Goodbye 2012 - Optimistic for 2013!

I can’t believe this is my last column of 2012!  On the one hand, we could not have had a better year for sport and it makes you proud to be British with the fantastic achievements from our truly inspirational sports men and women.   On the other hand, the retail and financial sectors have had another tough ride…

We have seen the demise of retail giants and household names such as Comet and JJB.  Many others are under extreme pressure to make ends meet.  The Northern Rock brand, the first major public crash of a lender in 07, will also soon just be a name in history, replaced now by Virgin Money .

We were all optimistic and hoping for a hugely more positive year, but the reality is that lending remained pretty static, despite the requests from ‘the powers that be’, and volumes will finish not much different from those in 2011.

Interest only mortgages seem to be on their last legs as more lenders are withdrawing this option.  The ‘Funding for Lending Scheme’ has received good press and appears to have had a positive impact.  It has huge potential for 2013 and I hope this is expanded to help the smaller lenders, not just the high street big six.

Finally, who can forget that we have had MMR (Mortgage Market Review) installed upon us.  Yet more regulation for the mortgage market, due to impact us all in April 2014. Good for mortgage brokers and mortgage advice!  This is a parting gift from the FSA, as they change name to the FCA (Financial Conduct Authority), same people, possibly different location….!  Roll on next year.

Thank you for reading my column.  I really appreciate it and thrive on it being mentioned on a visit to our offices (or whilst in the Pub!) and I’m always happy to discuss a mortgage or the state of the market!   It’s been an interesting challenge this year remaining positive when markets have been so tough.  I’ve always tried to say it as it is and hope that has been beneficial in your decision making, when it comes to finding the right mortgage/company/brokerage!

Please let me know if there are any specific issues or areas you would like me to cover in coming months.  You can email me at dale@atomltd.co.uk, or call me on the above number.  I’d be delighted to discuss with you.

On behalf of everyone at AToM, we wish you and your families a very Happy Christmas and a relaxing and prosperous New Year.  We look forward to being of assistance to you in 2013…

A debt is not just for Christmas...

Following on from last week’s news on rates, Nationwide have cut some of their mortgage rates by up to 0.7% as they join the apparent ‘product price rate war’.  That is a substantial cut!  Santander for Intermediaries has launched another set of attractive rates which are only available for seven days. The message from this lender is to be quick as the funds are usually snapped up within their seven day window. That said, you don't have to complete the mortgage transaction inside that timescale.  Simply secure the funds and protect the rate.  How the market has changed!  

Another lender has withdrawn from the Interest Only mortgage sector.  I might write a separate article on this shortly as I feel that there is still a place for this type of lending for the right client profile and it seems that many lenders are choosing to ignore these quality cases.  Pretty soon it might be easier to confirm who is still offering this option!!

There are rumours that mortgage lending may become easier to obtain next year and some financial gurus are predicting an increase of up to ten billion in net lending.  That is a substantial increase although we all suspect that the lenders will not necessarily relax their underwriting criteria!  So more mortgages but strict criteria and that is why my final point this week is, again, so important. 

Christmas will be here before we know it.  Now, I don’t want to preach but please remember that credit is like your life history to a financial institution. I’m not saying don’t use credit but, if you do, then make sure you can pay it back!  If you miss a payment over the Christmas period, on any debt, it could affect your ability to obtain any type of credit next year.  Credit reports show up to the last six years of your financial history and details any missed payments to everyone from mobile phone providers, to car insurance and, of course mortgages.  To be safe make sure all payments are made on or before the due date and keep your credit file crystal clear.

Lot's of activity in the mortgage market!

There is a lot happening in the mortgage market as we move into the last month of the year! Where have the last eleven months gone?

Good news in that lenders are looking to expand their distribution offerings to a wider market as both Kensington Mortgages and Saffron Building Society launch new products into the intermediary market. Both have various niches and are looking at a number of new products. Saffron, for example, have no redemption penalties on their products, so a customer can leave or overpay at will. These include Residential, Rent to Buy for First Time Buyers, Buy to Lets and Self Build Projects. Seek advice though!

On the other side, there was another nail in the coffin for Interest Only this week as both NatWest and Royal Bank of Scotland cease to offer new interest-only mortgages from Monday 3rd December. This does not affect existing customers or their Buy to Let mortgages.

Many lenders still offer Interest Only as an option, however we are slowly seeing it eradicated from the high street lenders. For the right situation and right scenario, Interest Only works, but it really does look like it is going to be an option only available through the smaller lenders and at a low loan to value soon.

The price war continues as we see lenders offering competitive rates, but this time on a ‘fire sale’ type basis. Santander issued some sub 2% fixed rates via brokers, for just 7 days! This has now been followed by Accord Mortgages who have launched some attractive options, but for a period of just 10 days. Do keep an eye on our shop front in the Carfax, if you are local, as we promote these opportunities in our window. If they are right for you, you will need to act fast as when they are gone, they are gone!

Finally, news just reaching me as I write this column is that the Bank of England has decided on Sir Mervyn Kings successor. Bank of Canada Governor Mark Carney will take over the post in June 2013. Personally I welcome someone external to take over the role as it does need a good shake up and a little modernisation!  However, there’s no denying that the job in hand is huge and the new Governor will need to settle in quickly to the tasks at hand, including financial stability, regulation and monetary policy.

The Mortgage event of the Year...

The great and the good of the industry descended upon London’s ExCel last week for the annual Mortgage Business Expo.   Around 70 exhibitors offered their wares to mortgage brokers, intermediaries, financial advisers, solicitors and others who attended the largest trade mortgage event in the calendar. 

The two day extravaganza was well received in its new venue (previously Olympia) and despite the slightly longer journey, attendees enjoyed the fantastic facilities available at the gigantic centre.

Big players such as Nationwide, Virgin Money and Halifax had their latest products and rates on offer which were well received especially as most have recently been reduced.  However, noticeable absentees included Barclays, Natwest and Santander, leaving a rather large gap from the high street contingent.

This left room for the smaller, lesser known lenders to promote their offerings.  They may not be processing the volume of cases like the high street lenders, but they have a huge appetite to lend and offer niche products to cater for a variety of customer profiles.

