Banks withdraw mortgage deals, what’s the best mortgage to apply for now? 

It has been a turbulent time over the past few weeks, with the markets reacting to the mini budget in September and in turn mortgage providers withdrawing mortgage products from their ranges.

Why are mortgage lender withdrawing their rates?

 With the dramatic and quick rise in borrowing costs combined with the drop in the value of the pound, lenders reacted by withdrawing their products from the market.  This was done to simply enable them to assess what to do next. With some products offered by lenders giving very little margin they had to take stock of the rates they were offering to their customers. Swap rates were increasing and in turn banks were experiencing a swift and unexpected rise in their own borrowing costs. The best course of action was simply to pull their products until they could assess the situation.

The good news is that although many products were withdrawn with little, or on occasion no notice, lenders have returned to a semblance of normality albeit the pricing of their rates has increased.

Can I still get a cheap mortgage?

It is fair to say that if you have recently come to the end of a fixed deal or are soon to do so, that the rate you will be looking at for a new fixed deal will be higher and in turn so will your mortgage payment. For some people, an increase of more than 6% in the average two-year fixed rate would be felt. However, keep in mind that these averages are just that and do not guarantee that everyone will suddenly experience a rate of 6%. Pricing continues to follow the same trend, in that the more equity or deposit you have the lower the rate you should be able to obtain. This does therefore mean that some will have rates of less than 6 % and sadly there will be some borrowers whose rates will be in excess of 6%.

Historically we are still in an era of cheap money. However, we have for many years now been accustomed to rates being offered to us at significantly lower levels than those which we now have available.  The rise in interest rates are also combined with other factors of the economic climate such as the energy crisis and inflation making it felt even more in our pockets.

Defining cheap can only be done when comparing in the present market.  Sadly the rates on offer today are not as cheap as they were even a couple of weeks ago. However, there are still deals available that could ultimately save you money rather than paying at a lender’s standard variable rate. So from this point of view, yes, there are still cheap mortgages out there.

What are the best fixed rates for mortgages in 2022?

 With rates on the increase and appearing to change frequently it can seem mindboggling as to what the best fixed rate for you is. For some people, an increase of more than 6% in the average two-year fixed rate would be felt. However, keep in mind that these averages are just that and do not guarantee that everyone will suddenly experience a rate of 6%. This will determine your loan to value, and the lower this is the better options that are typically available to you.

Another factor is how long  you take the fixed rate for, i.e., is a 2 year fixed or a 5 year fixed rate better value? This is where a good mortgage adviser can help. They can discuss the pros and cons of short-term to long-term and make recommendations based on your future plans.

It may also be worthwhile considering alternative options other than fixed rates. With the price of fixed deals on the rise, the margins between these and the current charge rates on variable schemes such as trackers have increased quite substantially. Make sure you assess all of the options available to you and determine which is better suited to you and your requirements.

Can my mortgage rate be withdrawn?

If you already have a mortgage application submitted this should reserve the rate as applicable at that time. This is also true if you have received your formal mortgage offer. Therefore, even if rates change you should be assured of that which you have applied for.  However, there may be reasons as to why your rate is withdrawn. These could be:

Offer expires – Formal mortgage offers will always have an expiration date. When this date has passed, any agreement to lend finishes. You may be granted an extension but a lender is not required to do this. To get a new offer you may have to resubmit documentation and choose a new rate.

Completion date expires – This is not to be confused with the offer expiry date. Some lenders will also have a completion date in addition to the offer expiry date. This means that if the mortgage does not complete before a given date, the rate offered will be lost and a new one from the current range will need to be applied for.

Change of circumstances – Just because you have an application submitted or indeed a formal mortgage offer you should still inform the lender of any material changes to your circumstances i.e. change of employment or credit status.  This may result in the lender reassessing your application and reversing any decision they have previously made.

Non-disclosed material facts – If a lender discovers a material fact about your circumstances that was not disclosed, they have the right to reassess your application and refuse any agreement they may have originally offered.

Property valuation – Typically a property valuation will be valid for 6 months and should this time elapse the lender reserves the right to revalue the property being mortgaged.  Should the property be deemed to have decreased in value you may find that this means an alternative rate is now available due to a change in the loan to value or indeed an offer having to be withdrawn completely if the property is no longer deemed adequate security.

Extenuating circumstances – Due to extenuating circumstances a lender is legally within their rights to withdraw a mortgage rate offered to you prior to completion.  Although extremely rare this can and has occurred in isolated circumstances.

What will happen next with mortgage rates?

Regrettably no one has the answer to this. However, it is expected that we will continue to experience a nervous market that will not hesitate to react quickly to any changes. As such there has never been a better time to ensure you are proactive and secure a mortgage rate as early as possible. Typically, this can be done six months in advance of when your current scheme expires and sometimes even earlier if you are looking at a property purchase especially if it involves a new build.