Mortgage lenders are reporting overwhelming levels of demand, as desperate homeowners and buyers try to lock in rates before they rise.
Last week the Bank of England announced a 0.5 per cent increase in its base rate to 1.75 per cent – the biggest rise in 27 years – pushing up rates on new fixed mortgages even further.
Since January 2022, interest on a typical two-year fixed mortgage has jumped from 1.3 per cent to 3.46 per cent, according to analysis from L&C Mortgages, increasing average monthly payments by around £159.
Rate rises: As interest continues to climb, lenders are leaving borrowers with less time to secure mortgage deals before they are removed from the market
Mortgage brokers have suggested that some lenders are reducing the number of products they have on the market, or setting interest rates artificially high, in order to reduce requests and keep up with their workload.
Mortgage products now only have an average shelf life of 17 days, according to the financial information service Moneyfacts – four days fewer than the previous recorded low of 21 days seen in June 2022.
This leaves borrowers with a shorter timeframe to secure their mortgage, risking rates going up before their application is completed.
However, there are steps home movers and those remortgaging can take in order to make the process move a little more quickly, and still ensure they get the right mortgage for them.
1. Get a broker
It may feel counter-intuitive to pay for a broker when there are plenty of mortgage comparison sites available.
While these sites are a useful place to start to get a feel for the market, the service brokers offer goes beyond simple rate comparison.
This is Money’s mortgage comparison tool is powered by broker L&C, so you can see the latest rates and then follow it up with fee-free advice.
Many brokers are fee-free, but not all.
One advantage is that brokers get access to special ‘intermediary’ rates that are not available to customers approaching the lender directly.
They are also often made aware when particular products are about to be withdrawn, so can be proactive in updating clients if they need to move quickly.
They also know lenders well and will be better able to discern which may pull products and those that are less likely to.
Applying to more than one lender runs the risk of harming your credit score, which can be negatively impacted by third-party checks.
Brokers can recommend lenders that suit your needs, especially if you have slightly different circumstances such as being self-employed, which could both save time and improve your chance of a successful application.
2. Work quickly
Getting your application in as soon as possible will help you secure a lower rate ahead of future rises.
Remortgagors can apply for a mortgage up to six months ahead of the new mortgage start date, effectively securing their rate months before the end of their existing mortgage.
As the crunch continues, lenders know there is more money to be made by keeping their customers so many are increasing the maximum time you can remortgage your house ahead of your current deal ending.
‘A lot of lenders now offer mortgages for six months if it is a remortgage, whereas it used to be three months with most lenders,’ says Ashley Thomas, director at mortgage specialist Magni Finance.
This additional few weeks may help you lock in a far more palatable deal.
With the ongoing uncertainty rates are rising multiple times a month, and expected to continue on the same trajectory. The average overall two-year fixed rate increased for a tenth consecutive month in August, according to data from MoneyFacts.
Now at 3.95 per cent, it sits 1.61 per cent higher than where the equivalent rate sat in December 2021 (2.34 per cent) and is the highest recorded since Feb 2013 when it was 4.09 per cent.
3. Get a decision in principle
You can also cut down the time to takes to process your application by securing a mortgage in principle first.
This is a written estimation from the bank of the money they can loan you and at what rate, based on the information you provide.
It is not a full agreement but does require a credit check and most likely the submission of income statements.
It will ensure you don’t waste time making a full application to a lender whose criteria you don’t meet. And it may make it quicker to get a mortgage with the same lender, as the information they already have on you will cut down the time it takes to sign off on your full application.
Matt Coulson, director at mortgage specialist Heron Financial, says: ‘Over the last couple of years, the decision in principle process has really evolved to the point it now encompasses a large part of the full application.
Acting quickly once you have an offer on a property accepted can save vital time in getting your application through resulting in a better deal
4. Don’t assume the best rate is the best deal
When securing a rate, be sure to dig into the detail and don’t always assume that the lowest one will equate to a cheaper deal overall.
‘Don’t always go rate chasing – the lowest rate is rarely the least expensive product,’ says Oli Pearce, director at Guild Mortgages. ‘Quite often headline rates come with arrangement fees and the size of the mortgage may mitigate this.’
For example, if you are taking a £100k mortgage, a lower rate with a high arrangement fee may end up costing you more than a slightly higher rate with no fee. Make sure you are looking at the offer in the round.
5. Keep on top of your paperwork
It isn’t rocket science but keeping on top of your documents is critical for a speedy mortgage process. This is especially true if you are buying a new home and are part of a chain.
In the current climate, brokers can get as little as two hours warning before a rate is pulled. If that happens and you are mid-way through compiling your application, it will be valuable to have all of your documents to hand ahead of time enabling you to react quickly if necessary.
A lot of lenders are experiencing painfully long delays, explains Pearce, with some asking brokers not to chase for the first 21 working days after application.
Ensuring that all questions are answered at the beginning of the application will cut down any further delays.
What is more, brokers aren’t allowed to submit an application if it is missing any of the required documents – so if you are under time pressure having everything to hand will make your and their life easier, and ensure you stay at the front of the queue to secure the best possible rate.
6. Overpay your existing mortgage
If you are currently on a fixed rate mortgage that is not coming to an end for some time, you may be fearful of where rates will be when your deal ends.
If you can afford it, L&C’s David Hollingsworth says overpaying on your mortgage can save you money in the long run – as you will be paying off a bigger chunk of what you owe at a lower rate.
‘Clearly we don’t know where we will be in 12 or 18 months, and rates it may have reduced, but preparing as much as you can makes sense. If you can afford to overpay then that may be something helpful,’ he says. Overpaying on your mortgage can equal thousands of pounds in savings longer term, and if you are able to pay down enough to take you into a different loan to value bracket you will likely benefit from lower rates.
However, most fixed mortgages have limits on how much you can overpay per year, often 10 per cent of the total balance, so you will need to stay within these.