Thriving areas also included short term funders/lenders specialising in Bridging Finance and a number of Commercial lenders were also in attendance as funding becomes somewhat more available to businesses.

Our trade association AMI (Association of Mortgage Intermediaries) held numerous seminars covering various issues including Mortgage Market updates and it’s estimated that over 1,750 people attended the two days.  Well done to the organisers!

AToM were the only Specialist Mortgage Packager/Distributor onsite who offered all areas of the mortgage finance sector.   If you follow us on twitter, you will see our stand (@atommortgages).

For those who don’t know AToM, we have a shop front in the Carfax, Horsham.  But we also process cases for lenders via exclusive products and to a database of over 8,000 mortgage brokers, intermediaries and IFAs.   In short, we are a one stop shop catering for all types of people whether it be a straight forward and clean credit history application, right through to complex deals needing a manual assessment on a product exclusive only available via AToM.  As the name suggests, All Types of Mortgages!  So why not give us a try!

Early Christmas Present - A Rate Price War!

The price war continues as three more lenders reduce their rates.  Nationwide, Virgin Money and Precise Mortgages have all cut rates as they try to lure customers to their attractive propositions.   

This is really great news for the end customer as there are some very attractive and competitive rates out there in the run up to Christmas.  Highlights across the market include 5 year fixed rates at sub 3% rates and shorter 2 or 3 year fixeds with minimal or no fees.  This really is a great time to review rates and see if a change of mortgage lender will save you money.

It’s not just the prime side the rate war is affecting.  For those who have had previous financial issues with their credit, the lenders who cater for this sector (normally called Near Prime) have also lowered rates as demand increases for these types of mortgages.   

There are many lenders re-lending in this arena and they will cater for a missed mortgage payment in the last 12 months, historic defaults, County Court Judgements (CCJs).  A limited few will also consider those who are discharged bankrupts, had IVAs or who are in a debt management plan.

There’s no denying that this area of the market took a battering back in 2007 as many, many lenders who offered these types of mortgages were shut down or mothballed.  However, the regulatory lending restrictions are now more stringent than back then and the new breed (some never really left) have a whole new outlook on the term ‘responsible lending’.  But where there is demand, there will always be supply.  Rates range from late 3%s, right up to double figures depending on individual circumstances.

Finally, the Near Prime lender tends to be a ‘stepping stone’.  Most issues usually disappear from a credit search after a few years.  Therefore, the aim would normally be to cater for current requirements on a short to medium term basis with the longer term outlook being structured to enable the customer to get back onto high street mortgage offerings, as quickly and cost effectively as possible.  Terms and conditions always apply and always best to seek professional advice.

Try to not give lenders any excuses to decline your application

Getting a mortgage application through a lender in the current climate can be challenging.  One day it appears relatively easy, yet the next, it’s a nightmare!  So whatever you do, try to not give lenders any excuses to decline your application or refuse to lend to you.  Try to pay bills on time, don’t miss payments of any type and especially not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision to lend to you.  Remember that many Insurance companies and mobile phone providers carry out credit searches on people before issuing their products.  Try not to incur too many searches in a short space of time as this can also be detrimental to your credit score.

 I haven’t reported on figures for a while, so I’ve highlighted a few stark reminders of the current state of the financials, estimated by creditaction, for November:

-          299 people are declared insolvent or bankrupt every day. This is equivalent to one person every 4 minutes 49 seconds.

-          93 properties are repossessed every day

-          1,432 people a day reported they had become redundant between June and August 2012.

-          1,170 Consumer County Court Judgements (CCJ’s) are issued every day (based on Q2 2012 trends). The average value of a Consumer CCJ in Q2 2012 was £3,217.

-          Citizens Advice Bureaux in England and Wales dealt with 8,465 new debt problems every working day during the year ending June 2012.

-           Average household debt in the UK (including mortgages) was £53,785 in September.

These are eye openers, but there are some that are really amazing:

-           the UK's total interest repayments on personal debt over a 12 month period would have been £60.3 billion.  This is equivalent to £165 million per day!  Just interest payments!

-          UK Banks and Building Societies wrote-off £5.3 billion of loans to individuals over the 4 quarters to Q2 2012.  In Q2 2012 itself they wrote-off £1.15 billion (of which £567 million was credit card debt) amounting to a daily write-off of £12.52m.

I know these are a grim read, but sometimes we need a gentle reminder of what’s what.  It also might help those who were looking to load up their credit cards on Christmas spending, and worry about it later, remember that these need to be repaid!!  Don’t become a statistic..

Anyone selling mortgages must be qualified!

After several years of consultations, panic by various areas of the market and the odd debate here and there, the Financial Services Authority (FSA) have issued their final policy rules following their Mortgage Market Review (MMR).

Some might argue this is badly timed with the market still in dire retraction from the crashes of 07/08 and no real recovery since then.  But at the same time these rulings are needed to ensure that the same issues cannot happen again, once we get back to some normality in the lending arena.

With many consultation papers previously issued to the market for responses, the final policy rulings are not of much surprise and we must not forget, are to ensure the best interest of the end consumer.

I thought I would try and highlight a few of the rulings that caught my eye and which must be adhered to (mostly from April 2014):

-          Anyone selling mortgages must hold the relevant mortgage qualifications
-          Firms must act ‘in the customers best interests’
-          Lenders are to be responsible for customer’s affordability and for verifying customer’s income.
-          All ‘interactive sales’, those completed face to face or over the phone, are to be treated as ‘advised sales’.  So, whoever sells the product is deemed responsible, whether it be your bank, broker or other suitably qualified individual. 
-          Stress testing must be carried out for future rate increases.  If you cannot afford an increase in rate, you are unlikely to be given that current product.
-          Interest only survives, but only for customers who present a credible repayment vehicle.
-          Concessionary rates offered by lenders cannot be removed because of payment problems.

These are just a few cherry picked from the 300+ pages of the MMR and I’m glad we have near 18 months to review, digest and act upon the rest!   

