Gen H increases rates, brokers point to “avalanche of applications”

Gen H, the first lender to launch sub-4% mortgage deals just before Christmas, has increased the rates on its headline deals.

Effective from 8:30pm on Sunday, 7th January, the lender is set to increase its 2-year and 5-year 60% loan-to-value (LTV) products by up to 0.37%.

Smaller increases of up to 0.10% will also be made across its 85% and 90% LTV rates.

In addition to these increases, Gen H will also be making reductions across all of its 3-year products by up to 0.12%.  

In light of these changes, Newspage asked brokers Gen H would be hiking prices when other lenders are cutting them.

Justin Moy, managing director at EHF Mortgages, said: “Gen H are not a huge mortgage lender compared to the high street providers, so their ability to keep these very competitive rates going for the past few weeks has been very impressive.

“But I guess it couldn’t last much longer. Whenever a mortgage lender suffers an avalanche of applications, rate increases are a natural defence to slow down their popularity. It’s not necessarily a sign of any pricing issues.

“Time for the rest of the market to share the load and bring cheaper deals for all borrowers.”

Lewis Shaw, owner and mortgage expert at Shaw Financial Services, added: “This has nothing to do with business levels as, by their own admission, they say it’s due to market fluctuations.

“The way Gen H is funded is extremely sensitive to movements in swaps. The problems in the Red Sea are forcing many ships to travel around Africa rather than through the Suez Canal.

“This is increasing the cost of container shipping by up to 40% and, once again, will lead to supply problems for goods.

“Added on top is the possibility of a few more dollars per barrel of oil, and we’ve got all the ingredients to start pushing inflation back up.

“As such, we’ve seen gilt yields and swap rates rise in response to this, which is why Gen H has to adjust their mortgage pricing so quickly.

“Maybe all those rate cuts we’re expecting will be scuppered again by another black swan.”

Further reaction:

Matthew Jackson, director at Mint FS:

“Credit has to go to Gen H for sticking their head above the parapet and being the first lender to go sub 4%.

“The not-unexpected reaction from brokers has been to pile business into them and being a smaller lender this pushes their service standards to the limit.

“I am sure they expected other lenders to move faster to match them which would then spread the applications, but unfortunately, a lot of the high street names have been slow off the mark, perhaps suffering from a new year hangover of sorts. Hopefully, this is temporary and once service levels are restored at Gen H they can reprice accordingly.”

Stephen Perkins, managing director at Yellow Brick Mortgages:

“Sometimes your rates put you too far out front and leave you exposed to attracting more applications than you envisioned, which has been the case here for Gen H.

“So this rate increase is just to sink back into the pack somewhat to reduce the flow of applications so that service levels and funding don’t become challenged.”

Gareth Davies, director at South Coast Mortgage Services:

“I wouldn’t read much into this other than the fact they are managing their business and service levels.

“By their own admission, they’re not one of the ‘big boys’ and need to tweak rates to accommodate application levels frequently. I certainly don’t see this move causing other lenders to do similar.”

Andy Keehner, head of Finanze strategy at Finanze:

Gen H took a punt and have benefitted from first mover advantage in stimulating new business.

“A slight adjustment in rates to quell demand isn’t a big deal, especially as other lenders are now offering more competitive deals. It’s good for borrowers and great for brokers!”

Rohit Kohli, director at The Mortgage Stop:

“Gen H led the way before Christmas and have been near the top of sourcing for a while.

“Given their funding model and scale it’s no surprise that they would want to ease the pressure on themselves as they are genuinely one of the lenders who try to maintain service levels.”

Jack Tutton, director at SJ Mortgages:

“This was always likely to happen given Gen H were the first lender to offer a product under 4%.

“They would have been inundated with applications even in what is generally a quieter time over the Christmas period.

“The increase in swap rates that we have also seen since the start of the year will not be helping matters either.

“Several larger lenders have since followed Gen H’s lead by offering sub-4 % products. It will be interesting to see how long they hold at these rates if SWAP rates continue to increase.”