Banks in the UK are struggling to withdraw mortgage deals in the short term and handle surging applications, while borrowers are frustrated as they rush to lock rates before they rise again.
Lenders are rapidly increasing the interest rates they charge on mortgage loans, keeping brokers busy to complete clients’ applications before products are withdrawn or replaced. The average validity of a mortgage transaction fell to a record low of 21 days last month, according to finance website Moneyfacts.
Adrian Anderson, director of broker Anderson Harris, said, “We are filing applications as soon as possible because rates are withdrawn in a very short time and increase very quickly. This is an unsettling time for buyers or mortgage brokers.”
He said most lenders take more than five business days to evaluate applications from homebuyers and borrowers seeking home equity loans. Under normal circumstances, it will take 1-2 business days. Some banks have warned that the process will take much longer.
Simon Gammon, managing partner at broker Knight Frank Finance, said the time it takes to agree on a rate and withdraw money over the past two weeks is a “balloon”.
“The fuss among borrowers to lock down mortgages before interest rates rise further is putting a tremendous strain on borrowers.”
He said banks are pulling out many products as well as price rebalancing as a proactive way to block application flows. “The lender is . . . We adjust or withdraw the price of a range of products at one time to maintain service levels.”
Chris Sykes, technology director at broker Private Finance, said this week that Barclays, HSBC and Accord sent three quotes to clients requesting loans of £600,000. Within three hours, all three lenders emailed them withdrawing the relevant mortgage deal and raising interest rates. “The rate hike on that loan is actually a lot of money,” Sykes said.
HSBC told brokers this week that applications will be reviewed within 10 business days. When asked about the delay, he said, “The current evaluation time is at the usual level and fluctuates depending on the size of the business.”
Santander said it has built in the ability to manage additional volumes. The average time to issue a home equity loan was 17 days.
Nationwide added that it aims to respond to and process applications as quickly as possible. “The current average time scale is what we expected given the high demand we see in the market.” As of Friday, the average number of working days from a standard mortgage application to an offer was 14.
Professional lender Hodge offered 16-17 business days turnaround time for a “fully packaged application”. On a webpage for mortgage brokers, “We are currently receiving a high volume of business with a Covid-19 related absence. We are doing our best to meet the above schedule, but temporary delays may occur.”
The Bank of England raised the key interest rate from 0.1% to 1% in December. Interest rates on two-year fixed rate deals for those with 25% deposits nearly doubled to 2.35% at the end of last month, from 1.2% in September, according to the BoE.
The BoE has warned inflation could reach 10%, raising expectations for further rate hikes in the coming months.
Consulting firm TwentyCi announced that the time it takes to complete the sale of the contracted property after agreeing to it has increased from an average of 12 weeks in March 2019 to 22 weeks in March 2022. .
Delays threaten to disrupt the housing chain, and buyers fear the deal will close and demand faster processing. Those in the chain are particularly affected, as a failed or delayed mortgage application for one buyer can thwart the plans of multiple participants. “Sellers want people to exchange faster, but the problem is that banks all take longer,” Anderson said.
As a result, cash buyers are more attractive to sellers because they avoid the mortgage application process and are often free from the real estate purchase chain.
“We’re seeing more cash purchases through our agency partners,” Sykes said. “It helps because you can break the chain.”
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