The AA is no longer offering mortgages to new customers, blaming tough competition for its decision to withdraw from the mortgage market.
The AA told Which? Money that a ‘highly competitive’ market was behind its decision, effective from Wednesday 27 February.
Read on to find out what this means for the mortgage market, and what to do if you already have a mortgage or an agreement in principle from the AA.
AA Mortgages: what happened?
If anyone called the AA to enquire about a mortgage yesterday, they may have been surprised to hear a recorded message informing them that mortgages were no longer available to new customers.
AA Mortgage website was still advertising home loans until at least 11am on Wednesday, promoting the lender’s annual ‘loyalty bonus’, low minimum overpayments, and dedicated help and advice team.
The website also informed customers they could manage their mortgage applications online 24 hours a day.
The AA Mortgage website on Wednesday morning.
In reality, the AA’s Mortgages had already been taken off the market and the website has since been updated to reflect this.
Although Brexit may have had an impact on the housing market overall, the AA told Which? Money that Brexit did not play a part in its decision.
A spokesperson told us: ‘We have taken the decision to pause mortgages to new customers for the time being as the market is highly competitive.’
- Find out more: mortgage rates drop and how to get the cheapest deal
How will existing AA Mortgage customers be affected?
The AA assured us that existing mortgage customers don’t need to worry. A spokesperson said: ‘Their mortgages will continue and there is no reason for them to be concerned.
‘[Existing customers] will, of course, continue to be looked after.’
If you have secured an agreement in principle (AIP) with the AA, the lender says it will honour the offer as long as the mortgage is completed within 30 days of the date you received it.
David Blake of Which? Mortgage Advisers suggests that, if you were in the process of applying for a mortgage with the AA or had received an AIP from the lender, ‘You should seek advice quickly to ascertain whether the mortgage you’re applying for is the right one for you.’
What does this mean for the mortgage market?
The AA was fairly new to providing mortgages, having only launched its Bank of Ireland-backed products in 2016.
When we checked in July 2018, the AA had 25 mortgages on the market, a relatively small number compared with other lenders.
In terms of competitiveness, our analysis found that the AA offered fewer cheap mortgages than the average lender.
If the AA found it difficult to survive in the current climate of low interest rates and extreme competition between lenders, it’s possible that more mortgage providers could be feeling the pressure, too.
On the other hand, one less lender in the market means less competition for other banks and building societies.
The AA also told us that its decision may not be permanent, with the spokesperson adding: ‘We will continue to keep an eye on the market and if circumstances are right we will consider offering mortgages to new customers again.’
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How to find the best mortgage for you
With AA Mortgages out of the picture, the field of lenders has shrunk very slightly – but there’s still plenty of choice out there, and trying to work out which is the best deal can be confusing.
Watch our video for five top tips on finding a mortgage that suits your circumstances.