Mortgage lenders pausing new business

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 06. August 2022

Looking to speak to mortgage brokers about mortgage lenders pausing for new business. 

  1. Several lenders, like Cambridge Building Society, Coventry Building Society and Saffron Building Society, have temporarily paused for new business. Do you expect more to follow suit? 
  2. Why do you think lenders have had to pause new business ? 
  3. How has this affected your day to day and how you deal with clients? 

9 responses from the Newspage community

Lenders only have a few levers to pull when they are becoming too busy, which many are currently, with application levels well above what they are geared up to cope with, they can; increase interest rates to become less attractive, amend their lending rules so they fit with less people (things like make the credit score harder to pass, or requiring a 10% deposit rather than 5% would be a few examples), or you can close the doors for a bit. Many lenders have tried levers one and two, with only very limited and temporary reductions in their business volumes, so some are turning to level number three (which I imagine is labelled "for emergency use only") and withdrawing almost totally from the market to get back on top of the mortgage applications they already have on their desks. It is a sensible, if a little drastic, thing to do and doesn't cause the market as a whole a huge issue, so long as it is only ever a limited number of lenders out of the game at any one time.
There's usually another lender you can use, so unless it's a particular niche point of criteria, most brokers and clients will still get their mortgage submitted, perhaps with a different lender. As to why lenders have to pause new business is an odd one, although it's more than likely a combination of remote working, staff members taking summer holidays and a deluge of remortgage business trying to get in before the next inevitable round of rate rises.
A lot of these lenders are getting snowed under with applications due to competitive pricing and/or flexible criteria. Service levels are deteriorating, and they've had to pause business to clear the backlog. The Cambridge BS initially put their rates up to stem the flow, but applications still flooded in. I also suspect some of the smaller lenders are becoming more cautious given the economic outlook.
A responsible business decision from these lenders. Lenders making the decision to pause new business to manage their service levels are acting in a responsible way for their staff, their brokers and their clients. It is becoming unrealistic to wait over one month just for a new business application to be acknowledged, this leads to issues with the clients' properties falling through as the delay is causing further issues with the sales/purchase/remortgage process. Not to mention the pressure this puts on our jobs as brokers to manage our clients expectations. Withdrawing from the market to catch up, give the lender's sales and underwriting teams some breathing space and make brokers' jobs that little bit less challenging is much welcomed. Yes there may be a few less mortgage deals in the market available for clients, but hopefully the lenders still offering new business can keep up with the demand.
It is a relatively new tactic being deployed to halt new business, it is hugely disruptive for all parties, lenders, intermediaries and borrowers. It was the last, unthinkable, move of a distributer not so long ago. Sudden withdrawal of products can damage a lender's relationship with intermediaries and, of course, consumers can be impacted. However, if volume pressures are causing significant service issues to pipeline this bold move should be respected. It is in nobody's interest to cause long delays in a transaction, possibly threatening its success and causing detriment to the consumer. The increased pressures of complaints handling is mitigated and the lender can focus on its day job and that is to be applauded.
We are in a post-covid environment where the world has generally gone back to normal except Airports, Conveyancers and Mortgage Underwriting. We know airports are suffering from staff recruitment and retention therefore can only presume the same is occurring in Solicitors' Offices and Lenders' Offices. What other explanation do we have unless 'working from home' is not working."
‘I believe it is a very, very good idea that lenders are withdrawing products and I should expect that more lenders will follow suit in the coming weeks. It's not fair on the client and the broker that mortgage applications are submitted based on lender service levels at that time, and service levels then changing during the underwriting process due to the volume of applications received. Stemming the flow of applications is very wise in the current financial climate, in order for the lender to remain credible to the broker and to appease frustration the broker may have with the lender. It obviously makes it more difficult when you're dealing with clients and letting clients know that their underwriting process hasn't been completed, and that the decision on the mortgage application will be a lot longer, which obviously makes it difficult for clients under a tight schedule such as exchange of contracts on a new build property.
Lender pausing business is great for the industry. It's if they don't pause business when the wheels really fly off. Pausing business is the most effective way lenders can control their business volumes. No one lender can offer the best rate for a sustained period of time, as the influx of new business sis just to great for their systems and staff to cope with. Pausing business is a mature and sensible business approach to maintaining a good level of service for customers who have applied. To compare, we often see the opposite in the conveyancing industry where legal firms will continue to take on new business until they are bursting at the seems. This negatively affects everyone as timescales and service levels drop into the abyss, frustrations run high, and property transactions are lost as a result. The conveyancing industry would do well to take a leaf out of these lenders play books.
As a mortgage advisers it's very rare that we wouldn't have a plan b or even c in mind and in the same way as if these lenders dramatically increased rates we might consider our options with another lender that is now more competitive. The worry is that this could have a snowball affect. At the moment lenders are increasing rates in order to stem the flow of business into them because they are too busy. What we sometimes see is that when a lender does this the next best lender follows suit because they don't want to be overrun with business either when they are struggling. If this starts to be the case with lenders pausing lending this could become a bigger issue if it starts to reduce our options considerably. I would like to think that during the pause of borrowing that these lenders are doing that they are seriously looking at their processes and looking for efficiency gains that they can make in order to prevent them having to do this again.