Following higher-than-expected inflation figures, there have been widespread product withdrawals and repricing in the market, with some lenders providing only a few hours’ notice before changes come into force.
Recent Moneyfacts figures show that over the weekend alone there have been around 200 product withdrawals.
Brokers say they understand why there has had to be withdrawals and repricing as lenders have to react to market conditions at quickly, but an obligation of 24 hours’ notice to brokers would be reasonable.
Lewis Shaw, owner and mortgage broker of Riverside Mortgages, said that lenders “regularly allow” up to 48 hours’ notice, so a minimum notice period of 24 hours would be “fair”.
“Fair on consumers, fair on brokers and fair for the mortgage marketplace if we’re all singing from the same hymn sheet. Hopefully, this will get the backing of our industry, and we can see positive change for everyone involved,” he said.
Riz Malik, founder and director of R3 Mortgages, agreed adding that it was “not unreasonable”.
He continued that the constant market volatility made it “crucial for brokers to have sufficient time to adjust their strategies and inform their clients accordingly”.
Malik pointed to Coventry Building Society, who give a notice period of 48 hours as an example, and said more lenders should follow suit.
Jamie Lennox added: “In this day and age, there are zero excuses for lenders not being able to give a minimum 24 hours’ notice when withdrawing products. Saying it’s all down to market volatility doesn’t really wash, in our eyes.
“These banks will have a huge team of experts in place to monitor these movements in advance before changes are actually made. None of these banks will be having a board meeting at 12pm and then rolling out new rates that same evening.”
He added that it was a “logistical job” which would take several days of planning and updating their software, websites and mortgage sourcing systems.
“All we are asking is if you know you plan to withdraw rates, let us know once that decision is made,” Lennox said.
Minimum period pledge ‘in-line’ with Consumer Duty principles
Paul Neal said the immediate or short-term withdrawal of products was having a “real detrimental impact on the mortgage market”.
He noted that with Consumer Duty on the horizon, brokers were “responsible for giving our clients the best advice possible”.
“They’re [customers] making decisions on possibly the biggest purchase they will ever make, and for us to tell them they have two hours to make that decision or their rate will go up is putting them under unnecessary stress and forcing them to make a decision.
“A minimum timeframe adopted by all lenders is something the market very much needs,” Neal continued.
Anil Mistry, director and mortgage broker at RNR Mortgage Solutions, said that if lenders adopted a 24-hour notice period it would “alleviate the challenges faced by brokers, but it would also prioritise the needs of clients and align more closely with the principles of Consumer Duty”.
Adam Smith, founder at Alfa Mortgages, agreed, saying it would not only make the industry more professional, put clients interests at the forefront but also be in line with Consumer Duty principles.
Rohit Kohli, operations director at The Mortgage Stop, said a 24-hour minimum notice period “should be the norm” and 48-hour notice periods should be “considered best practice”.
“It’s evident that when rates are on a downward trend, lenders do not display the same urgency to adjust their offerings, which makes their justification for rapid changes when rates rise appear inconsistent.
“Lenders’ capacity to react swiftly when rates are rising should be matched by a similar commitment when rates are falling. More importantly, any significant changes that could impact clients should be communicated in a timely and transparent manner, irrespective of market trends.
This is a campaign we wholeheartedly support,” he added.
Pledge ‘great in principle’ but fear of unintended consequences
However, some brokers said a 24-hour minimum notice period could have unintended consequences of more cautious pricing and was unlikely to be taken up by lenders.
Matthew Jackson, director at Mint FS, said that whilst he supported the measure, he doubted that lenders would take any notice.
“The past three years has taught me that the lender-broker relationship is often a one-way street. We are constantly told what we have to do to support their clients and agendas, but if brokers ask for 24 hours’ notice, which is totally reasonable, the question is: will lenders take action or even care?,” he explained.
Joe Stallard, director and adviser at House and Holiday Home Mortgage, said the pledge sounded “great in principle” but lenders were “recalibrating to the current climate and mortgage markets are mirroring rapid external change”.
“Challenges are all due to the market’s unpredictability as well as rapidly shifting consumer preferences.
“It would make our lives easier to have a minimum 24-hour notice but what if it led to overly cautious pricing from lenders? And the knock-on effects of that might disadvantage more customers than it helps. Rocks and hard places come to mind,” he noted.
Chris Sykes, technical director and senior mortgage adviser at Private Finance, continued that a minimum notice period would be “great for my own sanity” but lenders were “businesses reacting to the market, some quicker than others”.
“The rates we have seen over the past week in many cases have been under swap rates. Lenders will hedge certain amounts of funds at certain rates and once that hedge has run out anything further they lend is at a loss.
“My fear would be, if lenders are forced into minimum notice periods, it would be a net negative for the end borrower as lenders would have to factor this pricing risk into the rates that they offer,” he noted.
Sykes said he had seen situations where the days that rates are being pulled, lenders end up getting 20 times the level of business they usually would.
If that increased to 50 times due to an increased notice period, that could be a “real issue that then would have to be offset somewhere else” he added.
