With the end of the era of low mortgage rates, borrowers face chaos when they rush into cheap deals.
The best home loans are disappearing almost daily, and some five- and ten-year fixed-rate deals are now cheaper than two-year loans.
Brokers say their “overwhelmed” demand is growing, with long delays, making approval approval four times longer.
Disappearing deals: the best home loans are disappearing almost daily, and some five- and ten-year fixed-rate deals are now cheaper than two-year deals
Lenders are also stepping up availability checks as the cost of living crisis begins to intensify.
And home buyers are confused by banks, which reduce the cost of real estate, because they predict that the market may cool quickly.
So it is not surprising that borrowers are panicking. But experts urge to be careful.
Emma Jones, owner of Alder Rose Mortgage Services, says: “Mortgage rates are rising and over the last month we have had more people giving up loans than ever before. This causes great panic.
“The cost and circumstances are constantly changing, so it’s important that borrowers are in no hurry.”
Here Money Mail talks about how to navigate the mortgage chaos …
Last year, mortgage rates fell to record lows, with estimates of less than 1 percent of transactions.
But those deals were quickly ruined by the Bank of England’s decision to raise interest rates to 0.75 per cent last month – the third raise since December.
According to an analysis by financial information firm Moneyfacts, the average rate of fixed-rate mortgages was the highest in more than five years.
The typical two-year deal is now 2.86 percent, an increase of 0.21 percentage points over last month and the highest since June 2015.
The five-year equivalent reached 3.01 percent, a figure not seen since October 2016.
What’s more, deals disappear almost as soon as they appear on the market. Moneyfacts says the maturity of mortgages has fallen sharply to its lowest ever record – just 21 days, up from 48 at this time last year.
Rachel Dixon, a mortgage consultant with broker RH Dixon, says: “We advise on the best interest rate and then firms choose it with almost no notice. It’s a nightmare for brokers. “
Cooling market: lenders are increasingly “reducing” mortgage offers after the real estate boom, which is a pandemic, has forced many home buyers to pay more than asking prices
Fix the riddle
This week, Britain’s largest lender began offering amendments for five and ten years at a cheaper rate than their two-year deal.
Halifax has raised mortgage rates to 0.5 percentage points since Monday, with the cheapest two-year deal now at 2.54 percent. However, its lowest deals for five and ten years are estimated at 2.48 percent.
Usually you have to pay more to benefit from longer security rates. But concerns about high inflation mean banks expect interest rates to be higher in two years than in five to ten.
Miss Jones of Alder Rose says: “People are taking these five-year fixed-rate deals without wondering if their circumstances may change during that time.
“These deals can be with expensive exit fees, so it would be better to take a slightly longer two-year term.”
The race to secure fixed deals has created a backlog of applications, meaning loans that were usually approved within a week now take up to a month.
And experts warn that some lenders are even raising mortgage rates to reduce demand.
Meanwhile, angry buyers and sellers fear that delays could lead to the collapse of the purchase of their property. One of them wrote on Twitter: “I’m losing my dream home because you couldn’t sort out my buyer’s mortgage in 18 weeks.”
Mortgage broker Coreco reported an increase in requests from customers by 35% in March compared to the beginning of the year.
Raising rates: a typical two-year deal is now 2.86% – up 0.21 percentage points from last month and the highest since June 2015
Nick Mori, Coreco’s CTO, says, “It’s a vicious circle. Borrowers are in a hurry to fix rates to protect themselves from future growth.
“Lenders are overwhelmed, and the only way to cut bids is to raise rates. This is the perfect storm. Buyers are desperate to secure their purchase, while consultants are telling existing homeowners to apply when their current mortgage expires in the next six months. ”
Debtors affected by the delay should receive the rate they applied for when their loan is finally approved.
But if their application is rejected, they may find that the rates are higher when they come looking for another deal. Applicants must make sure their documents are in order before applying.
The bills are growing
Borrowers are facing tighter availability checks, with experts warning that banks are starting the biggest mortgage restrictions in more than a decade.
Last week, Santander told brokers that the lending criteria would reflect recent increases in household accounts, national insurance and taxes.
Other banks on High Street, including HSBC, Barclays, Lloyds Banking Group and NatWest, are considering similar steps.
Sabrina Hall, mortgage consultant at Kind Financial Services, says: “Brokers are upset because banks are constantly setting up and changing algorithms that determine what loans they can offer.
It is important that borrowers talk to their mortgage advisers at the beginning of the process so that they really understand that they can afford to borrow. ”
Lenders are increasingly “lowering” mortgage offers after the real estate boom caused by the pandemic, forced many home buyers to pay more than the asking price.
Banks and construction companies usually agree to pay a fixed percentage of the value of the property, but if they believe the house is not worth the notional price, their mortgage offer will be reduced accordingly.
This can leave buyers vulnerable as they have to find money to make up the difference.
Chris Sykes, technical director of mortgage broker Private Finance, says: “Recently one of my clients bought a property for £ 5 million and the lender reduced it to £ 3.5 million.
“It was definitely the most dramatic case I’ve seen.”
He adds that the buyer has given up on his lender, so his valuation has been lowered to just £ 4.7 million.
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Mortgage chaos: how to sort out a home loan as interest rates rise
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