Lenders are limiting their mortgage offers as they get savvy to those holding on to fixed rates.
A typical mortgage offer is valid between 3 - 6 months but many lenders are reviewing their offer validity periods as we speak. Alliance & Leicester offer some highly competitive products at the moment but they have announced that their remortgage offers are now reduced from 6 months to 4 months. As there is such a variation, it does depend entirely on your lender as to how long your mortgage offer will last, or indeed, how long your secured rate will last. You can check how long your mortgage offer lasts by reviewing your mortgage offer letter. The first page of the offer document will give you a period of validity from the date of issue.
What does this mean for me?
First Time Buyers:
Many people find themselves missing out on properties once they have made an offer and arranged the mortgage, which means they have to start looking again. In the meantime their mortgage is 'offered' subject to the new property passing a valuation / survey. Check with your lender or broker about how much time you have once your mortgage is offered if you haven't secured a new property.
Bear in mind that the legal work (conveyancing) could take a couple of months to complete, so if you find a new property with one month left on your mortgage offer, you need to have a decent solicitor in place to ensure you don't run out of time before your mortgage offer expires. If you need to check prices on conveyancing, we have our own company that does this -> Check what it should cost for conveyancing.
Timeline to exchange:
Remember, when buying a property the legal side of the purchase is on a timeline separate from your mortgage application. Hopefully they will both finish at the same time. Ensure your solicitor is up to speed and chase him. Hopefully they will have the answers to property enquiries by the time your mortgage offer is out.
MORTGAGE TIMELINE ---------------------------------------->
Exchange of Contracts / Completion
LEGAL CONVEYANCING -------------------------------------->
Savvy investors have been organising mortgage offers for cheap fixed rate deals, just in case interest rates rise in a few months. The idea is that if you already hold a mortgage offer the lender is normally obliged to honour the rate. Investors know this and some have been holding on to pre-arranged fixed deals for several months. When the mortgage offer is about to expire they make the decision whether to stay put or go through with the new deal.
Some remortgage customers are following savvy investors by attempting to have their cake and eat it. Whilst sitting on very comfortable variable rates they are also sorting out fixed rate mortgage rates, with a view to hold on to the mortgage offer until expiry just in case their rates start to creep up. It is suspected that this is the main reason why lenders are reviewing how long a mortgage offer lasts / is valid for. There is nothing wrong with this practice and most lender remortgages come with a free survey / valuation & legal fees, so there are no upfront costs for the borrower. The lenders foot the bill as people stay on their variable rate and this has encouraged lenders to take action and reduce the length of time that a mortgage offer is valid to affect everyone.
Whether you are buying or remortgaging, check your mortgage options and make sure you still have the best deal with both this and your conveyancing quote -> Check what it should cost for conveyancing.