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Rate switch cancellation will become more ‘common’ increasing broker and lender workloads ‒ analysis

  • 24/02/2023
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Rate switch cancellation will become more ‘common’ increasing broker and lender workloads ‒ analysis
Rate switch cancellations will become more and more common over the coming weeks as mortgage rate pricing continues to decline, which could lead to an increase in lender workload, brokers have said.

Brokers have said that this has become very common as rates comes down from the highs of the mini Budget.

According to latest figures from Moneyfacts, the average two and five-year fixed rates has fallen month-on-month in February for the third consecutive month to 5.44 per cent and 5.2 per cent respectively.

Michael Webb, managing director at Mortgage Republic Limited, said that rate switch cancellations had become “more common” as rates continued to fall, and this was “tied in” to rate switch windows of up to six months prior to the end of a deal.

Several lenders in the past few months have extended their rate switch windows to five or six months, which gives customers increased choice.

However, some have warned that this has and will increase the workload for both brokers and lenders.



(Source: Nationwide)


Earlier this week, Nationwide had warned of longer waiting times due to a “higher than normal number” of rate switch cancellation requests, adding that it was currently actioning them in 72 hours. This has since been removed from the intermediary page, implying that service has resumed to normal levels.

A spokesperson from Nationwide said: “As you’d expect, people are looking to make sure they can get the lowest rate possible when they switch onto a new deal. As rates come down, there has been an increase in the number of people looking to change the rate they were originally going to switch to, for a lower one.

“This scenario is likely to be seen across the industry.”

Webb continued: “Brokers should be constantly monitoring the market for their clients to assess whether a better deal is available during the period before completion.

“That said, at some point, borrowers do need to commit to a deal and progress. This trend is causing a significant increase in workload, both admin and compliance for brokers in the current market.”

Lewis Shaw, owner and mortgage broker at Riverside Mortgages, agreed and said: “This is causing additional work for brokers and lenders, impacting new borrowers with backlogs as we try to fix the Liz Truss debacle.

“Hopefully, this will abate over the next few months as the mortgage market calms and normal service is resumed.”


Rate switch cancellations ‘daily occurrence’ for brokers

David Conway, director at Clayhalll Financial Services, said that reviewing rates and monitoring market changes is “something a broker should do as standard”.

“It’s a premium service and USP for using a broker whose interests are aligned with the borrower. Going direct means you could potentially miss the opportunity for hundreds of pounds a month in savings,” he explained.

He said that the six-month window had allowed dozens of clients’ rates to be rebooked and reduced, with as many as six reductions before taking effect for some.

He said: “Lenders therefore really need to be prepared for the knock-on this has to their service as it’s an almost daily occurrence. Borrowers, and brokers, should be aware several lenders rescore remortgage and purchase cases and could see a secure case rejected, so there are checks to do before accepting a lower rate.”

Gareth Davies, director at South Coast Mortgage Services, said that it had several clients currently for whom it had cancelled or resubmitted rate cancellations at least five times in recent weeks.

“It’s a tad frustrating for sure, but ultimately it’s putting the client first and ensuring they have the best deal they can possibly get,” he noted.

Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management, said that advisers cancelling rate switches was the “right thing to do for our clients” as rates were falling constantly and many rate switches or product transfers were secured weeks or months beforehand.

She noted that it was a “weekly occurrence” to do a rate switch for a client.


Borkers a must as lenders struggle with pipelines

Lea Karasavvas, managing director at Prolific Mortgage Finance, said that the number of cancellations would only grow over the coming weeks as lenders become increasingly competitive and cut rates.

This coupled with falling swap rates had led to “considerably lower” than the previously locked-in product transfer deals secured last year.

He said that brokers had been “more diligent “ and hedged product transfer rates for six months ahead of their end date where possible.

“Now that rates have fallen since that point, it is best practice and financially the best advice to proceed on the new lower rates that are available as this could save clients thousands over the fixed period.

“This highlights the benefit of using brokers over renegotiating direct with a bank as brokers continue to track rates,” Karasavvas added.

Gary Boakes, director at Verve Financial, said that rate switch cancellations where why “brokers are worth their weight in gold at the moment”.

“With rates dropping over the last few months, it is very likely our customers will be eligible for a lower rate than previously – it is just excellent customer service,”

However, he said that it was going to be “very difficult for the lenders to manage their pipelines as there is no guarantees the mortgage is going to go through until the completion date”.

James Myatt, mortgage broker at Embrace Financial Services, added that the process and ease of the rate switch cancellation “varies dramatically from lender to lender”.

He said some lenders just require pressing a button to cancel the existing application, other lenders would require a call to the call centre and others requested an email to ask the rate switch be cancelled.

Myatt added: “This all takes time out of our busy schedule but is absolutely the right thing to do for our valued clients as mortgage rates reduce. Some clients have saved over £3,000 in interest charges as a result of us monitoring their rate switch options.”

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