‘Lenders need to adapt standard time frame to lock in loan cost’ – brokers want price promise on rate offers
Brokers are asking lenders to adopt a standard time frame for mortgage borrowers to lock in their rate offers to protect them from European Central Bank speed (ECB) increase.
thousands of homebuyers risk being stung by higher fixed-rate mortgages simply because lenders can take months to process mortgage draw applications.
As the ECB is in the midst of its fastest and largest rate hike cycle in its history, mortgage applicants are exposed to steep cost increases between loan approval and closing. the deal if their lender’s rates go up.
But the Association of Irish Mortgage Advisors (AIMA) thinks major lenders should guarantee rate offers for at least eight weeks, so borrowers are not forced to pay more than expected.
“Nobody’s saying you have to get the rate you asked for,” said AIMA President Trevor Grant.
“However, if you have a letter that you are approved at a certain rate, you should have a reasonable amount of time to close at the approved rate.”
Currently, banks and non-bank lenders have different policies on how to handle loan offers issued before they raise rates.
AIB, which last month raised rates on all its fixed-rate mortgages by 0.5%, gave customers four weeks to withdraw approved loans, although broker sources said the bank was flexible to anyone already in the queue.
Non-bank lender Finance Ireland initially insisted borrowers had just a week to close their loans at the original price before public outrage forced them to extend the deadline to a month.
Just two weeks later, Finance Ireland suspended its unique long-term fixed-rate mortgages, leaving borrowers with only loans under 10 years to choose from.
But with another ECB increase in sight for December, mortgage prices could experience a volatile period, making lending rates unpredictable.
Because of these mind-boggling increases, many borrowers are jumping into the switch market, hoping to get a cheap rate while they’re still there.
According to figures from the Irish Banking and Payments Federation, switching activity grew by 140% last year.
The departure of Ulster Bank and KBC means business is funneled to a smaller set of competitors. Finance Ireland and ICS are both effectively excluded from new loans at this time.
Mr Grant said a “large cohort” of 300,000 moneychangers with less than 24 months to run on their current mortgages were now coming to market, making the need for consistency and certainty more important than ever.
Brokers will benefit significantly from this activity, but will not make commissions on loan deals that do not close due to price changes.
“We’re not going to pop into the banks,” Mr Grant said. “We’re just saying let’s be fair and just. In reality, people are asking for a rate and no one wants arrears.