How to speed up mortgage application and keep interest rate low amid upswings

Mortgage lenders are reporting massive levels of demand, as desperate homeowners and buyers try to lock in prices before they soar.

Last week the Bank of England announced a 0.5 per cent increase in the base rate to 1.75 per cent – the biggest rise in 27 years – sending new fixed mortgage rates even higher.

Since January 2022, interest on a two-year fixed mortgage has jumped from 1.3 per cent to 3.46 per cent, according to an analysis from L&C Mortgages, increasing average monthly payments by around £159.

Mortgage brokers have suggested that some lenders reduce the number of products they have on the market, or set interest rates artificially high, in order to reduce orders and keep up with the workload.

The average lifespan of mortgage products is just 17 days, according to financial information service Moneyfacts — four days short of the previously recorded low of 21 days in June 2022.

This leaves borrowers with a shorter time frame to secure their mortgage, which leads to higher prices before their application is completed.

However, there are steps that remortgage companies can take in order to make the process move a little faster, while ensuring that they get the right mortgage for them.

1. Get a broker

It may not make sense to pay a broker when there are so many mortgage comparison sites available.

While these sites are a useful place to start learning about the market, the service brokers offer goes beyond simple price comparison.

This is a Mortgage Comparison Tool for Money powered by the broker L&C, so you can see the latest rates and then follow up with fee-free advice.

Many brokers are fee-free, but not all are.

One advantage is that brokers get special “broker” rates that are not available to customers who deal with the lender directly.

They are often notified when certain products are about to be withdrawn, so they can be proactive in updating customers if they need to act quickly.

They also know the lenders well and will be better able to distinguish which ones might withdraw products and which ones are less likely to.

Applying to more than one lender hurts your credit score, which can be negatively affected by third-party checks.

Brokers can recommend lenders that best suit your needs, especially if you have slightly different circumstances such as being self-employed, which can save time and improve your chance of a successful application.

2. Work quickly

Getting your order in as early as possible will help you secure a lower rate before future hikes.

Remortgagors can apply for a mortgage up to six months before the start date of a new mortgage, effectively guaranteeing their rate months before the end of the current mortgage.

As the crisis continues, lenders know there’s more money to be made by keeping their customers, so many of them are increasing the maximum time you can refinance your home before your current deal expires.

“A lot of lenders now offer mortgages for six months if it’s a remortgage, whereas it used to be three months with most lenders,” says Ashley Thomas, a director at mortgage specialist Magni Finance.

Those extra few weeks may help you land a more palatable deal.

As uncertainty continues to rise several times a month, it is expected to continue on the same trajectory. The two-year average flat total rate rose for the 10th consecutive month in August, according to data from MoneyFacts.

Now at 3.95 percent, it is 1.61 percent higher than it was in December 2021 (2.34 percent) and is the highest rate on record since February 2013 when it was 4.09 percent.

3. Get a decision in principle

You can also reduce the time it takes to process your application by securing a mortgage in principle first.

This is a written estimate from the bank of how much money they can loan you and at what rate, based on the information you provide.

It is not a full agreement but it does require a credit check and most likely the submission of income statements.

It will ensure that you do not waste time submitting a complete application to a lender whose criteria you do not meet. And it may make it faster to get a mortgage from the same lender, since the information they already have about you will reduce the time it takes to sign your complete application.

Matt Coulson, director at mortgage specialist Heron Financial, says: “Over the past couple of years, the decision in principle has really evolved to the point where it now includes a significant portion of the entire application.

4. Don’t assume that the best price is the best deal

When securing a price, be sure to research the details and don’t always assume that the lowest price will equate to a cheaper deal overall.

“Don’t always chase prices—the lowest price is rarely the cheapest product,” says Oli Pearce, director of Guild Mortgages. Prime rates often come with arrangement fees and the size of the mortgage may mitigate this.

For example, if you take out a £100,000 mortgage, lower rates with high arrangement fees could end up costing you more than a slightly higher no-fee rate. Make sure you look at the show on the tour.

5. Stay on top of your paperwork

Its not rocket science but keeping your documents is crucial to a speedy mortgage process. This is especially true if you are buying a new home and are part of a chain.

In the current climate, brokers can get a two-hour warning before the price is pulled back. If this happens and you are halfway through compiling your application, it will be helpful to hand in all of your documents ahead of time allowing you to respond quickly if needed.

Many lenders experience long, agonizing delays, Pierce explains, with some asking brokers not to chase the first 21 business days after submitting an application.

Ensuring that all questions are answered at the start of the application will reduce any further delays.

Furthermore, brokers are not allowed to submit an application if it is missing any of the required documents – so if you’re under time pressure, everything at your fingertips will make your life and theirs easier, and ensure you stay ahead of the queue to secure the best possible rate.

6. Overpaying for your current mortgage

If you’re currently on a fixed-rate mortgage that hasn’t expired for some time, you may fear where rates will be when your deal ends.

David Hollingsworth of L&C says that overpaying on your mortgage can save you money in the long run – you’ll pay a larger portion of what you owe at a lower rate.

Obviously, we don’t know where we’ll be in 12 or 18 months, and rates may have come down, but preparing as much as you can makes sense. If you can afford to overpay, it might be a good thing, he says. Overpaying your mortgage can equal thousands of pounds in savings in the long run, and if you’re able to pay back enough to take you to a different value class loan, you could potentially benefit from lower interest rates.

However, most fixed rate mortgages have limits on how much you can overpay annually, often 10 percent of the total balance, so you’ll need to stay within those limits.