With an estimated cost in the region of £70m to implement the changes, this is not a cheap exercise, but the cost of market failures has obviously been substantially more, so anything that will prevent such issues happening again must be welcomed.

Many lenders have already restricted lending policies and reduced exposures to higher risk products, so the real issues will revolve around how Banks and other lenders handle the ‘advised sale’ requirements.  We shall have to wait and see.  In the meantime, this is already in action at your local independent and whole of market mortgage brokerages….! 

Low rates, high fees?

The old saying goes ‘don’t believe everything you read’ (apart from this column of course!).  There’s a lot of very good marketing and PR taking place in the mortgage market as lenders try to increase business volumes and attract new customers in the last quarter of the year.  But are things as the headline suggests?

Even Watchdog touched on the promotion of certain products from lenders offering low rates but with the relevant lender arrangement fees ‘soaring by up to 70%’!

As I keep saying, a mortgage is the biggest debt you are likely to ever take on and you need to do your homework, check the fees and do your sums! 

That’s the benefit of using a professional mortgage brokerage that will look at the overall cost to you over a period of time, not just the promotional rate from day one.  If it’s a 5 year fixed rate deal, they will look at all the rates available and recommend according to the most cost efficient over the five years. It is crucial to take into account the lenders upfront fees, arrangement fees, booking fees, reversion rates (the rate you will be allocated after the 5 year ends), and any costs in changing your mortgage thereafter.   And, of course, ensure that you use an advisor that can access thousands of mortgages available, at the same time, to cost compare and save you traipsing around all the banks and building societies to see their individual offerings.

Watchdog also suggested that the average person changes their mortgage once every seven years!?  That was a shock to me.  Again, a reputable mortgage brokerage would seek to review mortgages a lot quicker than this.  Why would you stay on the lenders variable rate, after the promotional rate had ended, if there was a more cost effective rate available with another lender saving you money?  Always think of number one and show no loyalty.  You can be certain that lenders will not remain loyal to you when it comes to raising rates as we have witnessed with a number of recent increases in Standard Variable Rates.  Seek advice and save money!

The valuation is for the lender, not you!

Some weeks there is just too much news to take in and it can be difficult to assimilate and report on. Then there are quiet weeks where nothing much seems to happen.  This week has been the latter and the mortgage market has been quieter than normal.  So, what to discuss?

Well, it all went Wonga at Newcastle FC this week as the lender has agreed terms to take over the clubs shirt sponsorship.  Current sponsor, Virgin, indicated that they were sad to be losing the sponsorship deal previously negotiated by Northern Rock, the bank they recently acquired and whose name they are now phasing out totally.  

The Bank of England Base rate was retained at 0.50% for another month, but watch this space. There are a number of highly rated financial gurus predicting a cut in November.  Will it happen?  No one really knows but the momentum is gathering and we will see before too long.  If there is a reduction then it may not be for long and any resulting decreases in lenders tracker, discounted or fixed rates should be snapped up quickly.  Don’t miss any opportunities to save yourself money!  

On a separate subject, valuations on properties to be mortgaged come in various guises. Every mortgage lender will require a valuation on the property although, in some cases, they will not actually visit. This is because they can often access detailed information electronically.  Of course, this can prompt a borrower, who has paid a fee, to question the reasonableness of this method. In fairness to the lenders, it is a tried and tested system and rarely proves incorrect.  They have expenses regardless of the visit and this system does have the effect of keeping prices down.  Remember that this, fairly basic valuation is for the lender, at your cost, and should not be relied upon as a guarantee that the property is sound and fit for purpose.  Seek a more detailed survey if you have any doubts.

Interest Only takes another blow

Over the last few months I’ve mentioned Interest Only quite a bit.  Interest Only is one option to pay your mortgage, but it does exactly as it says, you only pay the interest on the loan.  So at the end of the term, say 25 years, you still owe exactly what you started with.   Normally a savings plan is also set up to build funds over time to match the mortgage amount at the end of the term.

This might be right for certain individuals who have careers that pay out a lump sum after a term, or for someone who gets many bonuses.  But unfortunately, that will no longer be a mortgage option you can get through Nationwide.  They have pulled out of offering Interest Only across their entire range of products.  The country’s biggest Building Society has said that it has taken the decision to remove this option as they were only processing 3% on this type of product.   In the scheme of things, very small and what happened to customer choice? 

The mortgage market is awaiting the imminent final release of the FSAs Mortgage Market Review (MMR) which highlights areas due for change and implementation of stricter rules across the market.  Interest Only was mentioned in the consultation stages, but it does appear that an over-reaction has occurred across the market place with many lenders restricting the amount that could be borrowed on Interest Only and Nationwide’s move could/will lead to others following suit and removing the option entirely.  No one wants to be the last man standing!

There’s no denying that this product has sadly been abused by some across the country in order to keep customers costs down and no suitable repayment vehicle being set up.  However, not all should be tarred with the same brush.  Many customers have reasonably performing endowments and investment returns that will repay any Interest Only mortgages and cause no risk at all, mainly thanks to the advice, recommendation and the brokers ‘knowing their customer’.  

In addition, lenders are consistently writing to all customers on Interest Only to ensure that a suitable repayment plan is in place and those who are no nearer to the end of their term should have sorted alternative arrangements.  Are you one of them?  Act now.

Without doubt this move has sent shockwaves through the industry and if others do follow suit, many customers could simply become mortgage prisoners with nowhere to go.

Positive activity in the mortgage market

Only a few days into the final quarter of the year and we’re already seeing lenders lowing rates to attract new business.  Woolwich have cut some rates by up to 0.2% and Abbey for Intermediaries have reduced various fixed rates across the range, both following numerous lender changes last week.  Accord Mortgages have also launched eight products aimed at First Time Buyers with a 10% deposit.  Rates are reasonable and some offer free valuations and £250 cash back.  All in all, it seems there is an appetite to lend in the last quarter (to hit bonus targets?!) and this is great news for the end consumer.

