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Is a 24h BTL product withdrawal notice period feasible??

Journalist: Andreea Dulgheru, Medianett Publishing

ended 25. July 2023

I am looking for comments from BTL industry experts (brokers, lenders etc) for a feature about whether a 24-hour notice period for BTL product withdrawals is feasible, and why this is (or isn't) important for this market. The comments will be used for a feature in the next BTL Insider Magazine:

I would like brokers and lenders to provide answers to the questions listed below (the deadline for submitting answers is COP 25th July)

Questions for brokers:

  1. Are you in favour of a 24-hour notice period for BTL product withdrawals? Why/why not?
  2. Do you think a 24-hour notice period for BTL product withdrawals is feasible for all lenders? Why/why not?
  3. How has your business been affected by last-minute BTL product changes or withdrawals? (deals failed, having to pay additional fees to complete a deal with a different lender, extensive delays etc)
  4. From your experience, what is the average notice period given by lenders when removing/changing products?
  5. Are you more inclined to work with lenders that are providing lengthier notice periods, as opposed to those that pull or reprice products at the last minute? Why/why not?
  6. Should a 24-hour notice period be introduced in the FCA’s new Consumer Duty rules? Why/why not?
  7. If a 24-hour pledge is implemented, what do you think will happen with lenders that do not sign this pledge?
  8. Do you expect lenders that give a 24-hour notice period to have a significant rise in BTL loan applications from brokers and if so, how could this affect service levels? (could this lead to further delays in deal completions, price increases etc?)

Questions for lenders: 

  1. Are you in favour of a 24-hour notice period for BTL product withdrawals? Why/why not?
  2. Do you think a 24-hour notice period for BTL product withdrawals is feasible for all lenders? Why/why not?
  3. What are the factors that influence a lender’s decision to remove/reprice BTL products, and how does this influence the notice period for these changes?
  4. Do you think brokers are aware of the factors that influence a lender’s decision to remove/reprice BTL products, and do you believe they should be aware of these processes?
  5. How has your business been affected by last-minute BTL product changes or withdrawals? (for example, have you seen a reduction of applications from brokers as a result?)
  6. What are the positive and negative ramifications of lenders implementing a 24-hour notice period for BTL product withdrawals?
  7. If you are not in favour of a 24-hour notice period, what alternative would you suggest lenders implement in order to find a compromise?

If you prefer sharing your views over the phone, more than happy to conduct a short phone interview.

For more details, please send me an email at andreea@medianett.co.uk

6 responses from the Newspage community

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Editor
Michelle Lawson
Director at Lawson Financial
As a member of The Broker Collective, I am totally in support of a 24hr product withdrawal pledge for all mortgage products. There are a few lenders that do this already where a product can be secured at DIP stage. I struggle to see how this can't be done as if pipeline is managed correctly, a lender will know when funds are running low and what is happening with rates. Little notice of withdrawals causes an influx of business and also log jamming of lender systems as well as poorer quality applications.These decisions are not made lightly but they are also not last minute either and get filtered through the lenders. As brokers, we are quoting products and we have no idea how long they are around for and different lenders give different levels of notice ranging from none to 48hrs or product reservation. It also applies unnecessary stress on applicants and brokers alike and can encourage rushed decisions with the penalties of much higher rates or fees if people miss out.
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Mike Staton
Director at Staton Mortgages
The major problem we have with the mortgage industry is the influx of brokers who have joined in the last 5 years, even more so during lockdown. Being a broker isn't easy and part of our role is to deliver bad news. If a lender needs to pull their rates from the market with immediate effect, then it is their own business decision to do so. We are all aware that the majority of lenders do not reserve the rate until the full application has been submitted, a good advisor will be making their client aware of this upfront.

Hopefully, we will see a reduction in the amount of brokers in the industry that joined because they thought it was an easy ride and a quick way to earn a couple of quid.

Brokers just need to pull up their socks and get on with it, because for everyone one Advisor that isn't happy at delivering bad news to their clients, theirs a very good Advisor that will be happy to take that client from them.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
Whilst having a decent notice period helps brokers and consumers, it can be damaging to lenders, as they can end up in a position where they are taking on high volumes of low profit, or even loss-making loans, with these volumes then crippling service. It is less of a problem for those that aren't at the sharp end of the market in terms of rates, but for those at the tip of the interest rate spear, it is a big issue. I'd hate for lenders to add additional headroom into their pricing to accommodate a forced notice period; especially if that extra margin was then not charged on the lenders' direct products. That being said there are still lots lenders can do to help the situation; having a product committee meeting as early in the day as possible is a stupidly simple one so that a rate withdrawal notice can be issued at a decent time of the day, not just before 5 pm. Lenders wouldn't ask their underwriters at 4 pm on the day to work until midnight, so why do they do it to brokers?
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
A prime example of what good looks like is Coventry B.S. who for as long as I can remember have offered a 48 hour notice pledge for product withdrawals.

If they can make it work, it should be feasible for everyone else.

Whilst us brokers always have to recommend the most suitable product, when a lender who you know will look after your clients is sourcing, you naturally move heaven and earth to ensure that they get the business.

Plus 48 hours notice actually gives you enough time to get documents and submit a case to the lender too.

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Marcus Wright
Managing Director at Bolton Business Finance
A minimum commitment to at least 24 hours' notice would somewhat help. It has been very common recently to receive notice of BTL product withdrawals on the same day. If a decision in principle has been issued to the client, then they are expecting that rate and may have made property purchase decisions on that basis. To then only get a few working hours to try and pull a full application together is very difficult. Especially when some lenders are still very old-fashioned using wet ink signatures and printed pieces of paper.
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Lee Gathercole
Co-Founder at Rebus Financial Services
I'm not in favour of this, 24 hours notice in my opionon is not enough time to be able to provide advice to a client and submit a formal mortgage application with the bank.

I don't believe all banks have the right systems & processes in place to deal with the last-minute influx of applications either, it's a last minute scramble to secure a rate only for the application then to be delayed because of the huge intake.

This can cause a great amount of stress for both us advisors and our clients if we are not given enough notice, which can lead to poor decision making on both parts. In the past we have seen properties and clients being lost because of the pressure to make such quick decisions.

I am absolutely more inclined to work with lenders that can provide us with at least 2-3 days notice, this allows us to secure the rate in good time for our clients but also gives our clients time to reflect on the mortgage deals available to them without being pushed into a corner.