Red flag? Mortgage broker trying to rush us into committing before potential BoE interest rate cut

readingroomred

My husband and I are currently arranging tracker mortgages to fill a short term cash flow issue due to money currently being locked away in bonds until the next financial year. 

Long story short, we need to buy our new home before we sell our existing, which we own outright. Our house is likely to realise a like for like sale price to the cost of the new home if we sell it within the next year or so. This is the only way we can realistically do it and it really does suit us best - we’ve looked at every which way and have done all the sums. 

The mortgage broker we’ve been dealing with was recommended by the estate agent selling the house we want to buy. They’re proposing 2 mortgages, one to free up equity in our existing home in order to cover a good sized deposit on the new house plus fees inc an increased SDLT etc. and another to cover the shortfall on the purchase price of the new house until we sell our existing home. If we’re left with a small mortgage going forward after we’ve sold our existing home that’s okay too. 

All the figures work for us but on the latest email from the mortgage broker the last paragraph told us we really need to agree it all and lock it in by this Friday, because if the BoE cut the interest rate this week, the mortgage companies they’re recommending may well increase their rates to compensate their loss of profit share and it’ll be more expensive for us …My heckles went up. 

The situation with the new house is that the sellers accepted our offer last Friday. No chain, but a level 3 survey needs to be done (renovations are needed) and subject to the survey not throwing up any horrors we would look to complete Oct/Nov time. 

This rushing tactic has really put me off using this broker and the lenders they’ve proposed. The fees alone will come to £6k - for the broker and 2 x lenders

Any advice welcome. I worked in a different regulated financial industry for many years and on the face of it, it feels very wrong to rush us to committing before interest rates might fall. 

la531983

Lenders price up their rates a) already taking into account predicted cuts and rises, and b) using other criteria such as swap rates, its not going to be a case that the BoE cut on Wednesday and then everyone shaves a percentage off their mortgage rates the day after, its already priced in to whats out there now.

readingroomred

la531983 said:

Lenders price up their rates a) already taking into account predicted cuts and rises, and b) using other criteria such as swap rates, its not going to be a case that the BoE cut on Wednesday and then everyone shaves a percentage off their mortgage rates the day after, its already priced in to whats out there now.

Thank for your reply. So, does it also follow that if the BoE cut the rate on Wednesday and we agree a mortgage proposal next week (after this coming Fri) a lender wouldn’t have quickly increased their rates to protect profit share in the meantime? 

kingstreet

You can usually change products while the application is being processed if rates are reduced. You can't expect instant changes to a base rate decision, so exactly how long will you put off making a decision.

BTW I'm not supporting what the broker is trying to do and I don't understand the reason for the fees mentioned unless you're borrowing an awful lot.

readingroomred

We need to make a decision by the end of next week, rather than this, it won’t be longer than that. We’re talking to other brokers now too. As of this afternoon we’re now also talking to a local broker and the fees quoted initially are much lower. Original brokers fees : £1600, local broker fees: £525…

We’re borrowing around £500k against an asset we already own outright worth £400k minimally. Plus have bonds over £100k and other smaller funds should we need them. New house price: £430k

readingroomred

To clarify, we’re not expecting ANY reduction due to a BoE interest rate cut, we just weren’t expecting to be told we should expect an instant increase due to a BoE interest rate cut

Mark_d

I would never let the seller's agents arrange my mortgage.  Their arrangements are what works best for them.
In this case the broker might be right that mortgage providers might revise their rates immediately following a change in the BoE base rate.  However it's also possible that they're rushing you in order to get their commission/fee payment sooner.

ACG

I agree with you in that the way the broker has broached it doesnt look great. 
Realistically I think the likelihood of fixed rates going up in the next week or 2 is almost nil. However, I remember during the mini budget the building societies were trying not to pass on all of the rate rises and so they were taking smaller margins. But as rates came down, they were also not passing on all of the rate reductions on their trackers. 

I have seen some building societies relaunch some of their tracker rates but at the same rate - meaning that the profit is actually 0.25% higher - meaning the broker may not be entirely wrong. 

But yes, the way its been worded doesnt come across great. 

As kingstreet says though, if you secure it now and rates come down you might be able to switch it to a lower product if rates do come down. And if they go up, it doesnt matter (for you) as you have your product tied down. 

readingroomred

Mark_d said:

I would never let the seller's agents arrange my mortgage.  Their arrangements are what works best for them.
In this case the broker might be right that mortgage providers might revise their rates immediately following a change in the BoE base rate.  However it's also possible that they're rushing you in order to get their commission/fee payment sooner.

Agreed. I question everything when it comes to money and never commit to anything without serious scrutiny. I think it’s very clear what’s going on. It didn’t start well. Last Friday morning the original broker told us confidently that he’d be able to get us loads of different options, by Friday evening apparently he could, in reality, offer only one. 

Originally, we were going to use cash and a mortgage we’d pre agreed direct with the lender prior to the viewing but then realised the cash we also needed wasn’t available until next Spring. On telling the seller’s estate agent this, we got sent in this broker’s direction, went along for the ride and have now rained it in. The original broker started okay but has increasingly deteriorated and is now coming across as immature and blatantly full of the proverbial. I’d love to be proved wrong but we are where we are.

The acid test will be when we see what our new broker comes back with. She’s calling us in the morning with her offerings. It was amusing when she said “now I will warn you we do charge a fee and it’s £525”, I think that speaks volumes. 

readingroomred

ACG said:

I agree with you in that the way the broker has broached it doesnt look great. 
Realistically I think the likelihood of fixed rates going up in the next week or 2 is almost nil. However, I remember during the mini budget the building societies were trying not to pass on all of the rate rises and so they were taking smaller margins. But as rates came down, they were also not passing on all of the rate reductions on their trackers. 

I have seen some building societies relaunch some of their tracker rates but at the same rate - meaning that the profit is actually 0.25% higher - meaning the broker may not be entirely wrong. 

But yes, the way its been worded doesnt come across great. 

As kingstreet says though, if you secure it now and rates come down you might be able to switch it to a lower product if rates do come down. And if they go up, it doesnt matter (for you) as you have your product tied down. 

This is good info, thank you

kingstreet

If you're considering tracker products the broker is speculating on an increase in the differential over base the lender is currently charging.

For example, if the current deal is 5.25% (BOE base rate + 1%) and next week the lender increases the differential at the same time as a base rate reduction, you could end up on base + 1.25%. Although your new rate will be 5.25%, if the base rate drops to 4%, it could have been 5.0% if you'd taken the earlier offer.