Brokers - let's talk about reducing product numbers

Product numbers are down and rates are up, but within these rates lenders are charging what I have started calling an RSP, or Rubbish Service Premium. Lenders' turnaround times in general are shocking and they are deliberately manipulating themselves down the sourcing to reduce the number of cases coming in so they don't get even worse. Consumers considering a long-term fixed rate should give this some thought and lender CEOs must be tearing their hair out about all this missed lending opportunity.

Most Lenders are still in the market, and criteria remain mainly unchanged. What the market has seen is a reduction in the variation of products. Precise Mortgages and Kent Reliance, for example, have only one loan-to-value bracket of 80% and 85% respectively, where previously they would have had products at 75% or 70% loan-to-value.

It's not unusual for lenders to reduce their product numbers in a changing market. Not only do they tend to reduce the number of products, they also change the rates on the other products very regularly. The difficulty for brokers is you advise the client on one product and by the time the application has gone in, the rates have changed or the product is no longer available. It makes managing expectations very difficult and can be costly to the client.

The low number of mortgage products currently available is the result of various factors. The predominant one being that many lenders are currently overwhelmed with applications. This had led to many reducing their product range so they can get on top of the business enquiries they have. Obviously you can also count the looming recession into the factors that are contributing to these lower product numbers, as some lenders are reducing their availability at higher LTVs.

A lot of lenders will have multiple versions of very similar deals, for example, a 3.49% 2-year fixed rate with a £999 fee, a 3.69% version with a £495 fee and then a 3.99% version with no fee. This would then be repeated for 3- and 5-year fixed rates, maybe a 10-year fix too and any trackers and variable rate offerings. Then, each product set would have offerings with maybe 5, 10, 15, 20, 25, 30, 35, 40, 45 and maybe even 50 percent deposit levels so it's easy to see how just one lender can very quickly end up with hundreds of deals. So trimming these down a little makes sense when you are not struggling to attract new business applications, especially as maintaining each deal will have a cost implication for the lender. 3890 mortgage deals is still a huge number, and most people are still going to be well served by the options available to them. If reducing the number of products on offer helps lenders maintain deals for longer, and so to not have to withdraw and replace them with 20 minutes' notice, then I'd say this should be viewed as a good thing. If it also helps them to improve service by reallocating resources to underwriting rather than product development and maintenance, then it will be even better.

Across the market products are being withdrawn, tracker products, variable products, 2 & 5 year fixed rates. What I have mostly noticed is that the lenders criteria’s are tightening up, where before a lender may have 20 products in their arsenal: 10 of those being for the perfect mortgagee with a great credit score and income and then 5 of those products being aimed at older borrowers and 5 of those products being aimed at the credit impaired I have found they have now dropped those products or significantly reduced them for the non-perfect mortgagees. Lenders are worries about the economy too and to combat this they are lowering their risk profiles by increasing loan amounts, decreasing income multiples, not lending to those borrowers with low credit scores ect. It is impacting the way we advise clients, before the client would have more options (eg products with no upfront fees, products with cash back, products with no early repayment charges) however these are now few and far between unless you are the perfect borrower.