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….!