I think it’s fair to say that we are facing a number of the same issues right now perhaps even in a more heightened version; in fact, you might call it ‘Capacity Crunch 2.0’, and few lenders (if any) including ourselves, are immune.
It will not take a genius to realise we have something of a ‘perfect storm’ of factors at play. Because no lender is an island, and we all have to react to this current situation, our own needs and requirements, and the changes that competitors make, advisers and their clients are seeing an incredible amount of product price change over a very short period of time, and that I know is ultra-frustrating.
We have increased rates across our range, which includes hikes to our two-year fixed rates to 4.89 per cent at 75 per cent loan to value (LTV) with a revert to rate of 6.25 per cent, raising the five year and seven year fixes to 4.95 per cent and 4.99 per cent respectively at the same LTV tier.
Transparency
From our own perspective, it’s important to be transparent. As a lender which has always put great store in our service levels – an area we try to protect at all costs – it’s been apparent for a little while that due to our success as well as the pricing pressures of other lenders in our space, and indeed our own ability to bring online new resource quickly enough, we were seeing our service times slip as our product range became more attractive and we took on more business.
At the moment we are simply not in a position to be taking in the volume of new business which we have been seeing grow week on week. Just recently competitors have withdrawn entire product ranges, and you can imagine what this has done for those lenders like ourselves who are still active in this space with attractively-priced products.
Without wishing to divulge full business activity details, over a relatively short period of time, our daily business run-rate has reached extraordinary levels, and we have had to make a decision around pricing in order to be able to service the business we have received prior to this change.
A tough decision
You’ll understand this is not a decision we’ve wanted to make but given everything that is going on in our market right now, it’s one we’ve felt was necessary. This is in order to get ahead of the issue and ensure it doesn’t get any worse so we can resume exemplary service to our intermediary partners and end customers – which is at the core of what Fleet Mortgages has always been renowned for.
As a result, you will see that we have significantly re-priced our product range as of today.
Just to reiterate, this isn’t a funding issue, or pressure from our fantastic parent, or a loss of appetite for buy-to-let business, but it’s simply a case of needing to react to the market we work in. Things are moving fast.
At the start of last week, we were thinking of a much smaller increase in pricing but we have realised this wouldn’t really have made enough of a difference.
Recalibrating business
While we are no longer reliant on the capital markets, swap rates have been extremely volatile for some time causing other lenders to leapfrog each other on price, and we still have to react to those who are active in our space.
And, with resource tight right across the industry – whether you are a lender, broker, surveyor or conveyancer – and with peak summer holiday period also here, there was a need to work with our existing capacity, not simply hope that we could keep running at the same pricing/business levels/activity and still deliver the same outcomes for advisers and their customers. The reality is that wouldn’t have been possible and that’s not what we stand for.
For us this is about recalibrating our business to control volume for a short period, otherwise we would simply have added a considerable number of days to our current service period. We have a full product range available, albeit temporarily priced, to control volume and get us back on track before we’re unable to deliver the critical service which our intermediary partners deserve.
By doing this, we hope a little short-term pain means we don’t have this situation going on for any longer than is necessary. It is not ideal for advisers and their clients, or indeed us, however we hope you understand the reasoning behind these decisions and our continued commitment to doing the very best we can in these difficult circumstances.
Transparency has always served us well, and these unprecedented market conditions demand exactly that for our business partners. Fleet Mortgages will continue to thrive, but we must take a short breath to create increased capacity.
Anything else would be doing wrong by our valued intermediary partners.
