Mortgage lender pulls pre-offer rates as borrowers face 8% interest

Mortgage lender pulls pre-offer rates as borrowers face 8% interest

Bluestone Mortgages made the decision last week to pull all its pre-offer rates after telling brokers the scale of rises in swap rates had made its pipeline “sub-economic”.

The decision, communicated to brokers on October 12, has left clients facing interest rates of over 8 per cent.

“I felt sick having to tell her”, Mansfield-based broker Lewis Shaw told FTAdviser. He had secured a 6.25 per cent deal for his client, but the lender’s decision not to honour the rate meant her mortgage interest repayment changed to 8.25 per cent.

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“It is detrimental to a customer I’m trying to help. It has cemented my position in not dealing with them [Bluestone] as a lender. I’m not going to put myself in this position again.”

Shaw’s client has no option but to accept the rate. She is now struggling with affordability, and may not be able to borrow as much.

A second broker, Bath-based Charles Yuille from Willow Brook Mortgages, said his client had an opportunity to buy their rental property from the local authority.

But because Bluestone pulled all its pre-offer rates, his client’s mortgage rate changed to 8.75 per cent.

His client, a young family, is no longer able to buy their rental property from the housing association.

“The decision to change rates on cases that have been processing for weeks, as Bluestone Mortgages have done, is a dark day for the UK mortgage sector. This kind of act has a huge emotional and financial impact on people,” said Yuille.

Bluestone told FTAdviser it was “working closely” with brokers to support them and their customers.

“Over the past several months, we have experienced extreme swap rate volatility [a leading indicator for mortgage rates] which has meant we have been faced with difficult decisions resulting in us having to migrate our pre offer pipeline to our new pricing,” a spokesperson said.

“However, given the ongoing challenging market conditions, we have now made changes to our hedging process to ensure loan values are locked in as soon as the application reaches us, ensuring we can better help brokers and their customers going forward.”

Signs of other lenders not honouring rates

Some brokers have cited individual cases at some building societies where rates have not been honoured due to the economic climate, though FTAdviser is not aware of any other lenders pulling all their pre-offer rates like Bluestone.

R3 Mortgages director Riz Malik said he came up against such a case. “I would expect this from a specialist lender due to their funding sources but not a building society. If market conditions deteriorate further, this could become a growing trend. I know a lot of brokers are anxious about their pipeline deals concluding successfully,” he said.

London broker at Springtide Capital, Craig Leverett, said he had heard of one regional building society pulling a rate after application, but that he has not experienced this with any mainstream lenders and labelled the case “pretty isolated”.