Swap rates rose again today following news of the Iranian attack on Qatar’s energy complex, as more lenders – including Santander and Halifax – prepare to hike rates from tomorrow and Clydesdale announces more product withdrawals.
The Bank of England, meanwhile, unanimously voted to hold the base rate at 3.75% in light of the conflict, with Monetary Policy Committee (MPC) members stating that they remain “alert to the increased risk of domestic inflationary pressures”.
Prior to the conflict, the financial markets had been anticipating a rate cut.
More than 25,000 deals withdrawn
Exclusive data from L&C Mortgages reveals the scale of the challenge brokers face.
“We’ve seen more repricing in the last three weeks than we saw in September, October and November 2022, after the mini Budget, combined,” said director David Hollingworth.
So far this month, the national mortgage brokerage has recorded 25,483 withdrawn mortgage deals and 25,219 launches. By comparison, in the whole month of September 2022, there were 12,390 mortgage rates withdrawn and 9,390 launched.
Data from Twenty7tec shows a similar picture of 212 mortgage lender updates between 9 March and 19 March and 34,380 product changes – but not all will be price increases.
Hollingworth added: “Swap rates looked like they were easing back very slightly yesterday, but with the strikes on other Gulf states’ energy sites being reported, they have jumped back up by 10-12 basis points today.”
Writing on LinkedIn, Ray Boulger, senior mortgage technical manager, said: “The impact on mortgage rates is obvious, but we should expect even more short-notice rate withdrawals and possibly even some temporary lender withdrawals as pricing fixed rates in such a volatile market becomes increasingly difficult.”
Mortgage rates edge up
However, there are two main differences between now and after the mini Budget, noted Hollingworth.
Lenders are applying incremental changes to mortgage pricing rather than large increases at one time, which accounts for the higher volumes of repricing currently being seen. Lenders are applying much smaller rate rises than those seen in 2022, which means that, so far, there has not been a spike in mortgage rates. According to Moneyfacts, mortgage rates edged up from 5.01% on 11 March to 5.32% on 19 March.
Furthermore, withdrawn deals are being replaced instead of disappearing from ranges completely, which means borrowers still have choice.
Brokers battle to secure rates
Brokers are deploying strategies to encourage homeowners who have six months or fewer before their mortgage deal expires to secure their next rate now, before rates rise higher.
In the two months from October to December, the Financial Conduct Authority’s (FCA’s) Mortgage Charter data showed that more than 230,000 households reserved a remortgage rate up to six months ahead of their existing deal expiring. Those who grabbed a rate in December, and have up until June before they must switch, can expect to pay on average 4.86% for a two-year fixed rate, according to Moneyfacts.
Now, the average two-year fixed rate sits at 5.32%.
Hollingworth said: “We’re seeing those who had been shopping around because rates were falling get off the fence because their hand has been forced. I think you’ll also see more people considering their options much further out.”
Gerard Boon, managing director of Boon Brokers, said: “Borrowers are panicking if their mortgage rate expires in the next six months.”
His team is compiling a newsletter to email to existing customers confirming the Bank of England’s base rate decision, the volatility in the mortgage rate market, and to encourage them to get in touch and secure a new deal. Boon Brokers uses an automated system to contact all existing customers when they have six months or fewer on their current mortgage rate.
John Fraser-Tucker, head of mortgages at Mojo Mortgages, said: “The ‘wait-and-see’ approach has become riskier. With swap rates increasing already, the window for locking in a lower fixed rate is currently narrowing.
“We’ve seen a 50% increase in customers proceeding to application from enquiry, which speaks to the urgency of beating the increases or hedging against further rises.”
Short notice for withdrawals
For purchases, however, there is little time to submit applications before brokers are notified of their withdrawal.
Helen Pierson, director at Mortgage Advice Bureau (MAB) New Homes, said: “Having enough hours in the day to submit applications before products are withdrawn is the biggest headache.
“With such volatility, most lenders are pulling rates in some cases giving brokers just a few hours’ notice. In this time, brokers need to advise customers who are considering their options of this, without spooking them, obtain and check all documents required, gain their authority to proceed and submit multiple applications in a very short time window. Most brokers are absolutely exhausted but carrying on regardless, because as a profession, that’s what we do.”
For borrowers who need extensions to a mortgage offer, particularly new-build borrowers waiting for the construction of their home to be completed, it is a tense time, but the industry is pulling together, according to John Doughty, chapter managing director at Just Mortgages.
He noted: “Alongside keeping clients updated, we’ll work closely with lenders to put forward the case for an extension where needed. Overall, lenders are willing to work with us to support clients and help transactions get over the line, but of course, it still has to make business sense – particularly in the current climate. Similarly, several builders and developers are heading into their year-end, so are just as keen to work with brokers and lenders to support clients and facilitate transactions.”
