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‘Here today, gone tomorrow’: Why the shelf life of mortgages is shrinking – L&G Mortgage Club

by: Clare Beardmore, head of broker and propositions, and Danny Belton, head of lender relationships, at Legal and General Mortgage Club
  • 15/08/2022
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Demand in the mortgage market is strong and what many would describe as ‘safe as houses’.

This year though has seen a growing trend of rapid rate changes or mortgage products withdrawn with little to no notice. Recently, Moneyfacts measured the average shelf life of mortgage products at a record low of just 17 days. In 2020, this figure stood at 48 days.  

It’s clear that swap rate fluctuations, inflationary pressures, wider economic uncertainty, and high levels of demand are all contributing to these challenges. It’s a tricky environment for lenders to navigate, but this turbulence is already having huge implications for brokers and their customers. As an industry we need to find a way to minimise the impact of these changes on the market and work together to deliver the best outcomes for consumers.  

 

In defence of brokers

Clare Beardmore, head of broker and propositions at Legal and General Mortgage Club

Disappearing rates leave brokers in a difficult position with clients, as it is near on impossible to manage their expectations. I’ve even read reports of one broker starting an application at 4pm, before the rate was pulled with no notice at 6pm. Moves such as this are very harmful to the client relationships that many brokers spend years nurturing.  

Many brokers I’ve spoken to would much prefer to have 24 or 48 hours warning before products are altered or pulled. Of course, they acknowledge that service will be slower during these notice periods. With Coventry Building Society among those already taking this approach, it begs the question; why can’t more lenders give notice before product changes, instead of holding out until the very end? 

These last-minute withdrawals also strain house purchase chains and put mortgaged buyers further out of favour when competing against cash purchasers. An eleventh-hour change in the product can run the risk of frustration, disappointment, and added workloads for all parties. The Mortgage Industry Mental Health Charter (MIMHC)’s recent survey on mental wellbeing revealed that more than one in eight brokers are already working over 60 hours a week, with one in 50 working more than 75 hours.  

As such, a measly five percent agreed that they sleep well every night.  

Intermediaries accounted for the majority of mortgage sales last year – let’s give them the respect that they deserve and stop pulling products from under their feet. We cannot have a winning year if we keep moving the goalposts. 

 

In defence of lenders

Danny Belton, head of lender relationships at Legal and General Mortgage Club

There is no denying that many brokers find themselves in a tricky spot, but a defence must also be made for lenders.  

It is common knowledge that UK inflation has hit a 40-year high of 9.4 per cent, contributing to wider economic uncertainty. The central bank’s six consecutive base rate rises only add to lenders’ skepticism. With the market braced for further hikes (predictions suggest that the base rate could hit 2.5 to three per cent by the end of 2023), you can see why lenders are having trouble pinning down figures. 

These economic factors have caused swap rates to rise sharply. This, coupled with high loan volumes, has led lenders to reprice products more often than they normally would. Ultimately, each time a lender pulls a product, they’re met with many days’ worth of business in one go.  

This stretches workloads and creates a mismatch between the quality of service that lenders want to provide and their ability to do so.   

It’s also worth reiterating that we are at the business end of the annual ‘spring bounce’, made busier by borrowers trying to quickly source products before rates climb further, and brokers trying to lock into deals before they slip away. It’s important that lenders try and maintain service levels and putting a lid on some popular deals is often an effective way to do this. The current market conditions have meant that this tactic hasn’t been entirely effective. 

As such, lenders pulling rates at short notice is both an issue in and of itself, and a response to that very same issue. It’s a cycle and the blame can’t be solely laid at any party’s door. 

 

Looking ahead 

Starting conversations with clients well ahead of the end of their current mortgage term often proves useful, especially in an uncertain time such as this. Not only does this help to manage expectations and hopefully lessen the stress of the situation, it also allows more time to source a suitable product. 

Some lenders can even effectively lock in an interest rate nine months in advance, by offering a decision in principle that secures a rate for up to three months, which can then be converted to a mortgage offer valid for a further six months. A long-term fixed-rate mortgage might also be of interest for those customers concerned about imminent rate hikes.

The recent uncertainty has led to a notable uptick in borrowers locking into deals for longer – as a result, many 10-year deals are currently priced very competitively.  

 

Let tech take the burden of added admin 

There is no escaping that last-minute changes lead to added work, but tech can and should be used to alleviate that burden.  

Mortgage research platforms offer other tools such as digital ID verification, open banking, and automatic decision in principles which streamline the homebuying journey. Allowing clients to complete their own digital fact find can also help. Not only does this reduce the workload of the broker, but it also allows applications to be progressed round-the-clock. 

This is clearly a complex issue that cannot be taken lightly, but there are steps that brokers can take while wider economic forces settle. Starting conversations with borrowers well ahead of the end of their current product term allows more time to manage expectations and source a suitable replacement. Embracing tech tools will also streamline this process.  

Our market has proved its resilience time and time again – we are confident that it will continue to do so. 

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