Second charge lenders are also in the midst of a price war.  Many have reduced rates, one or two new lenders have entered the market and another has increased their maximum loan size up to £200,000.   Many customers are making use of a second charge, rather than a full remortgage, as their existing first charge mortgage is on a very good rate and it may not prove cost effective to remortgage the whole amount.  Make sure you review all options available to you.

House prices have fallen 0.4% in September, according to the Nationwide House Price index.  The average house price now stands at £164k.  Nationwide go on to suggest that overall house prices should remain “relatively flat” or decline only modestly over the next 12 months.

With a recent Panorama programme highlighting the use of Payday loans around the country, I need to reiterate that these are classed as an ‘adverse entity’ with most lenders (not that some would admit it!).   In short, these lenders will charge a premium interest rate for a mortgage, compared to a high street lender.   However, even these lenders (those who accept customers with historic CCJs, defaults, or missed mortgage payments registered against them) MAY NOT accept someone who has taken out a payday loan.   So, although these may be right for a customer in certain circumstances, they will most definitely limit the number of lenders available to you when you come to apply for or change mortgages.  Seek advice.

What if 'the computer says No'?

A flurry of activity in the mortgage market this week as a number of lenders reduce their rates.   Virgin Money, Natwest, Accord Mortgages and Platform are a few of the lenders who have cut various rates in their product offerings.  This follows decreases in both LIBOR and SWAP rates (in the main, measures against which banks lend each other money).  This is good for the end consumer and I’ve even heard whispers that this could lead indirectly to a Bank Base Rate cut shortly.  Who knows, as uncertainty seems to the only certainty in the financial sector!  Personally, I’m not sure a cut is a good thing right now, but with many companies struggling to survive and some big casualties (JJB the most recent noticeable), it will be welcomed by all those on sitting on a bank base rate tracker.

I mention credit scoring/searching quite a bit, but it really is so important in the current financial world when deciding to lend to you, or not!  Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile on any existing credit.   The number of recent credit searches you have on file will also have an impact.  Nearly all financial institutions will register a search against you.  So, if you have recently updated your car insurance, home insurance, taken out a mobile contract and just got a new credit/debit card, that’s probably four searches in a short amount of time!

If the computer says ‘no’, you will tend to find most high street lenders doors shut to you.  But fear not, if you have a reasonable deposit and can prove all income, there are lenders who do not credit score, but will manually review and underwrite affordable applications on an individual basis.  AToM has access to a number of these lenders so don’t despair if the high street lender’s computer says no, give us a call to see if we can assist.

Much has changed since 2007...

Someone said to me this week its five years since Northern Rock crashed the ‘mortgage boom’ party and to be honest, I did ponder on where those years have gone!  Much has changed since 07 and lenders now appear to be run by their credit risk personnel, who in turn report to the Financial Services Authority, our regulators.   Let’s be honest, most feel that the FSA now run the lenders too!  As a directly authorised mortgage intermediary, we have had our fair share of ‘guidance’ by the regulator and with the fees involved just to trade in the mortgage market, it’s no surprise that so many have jumped ship and started new careers.  However, what this has left is huge gaps and I often wonder where the market will be in two or three years time as many more retire and fresh blood seems to be so scarce on the horizon.  What will be will be!  But in the meantime, there’s no substitute for honest, transparent professional advice and recommendation, based on your exact needs and requirements.   Online computer systems just can’t compete with that!

Halifax has launched a 5.89% (APR 6.1%) seven year fixed rate mortgage up to 90 per cent of the property value, exclusively for first time buyers.  There is no product fee and customers are eligible to receive £500 towards their moving costs.  Might be right for some very cautious people who like to fix payments long term.  However, rates are lower on shorter term fixes and with rates predicted to be static for some time, alternative products at the end of the short term are likely to still be more competitive.  But, the principle of trying to help First Time Buyers is to be applauded.

Finally, the 2^nd Charge Secured Loan market showed huge growth in July.  Second charge mortgage lending shot up by 11% according to the latest figures from the Finance & Leasing Association.   Many who require a loan to carry out home improvements or for other luxury items, but are currently sitting on very low lenders variable rates are opting to add on a second charge to their current property (sits behind the first charge mortgage).  Again, right for certain people but rates start from 6.9%, so will need to ensure its beneficial in the short to medium term compared with a complete remortgage to another lender/rate.

Act quickly - once they're gone, they're gone!

The summer is over, the kids are back to school and the post holiday credit card statements are on their way!   Ok, so a bit negative, but don’t panic when they arrive.  Debt Management Plans and Payday loans look like an attractive solution and they will be right for some people, however most mortgage lenders are not favourable to these arrangements.  If you are looking to change your mortgage, think twice before committing to such a plan.   Consolidating debts into one monthly payment via a secured loan or even a total remortgage may be a better option.  Obviously securing short term debt in to a longer term loan will inevitably increase the amount of interest paid and professional advice should be sought before going this route. 

Some lenders have been trying to boost mortgage volumes by launching products for a limited amount of time.  Accord Mortgages launched some superb products for a period of 10 days only.   These included cash back, free valuation, low arrangement fees and great rates.  A number of lenders took this approach around this time last year and maybe this is the start of things to come.  Watch this space and act quickly!  Once they’re gone, they’re gone.

Other lenders have made movements in the mortgage market over the last week or so, including rate reductions by Co-Op Bank, Tesco Bank, Santander, Coventry, Virgin Money and Skipton, to name but a few.  Lenders want your business, so make sure you shop around and do your homework.

August was a superb month for AToM.   Completion numbers, those taking out mortgage loans, were the best for nearly four years!  Thank you to all those who have been using AToM’s services, we really do appreciate it. 

Buy to Let takes a hit

The Buy to Let market has been hit hard this week as two of the major players make significant changes to their criteria.

BM Solutions (part of the Lloyds Banking Group) have withdrawn their House to House product.  What does this mean?  Well, the majority of investment mortgages, or better known as Buy to Lets work on a required rental calculation.  Most use a 125% rule.  Therefore the rental payment must be 125% of the monthly mortgage payment, usually based on the actual interest pay rate.  If the rental payment was short in calculation, then the loan offered would be reduced to fit.

