Mortgage lenders are reporting overwhelming levels of demand as desperate homeowners and buyers try to lock in rates before they go up.
Last week the Bank of England announced a 0.5% increase in its base rate to 1.75%, the biggest increase in 27 years, further raising rates on new fixed mortgages.
Since January 2022, interest on a typical two-year fixed mortgage has risen from 1.3% to 3.46%, according to an analysis by L&C Mortgages, increasing average monthly payments by around £159.
Rate Rises: As interest continues to rise, lenders leave borrowers with less time to secure mortgage deals before they are taken off 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 to reduce applications and keep up with their workload.
Mortgage products now only have an average lifespan of 17 days, according to financial information service Moneyfacts, four days short of the previous recorded low of 21 days seen in June 2022.
This leaves borrowers with a shorter term to secure their mortgage, risking rates going up before their application is complete.
However, there are steps movers and remortgagers can take to make the process go a little faster and still make sure they get the right mortgage for them.
1. Get a broker
It may seem counterintuitive to pay for a broker when there are so many mortgage comparison sites available.
While these sites are a useful place to start to get a feel for the market, the service the brokers offer goes beyond simply comparing rates.
This is Money’s mortgage comparison tool that works with broker L&C, so you can see the latest rates, then follow up with free advice.
Many brokers are free, but not all.
One advantage is that brokers gain access to special “broker” rates that are not available to customers who approach the lender directly.
They are also often informed when certain products are about to be retired, so they can be proactive in updating customers if they need to move quickly.
They also know the lenders well and will be better able to discern which may attract products and which are less likely to.
Applying to more than one lender risks hurting your credit score, which can be negatively affected by third-party checks.
Brokers can recommend lenders to suit your needs, especially if you have slightly different circumstances, such as being self-employed, which could save you time and improve your chances of a successful application.
2. Work fast
Applying as soon as possible will help you secure a lower rate before future increases.
Mortgagers can apply for a mortgage up to six months before the start date of the new mortgage, effectively locking in your rate months before the end of your existing mortgage.
As the crisis continues, lenders know more money can be made by keeping their customers, so many are increasing the maximum time you can remortgage your home before your current agreement is up.
“Many lenders now offer six-month mortgages for a new mortgage, whereas most lenders used to offer three months,” says Ashley Thomas, director of mortgage specialist Magni Finance.
These few extra weeks can help you close a much more palatable deal.
With the current uncertainty, rates are increasing several times a month and are expected to continue on the same trajectory. The two-year average headline fixed rate rose for the 10th straight month in August, according to data from MoneyFacts.
Now, at 3.95%, it is 1.61% above the equivalent rate in December 2021 (2.34%) and is the highest recorded since February 2013, when it was 4.09%.
3. Get a decision in principle
You can also reduce the time it takes to process your application by getting a mortgage in principle in the first place.
This is a written estimate from the bank of how much money they can lend you and at what rate, based on the information you provide.
It’s not a complete deal, but it does require a credit check and most likely the filing of income statements.
It will make sure you don’t waste time making a full application to a lender whose criteria you don’t meet. And it can make it faster to get a mortgage with the same lender, since the information they already have about you will reduce the time it takes to sign your completed application.
Matt Coulson, director of mortgage specialist Heron Financial, says: “Over the last few years, the in-principle decision process has really evolved to the point that it now encompasses a large part of the entire application.
Acting quickly once an offer on a property is accepted can save vital time in processing your application, 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 details and don’t always assume that the lowest will equate to a cheaper deal overall.
“Don’t always chase the rate: The lowest rate is rarely the least expensive product,” says Oli Pearce, director of Guild Mortgages. “Very often, prime rates come with setup fees, and the size of the mortgage can mitigate this.”
For example, if you’re taking out a £100k mortgage, a lower rate with a high origination 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. Stay on top of your paperwork
It’s not rocket science, but staying on top of your documents is critical to a fast mortgage process. This is especially true if you are buying a new home and it is part of a chain.
In the current climate, brokers can receive as little as two hours’ warning before a fee is withdrawn. If that happens and you’re in the middle of compiling your application, it will be valuable to have all your documents on hand ahead of time, allowing you to react quickly if necessary.
Many lenders are experiencing painfully long delays, Pearce explains, with some asking brokers not to pursue them for the first 21 business days after applying.
Ensuring that all questions are answered at the beginning of the application will reduce any further delays.
What’s more, brokers can’t submit an application if any of the required documents are missing, so if you’re under time pressure, having everything on hand will make your life and theirs easier, and ensure you stay to the front of the queue to secure the best possible rate.
6. Overpay your current mortgage
If you currently have a fixed-rate mortgage that isn’t going to finish for some time, you may be afraid of where the rates will be when your deal is up.
If you can afford it, L&C’s David Hollingsworth says overpaying on your mortgage can save you money in the long run, since you’ll be paying more of what you owe at a lower rate.
“Clearly, we don’t know where we’ll be in 12 or 18 months, and rates may have come down, but preparing as much as possible makes sense. If you can afford to overpay, that can be a helpful thing,” she says. Overpaying on your mortgage can equate to thousands of pounds in savings in the long run, and if you can afford to pay enough to move to a different-to-value loan, you’ll likely benefit from lower rates.
However, most fixed mortgages have limits on how much you can overpay each year, often 10 percent of the total balance, so you’ll need to stay within these limits.
The best mortgage rates and how to find them
Mortgage rates have risen substantially as the Bank of England base rate has risen rapidly.
If you’re thinking about buying your first home, moving or remortgaging, or are a buy-to-let landlord, it’s important to get good, independent mortgage advice from a broker who can help you find the best deal.
To help our readers find the best mortgage, This is Money has partnered with independent broker L&C.
Our L&C-powered mortgage calculator can allow you to filter offers to see which ones best match your home value and deposit level.
You can also compare different fixed-rate mortgage durations, from two-year arrangements to five-year arrangements to ten-year arrangements, with monthly and total costs displayed.
Use the tool at the link below to compare the best deals, taking both fees and rates into account. You can also start an online application on your own time and save it as you go.
> Compare the best mortgage deals available now
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