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...