The now defunct House to House product ignored this requirement and looked at the Buy to Let using the customer’s income and expenditure.  It was one of the only products in the market that offered this option and was incredibly useful for properties where rental coverage did not cover the mortgage payments by the required rental calculation.  The lender would consider the customers income when considering loan amounts.

The Mortgage Works (part of Nationwide) have also made a number of changes to their Buy to Let offerings.  These include the withdrawal of their regulated Buy to Let offering.   A regulated Buy to Let is where a sizeable portion of the property is rented out to a family member.  They have also withdrawn the option for clients to buy a property from a relative. 

With property prices still low, First Time Buyers struggling to get on the property ladder and returns on savings still relatively unattractive, many have invested in property as a long term investment.  This area of the mortgage market has been buoyant and as such, many lenders are incurring service issues.  So these are substantial moves by two major lenders begging the question if this is the start of more negative things to come?   Let’s hope not!

What's the process?

Not too much excitement on the mortgage news round this week so I thought I would recap on the mortgage process.

The mortgage process, regardless of whether you are a first time buyer, home mover or simply re-mortgaging, will be roughly the same. On any new purchase, the selling agent will seek to agree a number of deadlines with you, including the arrangement of mortgage finance. At this point you can shop around and should make sure that you speak to an independent mortgage brokerage who will assess your overall financial position and discuss your mortgage requirements with you. Advisers are required by law to provide you with a Initial Disclosure Document detailing who they are; who regulates them; their scope of permissions; whether they are restricted to a small lender panel or ‘whole of market’; any fees and costs involved including any charged for advice or consultation. This document also advises how to complain if you are unhappy (now or in the future) about the advice provided.

A good advisor will complete a financial fact find ensuring that they fully ‘know and understand their client’s financial position and requirements.’  This is necessary before any ‘advice or recommendation’ can be provided.  Be patient as this process can be lengthy.  It is in your best interests however, ensuring that you receive the best possible advice designed to meet your personal mortgage needs and requirements.

Once you’ve agreed the best mortgage for you, a decision in principle (DIP) will be completed, usually online with the chosen lender. This involves brief personal details, income disclosure and a credit search. Be wary here as too many credit searches will have a negative effect on your credit score. Ensure that the product and lender are right for you BEFORE a DIP is conducted.

DIP decisions are normally instantaneous.  Assuming success, it is then up-graded to full application. Payment for valuation is made (sometimes free) and the valuer confirms to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more detailed in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost. That said, for older properties it should be considered a worthwhile investment as it could save you thousands in the long run.

The chosen lender will require information on income, identity, proof of residency as part of their due diligence requirements.  Assuming no issues arise, a mortgage offer should be issued. Then, subject to the solicitor’s conveyancing process, you are now on the road to completion and, if it is a purchase, you should soon pick up the keys to your new home

Short Term Loan required?

The ‘Short Term Lending’ market is growing at a rapid pace. Specifically geared at speedily arranged loans, normally with a monthly rate of interest and pre-agreed with an ‘exit’ route, the term ‘Bridging Finance’ is quickly becoming a household name. With many lenders in the market, offering loans up to 75% of the property value (sometimes higher with additional security offered) these types of loan are calculated and charged on a daily/monthly basis, with some even offering to roll up the interest (no committed monthly payment). Interest rates start from 0.75% per month and normally are arranged over a period of between 1 to 18 months. Most will carry a lender fee, an assessment fee, some will include early repayment charges and possibly an exit fee. However, for the right scenario, these loans provide a superb funding line.

Ideal scenarios for Bridging Finance include –

1) Chain breaking or not sold your property yet
When the chain breaks or you have not sold your property but found one you have fallen in love with, bridging finance may enable you to complete on the purchase before you have sold your existing home.

2) Refurbishment – allows you to buy and refurbish property quickly
A loan to support with the purchase of a property and then undertake the refurbishment
before it is eventually presented to a mortgage company or bank for long term re-mortgage finance, or sold.

3) Purchasing properties at auction
Short Term Loans can be arranged very quickly and can be ideal where there are tight deadlines to meet. A typical 28 day completion from purchasing an auction property is usually easily achievable. A pre-auction valuation is considered a must.

These are just some examples, there are many others.

However, where there are positives, there can be negatives! Many lenders have set a minimum term for a property to be owned before they will allow a remortgage to occur. This is usually six months. So please ensure this is factored in to any purchase, budget calculations, etc before committing to any Short Term Funding/Bridging Finance. For more information, or to discuss a specific scenario, please contact AToM.

What a load of PR!

Lenders are lending, mortgages are flying through with little delays and lenders are doing everything in their powers to help the First Time Buyer…..What a load of PR!   Don’t believe everything you read in the papers.  Some lenders are currently 12 working days behind.  Others nearly a month, or two.  The more you shout, the longer the delay, it appears!  However this is not the case with all lenders, just a few.  If you’re in a rush to get your mortgage arranged, make sure you review the lenders service levels first.

A mortgage is the biggest debt you’re likely to ever take on, so you need to do your homework and understand more than just what the national press decide to publish. Advice is crucial and ideally from a company who can offer ‘whole of market’ mortgages, not just products from a limited panel of lenders, like some Estate Agency chains or a Bank/Building Society who only offer their own products.

Most lenders have a set of rules and criteria that need to be met even before requesting a decision in principal (stage at which you are credit searched for pre approval).  Some will not allow a purchase where the vendor has owned the property for less than 6 months.  Some won’t look at unencumbered properties for remortgages, or assist where the customer sold their house within the last year and are renting, so falling between a first time buyer and a residential home owner. Some won’t allow lending in to retirement and so on. 

All of these are little idiosyncrasies that should be known by anyone advising on a mortgage. These save time and probably unnecessary credit searches being carried out.  Remember, the more credit searches you have against your name, the more likely your credit score will decrease, which may affect your ability to obtain finance. Whoever you talk to about your financial requirements, make sure you say at the outset that you do not want to be credit searched, unless you give them the authority to do so.

