Brokers are urging lenders to introduce a standard timeframe for mortgage borrowers to lock in their rate offers to protect them from quick hikes from the European Central Bank (ECB).
Thousands of homebuyers are being stung with higher fixed-rate mortgages simply because lenders can take months to process mortgage loan applications.
With the ECB in the midst of its fastest and largest rate-hike cycle in history, mortgage applicants face large increases in costs between approving a loan and closing the deal if their lender’s rates rise.
However, the Association of Irish Mortgage Advisors (AIMA) believes that key lenders should guarantee interest rates for at least eight weeks so borrowers do not have to pay more than they have budgeted.
“Nobody says you have to get the rate you applied for,” said AIMA chairman Trevor Grant.
“However, if you have a letter stating that you have been approved for a specific course, you should be given a reasonable period of time to complete the approved course.”
Currently, both banks and non-bank lenders have different policies on how to handle offers of credit before raising rates.
AIB, which increased interest rates on all of its fixed-rate mortgages by 0.5 percent last month, has given customers four weeks to draw down approved loans, although broker sources said the bank is flexible for anyone looking already in the queue.
Non-bank lender Finance Ireland initially insisted borrowers had just a week to call their loans at the original rate before public outrage forced them to extend the deadline to a month.
Just two weeks later, Finance Ireland suspended its unique fixed-rate long-term mortgages, leaving borrowers to choose only loans under 10 years.
Mortgage lenders Bank of Ireland and Permanent TSB are now widely expected to hike rates after the ECB’s recent hike that took base rates to 2%.
But with another ECB hike in December, mortgage prices could enter a period of volatility, making lending rates unpredictable.
Because of these staggering increases, many borrowers are jumping into the switcher market in hopes of snagging a cheap interest rate while they’re still running.
According to figures from the Banking and Payments Federation of Ireland, switching activity has increased by 140 per cent in the last year.
The departure of Ulster Bank and KBC means business is diverted to a narrower group of competitors. Both Finance Ireland and ICS are effectively priced out of new lending for now.
Mr Grant said a “huge cohort” of 300,000 switchers with less than 24 months to maturity on their current mortgages were entering the market now, making the need for consistency and security more important than ever.
Brokers will benefit significantly from this deal, but will not receive commissions on credit deals not completed because prices move.
“We don’t have pop in the banks,” said Mr. Grant. “We’re just saying, let’s be fair and just. In reality, people are applying for an interest rate and nobody wants arrears.”
https://www.independent.ie/business/personal-finance/property-mortgages/lenders-must-adapt-standard-timeframe-to-lock-in-cost-of-loans-brokers-want-price-promise-on-rate-offers-42123400.html “Lenders need to adjust the standard time frame to capture the cost of borrowing” – Brokers want price promises for interest rate quotes