financial Times, the average shelf life of a mortgage deal has fallen to just 21 days, the lowest on record.

That amount of turnover leaves borrowers and brokers scrambling to secure deals.

Many times mortgage deals are pulled with little notice, disappointing remortgagers who had their eyes on a rate but couldn’t get an application in in time.

Adrian Anderson, director at broker Anderson Harris, told the FT: “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.”

Deluged with applications from borrowers, lenders are also taking longer to process them—five working days or more, compared to the one or two days it used to take. 

Some banks have warned the process could take even longer. HSBC recently emailed brokers saying applications will be assessed within 10 working days. Santander said it has increased its capacity to process higher volumes of applications but still said its average time to offer a residential mortgage stands at 17 days.

Nationwide said borrowers should expect to wait an average of 14 working days to hear back about a mortgage application. “Our current average timescales are what we’d expect given the high demand we’re seeing in the market,” the building society said.

Simon Gammon, managing partner at broker Knight Frank Finance, said: “The clamour among borrowers to lock in a mortgage before interest rates rise further is putting a huge amount of strain on the lenders.”

Lenders are also withdrawing mortgage deals in order to staunch the flow of applications. Banks are “repricing or withdrawing chunks of their product ranges at a time in an attempt to maintain service levels,” he said.

But even borrowers who move quickly should expect higher monthly mortgage payments than those who locked in a deal last autumn when rates were at record lows. According to the Bank of England, rates on two-year fixed-rate products for borrowers with 25% deposits nearly doubled from 1.2% in September to 2.35% at the end of April.

Broker London and County says that increase has added £100 to the monthly mortgage bills of the average homeowner.

Sources