The computer can still say 'no'

The Bank of England held the base rate for another month and we all breathed a small sigh of relief as some industry pundits had suggested that a reduction may occur.   Obviously it would be good for the consumer, but not so good for keeping the funds moving around the marketplace.   As it is, many are already enjoying a nice base rate tracker and sitting comfortably with no intention of moving, and why would they?  From the business aspect and funding lines, lenders need to turnover customers, attract new business and collect fees.   More money moving around is good news for the market; static money tends not to be!

With this in mind, and as I have not reported on the monthly “creditaction” figures for a while, here are some stark reminders of the state of the economy:
·         Average household debt in the UK (including mortgages) was £55,448 in June. 
·         The average amount owed per UK adult (including mortgages) was £29,687 in June. This was around 121% of average earnings.
·         105 properties are repossessed every day (based on Q1 2012 trends).
·         1,443 Consumer County Court Judgements (CCJs) are issued every day
·         314 people are declared insolvent or bankrupt every day
·         1,607 people a day reported they had become redundant between March and May 2012.
·         The UK population is growing by an estimated 1,342 people a day

Meanwhile, credit scoring is creating havoc for mortgage applications via high street lenders.  Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile on any existing credit.  If the computer says ‘no’, you will tend to find all high street lenders doors shut to you.  But fear not, if you have a reasonable deposit and can prove all income, there are lenders who do not credit score, but will manually review and underwrite affordable applications on an individual basis.  AToM has access to a number of these lenders so don’t despair if the high street lender’s computer says no. If you fit the above profile, give us a call to see if we can assist.

Competition is a good thing for the end consumer

As the world’s eyes are diverted from the on-going banking and financial issues and redirected to the biggest sporting event in the world, it makes you wonder how much business will be lost due to people sneaking off and watching the Olympics!  I’m sure I’m overdue a sick day or two! 

Competition is also taking place in the mortgage finance arena as we witness some rate wars taking place, which can only be a good thing for the end consumer.

For those on an attractive lender standard variable rate, but who need to raise a small amount of funds, a secured loan might be an option.  Secured loans tend to be a ‘second’ charge on your property and provide an alternative way to release equity from your home whilst leaving your current mortgage in place.  Various lenders operate in this arena and strong competition has bought rates down to below 7%.  Rates are subject to circumstances and terms and conditions, etc.

In the first charge arena, we have seen HSBC promote a sub 3% rate fixed for 5 years.  Santander quickly followed and, through brokers, also offered a free valuation and free legals on their 3 year sub 3% fixed re-mortgage product.  Natwest have also joined the front runners and launched a sub 3% fixed for 5 years, through the intermediary sector.  All subject to terms and conditions and individual circumstances, etc!  Others cutting rates include Accord Mortgages by up to 0.6%, Nationwide by up to 0.4% and Halifax by up to 0.5%.  Great to see!  Definitely worth a review with someone who can access the whole of market, if you’re looking to change your mortgage.

And finally (and I had to end on an Olympic note!) if you are lucky enough to own a property near the main Olympic sites in London, Lloyds research suggests that homeowners have seen the value of their home rise by nearly £70,000 since the winning bid was announced in 2005.  The average house price across the 14 postal districts closest to the main site for the London 2012 Olympic/Paralympics Games stood at £273k in March 2012, an increase of 33% from July 2005s average of £206k.

Payday Loans and Mortgages = Limited options

We get many enquiries where the customer has had historic financial issues, missed a payment or two or occasionally, not made a payment at all.  Even so, in the current climates, some specialist lenders will still look to assist, albeit at a premium cost.

However, more recently you can’t pick up a newspaper, or put on daytime TV, without seeing the ever increasing number of ‘payday’ type loans available.   They are everywhere and pretty self explanatory as to why they are being used, normally more month than money…   

But, I want to explore the consequences for those who have taken out a payday type loan (short term loan, high interest rate) and then apply for a mortgage.

Payday loans are being treated, more recently, as an ‘adverse’ entity by some lenders in the market.  Even the lenders that accept customers who have had CCJs, defaults, missed mortgage payments registered against them, MAY NOT accept someone who has taken out a payday loan.

One such lender publicised their views this week - ‘Payday loan data is one of many items included in our review and if a mortgage applicant has a current or had a recent payday loan, it is unlikely that we will consider their mortgage application.’

The credit reference agencies have also buckled under the pressure from lenders to show such information on customer credit checks.  Companies like Experian now show Payday loans as a separate entry and therefore, make it easier for any prospective lender to see any history with regards to these types of loans, before making their decision whether to lend or not.

There are always two sides to every argument - “if they can’t afford to get to the end of the month, should they be looking for a mortgage?” and “the new loan will be cheaper allowing the customer to be in a better position”.     

I’m not against payday loans, they will be right for some people in certain circumstances.  But I will strongly point out that if you do take out such a loan, you will most definitely limit the number of lenders available to you when you come to apply for any type of mortgage finance.

Changing from Interest Only is not a job for 'tomorrow'.

Most weeks, I try to bring a bit of humour, sarcasm and light heartiness to a relatively uninteresting, but extremely important part of most of our lives.  How else could I entice you to read a column about mortgages!?   However, I need to be serious this week and discuss the huge issues surrounding mortgages on an ‘Interest Only’ basis.   

Many have taken out mortgages on an Interest Only basis.  To clarify Interest Only - if you take out a £100k mortgage loan over 25 years on Interest Only, at the end of the 25 years you will still owe the lender £100k!  As the term says, you are only paying the interest on the loan borrowed.  Historically, many also contributed to an endowment policy that acted as a savings plan which would hopefully match the outstanding loan at the end of the term.  Enough said!   Today, ISA’s are normally the preferred savings vehicle but many have not carried on with the savings plan as other distractions have, for whatever reason, taken priority.

Lately, we’ve seen many who have just a matter of years left on their Interest Only mortgage with no repayment vehicle in place.  The stark reality is that unless they can afford to repay the mortgage over a short term on a Capital & Interest basis, they risk losing their house when the lender demands repayment of their debt at the end of the contractual period. 

Where the big problem lies is that many consumers suggested that their repayment vehicle would be ‘sale of property’, i.e. they would downsize at the end of their mortgage, normally coincided with a retirement date.  The issues, more recently, may well include house price decline and there may no longer be enough equity in the property to downsize and still purchase a suitable property to live in. 

