Mail Online / Thisismoney seeks mortgage experts

ended 16. August 2021

A journalist at Thisismoney / Mail Online is writing a piece on research from Moneyfacts showing the shelf-life for mortgages is at its joint-lowest on record.

Apparently, the choice of mortgages improved for the tenth consecutive month in August and is now at 93% of August 2019 levels - but the average shelf life of a mortgage deal is at 21 days - equal to the lowest ever recorded, which was in May 2017 (records date from 2011). She wants to know:

  • How does the low shelf life of mortgages impact borrowers?
  • Why are shelf lives so low at present?
  • Should borrowers move quickly when they see a deal that works for them?
  • Is there a risk of mortgage FOMO and people potentially rushing into the wrong mortgage?
  • What key things should they look out for when having to make a potentially quick decision?

Keep your alert_responses to no more than 3 sentences. Journalists want soundbites, not War and Peace.
 

9 responses from the Newspage community

Although there are a greater range of mortgages available, many of these are short-lived specials designed to catch the eye. Smaller lenders are battling to compete with the big 5 banks who are awash with money. The only way to do this is by launching attractive rates which are oversubscribed very quickly and have to be withdrawn shortly after. Clients must not be lulled into taking out a cheap rate just because it appears to be the best deal. The rate is only one aspect to consider, fees, term and deal type are often equally as imprtant.
At present the shelf life of mortgage products is helping borrowers, as the rate wars continue, lenders are releasing products with lower interest rates, as a broker we are reciving mutiple notifications daily with products appearing and then by the time a customer makes up their mind its gone faster than changes in the covid guidance. When looking for the best deal dont just look at 1 lender, there are so many variances, just beacuse the interest rate is the lowest doesnt neccessirly mean its the cheapest, you need to factor in Loan to Value (LTV), fees like Product Fees, Valuation Fees, Application fees whcih can tot up to thousands Dont use the low interest rates as a badge of honour, speak to a broker who is independant, they will have access to upwards of 90+ lenders, and be prepared to move quickly to seal the deal you want.
People worry about rates far too much when they should be more concerned about the cost of the deal over the initial period since that's an accurate reflection of the costs of the mortgage, taking into account all the fees and associated costs. At the moment, mortgage lenders are competing to get market share for low-risk business. In order to make ultra low deals, they allocate specific tranches of money. If they have loaned the allocated amount, then the deals can be pulled without prior notice. People tend to have a fear of missing out, leading them to make decisions based on emotions. Some even use rates as bragging rights instead of listening to good advice from a mortgage professional. Key points are to find a good broker that you trust and then listen to them. Don't get caught up in making a rash decision and be guided by quality advice from a quaility broker.
• How does the low shelf life of mortgages impact borrowers? The shelf life of a mortgage product does not massively impact borrowers especially if they are seeking advice as they will always be recommended the best product for their circumstances. • Why are shelf lives so low at present? As some deals right now are there to generate headlines others can be pulled once the lender has had a multitude of applications in for a specific product and as the rate war intensifies this may continue. • Should borrowers move quickly when they see a deal that works for them? Borrowers who wish to secure the best deals should always move quickly as what is here today is likely to be gone tomorrow. • Is there a risk of mortgage FOMO and people potentially rushing into the wrong mortgage? If getting advice it’s highly unlikely but the DIY approach usually tends to have a negative outcome. • What key things should they look out for when having to make a potentially quick decision? Borrowers should always look at the overall cost over a 2,3 or 5 year period, not just the headline rate.
How does the low shelf life of mortgages impact borrowers? The risk of not securing the most suitable deal is low as when one rate is withdrawn another good one is launched, but it could be with another lender so it means borrowers need to keep their fingers on the pulse. Why are shelf lives so low at present? Mortgage products are very competitive right now with lenders battling it out to secure top spot on 'best buy' tables. As such new products are launching daily. Should borrowers move quickly when they see a deal that works for them? Borrowers should never rush in to applying for a mortgage. It's the biggest liability you will ever have so always take your time and make sure you are comfortable before you apply. If one deal goes, another one will pop up! Is there a risk of mortgage FOMO and people potentially rushing into the wrong mortgage? I think some borrowers will be experiencing FOMO but my advice is to never feel rushed in to making a decision unless you are 100% happy. New rates are always launching all the time, there are plenty of good deals out there. What key things should they look out for when having to make a potentially quick decision? I would recommend engaging with a mortgage broker as once they have your details, they can apply to whichever lender has the most suitable deal at that time. If you go to your bank because they appear to be offering the best deal but then withdraw it at short notice you are either stuck with the new deal that may not be the best for you will to apply all over again with another lender which can be very time consuming and frustrating.
The good thing about mortgages going so quickly is the lenders are pulling them to lower prices. Some banks and building societies change their rates much more often than others and they do it to make sure they top the best buy tables. Lenders like Nationwide will let borrowers secure the rate when they do a decision in principle but it is quite unusual.
The mortgage market has always ebbed and flowed, although the rate of this has increased lately the changes have been very modest; with no really significant shifts in rates, or fees, in either direction. These tweaks are often caused by lenders using headline rate as a way to either increase business flow (because they have spare underwriting capacity, or are behind a certain target), or to decrease the levels of applications being received for the opposite reasons. These goals can be achieved by very small changes in rates at the sharp end of the market, maybe even 0.1% could be the difference between the very lowest interest rate and being only just inside the top 10, as the market is so competitively priced. The key thing to remember is to not panic and make a poor decision that will cost you far more in the long run. Seek professional advice from a mortgage broker who will be able to advise on the best overall deal for you; so rate, fees, cash backs are all taken into account - not just a headline grabbing rate.
Recommending a product for a home mover or first time buyer used to feel safe allowing you to select a specific deal up front. With the current market being so fluid though I am reluctant to provide full advice until they actually find a property, otherwise the chances are what I recommend will vanish before we can actually secure it. It's creating unease for buyers as they fear the rug could be pulled from underneath their dream at the last hurdle making it more important than ever for advisors to have a Plan B up their sleeve. Lenders simply can't afford to do too much business on these ultra-low rates with minimal margin resulting in a merry-go-round at the top of the sourcing systems and the need for agile advice to weather the volatility.
"An active market means buyers are having to make quick decisions - so it's no wonder the shelf life of mortgage products is so short. "Mortgages are based on an individual's circumstances today, but anyone looking to invest in a home must consider the future: how secure they want their monthly payments to be, what they want out of a property in the long term, and any other motivations. "Seek advice. Buying a home or investment property can be incredibly daunting, and it's crucial to make sure that your decision is not just quick but also smart."