Skipton Building Society has extended the validity of its mortgage offers from six to nine months, giving borrowers more time to complete their purchase. The building society has informed mortgage brokers of the change, which applies to residential purchases, remortgages and buy-to-let deals.
Why the change was made
Skipton said: "Buying a home doesn't always go to plan. Sometimes, your clients simply need more time to get the keys in their hands. So we're making things a little easier. We're increasing our mortgage offer validity periods to give your clients longer to complete. Our analysis found that the majority of customers who needed a replacement offer because their transaction had overrun completed between six and nine months after applying."
The lender has also extended additional borrowing from three months to one month. It confirmed that all standard mortgage offers will continue to have the option of a further three-month extension, "where applicable and subject to our existing requirements".
Brokers react to the move
Brokers have reacted to the "positive" news and "hope" that it will start a trend. Stephen Perkins, mortgage broker and managing director of Norwich-based Yellow Brick Mortgages, said: "The really interesting part of this change is not purchases, it is remortgages. A nine-month offer potentially allows someone to secure a new mortgage long before their current fixed rate ends, giving them protection if rates rise while still leaving time to review the market if pricing improves.
"In effect, a longer offer period starts to act like insurance against future rate rises. That is very attractive for borrowers, but it creates an interesting challenge for lenders because customers are most likely to keep the offer if rates rise and look elsewhere if rates fall. I will be interested to see whether other lenders follow Skipton or decide nine months is simply too long to commit to today's pricing."
Positive move and potential trend
Elliott Culley, director at Hayling Island-based Switch Mortgage Finance, said: "This is a positive move by Skipton and hopefully more lenders will follow their lead. Although most mortgages should be sorted within 6 months, there are a few that go beyond this timeframe and this extension eases that pressure, especially in the current climate, where clients who don't complete would see large increases to monthly payments as rates have increased. This should not be a difficult change for lenders to make as a few already offer extended offers on new build properties."
Louis Mason, content and communications director at London-based Oportfolio Mortgages, said: "I wouldn't be surprised if other lenders follow Skipton's lead. Mortgage lenders are competing not just on price anymore, but on how early they can get borrowers through the door.
"In an unpredictable rate environment, offering nine months of certainty is an attractive selling point and it gives lenders an opportunity to secure business before competitors even enter the conversation. However, there's a difference between securing a mortgage early and committing to one too early. Nine months is a long time in the mortgage market, and a deal that looks competitive today could be considerably less attractive by next summer.
"The key is retaining the flexibility to review the rate before completion. There's also a commercial gamble for lenders. If funding costs rise significantly during those nine months, an earlier offer could become less profitable, although lenders will manage that exposure through their pricing and hedging strategies."