Arranging a repayment vehicle for an Interest Only loan is not a job for ‘tomorrow’.  As we all know, tomorrow never comes.  So, do it now!  Sort out a plan of action and put it into motion.  Speak to your current lender or mortgage broker and see if you can change to a repayment option.  There may be other options available to help you achieve repaying the loan over a specific time period.  But don’t delay…the clock is ticking!

A serious lack of consumer confidence...

Where do I start this week!?  So much negative news surrounding the world of financial services.  As I write this column, the Breaking News is that Bob Diamond has resigned as Chief Executive of Barclays, following his Chairmans departure some hours earlier.   Both following Libor (London Inter Bank Offered Rate) and Euribor, the interest rates at which banks lend to each other, fixing and interest rate swap miss-selling scandals.  Also, in relation to last week’s fine of £290m by the FSA and US authorities after it admitted that their traders manipulated Libor.  This now leaves a rather large ship with no captains to steer them.  No doubt the board will act quickly and more light will have been shed on the matter by the time this is printed.  However, the bottom line is that, allegedly, a number of other banks are also under investigation and thus, this could be just the first of many, and in addition, it‘s a further act of mistrust and will bring an increased lack of confidence to an already fragile market.

This comes in the wake of the technical issues at Natwest/RBS, which affected many customers across the country.  Despite the bank confirming all issues had been sorted last week, the bank still has issues and some customers, allegedly, were hit with incorrect duplicate payments on their mortgages this week.   Does make you wonder how we ever functioned without technology and, more worryingly, how totally dependent we have become on it…

And finally…the Bank of England’s latest figures suggest that gross lending secured on dwellings hit £12.2bn in May up from £11.6bn in April.  Repayments also rose from £11.4bn in April to £11.7bn in May.   House purchases fell to 51,098 in May from the 51,627 figure recorded in April and remortgage approvals also dipped from 30,799 in April to 29,244 in May.  All signs of a reduced availability of mortgage credit and with the Eurozone crisis still in the mix, and a serious dent in consumer confidence, we might not see these figures change dramatically any time soon.

Credit Rating Downgrades...

Lots of news this week surrounding banks and how some have had their credit ratings downgraded by ratings agency, Moody’s.  These moves are a consequence of the on-going Eurozone crisis and weak economic performances.  Despite low interest rates and falling LIBOR (London InterBank Offered Rate), the impact on the costs of borrowing funds, for the banks that have been downgraded, will increase.  And of course, the increase will only be passed in one direction - the end consumer.

Royal Bank of Scotland, Barclays and HSBC were three banks in the UK among the downgrades, which ranged from one to three notches.  Moody’s also downgraded 28 Spanish banks, including giant Banco Santander.  Three were downgraded by one notch, 11 downgraded by two notches, 10 banks by three and six banks by four notches! 

The Council of Mortgage Lenders has reported that the number of first-time buyer loans dropped by 48% in April, compared to March.  They put this as a result of the Stamp Duty concession coming to an end.   According to the latest figures, 12,600 loans were advanced to first-time buyers in April with the average loan being £98,000 and first-time buyers typically borrowed 3.12 times their income (down from 3.34 in March).

According to zoopla.co.uk, it’s cheaper to own than rent!  It now costs 14% more per month on average to rent a home compared to servicing a mortgage on an equivalent property, say the property website.

And finally…. AToM has been heavily involved in the local Set4Success initiative.  Working in partnership with Horsham District Council, Horsham Rotary Club, Horsham Schools and local businesses, Set4Success assists Horsham District’s young sportspeople with funding for training and competing.   It was great to see so many people at South Lodge recently as the sporting achievements of 21 young local sports people were celebrated, with special guest Sophia Warner, Paralympic sprint champion, presenting the Awards.  AToM are delighted to be a founding business sponsor of this charity.  Patrons include Chris Nash, Gemma Spofforth, Sarah-Jane Honeywell, Dave Benson-Philips, Lord Lytton and others!  To find out more or to see how you can get involved, visit www.set4success.org

Product innovation is welcomed

Delays delays delays!  Some lenders are a couple of weeks behind, some even a couple of months.  Yes, a sign of a buoyant market, but also a sign that although volumes are no way near where they used to be, lenders still don’t have enough staff to cope and process the current volumes of business or to catch up on back logs.  Some have even tried to stem the flow of business by raising rates, but as yet, this has not helped.  Demand is most definitely out there.  If you are in a rush to purchase a property, I would check current service levels with the lender you are looking to put your application to, before releasing any of your hard earned cash!

For those looking to remortgage to a better rate, now might be a good time to do it, even with the delays.  There are some good deals to be had and especially in the longer term fixed arena.  Terms and conditions will apply, etc.

As I mentioned some while back, we are seeing some of the smaller lenders launching innovative products.  These lenders are not high street names and are not necessarily looking for huge volumes, but they are looking to fill gaps in the market and this should be applauded.  One such lender has reviewed the options available to those in retirement and above the age of 65.  They’ve realised there’s a huge gap (unless it’s an equity release mortgage required) and have launched a variable rate mortgage product specifically designed to assist this type of consumer.  This can be on an interest only basis and up to any age.  Income must be provable, whether this is from pensions, investments, rental income, even earned income or off-spring support and must fit the lenders affordability criteria.  A max of 50% of the property value can be advanced and there are only redemption penalties in the first year.  This makes it reasonably flexible.  To find out more about the AToM Retirement Mortgage, please call us, we’d be delighted to assist.

House prices increase as Remo market 'well and truly open'!

According to a recent poll by Safestore Moving and Improving Index, a massive 50% of tenants believe they won’t own a property at any stage in their lifetime.  Its recent poll, which quizzed 2,058 adults, found that 42% of people wanting to get on the property ladder think that their best hope of being able to afford a home is to inherit money or a house itself.   Lack of deposit and the inability to get a mortgage are cited as the main reasons stopping those that don’t currently own a home getting on the property ladder, according to 29% and 17% of respondents respectively

House prices increased in May.  Halifax House Price Index suggest they increased by 0.5% and Nationwide suggest a raise of 0.3%.  This was the second successive increase in these measures.  The price of a typical home is now £166,022.

