Mortgages  

Brokers question fairness in sudden mortgage rate changes

Brokers question fairness in sudden mortgage rate changes
 Credit: Jason Alden/Bloomberg

Mortgage brokers have called on lenders to provide longer notice periods of rate changes after being affected by increases, often with little notice.

Jiten Varsani, mortgage and protection adviser at London Money, recounted an example of a four-hour notice period at the end of a working day before the rate increased by 0.57 percentage points

Mr Varsani said such short notice periods seemed to go against the principle of treating customers fairly.

He said: “Fortunately, in this instance, with just five minutes to spare, I managed to submit the application and secure the rate. The cost to the client would have been a significant £2,600 over the two-year period.

“I was fortunate I saw the email with enough time to get the application submitted.”

Jamie Lewis, managing director at Affinity Mortgages, similarly described clients being informed within a few hours of an earlier conversation that their rate was being increased by up to 1 percentage point.

He commented: “From a consumer point of view this does not give any faith to the customer, many of which may well be experiencing this for the first time.

“I believe that the FCA should enforce lenders to offer a minimum time to withdraw products; perhaps 24 hours would be a good starting point.”

Mr Lewis also said lenders’ practices of rate withdrawals were not within what he believed to be the principle of treating customers fairly.

London Money’s Mr Varsani called for a “reasonable period” of 48 hours' notice, for example, from announcement to implementation of changes to rates, particularly throughout the pandemic.

He added advisers and clients would “remember the good lenders who helped, rather than hindered, business” during the pandemic.

Aaron Strutt, product and communications director at Trinity Financial, recalled lenders adding clauses on their websites during the last recession that rates could be withdrawn without notice.

He said: “It was a bit of a shock at the time because we were used to getting calls from the lenders telling us rates were going to be pulled. We tended to have a couple of days to submit applications.”

Mr Strutt said one of the firm’s brokers had recently submitted an application that was automatically referred to an underwriter as the client was self-employed. 

According to Mr Strutt, the lender raised its rates while the case was in the queue with the underwriter, and would not honour its previous price.

He added: “We are asking our clients to provide us with the documents required more quickly than normal to secure a deal.

“That way, we can get applications submitted when their offers are accepted, and there is less of a risk they will have to pay more if the rates are increased.”

Kate Davies, executive director at IMLA, commented: “Unprecedented levels of demand are clearly impacting service levels across the industry and this has led some lenders to withdraw products at short notice.