Mortgage lenders are blocking new inquiries from buyers amid a surge in demand as interest rates rise.
At least four mortgage providers have temporarily stopped processing applications.
The 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 raised the base interest rate to 1.75% and mortgage holders were told to lock in on cheap deals while they were still available.
Experts have warned of a mortgage ‘ticking time bomb’ as millions of homeowners on fixed deals that expire in the next 12 months sit on a knife edge as mortgage rates are already several thousand higher of books.
Ray Boulger, technical director at brokerage John Charcol, said: “The lenders with the most competitive offers are receiving more inquiries than they can handle and so they have two choices: raise their rates to reduce inquiries, or temporarily withdraw from the market.
Rising interest rates mean there has been a rush of buyers asking for mortgages to secure a fixed deal before rates rise.
David Hollingworth, director of mortgage brokerage London & Country, added: “We’ve seen this before and it’s usually temporary, usually only lasting a few days.
“Lenders need to make practical decisions to be able to get their service back on track – this is a by-product of the frequent and rapid market changes we are seeing at the moment.
“Every time the base rate changes, lenders have to reprice and they get a new wave of business as everyone tries to get a deal done before he’s gone.”
Hollingworth said with more rate hikes expected, more lenders are likely to take similar action throughout the year.
But it has raised concerns among some buyers, who are already noticing that mortgage rates are considerably higher than they were a year ago.
Which lenders are not accepting applications?
The Suffolk Building Society said it had temporarily suspended applications to clear its backlog.
He said, “The team is working hard to process its existing pipeline, with a view to getting all cases to offer and milestones to completion as quickly as possible.”
The Coventry Building Society will reopen applications from Friday August 12, after a temporary break came into effect last Thursday (August 4).
Jonathan Stinton, Intermediary Relations Manager at the Coventry Building Society, said: “We have decided to suspend business so that we can protect service levels to mortgage brokers and their clients.
“Brokers and their clients have been able to send us product transfer requests and other advanced requests and all requests that were already in progress with us are being processed.”
There is speculation that the move was linked to IT issues the company suffered a week ago.
The Cambridge Building Society said it was still accepting new applications from “direct channels”, but not through brokers at this time.
The lender said it was a temporary pause and is constantly monitoring the situation. He added that clients can still make appointments with his mortgage advisers.
The Saffron Building Society has also suspended new applications. Its Head of Mortgage Sales, Tony Hall, said: “The unprecedented level of interest in our range of specialty mortgages has resulted in a record number of broker enquiries.
“It would have been unsustainable to continue with so many new apps while continuing to provide the service we are renowned for. This is a temporary solution, and we aim to return to normal operations soon.”
The Sun asked other lenders, including Nationwide, HSBC, Barclays, Lloyds, Natwest and Santander, if they planned to suspend new applications.
HSBC said it had “no foreseeable plans to suspend new mortgage applications and will continue to support people on or at the top of the homeownership ladder, or to remortgage”.
A Nationwide spokesperson said: ‘We have not suspended new loans and have no intention of doing so.
A Santander spokesperson said: “We do not intend to withdraw any new commercial mortgage products or withdraw any applications already made.”
What if a lender stops accepting applications?
It’s important not to panic – app breaks aren’t new and there’s still plenty to choose from.
Boulger points out that there are still more than 100 lenders in the market: “So if a few pull out temporarily, that still leaves a lot of choice for borrowers.
“It’s better for a lender to take a short break than to continue accepting applications and see their service levels deteriorate.”
Buyers may notice that there are fewer options available to them when looking for a mortgage.
According to Moneyfacts, there are 149 fewer deals available on the market than there were in July (although there are still over 4,400 to choose from).
Eleanor Williams, finance expert at Moneyfacts, said some deals were only available for a few days, meaning shoppers need to act fast to get the best rates.
Applications also take longer to be approved amid a deluge of applications.
Hollingworth said: “A few years ago applying for a mortgage took just two weeks. Now you should expect it to take at least four weeks.”
Using an independent mortgage broker can help you get the best deal available, although some providers won’t accept new applications.
With rising interest rates, mortgage rates are also rising, so you may notice transactions are more expensive than they were six or 12 months ago.
The average two-year fixed rate is now 3.95%, down from 2.34% in December 2021.
A standard five-year fixed rate is now above 4% for the first time since October 2014.
If you’re 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 contract can also lock in a new rate in advance.
A mortgage expert tells you what you need to do to prevent your repayments from skyrocketing to £2,000 a year.
Mortgage warning as FOUR lenders stop processing applications