I was surprised to see the news that price comparison site MoneySupermarket.com is set to acquire MoneySavingExpert for £87m.  A £35m upfront cash payment will be made as part of the deal alongside approximately 22.1m MoneySupermarket.com shares. There is also a deferred consideration of up to £27m subject to performance.  Credit to Martin Lewis, the personal finance journalist who set up MSE in 2003, and who will become an employee of Moneysupermarket.com.  However, it will be interesting to see if MSE can remain a truly independent and unbiased advice service moving forward.  There’s a big price tag to repay.

Finally, the remortgage market is well and truly open – some lenders are actively looking for business. Now is a superb time to review your current mortgage and possibly obtain a great rate with minimal (if any) costs to change your mortgage. Whether you want to fix your monthly payments for a period of time, or you fancy a low rate tracker mortgage, or maybe both - a tracker rate with the option to fix later on, there are plenty of great products currently available.  If you are in any doubt, speak to a mortgage adviser, get a free mortgage review and you may not miss out on some great offers before they are gone.  It’s good to talk!

All Types of Mortgages....for all types of people!

May was a truly great month for new business with AToM recording our best month for actual new applications received, since October 2009.  However, for all the jubilations this may bring, it’s probably been the toughest month for actually getting cases through to offer via the lenders.  For example, one high street named super giant has decided that on all loans under a certain percentage of the property value, they won’t need a full physical valuation.  So rather than a surveyor going in to the property to view all the details, they just drive past…!  In one recent case, the drive by valuer decided said property was worth £35k less than the owner thought (despite the property next door selling for the same price in Nov 2011).  We were then told in order to challenge the valuers decision, we had to provide two comparable properties that have been sold in the immediate vicinity within the last 120 days!  Nigh on impossible…yet remember the adjacent property had sold for the same amount, just six months ago!  No two days are the same in the mortgage market, but many are very frustrating!  

Then, we are witnessing the demise of interest only as a repayment option.  Virgin Money have now followed most others and reduced their 75% Interest only offering down to 70% with an acceptable repayment vehicle, ISA etc, and only 60% LTV if Sale of Property is to be used.  The days of Interest Only are surely numbered!

Finally, on the up side, we’re seeing a lot of the smaller Building Societies and Mutuals offer products that may not be looking for mass volume, but which do fit gaps in the market or which are looking to assist the more complex scenarios that won’t fit the normal high street mould.  Examples recently placed include, properties in trust, lending to those already in retirement, cross collateral charges (more than one property), lending to those not paying UK tax, guarantors, shared ownership and more.  As our name suggests, All Types of Mortgages for all types of people!

"Must I use the Agents 'In-House' adviser....?"

I feel compelled this week to look at the benefit, or otherwise, of using an Estate Agent’s in-house financial services/mortgage adviser to negotiate your mortgage.  This has the potential to be a minefield and there are a number of myths centred around it, which need to be explained.

You may often find that a selling agent will 'suggest' that they cannot put your offer forward to the vendor unless you have been pre-qualified first by their own mortgage advisers. This is refuted by the National Association of Estate Agents (www.naea.co.uk) own Code of Practice which quite clearly indicates that any reasonable offer must be notified to the vendor.  Obviously the agent acts on behalf of the vendor and has every right to enquire and confirm you have finance in place and can afford the property and, indeed, this does make sense in the overall context of the transaction.

Amazingly, we had one client in the last week who had been ‘advised’ by the selling agents that the vendor would only sell the property if the buyer used their mortgage advisers!  Really?  Again, there are no regulatory requirements that can be imposed for this purpose. 

Our concern in the overall picture is that both buyer and seller concern themselves over the potentially contentious 'conflict of interest' issue.  For example, who takes the majority stance in the event that property is down valued and the buyer wishes to negotiate a reduced purchase price, or there is a dispute over items to be left or removed from the property, or if time taken in obtaining the mortgage offer becomes protracted?   These are just simple issues and there are potentially many others that can arise.  

I guess what I am saying is think before you agree to use any in-house service of this type as overall, it may not always be in your best interests and, as this is the largest financial transaction you will be involved in at the time, it is important to feel comfortable about it.  And also to have some independence in the event of any concerns or disputes. 

That said, there are, undoubtedly, some very good Estate Agents with well respected and highly professional internal advisers.  Just don’t get drawn in by the few...

On a good rate? Maybe a Loan is an option..

Many of us will review car insurance, home insurance, gas and electricity suppliers to find the best rate on the market.  But it’s astounding how many people just leave their mortgage with their existing supplier.  Most lenders look to attract new customers, but are less likely to offer attractive options to stay with them.  This, in the main, is due to the different fees and charges that can be added to the new mortgage at the outset.  In the current climate, the lenders bottom line tends to be more profitable with new clients, rather than old.  So don’t feel loyal, if a better option is with another lender; think of number one!

That said, we are still stuck with the fact that many lenders do not want to lend in huge volumes. Therefore, you may find that actually getting a mortgage becomes the main obstacle and you may find that you have to stay with your current lender anyway!

The other option, if you’re looking to raise cash for home improvements, to consolidate debt (although not always encouraged) or for another legal purpose, is a secured loan.

A secured loan is a 2nd, or subsequent charge, designed for homeowners and which allows the equity in their property to be used as security. Loans are usually between £3k and £100k. There are also no 'up-front' fees to find.

We tend to find that many customers looking to re-mortgage to raise additional funds are already on an attractive rate with their lender. To move away could be costly and they could end up on a much higher interest rate. Depending on the amount already lent as a mortgage, compared to the value of the property, most lenders will allow a secured loan to be added as additional borrowing.

The secured loan is usually repaid over a shorter term than a mortgage, circa 3-10 years, but the term can be longer, although this will increase the amount of interest repaid.  Rates vary depending on the customer’s circumstances and current level of borrowings.

As with all finance, seek advice and think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other loan secured on it!