Lenders shortening six month mortgage offers?
Brokers - are you hearing of lenders shortening their mortgage offers down from the typical six months? Can we expect this to become more common as lenders navigate choppy markets and rapid rate rises?
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We're not seeing this yet, but it could be a possibility in the coming months as we enter this unprecedented period of economic instability. Lenders are always looking at way to minimise their risk, and shortening offers could well be one way of doing this, but equally there will be those lenders who buck the trend and extend their offers to lap up a share of the market. Definitely interesting times ahead.
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No mortgage lenders have yet reverted to shortening their offer validity periods to less than six months, which has become the industry norm for both purchase and remortgage applications. Such a move would certainly spell bad news for both mortgage brokers and mortgage applicants alike, but would also create even more unwanted headaches for mortgage lenders, in what is an already chaotic period of constant rate withdrawals and product changes. In so doing, lenders would be shooting themselves in the foot, as their service levels would travel down what is an already very congested road, to the point of a complete processing gridlock.
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We're yet to see any change from lenders in shortening their mortgage offers down from six months. With the average conveyancing process taking in excess of 20 weeks, we'd be surprised to see if any lender looks to shorter their offer down dramatically, but we can never say never. We may, however, see more examples of lenders taking the approach of Santander and Halifax where they also have a product end date that can end up being shorter than the typical six month offer, resulting in the client having to select a new product midway through the life of their mortgage offer.
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I am yet to see any lender come out and say they are reducing the length of mortgage offers as this could and would be a major kick up the backside for everyone involved. It would apply more pressure onto solicitors to avoid delays in ensuring completions are done promptly and also to ensure sellers crack on and find a place and avoid any dithering which is easier said than done in a competitive property market. Lenders like the Halifax and Santander already have product end dates which, once passed, mean a new product has to be selected.
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Never say never, but it would be a very surprising move by any lender who reduced their offer term again given the issues and backlogs that the market currently faces. Whilst it may be perceived that given the volatility in SWAP rates this may help lenders, the reality is this would put more strain on them as they would need to redo applications they have already done, reissue new offers and deal with a whole host of accompanying issues from angry clients and stressed brokers. Much depends on how the lender is funded in determining the pressure changes in SWAP rates put on them, with smaller, new specialist lenders more exposed than mainstream high street lenders. Whilst some have increased their offer times recently to help, which has been most welcome, I suspect this will continue for some time yet before they revert back to their normal offerings.
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I was recently caught out by a lender whose mortgage offers only last three months by default. They explained that they would kindly extend the offer by a month. I thought that was a bit cheeky as most lenders offer a 6-month offer period, many with an 3-month extension and some even beyond that. With the time scales that some solicitors are taking to complete conveyancing at the moment, offer duration is certainly something I take account of when it comes to which mortgage lender I recommend. An additional few months of validity can be worth thousands more than going to a lender a few pounds a month cheaper with a shorter offer period, if the chain isn't ready in time. Four, six, nine, 12 months, it doesn't really matter as the lender can still retract an offer after issuing it if they get spooked by the market. It's happeend before and it will happen again.