Huge numbers of mortgage products have been withdrawn over the last week, in the fallout from the government’s mini Budget and predictions of sizeable increases to bank base rate.
This led to Nikhil Rathi, chief executive of the Financial Conduct Authority, urging lenders to be more transparent about when they will return to the market.
He told the Sunday Times: “If a product is withdrawn for a temporary period, we want to understand when they’re going to come back to market so that those people who may need to refinance are able to proceed with their plans.”
Brokers have suggested that a lot of the heartache and stress experienced by their clients could have been prevented if lenders across the sector gave real notice before pulling deals.
Par for the course
Richard Campo, founder of Rose Capital Partners, said that it was “par for the course” for lenders to rapidly change products during times of uncertainty, admitting that his “expectations are low” for how lenders will handle these changes.
“Their responsibility is to their shareholders who will want products repriced so they are profitable as soon as possible, whereas our responsibility is to our clients to secure these products before they are withdrawn and do all in our power to get the best terms possible. It’s a classic poacher/gamekeeper relationship that will never change,” he added.
Anil Mistry, director and mortgage broker at RNR Mortgage Solutions, said that one lender had sent an email at midday and withdrew the products at the same time, giving no notice at all.
He said: “This then causes the stress of going back to the borrower to tell them that the product that was recommended is now no longer available.”
Guarav Shukla, sales manager at Home Me, said that too often lenders have pulled products with little to no warning.
“This doesn’t give brokers enough time to get cases submitted, so there will always be some borrowers left worse off. For me, it always comes down to the fact that lenders don’t speak to customers throughout the application journey, so we face the brunt of it when we have to let customers know that the product is no longer available and the next best rate is a lot higher, meaning they now have to pay much more per month.”
Blame the government
The scale of the upheaval means that “we should all cut each other some slack,” suggested Lewis Shaw, founder of Shaw Financial Services, who argued that it was no good “reprimanding” lenders for things out of their control.
He continued: “If anything, the head of the FCA would be better placed to talk to the government about the reckless and ill-thought-through fiscal event that caused this shambles. Blame the person at the helm, not those below decks trying to run the engine room.”
The best lenders for communication
Campo suggested that some lenders stood out for how well they have communicated with brokers during the recent turmoil, including Coventry Building Society, NatWest, Barclays and Halifax.
He continued: “I won’t bad mouth any other lender as in their position, if I saw my funding costs rapidly change, would I have pulled products at little to no notice? Yeah, of course I would. It’s all part of the game, and why brokers don’t clock off at 5pm but crack on to make sure we do all in our power to do the best for our clients.”
Riz Malik, director at R3 Mortgages, said that there was a clear contrast between the likes of Coventry Building Society, and its pledge to give two days’ notice, and other lenders who would provide only a matter of hours before pulling products, even at weekends.
Shukla said that Halifax deserved praise, because though it had repriced several times, it always gave at least two days’ notice.
He continued: “Coventry have also kept up with their long-term promise of providing a minimum of two days for any rate changes, and I have to commend them for sticking to this, when we have seen other lenders give no notice and pull rates immediately.
Lenders should be required to give at least 48 hours notice when pulling products, according to Mistry.
“This will allow ample time for brokers to submit applications and obtain any final proofs from the client.”
The suggestion was echoed by Malik, who said: “I would like to see lenders sign up to a voluntary charter where they are required to give at least two days’ notice. That would not solve the problem but would certainly help.”
Shukla agreed with Rathi that lenders needed to be more open about when they will be returning to the market.
“Lenders want to lend, and the panic could have been resolved by lenders stating when they will have the new rates available,” he concluded.