MORTGAGE lenders are blocking new applications from buyers amid a flurry of demand as interest rates rise.
At least four mortgage providers have temporarily stopped processing applications.
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Coventry Building Society, Cambridge Building Society, Saffron Building Society, and Suffolk Building Society have all hit the pause button on new business.
The move comes just days after the Bank of England hiked the base rate of interest to 1.75% and mortgage holders were urged to lock in to cheap deals while they were still available.
Experts have warned of a mortgage “ticking time-bomb” as millions of homeowners on fixed deals which expire in the next 12 months are sitting on a knife edge, as mortgage rates are already thousands of pounds higher.
Ray Boulger, technical director at broker John Charcol, said: “Lenders with the most competitive deals are receiving more applications than they can cope with and so they have two choices: increase their rates to reduce applications, or temporarily withdraw from the market.”
Rising interest rates mean there has been a rush of buyers applying for mortgages to lock in a fixed deal before rates rise.
David Hollingworth, director at mortgage broker London & Country, added: “We have seen this before and it’s usually temporary, usually only lasting a few days.
“Lenders are having to take practical decisions so they can get their service back on track – it’s a byproduct of the frequent and rapid changes in the market that we are seeing at the moment.
“Each time base rate moves, lenders have to reprice and they get a new wave of business as everyone tries to grab a deal before it goes.”
Hollingworth said that with more rate hikes expected, it’s likely more lenders will take similar action through the year.
But it’s sparked concerns among some buyers, who are already noticing that mortgage rates are considerably higher than they were a year.
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Which lenders aren’t accepting applications?
Suffolk Building Society said it had temporarily paused applications to clear its backlog.
It said: “The team is working hard to process its existing pipeline, with a view to getting all cases to offer and completion stages as quickly as possible.”
Coventry Building Society will re-open applications from Friday August 12, after a temporary pause came into effect last Thursday (August 4).
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “We decided to pause activity so we could protect service levels to mortgage brokers and their customers.
“Brokers and their clients were able to send us product transfer and further advance applications and all applications that were already in progress with us are being processed.”
There is speculation that the move was linked to the IT issues the firm suffered a week ago.
Cambridge Building Society said it was still accepting new applications from “direct channels” but not through brokers currently.
The lender said it was a temporary pause and it is constantly monitoring the situation. It added that customers could still make appointments with its mortgage advisers.
Saffron Building Society is also reported to have paused new applications, according to trade publication FT Adviser.
Saffron did not respond to The Sun’s request for comment.
The Sun asked other lenders including Nationwide, HSBC, Barclays, Lloyds, Natwest and Santander if they had plans to pause new appliations.
HSBC said it had ” no foreseeable plans to pause new mortgage applications and will continue to support people onto or up the property ladder, or to remortgage”.
A Nationwide spokesperson said: “We haven’t paused new lending and have no plans to do so.”
A Santander spokesperson said: “We have no plans to withdraw new business mortgage products or to pull applications already made.”
What to do if a lender stops accepting applications?
It’s important not to panic – pauses in applications are nothing new and there is still plenty of choice out there.
Boulger points out that there are still more than 100 lenders in the market: “So if a few temporarily withdraw, it still leaves borrowers with plenty of choice.
“It is better for a lender to take a short break rather than keep accepting applications and see their service levels deteriorate.”
Buyers might notice there are fewer options available to them when they are searching for a mortgage deal.
According to Moneyfacts, there are 149 fewer deals available on the market than there were in July (although there are still more than 4,400 to choose from).
Eleanor Williams, finance expert at Moneyfacts, said some deals were only available for a matter of days, meaning buyers have to act quickly to get the best rates.
Applications are also taking longer to be approved amid a deluge of demand.
Hollingworth said: “A few years ago, a mortgage application would only take two weeks. Now you should expect it take to take a least four weeks.”
Using an independent mortgage broker can help ensure you get the best deal available, even if some providers aren’t accepting new applications.
With interest rates rising, mortgage rates are going up too, so you may notice that deals are more expensive that they were six or 12 months ago.
The average two-year fixed rate is now 3.95%, compared to 2.34% in December 2021.
A typical five-year fixed rate is now above 4% for the first time since October 2014.
If you are hoping to buy a home soon, you can lock in a mortgage rate up to six months in advance.
Homeowners coming to the end of their current mortgage deal can also lock in a new rate ahead of time.
One mortgage expert explains what you need to do to avoid your repayments rocketing by up to £2,000 a year.
