Mortgage 'prisoners' need protection

I’m really trying to move on from the number of lenders shying away from interest only as a style of mortgage repayment offering, yet more and more keep joining the band wagon! Coventry Building Society followed Nationwide last week in restricting interest only lending to 50% loan to value. This week, Skipton Building Society has limited their interest only offering to 60% of the property value. However, they have been more positive than some, in that they will allow 60% on interest only and a further 20% on repayment, taking the total to 80% of the property value. Well done Skipton! This is a much better option than with those lenders who insist that anything over 50% must be all on a ‘repayment’ only basis. Customers must be allowed to take some responsibility for their own decisions in these matters.

Last week’s budget was something of an anti-climax. As we all sat waiting for the big fix to aid an increase in mortgage lending and a boost to property sales, only the NewBuy scheme really got a mention. We saw an increase to 7% stamp duty land tax (SDLT) implemented on properties of £2m and an eye watering 15% SDLT for those buying a property over £2m in a company
name. But that was it! Nothing obvious to help get the ball rolling for property sales in the middle sector. I’m also still unsure why the Government are concentrating on New Build
properties for First Time Buyers when there are, allegedly, over one million properties currently sitting empty in the UK and over two million people are sitting as mortgage ‘prisoners’ due to recent changes in lenders mortgage criteria making it nigh on impossible for them to change mortgages. I therefore beg to question where the responsibility may lay for this torrid state of affairs! As we’ve seen recently, lenders are hiking their Standard Variable Rates to existing customers and someone needs to protect those with nowhere else to go, otherwise there are more huge issues yet to come. Watch this space……..

Finally, house prices rose by 0.6% in February after falling for the previous two months, with the average UK house price now at £162,712, according to the Nationwide House Price index.

Visit our Lender day on 28th March

Would you like to know more about Short Term Lending / Bridging Finance / Chain Break Finance? If so, AToM is hosting a free to attend lender presentation event on Wednesday 28th March at 6.30pm at Horsham Park Barn. This is an open invitation to all Customers, Estate Agents, Solicitors, Mortgage Brokers, IFAs and any other parties who would be interested in learning more about this fast growing part of the mortgage/finance market to hear directly from the experts.

Many lenders in this area of the market offer loans up to 75% of the property value (sometimes higher if additional security is offered). These types of short term loan are calculated and charged on a daily/monthly basis. Some offer to roll up the interest (no committed monthly payment) and interest rates range from 0.75% per month upwards and are normally arranged over a period of between 1 to 18 months. Most will carry a lender fee and an assessment fee and some will include early repayment charges and possibly an exit fee.

However, for the right scenario, these short term loans provide a superb and speedy funding line.

Ideal scenarios include –

1) ‘Chain Break Finance’ - When a chain breaks, or you have not yet 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 the purchase of a property on which you undertake refurbishment before it is eventually presented to a mortgage company or bank for long term re-mortgage finance, or sold.

3) Auction property purchase - 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, so do come along to our event on Wednesday and listen to the experts. Places are still available. Please call AToM asap on the number below to secure your seat, or email pt@atomltd.co.uk

FINALLY, as I write this column, I’ve just noticed that Nationwide are the latest lender to cap their interest only lending at 50% of the property value on all residential mortgages
(excludes Buy to Lets). This is with effect from Wednesday 21st March and all applications which exceed 50% of the property value will now only be considered on a repayment basis. Long
live interest only…!

..introducing the Retirement Mortgage

More lenders have joined in the latest trend of increasing their Standard Variable Rate (SVR). This is the Lenders own rate of interest, and the rate which a customer normally reverts to once their specific product (i.e fixed rate) period comes to an end. The latest change comes from Yorkshire/Clydesdale who increased their SVR from 4.59% to 4.95%. This was following Bank of Ireland (2.99% to 4.49%), RBS (3.75% to 4%) and Halifax (3.50% to 3.99%) over the last couple of weeks. These can affect some existing customers as well as new customers. The general consensus from the lenders was that the changes were necessary to bring them ‘into line’ with other lender offerings. Do you know what yours is? Maybe this is a good time to review your mortgage and the small print? We do tend to see someone lead the way and others follow quickly behind. The most recent example was the restricting of the percentage (of property value) someone could borrow on an Interest Only basis. Now we’ve seen the increase of SVRs. What’s next…? Life is rarely dull in the mortgage world!

