Rising mortgage rates and reduction in product availability

During times of economic uncertainty, we always see a reduction in available mortgage products. This is because banks and building societies are unsure to what extent the Bank of England is going to act to curb inflation. The bank reacts to economic data, and that is difficult to predict. Most lenders expect rates to rise further over the next 2-5 years. This is why you are seeing such increases in their products over these terms. However, it is interesting that some 10-year products are on lower rates. This suggests that lenders think the economy will weaken over this period and rates will need to be reduced in the long term.

The reduction in available products is not a new thing, and there are multiple reasons as to why we are seeing it. One reason at the moment is uncertainty over the trajectory of interest rates, whilst other lenders have withdrawn products just because of the sheer volume of applications that have been flooding their way. Current service levels show that lenders simply can't handle the volume of applications coming into them. With service levels exceeding 28 working days for some lenders, they run the risk of FCA-regulated complaints due to poor service, so the easiest way to prevent this is just to turn the tap off by withdrawing products. Unfortunately, a lot of lenders and solicitors are still stuck in the 20th century with their mortgage systems. With the technology we have available to us, we shouldn't see lenders pulling out because of an inability to deal with current demand. However, some lenders do not care about the service that they provide to their clients, instead putting profits first and still sourcing business even when they clearly have too many applications in their pipeline and service levels are exceeding an acceptable level. One thing to bear in mind if you are searching for a deal at the moment is to ask your adviser the size of their panel. Some brokers have as little as 23 lenders on their panel, which means they will likely be affected more by this reduction than brokers with over 100.

Several reasons are causing the rise of rates and also products being pulled. One of them is the swap rates for mortgages. Another islenders being unable to service the sheer volumes of applications they're receiving as people seek to lock into rates before they rise further. The past three months has resulted in many people having a long and hard look at their mortgage options and some lenders are seeing significantly increased applications as a result. The only way to ensure everyone stays sane is to either remove products or increase rates. Some lenders have therefore decided to simplify their product offering by reducing the range so instead of having 20 2-year fixed rate products they many only now have four as this can allow for easier re-pricing and removal as right now no lender wants to be cheapest. The main thing for lenders right now is service levels.

Mortgage lenders change and remove products for a variety of reasons including how busy they are or want to be. One thing is for sure, anyone procrastinating on the sidelines wondering whether to take action or their mortgage or not is highly likely to be out of pocket for doing so. Presently, interest rates can only travel in one direction, and that's north. Delaying will certainly leave borrowers seriously of pocket. We advise people to start the remortgage process six months in advance and those borrowers that followed us are now benefiting from the cheapest rates available by over 1%. Delay and pay.