Mortgage chaos as buyers rush to lock in to cheap deals

Mortgage chaos as buyers rush to lock in to cheap deals as the era of rock-bottom rates comes to an end

  • Some five and ten-year fixed rate deals are now cheaper than two-year fixes
  • Brokers ‘overwhelmedby soaring demand sparking long delays for applications
  • Lenders tighten affordability checks as the cost-of-living crisis starts to bite
  • Banks down-valuing properties amid predictions market could soon start to cool
  • With the era of rock- bottom mortgage rates coming to an end, borrowers are facing chaos as they rush to lock into cheap deals.

    Top home loans are disappearing on an almost daily basis and some five and ten‑year fixed-rate deals are now cheaper than two-year fixes.

    Brokers say they are ‘overwhelmed’ by soaring demand, with long delays causing applications to take four times as long to approve.

    Disappearing deals: Top home loans are disappearing on an almost daily basis and some five and ten‑year fixed-rate deals are now cheaper than two-year fixes

    Disappearing deals: Top home loans are disappearing on an almost daily basis and some five and ten‑year fixed-rate deals are now cheaper than two-year fixes

    Lenders are also tightening their affordability checks as the cost-of-living crisis starts to bite.

    And homebuyers are being blindsided by banks down-valuing properties as they predict that the market could soon cool.

    It is little wonder then that borrowers are panicking. But experts are urging caution.

    Emma Jones, owner of Alder Rose Mortgage Services, 说: ‘Mortgage rates are all going up and we have had more people declined for loans in the last month than ever before. It is causing a lot of panic.

    ‘Costs and circumstances are changing all the time so it’s important borrowers don’t rush into anything.’

    这里, Money Mail talks you through how to navigate the mortgage mayhem . . .

    Disappearing offers

    Last year mortgage rates sank to record lows, with scores of under 1 per cent deals up for grabs.

    But those bargains have fast been wiped out by the Bank of England’s decision to raise interest rates to 0.75 per cent last month — the third increase since December.

    Average fixed-rate mortgage deals are at their highest in more than five years, according to analysis by financial information firm Moneyfacts.

    A typical two-year deal is now 2.86 per cent — an increase of 0.21 percentage points since last month and the highest since June 2015.

    The five-year equivalent has reached 3.01 per cent — a figure not seen since October 2016.

    更重要的是, deals are disappearing almost as soon as they appear on the market. Moneyfacts says the shelf-life of mortgage deals has plummeted to the lowest on record at just 21 天, 从下 48 去年的这个时候.

    Rachel Dixon, a mortgage adviser at broker RH Dixon, 说: ‘We advise on the best interest rate and then firms pull it with little or no notice. This is a complete nightmare for brokers.’

    Cooling market: Lenders are increasingly 'down-valuing' mortgage offers after the pandemic property boom caused many homebuyers to pay over the asking prices

    Cooling market: Lenders are increasingly ‘down-valuingmortgage offers after the pandemic property boom caused many homebuyers to pay over the asking prices

    Fix conundrum

    This week the UK’s largest lender began offering five and ten-year fixes at a cheaper rate than their two-year deals.

    从星期一开始, Halifax increased its mortgage rates by up to 0.5 百分点, with its cheapest two-year deal now 2.54 百分. Yet its lowest five and ten-year deals are priced at 2.48 百分.

    Usually you have to pay more to benefit from longer rate security. But concerns around high inflation mean banks expect interest rates to be higher in two years’ time than in five or ten.

    Miss Jones, from Alder Rose, 说: ‘People are taking these five-year fixed-rate deals without considering whether their circumstances could change in that time.

    ‘These deals can come with costly exit fees so it could be better to take the slightly higher two-year fix.’

    Loan Delays

    The race to secure fixed deals has created a backlog of applications, meaning loans that were typically approved within a week are now taking up to a month to go through.

    And experts warn that some lenders are even hiking mortgage rates in a bid to reduce demand.

    与此同时, furious buyers and sellers fear the delays could cause their property purchases to collapse. 一位在推特上写道: ‘I lose my dream home all because you couldn’t sort my buyer’s mortgage in 18 weeks.’

    Mortgage broker Coreco reported a 35 per cent increase in enquiries from customers in March compared with the start of the year.

    Rising rates: A typical two-year deal is now 2.86% - 增加 0.21 percentage points since last month and the highest since June 2015

    Rising rates: A typical two-year deal is now 2.86% – 增加 0.21 percentage points since last month and the highest since June 2015

    Nick Morrey, Coreco’s technical director, 说: ‘It is a vicious cycle. Borrowers are rushing to lock in rates to protect themselves against future rises.

    ‘Lenders are overwhelmed and the only way to reduce the applications is to push up their rates. It is a perfect storm. Buyers are desperate to secure their purchase while advisers are telling existing homeowners to apply if their current mortgage is expiring in the next six months.’

    Borrowers hit by delays should get the rate they applied for when their loan is finally approved.

    But if their application is rejected, they could find rates are higher when they come to look for a different deal. Applicants should ensure their documents are in order before applying.

    Rising bills

    Borrowers face stricter affordability checks, with experts warning that banks are beginning the biggest clampdown on mortgages in more than a decade.

    Last week Santander told brokers its lending criteria would reflect recent rises in household bills, National Insurance and taxes.

    Other High Street banks including HSBC, 巴克莱, Lloyds Banking Group and NatWest, are considering similar moves.

    Sabrina Hall, a mortgage adviser for Kind Financial Services, 说: ‘It is frustrating for brokers because banks are constantly tweaking and changing the algorithms which determine what loans they can offer.

    It is really important that borrowers are talking to their mortgage advisors at the very start of the process so they really understand what they can afford to borrow.’

    Devalued homes

    Lenders are increasingly ‘down‑valuing’ mortgage offers after the pandemic property boom caused many homebuyers to pay over the asking price.

    Banks and building societies generally agree to pay a fixed percentage of the value of the property, but if they think a house is not worth the price agreed, their mortgage offer will be reduced accordingly.

    This can leave buyers vulnerable as they must find the cash to make up the difference.

    Chris Sykes, technical director at mortgage broker Private Finance, 说: ‘Recently one of my clients had bought a property for £5 million and this was down-valued to £3.5 million by the lender.

    ‘That was definitely the most dramatic case I’ve seen.’

    He adds that the buyer pushed back with his lender so it was only down-valued to £4.7 million.

    h.kelly@dailymail.co.uk