Inflation rates to reach 18.6% in January, analysts suggest
As the UK economy continues to be put under pressure due to rising inflation and the cost-of-living crisis, brokers are having to jump extra hurdles to help clients gain access to their desired mortgage products.
The UK economy is set to see inflation rates soar to 18.6% in January, reaching their highest level in almost half a century, according to investment bank Citi.
“Brokers are really busy at the moment - people are worried about not just mortgage interest rates increasing but cost-of-living too, so anything to save money is always a benefit,” said Lyn Webb, director of Mortgage Saving Experts.
Webb went on to say that mortgage lenders and providers are also extremely busy with some of them taking around 16 days to look at supporting mortgage documentation sent to them.
“Lenders are pulling interest rates regularly with brokers sometimes only getting six hours’ notice that of midnight that day the rate will be gone, meaning working late into the night for us to secure that interest rate for our client,” she added.
As demand for particular lenders is often very high, Webb noted that as a broker you are often either in a queue waiting to access their website or the website crashes.
Webb believes that most brokers are tired and worn out as they are working long days in a very stressful climate.
“Clients do not seem to understand this and often get frustrated with us when we tell them it may take up to 16 days for them to look at additional supporting documents before they agree to the mortgage. I know our staff are really feeling the strain at the moment,” she said.
Webb went on to say that, currently, lenders do not want to be atop the mortgage sourcing system, as they have enough work at the moment. As a result, Webb said that Mortgage Saving Experts has seen lenders pulling rates or increasing rates higher than the rest of the market to be less appealing.
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“Everyone wants to fix their interest rate - my neighbour fixed his for 10 years last year, and is now sitting pretty for another nine years at 2%, but we as brokers are not fortune tellers and cannot predict what will happen in the next few years, although clients always ask us,” she said.
Webb believes homeowners are conscious of continued rising rates, and noted that some older people remember in 1988 when rates rose steadily from 9.8% to 15.4% in 1990.
“Mortgage Saving Experts’ clients are worried about interest rate rises and many people are requesting to remortgage, or are trying to switch from their current fixed rate to a new longer term fixed rate,” Webb added.
Webb explained that fixed rates are now around 3.44% for a two-year product and 3.49% for a five-year mortgage. She also noted that to come out of a fixed rate early and lock into another rate will incur a fee which needs to be considered in the process.
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“I think our are clients are shocked by the rise in rates because they have been so low for such a long time. However, the housing market is still very buoyant and if a property comes up for sale or rent, it is usually snapped up quickly,” Webb said.
She has seen clients are trying to save money where they can, often checking their bank statements to see what standing orders or direct debits they can cut. However, she noted that one of the most common monthly payments to cut has been insurance – which can have a hugely negative impact.
“This is such a mistake to make for clients, as it could be unemployment cover, critical illness cover or even life insurance, to reapply when the economy changes will find them looking at increased premiums. It would be better to review other items other than one’s insurance,” Webb concluded.
