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Fast-changing mortgages make the market more uncomfortable – Phillips

by: Justin Phillips, firm principal at Open Vision Finance
  • 28/07/2023
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Fast-changing mortgages make the market more uncomfortable – Phillips
Running a broker company is, at the best of times challenging this year, not least for us but even more so for our customers.

Visit after visit, it’s all been about how best we deliver bad news and how best we find a solution to the almost certain, insurmountable increases to monthly mortgage payments.   

What’s the real effect on the consumer? Are they suddenly spending less thus helping the country’s inflation woes? Well, in our experience they aren’t overly spending as, more trying to prioritise their gas, electricity, school trips and life assurance payments – not to mention the strain on shopping and fuel bills. 

Then they have us turning up to let them know how their existing mortgage payments are increasing, not just a bit, but often doubling. Regardless of your earning capacity, the increases are hitting hard. 

 

Everyone is trying to cope 

Our average £150,000 mortgage customer is spending £397 per month more, at £500,000 they are spending £1,323 per month more and our customers renewing a million-pound mortgage are on average, spending £2,646 per month more than they were just 18 months ago.  

What I’m getting at, is no matter the demographic everyone is hurting and it’s worth posing the question, how long can they continue to do this? 

With all this in mind and with a level of understanding the lenders are suffering too, are the banks and building societies doing everything they possibly can to help the client? Well, the Treasury has introduced the Mortgage Charter, essentially a pledge to help those worried about how the rising interest rates will affect their mortgage payments.  

In theory, it’s a great effort from the Treasury to ask lenders to adopt a set of guidelines to assist their mortgage borrowers.

So why is renewing a mortgage product still so difficult? 

  

The actions of lenders 

All too often lenders are reacting to their own market challenges but when some of the largest banks, the most responsible lenders, have increased rates no less than 10 times since the beginning of last month how can a broker, let alone a customer, transact the business before rates increase further? 

There were 22 working days last month and with this level of rate changes, all too often we will speak with a client, who may take 12-24 hours to consider their options. We compliantly ask to meet them again or email them to sign relevant documentation, and by the time they are back with us, the rates have already changed, and the process has to start all over again. Consumers are pulling their hair out and I don’t blame them. 

What are the real kickers of all this?  

  

No time to prepare 

With the lack of notice of products being withdrawn, which is often a couple of working hours, we are faced with persuading the client to make a very difficult decision quickly and then using online systems with hundreds of brokers, all at the same time. 

More often than not, the systems crash and we simply can’t process the client’s new mortgage rate, resulting in even more uncomfortable conversations. 

I feel both brokers and clients alike are aware the Treasury has tried onboarding lenders to the Mortgage Charter, but is it enough?   

Do customers not deserve a little more notice? Do brokers not require more notice? All of the above is harming relationships between client and broker, after all we are customer-facing and the messenger delivering the bad news.  

Less broker input leads to misinformed decisions and ultimately affects the one thing we all need to look after, our mutual clients and their financial needs. 

Isn’t greater transparency, more notice and better communication the least we can ask for our customers? 

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