The mortgage market descended into chaos last week, amid fears interest rates could hit 6 percent next spring.
As group director of JLM Mortgage Services, a Hitchin-based brokerage that handles 12,000 home loan applications each year, Sebastian Murphy, 48, has been at the forefront of the chaos.
Here he tells Fiona Parker how the week turned out – and offers his top tips for borrowers…
Hard Days: Sebastian Murphy (pictured) is Group Principal of JLM Mortgage Services, a Hitchin-based broker that handles 12,000 home loan applications each year
It’s seven in the morning and I’m at my desk. As a director of the company, I still write about 30 mortgages a month and spend most of my day talking to clients. Like any broker, we help clients find the best deal for their circumstances. The past two years have been chaotically busy and I hope today’s micro-budget will bring some stability.
Rumors of a stamp duty cut have been a concern, but fortunately this gasoline won’t flood the market because it’s not as generous as the discount offered during the pandemic and there’s no deadline.
Since February, it has become the norm for lenders to re-price mortgage deals weekly rather than once a month or so.
After a short period of mini-budgeting, with the pound fluctuating, Halifax confirms it will re-price deals early next week.
Hopefully it won’t be the first of many.
The pound sterling fell. Halifax is not just re-pricing deals but taking away all home loans that come with fees.
This afternoon, Virgin Money said it would withdraw all mortgages from new customers by 8pm. Other lenders soon followed. Everything is ready to go for the 110 brokers as we tap the phones to tell our borrowers what’s going on.
On a typical day I talk to about 20 clients. Today, I’ve been through over 60. These conversations aren’t easy. Most of them are with people looking to remortgage.
When you tell someone paying 2 percent interest that their best bet is a 4 percent deal, you can’t be offended if they wonder if that’s really the case.
If a customer wants a fixed deal, we make it clear that they must act fast before it’s gone. Fortunately, most of the buyers we spoke to are able to negotiate with sellers to lower their asking prices and don’t have to pull out of sales.
But many first-time buyers want to know if they’d be better off waiting for cheaper prices to come back. Our brokers stay late to get through the workload and some of them are still in the office at 11pm.
You can check which fixed rate mortgage deals can be offered to you and how much they will cost based on the size of your mortgage, the value of the house and how long you want to fix it. With Money’s best mortgage rate calculator, powered by L&C.
Grim fact: Customers currently paying around 2% interest are told their best bet is a 4% deal.
Mortgages are being taken away massively and quickly. Nationwide, Britain’s largest lender, confirms it will raise interest rates for five years for borrowers with deposits of 5 per cent and 10 per cent.
Customers start to panic and brokers wake up at 6 am to find half a dozen emails already in their inbox. Some clients call us at 4 am because they can’t sleep.
WhatsApp messages and texts also arrive at every hour of the day and night.
Even those who manage to secure a deal are not necessarily happy with the outcome.
I get a call from a customer whose 1.45 percent fix is about to expire. Another broker offered him a deal at 3.11 percent, but that was ten days ago. Today, the best he can get is 4 percent fix for five years.
He agrees, but that means he will have to pay an extra £3,240 each year. That’s more than anyone would have feared from a high energy bill.
Many first time buyers want to know if it would be better for them to wait for cheaper prices to come back
I wake up wondering how many deals are going to disappear today.
It usually takes five minutes before I can sign someone up for a mortgage with HSBC. However, yesterday, I was waiting for 2 hours after starting at 1092 in the queue. Later, the bank confirmed that it would not make any more mortgages that day.
This means that we are all up early this morning, hoping to secure the prices customers wanted yesterday.
I try to increase my chances by logging in with my laptop and smartphone simultaneously. I have personally written 27 mortgages in the last 48 hours.
Alarming headlines confirm that nearly 1,000 mortgages have been taken down since Tuesday morning.
Fortunately, some lenders are still allowing existing customers to migrate to new deals with them and we’re starting to focus on those applications — after prioritizing borrowers who wanted to switch to a different bank or a different building society.
I am underwhelmed and think some of these quoted prices are unreasonable. It is clear that some lenders are setting high rates because they cannot handle the increased demand.
Some borrowers are very upset and I speak to a woman in private distress whose mortgage is due to expire in August of next year.
Even if she strikes a new deal now, before prices rise further, the best option available is to raise her payment from £1,400 to £1,750.
She worries that she will not be able to afford such an increase along with the high other costs, and her tears force us to stop our conversation several times.
Currency crisis: After the pound fell in response to consultant Kwasi Quarting’s poorly received small budget, the mortgage market took an immediate hit
News of the government’s turnaround prompts customers to start asking if cheaper rates will return. So far, this is not the case.
A borrower of 6.14 percent is being offered a two-year fix by Bank Santander, the current lender. We haven’t seen rates this high in over a decade.
Unfortunately, there is no way to know what will happen in the coming months.
But if you’re less than six months away from your deal expiring, it might be worth securing another fix ready today when you buy back. Just be sure to ask about exit fees.
I’m not convinced that trackers that look cheap now are a good idea if prices keep going up.
But whatever you do, don’t switch to a standard variable rate.
- JLM is a full market intermediary company that receives a fee from lenders for the advice and recommendations it provides to borrowers. About 5 per cent of customers – those who apply for smaller loans – may have to pay a fee, which is only £595.
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