How do I fix the broken 'Change Location' feature in Pages, Preview, and other apps on Mac?

In any app (pages, preview, ...) when I try to change location of the file simply by clicking on its name (top row) it allows you to quickly change file name and also location through drop-down menu.

Previously the change of location worked seamlessly trough this drop-down menu just picking any of the favourites or "last used" folders - but since about a month or two ago, this feature stopped working. I can click the favourites folder, it shows change of location. But once I open this menu again, nothing changes, and location is the same as previous.

Only way how to change location from this menu is to go to "other" and then manually choose the favourites in "finder" window.

This is slow. I really need the previous functionality.

[Re-Titled by Moderator]