New data released by Moneyfacts this week revealed that the number of available mortgage products dropped by 517 in September to 3,890, the lowest level seen since April 2021. It is also 1,425 fewer than were on offer back in December 2021, before the first increase to the base rate.
As well as a means of improving service standards, lenders may also be looking to ‘simplify’ their ranges, brokers suggested, though there were warnings that the reductions have reduced options for borrowers with less than perfect credit records.
The ‘rubbish service premium’
Malcolm Davidson, director of UK Moneyman, said that lenders are charging a “rubbish service premium” in order to address their processing issues.
“Lenders’ turnaround times in general are shocking and they are deliberately manipulating themselves down the sourcing to reduce the number of cases coming in so they don’t get even worse. Consumers considering a long-term fixed rate should give this some thought and lender CEOs must be tearing their hair out about all this missed lending opportunity,” he continued.
Mark Robinson, managing director at Albion Forest Mortgages, argued that the drop in mortgage products was likely the result of lenders being “overwhelmed with applications”.
He added: “This has led to many reducing their product range so they can get on top of the business enquiries they have. Obviously, you can also count the looming recession into the factors that are contributing to these lower product numbers, as some lenders are reducing their availability at higher LTVs.”
Causing confusion
While it’s not unusual for lenders to reduce and reprice in a changing market, Paul Neal, mortgage and equity release specialist at Missing Element Mortgage Services, argued that this presents challenges for brokers when it comes to managing the expectations of clients.
He said: “The difficulty for brokers is you advise the client on one product and by the time the application has gone in, the rates have changed or the product is no longer available. It makes managing expectations very difficult and can be costly to the client.”
James Miles, director of The Mortgage Quarter, suggested that some lenders were trying to “cash in” through delivering smaller ranges.
He added: “I am having a lot of conversations discussing clients’ appetite for risk. With more deals available on variable, tracker and discounts rates, clients are trying to second guess whether these lower rates will hit the heights of fixed rates and hoping they can save a quick buck.”
Lenders are ‘simplifying’ their ranges
Lewis Shaw, founder of Shaw Financial Services, suggested that some of the product withdrawal was likely to be a case of simplifying their ranges, rather than a material reduction in options.
He explained: “For example, rather than having first-time buyer ranges and home mover ranges, they’ve opted for a purchase range and a remortgage range, reducing deals by a third in some lenders’ cases.”
This was echoed by Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, who noted that lots of lenders have multiple versions of similar deals, and “trimming these down” makes sense when the lender is not struggling to attract applications.
He continued: “If reducing the number of products on offer helps lenders maintain deals for longer, and so not have to withdraw and replace them with 20 minutes’ notice, then I’d say this should be viewed as a good thing. If it also helps them to improve service, by reallocating resources to underwriting rather than product development and maintenance, then it will be even better.”
Mark Hosker, mortgage adviser at Cyborg Finance, said that most lenders were still active in the market, with criteria mainly unchanged. However, what has changed has been the level of variation.
He explained: “Precise Mortgages and Kent Reliance, for example, have only one loan-to-value bracket of 80% and 85% respectively, where previously they would have had products at 75% or 70% loan-to-value.”
Targeting vanilla clients
Imogen Sporle, head of regulated and term finance at Finanze, suggested lenders are adapting their ranges to offer a smaller proportion of their products to borrowers with less than spotless credit histories.
She explained: “Before a lender may have had 20 products in their arsenal; 10 of those being for the perfect mortgagee with a great credit score and income and then five of those products being aimed at older borrowers and five of those products being aimed at the credit impaired. I have found they have now dropped those products or significantly reduced them for the non-perfect mortgagees.”
Sporle said that this was impacting the advice process, as it was not solely that borrowers had fewer deals to choose from, but also fewer options on factors like product fees, early repayment charges and cashback.
