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Mixed results for lenders allowing rate switches post-mortgage offer – analysis

  • 19/12/2022
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Mixed results for lenders allowing rate switches post-mortgage offer – analysis
Mortgage rates are starting to come down following rapid increases, and some applicants may not be facing as sharp a payment shock as initially thought.

Some lenders are allowing people still in the application process to benefit from a lower rate than they initially applied for, provided they have not yet completed. Attempting to get a favourable rate to mitigate some of the recent increases has been noted by Knowledge Bank, which added a search function allowing brokers to see which lenders are flexible post-offer.

However, the process varies from lender to lender and brokers are reporting mixed experiences. 

Jodi Spreadbury, senior mortgage and protection adviser at The Mortgage Broker, said some lenders were permitting this but making the applicant cancel their application and start again. This means having to go through the credit score process again, potentially leaving a footprint and weakening their profile. 

Others are allowing a rate change but conducting another affordability assessment which, with the economic outlook and rising costs, risks the applicant failing to meet the new criteria and losing out on their offer completely. 

Spreadbury said she had contacted the lenders in her address book to ask about their policy. She found terms varied between applying such as having to pay a fee, being able to bypass additional credit checks, having to provide additional documents or re-broking the application but not getting an extension on the offer. 


Not beneficial to borrowers 

Spreadbury said being allowed to apply for a new rate without an extension was “at the detriment to the borrower” because having to go through the underwriting process again could be time-consuming and risked missing completion deadlines. 

Niamh Byrne, head of mortgages at Financial Advice Centre, also said there was difficulty with re-opening applications as further underwriting requests were “not ideal in time sensitive cases”. 

Dee Ganesharajah, senior associate at Mesa Financial, said: “Each lender has a specific process. Some may require full underwriting again, whereas for others it is simply informing them of the new product they require.  

“I haven’t come across any where they may just allow it for one and not another on a case-by-case basis.” 

Ganesharajah said it was surprising how complicated it was to change the product with the same lender. She said those who asked brokers to submit a new application wasted everyone’s time, adding: “Surely if the case has been underwritten, it’s a simple product code change and re-issuing of an offer? Especially when they are reverting to a lower rate.  

“Other lenders have a far simpler process, a memo on the case to change rate – i.e. Natwest, which typically has a 48-hour turnaround dependent on service level agreements.” 


Brokers doing the work 

While lenders are transparent about when rates have been changed, brokers said they were often having to be the ones to check if post-decision in principle (DIP) amendments were allowed. 

Spreadbury said she was taking the initiative to email clients, letting them know rates had gone down even though they were not explicitly asking if this was possible. However, she ensures she informs them of the risks that may come with trying to obtain a better rate. 

Bryne said lenders were proactive in advertising their rates for new business, adding: “And in an ideal world, they could enhance their service by notifying brokers by email if their clients could be positively impacted. In these hard and uncertain times, anything we can do to help our clients save costs should be at the top of our agenda.” 

Ganesharajah said her firm was regularly checking to see whether clients were still on the best deal available to get the “best outcome”. 

She added: “I have had lenders inform us that overall, their rates are changing but never on specific cases, which would make my life a lot easier whilst also doing the best thing for the customer.” 

Other brokers have had more positive experiences. 

Adam Wells, co-founder of Lloyd Wells Mortgages, said he recently had a visit from his Nationwide business development manager (BDM) who informed him that if rates did drop, it was “really easy” to switch.  

He added: “When Nationwide told us they were lowering rates, I simply logged on to their portal, amended the product and a new offer was issued instantly. Brilliant service.” 


Varying service 

While Bryne said it was typically easier to switch rates post-offer with larger mainstream lenders due to their infrastructure and technology,  the ability to do so differed across the board. 

Ganesharajah said: “Each lender is to their own. It isn’t a given that a high street lender will allow you to switch onto a more competitive deal.” 

She also said it did not necessarily depend on the strength of a broker’s relationship with a lender. 

Ganesharajah added: “I would be reluctant to say it is dependent on the relationships you hold; it’s down to the individual process the lender has. Sometimes you may be able to get cases looked at quicker if you have a stronger relationship, depending on the urgency such as the time to exchange.” 

Bryne also said personal relationships did not impact this but added that it “certainly does help if you have a willing BDM on side”. 

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