As a direct result of the mini budget announced by Chancellor of the Exchequer Kwasi Kwarteng a few days ago, the mortgage world has been thrown into a state of panic to put it lightly. Despite there not actually being any reason to panic at the moment, mortgage lenders started to pull their mortgage products one after the other and some have even refused to lend to any new clients. It seems that it’s a little bit like blind leading the blind right now with no one really knowing what’s going on. Lenders may be pulling their products and refusing to lend to new clients but, the question on mortgage customer’s lips is “Can the lenders cancel my mortgage application?”.
Will A Mortgage Lender Cancel My Mortgage Application?
Before we go into the “What if’s” and hypothetical mortgage cancelation scenarios, it’s important that everyone is clear on what has happened. So, here we go. A few days ago, the new Conservative government and the newly appointed Chancellor or the Exchequer announced a ‘Mini-Budget’ to announce a series of initiatives that the government will hopefully save the UK economy.
This mini-budget was full of tax cuts, and government spending that to some seemed like a stroke of genius that will help millions, and to others like a foolish and misguided plot. One of these organisations that had a negative reaction to the mini-budget was the Bank of England. The BOE have spent the last year trying to cool inflation by increasing interest rates which in-turn should drive down spending (which is what the economy needs). But, the new tax cuts announced would put more money into the pockets of the public and increase spending…therefore worsening inflation.
As a reaction to these tax cuts, the BOE announced an emergency rate increase and pushed rates up to 2.25% from 1.75% only announced a few weeks ago. Because most mortgage lenders base their mortgage interest rates on the BOE’s base rate, they were unprepared for a rate increase and are now concerned that the BOE could raise interest rates again. So, many lenders are pulling their products or completely stopping lending until they can get a clearer picture of what on Earth is going on.
Is My Mortgage Application Safe?
Although lenders are pulling rates and stopping lending, it is generally understood and accepted by mortgage brokers and advisors that if you have secured your mortgage offer, the lenders who are stopping lending will honour your offer and you will still be able to proceed. However, if you have an application in place with a lender who has stopped lending on new business but not yet received an offer or you have secured a product but not actually applied for the mortgage yet, chances are that your application will not be able to proceed with that lender.
The same thing is true if you are going with a lender who is pulling lots of products. If you have secured a rate and a product with a lender through a mortgage advisor then the lender will in most cases honour the rate that they have already offered you. However, if you have discussed a product but have not given your advisor the go-ahead to secure the product and it gets pulled, you will not be able to proceed with that product!
When Will Lenders Start Lending Again?
When it comes to certain products or rates returning to the market that have been pulled, that really is a loaded question that doesn’t really have an answer at the moment. Lender rates will continue to fluctuate until some sort of financial stability is established in the country. Rates will only go down when inflation is under control and the BOE reduces rates. When will this happen? Only time will tell unfortunately.
When it comes to lenders who have completely pulled out of lending returning to the market, that depends on when the lender feels like they have a comfortable idea of what is going on and what the future outlook looks like. Lenders will not return to lending until they have a good idea of where interest rates are going to be and until they have confidence that they aren’t going to lose too much money.
What Can I Do As A Mortgage Customer?
The time to act is now, for all the reasons we have mentioned above. Lenders are dropping out of the market and product availability is becoming fewer and fewer. Speak to a mortgage advisor as soon as you can to make sure that you get the best possible rates, products and lenders before they disappear too. Give our advisors a call today to see how we can help.