MortgagesAug 17 2021

Mortgage product shelf life equals lowest on record

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Mortgage product shelf life equals lowest on record
Photo by Polina Tankilevitch from Pexels
ByRuby Hinchliffe

The average shelf life of a UK mortgage product is now 21 days, equal to the lowest ever recorded.

Mortgage products last held such a short lifespan in May 2017, according to Moneyfacts’ electronic records which run back as far as 2011.

This means borrowers don’t have long to take advantage of ever decreasing rates.

“The lowest deals out there (sub 1 per cent) don't tend to last long, as they effectively 'sell out' once the lender's allocated funds for this deal is effectively ‘used up’,” Rosie Fish, mortgage expert at Habito, told FTAdviser.

“It’s also worth noting that super low deals can result in lender processing centres being overwhelmed with demand, and it can take more than twice as long to get to the mortgage offer stage - which is not ideal for those with tight deadlines.”

Lenders have continued to cut rates on higher loan-value-mortgages. For the second consecutive month (July and August), the average overall two-year and five-year fixed rates fell by 0.03 per cent. They now sit at 2.52 and 2.75 per cent respectively.

Fish added that “having your ducks in a row” when it comes to the paperwork “is very important” if borrowers need to move quickly with an application.

She explained: “Your mortgage rate is 'reserved' once a full application has gone to the lender, regardless of whether that rate is then changed later on by the lender. From there it can take two-six weeks to get an offer and this is then valid for three-six months, depending on the lender.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said for borrowers gambling on a lower rate, an opportunity may be missed should the lender choose not to cut rates or even raise rates to preserve service.

“Likewise; should an alternative lender release a lower rate, is it worthwhile to cancel an application and re-submit elsewhere? There is no guarantee the borrower will fit the lending policy of the new lender.”

Harris said a mortgage broker may not advise the cheapest on the market, “but given a number of factors, such as repayment strategy, term required, age, income structure and so on – it could be the best option”.

Whilst time is of the essence, choice is by no means scarce. For the tenth consecutive month (December 2020 to August 2021), the number of mortgage products has risen - this time by 148 products to 4,660.

“This demonstrates the level of recovery in the residential sector where, for only the second consecutive month since June 2018, availability rose across all the individual LTV brackets as lenders endeavour to accommodate borrowers with varying levels of deposit or equity,” said Eleanor Williams, a finance expert at Moneyfacts.