There is currently much comment in the press about the number of mortgage products being withdrawn from the market, often at very short notice. Understandably, mortgage intermediaries – and their clients – find this extremely frustrating.
IMLA absolutely understands this, but would emphasise that it is not remotely in lenders’ interests to take action which they know will frustrate and infuriate their broker partners, who introduce a very high proportion of their business (84% and growing) to them.
Decisions to withdraw products and re-price are taken only when absolutely necessary – and the root cause of the current swathe of product withdrawals is the volatility in the swaps market, combined with the continuing speculation about further rises in Bank of England base rate, and market confidence in the Bank’s grip on inflation.
We understand brokers’ wish for lenders to agree to minimum notice periods before withdrawing products – but would counsel caution in adopting such an approach. Lenders come in a variety of shapes and sizes – and each will have different funding and hedging strategies, meaning that they will take swaps at different times in the process of approving and releasing funds for a mortgage. The larger the lender, the more complex the overall picture will look and, for some, the variety of internal governance and approval processes will also affect the lead time required to sanction product withdrawals.
In practice, we do not think there could ever be a “one size fits all” approach to giving notice of the withdrawal of a particular product. If a specific period were to be adopted, it could have the unintended consequence of disadvantaging some customers – a case of be careful what you wish for. It is very important that lenders retain control over their product pipelines – and in the vast majority of cases they will want to make sure that brokers are able to get individual cases over the line before a product has to be pulled.
I am confident that lenders will continue to do their best to control their pipelines and help their intermediaries to do their best to help their clients – who are ultimately the lenders’ customers.
With the best will in the world, lenders cannot always anticipate movements within the capital markets, and there will always be some occasions when they have to move very quickly in order to remain prudent. This will inevitably cause disappointment for some borrowers and the brokers who are advising them. Even if lenders were to agree to aim for a specific minimum period, there could still be circumstances which made this impossible for operational reasons.
In the same way that any sudden spike in costs of supplied goods – whether that be food, energy or any type of raw materials – has to be passed on to consumers, lenders have to respond when the cost to them of funding loans increases. They will bring new products to market, so loans will still be available, but the reality is that – for the immediate future – those loans will cost more. They will also continue to re-assess and re-price their product ranges – the mortgage market remains highly competitive. And that only serves to emphasise the importance of the role played by mortgage intermediaries in helping borrowers find suitable product at sensible prices at the right time.
IMLA members take this issue very seriously and will continue to do their best to give brokers as much notice as is reasonably possible when a product is about to be withdrawn. During this current period of volatility, however, some lenders will find themselves with no option but to withdraw products with very little notice. We all look forward to a less bumpy outlook when interest rates and markets settle down.
Kate Davies is executive director at IMLA
