Following the Bank of England’s base rate hikes and volatile swap rate markets, we’ve seen a huge volume of interest rate hikes hit the buy-to-let space over the past few weeks. .
While I’m sure the broker community fully expected this, it raises several concerns. With lenders giving increasingly tight deadlines to secure rates, customers may face the impossibility of obtaining what was considered the best option for them.
This begs the question: are we as fair to the customer as we could be?
At any given time, brokers will be working on many applications at different stages of the mortgage process. In TBMC we will have applications to be entered on the lender’s system for decision in principle (DIP), DIP accepts pending information and supporting documents prior to submission, fully submitted applications pending lender to issue an offer and proposed cases pending finalization. All of these cases could potentially be affected by a price increase, not just apps that aren’t on your desktop yet.
The most common problem is the time limit for performing the DIP. We are seeing more and more “withdraw effective immediately” rates, with little or no time to effect a DIP. If you’re sitting at your desk when the withdrawal email arrives and you have an application that needs to be DIPd, this can be a simple task.
However, the job of a broker is not so simple – you are more likely to meet another client or have several cases to deal with. In these cases, the two hours allotted to the DIP of a case, for example, might simply not be feasible.
This can lead to difficult discussions with customers, explaining that although they filled out their application before the tariff was withdrawn, the product they had opted for is no longer available.
The lender should fund the book through BDM
It would be fantastic to see lenders trying to mitigate this, perhaps by earmarking funds through Business Development Managers (BDMs). Brokers would happily give the number of applications, loan amounts and client names over the phone to guarantee the rate, and then have more time to enter the case.
At the start of the pandemic, we saw a number of lenders not only withdrawing from new applications, but also refusing to honor their application pipelines. This resulted in a massive re-distribution of requests and multiple disgruntled customers to deal with.
Given the uncertainty in the markets and the fact that many specialty lenders are fully funded by the capital markets, there are concerns that the pipeline business could be similarly affected.
It’s safe to say that we fully understand the need to pull back and raise rates, we also all appreciate that things are moving fast so so should the lender. I think what we would all like to see, however, is improved lender withdrawal processes and for lenders and brokers to work together to minimize the impact to customers.
In these times of uncertainty and rising costs, I hope the specialty lending market can find a way to support and help our customers.