On the positive side - we are seeing some of the smaller lenders looking to launch innovative products. Not necessarily looking for huge volumes, but 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 40% of the property value can be advanced and there are only redemption penalties in the first year. This makes it reasonably flexible. One final thing, I’m delighted that the lender has made this totally exclusive to AToM and it is the only product of its type in the current mortgage market! What a plug! To find out more about the AToM Retirement Mortgage, please call us, we’d be delighted to assist.

Lenders are increasing SVRs now too!

Many existing customers with the Halifax will shortly receive a letter confirming that their Standard Variable Rate will increase from 3.50% to 3.99% on 1st May. Not a nice letter to receive, but it is within the lenders power and will affect between a reported 600,000 – 850,000 customers. A spokesman for the lender says the change acknowledges that the cost of funding a mortgage in today's market remains significantly higher than the longer term average. The increase to the rate reflects the fact that raising money through savings and wholesale markets is currently very expensive. It is not expected that many others will follow suit (RBS also had previously increased rates for some 200,000!). Some lenders have written in guarantees to their mortgage offers terms and conditions, so don’t panic just yet as many track Bank Base Rate. It
does mean that you should review your mortgage offer, especially the small print. If your lender can increase the SVR rate whenever they feel necessary, maybe it’s a good time to review your
options. You don’t have to be loyal to the lender…they may not be thinking especially about you!

The deadline for the end of the stamp duty holiday is looming. The first time buyer's £250,000 completion threshold applies up to 24 March 2012 inclusive. During this time, all First Time Buyers can claim relief on Stamp Duty. Not long now, so get pushing for completion!

The latest figures from creditaction report
- The average amount owed per UK adult (including mortgages) was £29,634 in January. This was around 122% of average earnings.

- 318 people are declared insolvent or bankrupt every day (based on Q4 2011 trends). This is equivalent to 1 person every 62 seconds during each working day
- 1,473 Consumer County Court Judgements (CCJ's) are issued every day (based on Q4 2011 trends). The average value of a Consumer CCJ in Q4 2011 was £2,949.
- Citizens Advice Bureaux in England and Wales dealt with 8,652 new debt problems every working day during the year ending September 2011.
- 93 properties are repossessed every day (based on Q4 2011 trends).
- In Q4 2011, Banks & Building Societies wrote-off £1.48 billion (of which £907 million was credit card debt) amounting to a daily write-off of £16.23m!!

Although these are some horrific and eye opening figures, I do think it’s worth stating these
every now and again. It highlights the state of our economy and makes you stop and think about finances and whether there’s something you could be doing better or with another provider. It is always good to talk!

Product rates are on the up...

Over the last seven days, we’ve seen nearly every lender pull their products and, in the main, increase rates across the board. Is this a time to panic? I’m really not sure. Who can predict the future and what is around the corner?

Fixed rates on offer at the moment are very attractive and some pundits have suggested that if they increase, they may not come back down. The only way to be sure and secure a good rate is apply as soon as possible!

Another lender has reduced its maximum loan for interest-only mortgages from 75% to 50%
for certain repayment strategies. Clydesdale Bank say that where the repayment vehicle is either cash savings or downsizing, the maximum loan to value will now be a maximum of 50%
on interest only loans.

In a week of many changes, the most ‘interesting’ came from Santander who will now require customers to account for one-off costs such as Christmas and birthdays in their income and affordability assessments. Regular costs are already accounted for in assessments, but the lender now requires non-regular costs to also be disclosed. The old joking phrase of a lender requiring your shoe size and inside leg measurement, all of a sudden does not sound quite so far off…and, on the birthday thing....what if you are at the older end of the scale and have four or five grandchildren as well?

What this all demonstrates is that it is still a very tough market out there and in some cases, getting tougher. Many turn to the internet as it’s such a superb tool. However it can also be a disadvantage as so much information, news, products and detail can make it more confusing than planned. A good ‘old fashioned’ face to face conversation with your local specialist independent mortgage brokerage might be the answer. They will, in most cases, have a relationship with the lenders, understand their requirements and ensure all the correct information is submitted from day one. There really is no better time to utilise the expertise and staffing levels they can provide for you in what’s becoming an over informed and more recently, negative market place.