The mortgage market was thrown into chaos last week amid fears that interest rates could hit 6 percent next spring.
As group director of JLM Mortgage Services, a Hitchin-based broker that handles 12,000 home loan applications each year, Sebastian Murphy, 48, was on the front lines of the chaos.
Here he tells Fiona Parker how the week went by and gives his best advice for borrowers…
Busy days: Sebastian Murphy (pictured) is group director of JLM Mortgage Services, a Hitchin-based broker that handles 12,000 home loan applications each year
It’s 7 am and I’m at my desk. As a principal of the firm, I still write about 30 mortgages a month and spend much of my day talking to clients. Like any broker, we help clients find the best deal for their circumstances. The last two years have been chaotically busy and I’m hopeful that today’s mini-budget can bring some stability.
The rumored stamp duty cut was a concern, but luckily this one won’t spill gasoline on the market, as it’s not as generous as the discount offered during the pandemic and there’s no cut-off date.
Since February, it has become the norm for lenders to change the price of mortgage offers weekly instead of just once a month.
Shortly after the mini-budget, as the pound falters, Halifax confirms that it will re-price offers early next week.
Hopefully, it won’t be the first of many.
The pound has plummeted. Halifax not only changes the price of the offers, but removes all home loans that come with a fee.
This afternoon Virgin Money says it will withdraw all mortgages for new customers at 8pm tonight. Other lenders will soon follow. All of our 110 brokers get down to business as we make phone calls to let borrowers know what’s going on.
On a normal day I talk to about 20 clients. Today I am over 60. These conversations are not easy. Most of them are with people looking to remortgage.
When you tell someone paying 2 percent interest that their best bet is a 4 percent offer, you can’t take offense if they wonder if that’s really the case.
If a client wants a fixed offer, we make it clear that they must act quickly before it disappears. Fortunately, most buyers we talk to can negotiate lower prices with sellers and don’t have to back out of sales.
But many first-time buyers want to know if it would be better to wait for the cheaper rates to return. Our brokers stay late to get over the workload and some are still in the office at 11pm
You can check what fixed-rate mortgage deals might be offered to you and how much they would cost based on the size of your mortgage, the value of the home, and how long you want to settle for. with This is Money’s best mortgage rate calculator, powered by L&C.
Grim reality: Customers currently paying around 2% interest are being told their best bet is a 4% offer.
Mortgages are coming off hard and fast. Nationwide, Britain’s biggest lender, confirms it will raise its five-year rates for borrowers with deposits of 5 and 10 percent.
Clients are starting to panic and brokers are waking up at 6am to find half a dozen emails in their inbox. Some customers contact us at 4 am because they can’t sleep.
WhatsApp messages and texts also arrive at every hour of the day and night.
Even those who do manage to secure a deal are not necessarily thrilled with the outcome.
I get a call from a customer whose 1.45 percent flat rate is coming to an end. Another broker offered him a 3.11 percent deal, but that was ten days ago. Today, the best you can get is a five-year 4 percent correction.
He agrees, but that means he’ll pay an extra £3,240 each year. That’s more than anyone feared would add to his energy bill.
Many first-time buyers want to know if it would be better to wait for the cheaper rates to return.
I wake up wondering how many deals will disappear today.
It usually takes me five minutes before I can sign someone up for an HSBC mortgage. However, yesterday I was waiting for two hours after starting at 1,092 in the queue. Later, the bank confirms that it will not offer any more mortgages that day.
It means we all got up early this morning, hoping to lock in the rates customers wanted yesterday.
I’m trying to increase my chances by logging in with my laptop and smartphone simultaneously. I have personally written 27 mortgages in the last 48 hours.
Sobering headlines confirm that nearly 1,000 mortgages have been withdrawn since Tuesday morning.
Fortunately, some lenders still allow existing customers to switch to new agreements with them, and we began to focus on these applications, after prioritizing borrowers who wanted to switch to a different bank or building society.
I am exhausted and believe that some of these rates being offered are unreasonable. Some lenders are clearly setting rates high because they can’t keep up with the increased demand.
Some borrowers are very upset, and I speak to a particularly distraught woman whose mortgage is due in August of next year.
Even if you were to sign a new deal now, before rates rise further, the best available option will increase your payments from £1,400 to £1,750.
She worries that she won’t be able to afford that increase along with other mounting costs, and her tears force us to pause our conversation several times.
Currency crisis: After the pound plunged in response to Chancellor Kwasi Kwarteng’s ill-received mini-budget, the mortgage market took an immediate hit
News of the government’s u-turn has customers starting to ask if cheaper fares will return. So far, this is not the case.
Santander, his current lender, offers a borrower a two-year fixed 6.14 percent. We haven’t seen rates this high in over a decade.
Unfortunately, there is no way of knowing what will happen in the next few months.
But if your agreement is less than six months away from expiration, it may be worth securing another solution today, ready for when you remortgage. Just be sure to ask about exit fees.
I’m not convinced that cheap-looking trackers now are a good idea if rates are going to keep going up.
But whatever you do, don’t go with a standard variable rate.
- JLM is a market intermediary company that receives fees from lenders in exchange for the advice and recommendations it offers to borrowers. Around 5 per cent of clients, those taking smaller loans, may have to pay a fee, which is capped at £595.
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