Coreco were again in The Sunday Times this weekend talking about the fact that the pricing of mortgages, especially over 5 years, seems to be tripping upwards once more.
There has been a hike in SWAP rates over the last couple of weeks and 5 year pricing looks to be the most affected. Already the days of 5 year fixed rates beginning with a 2 appear to be well and truly numbered.
With Governor of the Bank of England Mark Carney again spelling out that he thinks there is a good chance Bank Base Rate will rise before the next election it is no surprise the money markets have reacted.
This week also marks the entry of some lenders into Mortgage Market Review territory and over the next 3 weeks all lenders will have to move to the new regime. As a result, with some lenders will potentially price upwards to try to curb high levels of business whilst new systems are being bedded in, we could well be entering a short period of upward pricing.
The key thing to point out is the following – anyone who has a Mortgage Agreement In Principle, (AIP) now who does not submit a full application before the changes will have to start again. In other words, the AIP’s will be worthless.
The ramification of this over the next few weeks are pretty clear. There will undoubtedly be a period of confusion and whilst most buyers should be ok it is important to be aware of this. Brokers are best placed to be able to understand and react to the changes quickly.
Direct branch staff have never worked under this regime before and every change will need to go through a new, time-consuming advice process before a new Agreement can be reached. Brokers however have always worked in this way and will be able to move quickly.
There will also be delays in processing applications as lenders get used to the new system so we all need to be aware of this fact when deadlines are set.
Also, any material change, i.e., a change of loan amount, purchase price, income etc. will result in the whole application needing to be reassessed under the new rules which will mean further delays and could mean an accept becomes a decline.
This of course is the worst case scenario and lenders have assured us that only around 4% to 5% of customers are likely to be affected. As an example however, one lender will now assess affordability based on a stress rate at 6.99% rather than the 5.69% they use now; the difference is clear.
As ever, Coreco are here to help and we have taken the time to understand each lenders changes so if there are any blockages, especially with applicants going direct to a bank, we are well placed to swoop in and try to save the day!
April and May are traditionally busy months and even with all the changes going on we see no reason why that will change.
The main conclusion, is that the earlier borrowers get their paperwork together and application in the better.