How to deal with lenders pulling their mortgage rates.
If you were in the process of applying for a mortgage you might just have been stung by a very rare event. Multiple mortgage lenders pulling their headline rates at once, leaving many buyers having to recalculate their finances. The last time an event like this happened was at the start of lockdown.
It is likely these lenders will return a lot sooner than they did before with new products, only now we have firmly shut the door on low-priced interest rates. It’s been quite a few days and a turnaround for the mortgage market.
What do we do if we’re in the process of buying/looking for a property?
Mortgage application in place
If you’re advanced along the process with your mortgage application in place, you’ll need to call your lender/broker and see if they will honour the rate agreed at the point of application. They are likely to respond “We are for now” or something to that effect, even if you paid a booking or arrangement fee. In normal circumstances, this would ‘secure’ the rate upon application. However, I use this term loosely as this does not mean it’s guaranteed.
If you have a mortgage offer, your mortgage offer expiry date is usually on the offer letter and, generally speaking, it is only due to unforeseen circumstances that a mortgage lender would not honour a mortgage offer. We are however heading into that realm right now so once again, nothing is guaranteed although you are probably in the safest place right now with the big lenders.
No mortgage application in place
If you are at the beginning of the process it is now highly unlikely that any mortgage quote you have been given might still be valid. Indeed, there is a small worded line on them that says: “This illustration is valid on the date produced”. Moreover, it even states that the quote is subject to “current financial market conditions”. If you are in this position, now would be the time to speak with your mortgage advisor to ask them for a new quote and, if you haven’t already, get yourself an agreement in principle. This does not reserve an interest rate, but it will help get you ready to secure a rate and get your application in more quickly when you find a property.
Finally, if you haven’t got a mortgage quote and have only just started looking then now is the time to factor in more rate hikes into your research. Anticipate at least another 1% increase in the short term for fixed-rate interest deals. This does not mean it will happen, but preparation is key to understanding if this is something you could work with.
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Author: Ben, Glow (CeMAP, BSc Hons)