Interestingly I wrote a post last week about Mortgage myths. It was just before the proverbial hit the fan and everything seemed to go wrong in the country. If only I had held off a couple of hours, I could have probably added a few more myths based on what I have seen over the last week.
What is happening in the Mortgage world?
This is a good question. I could be over simplifying this but the reason for mortgage products (note I am saying mortgage products rather than mortgages. I will write more about this later in the post) being pulled is because of the uncertainty on how to price them.
Mortgage lenders have the money, they have the ability to lend and are more than happy to carry on lending. The problem is down to swap rates to a large extent. Swap rates are the rates at which banks lend to each other. There have been large increases and smaller drops, the rates have been up and down over the last week or so.
This has meant lenders have no idea what to charge on mortgage rates in order to make a profit. Strangely though, 5 year swap rates have been a little more stable which is why we are seeing more 5 year fixed rates than we are 2 and 3 year deals.
This has had a knock on effect whereby if they do not know what to charge in order to make a profit, they need to pull the products until they do know otherwise they could be committing to a product and losing money on it.
Things do seem to be settling down, although with another announcement from the government and the bank of england in the coming days/weeks, who knows.
Pulling of mortgage offers
This is something that was all over the internet due to something a lady said on a TV program about her mortgage being pulled and the rate doubling. Firstly, what said and what she has reportedly said do differ. Secondly just for the avoidance of doubt lenders in the main are not pulling mortgage offers. 2 lenders did pull offers, these were both small lenders and very specialist lenders. 99% of the population will never need either of these lenders and very few will have actually heard of them.
The majority of lenders are so far honouring their mortgage offers and with no reason to believe that will change, I think most people with an offer in hand will be fine.
What about the changing of rates?
Again, this is something being mis-represented by the press. The lady on the TV had been given an illustration or a verbal expectation of the rate. I do not believe she had make an application nor had an offer. So her rate has not changed, she had not secured a product.
Summary
- Mortgage offers are in the main not being pulled.*
- Lenders are in the main not altering rates post offer.*
- Lenders still want to lend, they just do not know where to price to make a profit.
There is a lot of noise and none of it is positive. It is hard to take any positives when mortgage rates are going up so quickly, but do not believe everything you read. If you are unsure speak to your broker if you have one. If not, get in touch with a broker, they will hopefully help to alleviate any concerns you have and provide you factual information. We are not here to sensationalise. Brokers are hear to help.