Just as we thought the market was returning to normal after the turbulence of the pandemic, the stamp duty holiday and astronomical house-price increases, we get… inflation.
Not just a slight increase, but the highest inflation rates for 30 years. At the time of writing, the Consumer Prices Index shows a 7% rise in the 12 months to March 2022, up from a 6.2% rise in February.
Mortgage products are available for only 21 days
Predictions from the start of the year put the peak of inflation at 7% in April — so we’re ahead of schedule. And new forecasts say “around 8% in spring 2022 and perhaps even higher later this year” (Bank of England). How comforting.
Swap rates too have steadily risen (with a few short-lived recessions), increasing the rates at which lenders borrow from and lend money to each other.
Of course, there are many contributing factors for these situations, including the horrific Russian war on Ukraine, culminating in something of a perfect economic storm.
So, apart from the rocketing cost of living at the macro level, how is this affecting mortgage professionals like us on a micro basis?
Work on the assumption your client’s favoured rate won’t last for long
As money becomes increasingly expensive for lenders, we are past the point at which they can keep squeezing profit margins to entice extra clients. Instead, lenders are adjusting pricing more frequently, both in reaction to the market changes and in anticipation of Bank of England base rate increases.
Consequently, mortgage products are available for only an average of 21 days, compared to 48 in August 2019, according to research from Moneyfacts.
Difficult conversations
Needless to say, this is resulting in difficult conversations with clients when lenders suddenly withdraw their top mortgage pick — sometimes with only a few hours’ notice.
As you’d expect with a constantly changing product range, some lender service level agreements (SLAs) are slipping, adding more frustration to the process. While the average time to review or acknowledge new applications (of the 48 buy-to-let lenders we regularly track) is still around 2.4 working days, at least six lenders advertise a minimum of five to eight working days. However, the reality is sometimes longer.
It’s easy to forget that our clients don’t necessarily understand the intricacies of the mortgage lender world
I understand and sympathise with lenders. The market is, quite frankly, bonkers, and they’re trying to balance attracting new business and making a profit when the goalposts for the latter keep moving.
What can we brokers do to mitigate the stress for ourselves, lenders and, most importantly, our clients?
Know your lender SLAs: Having this information will help you give clients accurate expectations. Furthermore, it’ll help you avoid difficult situations, such as where a client requires a quick offer or completion to seal the deal but you’ve picked a mortgage on the merit of the rate alone and realise, after they’ve paid the application fee, that the lender will struggle to meet your deadlines.
When clients start a deal, let them know what’s happening in the market, and impress how important it is to move quickly
Over-prepare: We all know there’s the essential collection of documents lenders will require. Where possible, submit these before you’re asked. For more complex cases, or with quirky lenders that like to see extra documentation, know what’s needed and prepare it early. It’s incredible how much time this can save, and it provides a better experience for your client.
Thoroughly check client documents: Don’t leave it to the underwriter to find issues with your client’s accounts; check it all yourself and head off those challenges before submission. Ensure your clients have correctly completed all necessary forms to help move things along quickly.
Communication: When clients start a deal, let them know what’s happening in the market, and impress how important it is to move quickly to secure the best rate. Be clear with what you need from them, and when, in order to get an assessment in principle or full submission completed in time.
Lenders are trying to balance attracting new business and making a profit when the goalposts for the latter keep moving
I’m not one to teach Grandma how to suck eggs; hopefully, the above is standard practice for you. However, as experts in our field it’s easy to forget that our clients don’t necessarily understand the intricacies of the mortgage lender world. So, when things are chopping and changing at a speed we struggle to keep up with, we must remember to communicate this to them.
As I write, we anticipate another base rate increase in May. Most experts predict another 0.25% rise to 1%.
Don’t leave it to the underwriter to find issues with your client’s accounts; check it all yourself
Either way, if it’s anything like February, some lenders will adjust in the run-up while most will withdraw and relaunch in the days and weeks afterwards.
I wish you all luck in navigating the inevitable; we are all in this together. Work on the assumption your client’s favoured rate won’t last for long. Blink and you’ll miss it.
Jeni Browne, sales director, Mortgages for Business
