2013 was the foundation for a great 2014!

For my last column of the year, I’m not going to do the obligatory round up of the year!  Nor will I gasp my astonishment at how quickly the year has gone by.  What I will say is that I think that 2013 has been a year of foundations for what we all hope will be a fantastic year in 2014. 

Total lending for 2013 was predicted to be in the region of £150-160bn.  The actual figure will be nearer £170bn.  Predictions for 2014 are already being suggesting volumes will reach £190-£200bn (2007 was £370bn!).
Although the funding for lending scheme is being withdrawn in January, a year earlier than planned, the financial sector is in a strong position and one that we hope will be able to stand on its own two feet to move forward successfully over the coming months.

We have a new housing minister, who so far seems to be singing from the right hymn sheet and might be a friend to the industry, rather than predecessors who thought they knew best.  Working together is key for all sectors.

It is also reported that there are a number of lenders looking to enter the UK market who are in the process of getting their FCA authorisation.  More competition is great news for the economy and  can only be good news to the end consumer.

The only negative hanging over all of our heads is that the Bank of England base rate has to rise at some point.  The million dollar question is when?  If you are looking to review your mortgage at any time soon….don’t leave it too late.

Finally, a heartfelt thank you for reading my column over the last twelve months.  It has been an enjoyable(!) experience each week trying to provide an insight in to what happens behind the scenes in the mortgage market.  But I do love it!  No two days are the same and how can anyone not enjoy helping people reach their dream!? 

Thank you to all those who have used AToM to source and arrange their mortgage requirements.  We’ve had a fantastic year and enjoyed growth in both volume, with November amounting to just shy of £20m in lending, and staff numbers, with our headcount now over 20!  And what a great team they are.

On behalf of all the staff and directors at AToM, we wish you and your families a very Happy Christmas and Prosperous (& Relaxing) New Year!   We look forward to working with you in 2014.

More lenders offering Help to Buy. Activity at AToM huge!

There has been substantial mortgage activity happening across the country as we roll towards the Christmas break and festivities.  November was AToM’s second best month over the last four years for new business levels!  This is slightly unusual for this time of year, but then nothing surprises us any more in the current climates!  I certainly shall not complain at being very busy but do express our heartfelt thank you to all those who are using AToM and making use of some of the fantastic exclusive mortgage products available via our Horsham branch!

It is good to see that more lenders are offering the Help to Buy schemes.  Virgin Money is the latest to launch products through the Government’s Help to Buy Mortgage Guarantee.   Virgin Money will offer customers with smaller deposits two year fixed fee saver deals up to 95% of the property value.  In addition, all of their 90% and 95% deals now come without a product fee, and remortgage deals are available up to 90% of the property value.  The first challenger bank to join the initiative, Aldermore Bank will launch with the scheme on December 16^th.  Obviously terms and conditions apply and APRs will be dependent on the product chosen.

It always surprises me how few people actually know what rate they are on, the type of mortgage, i.e., fixed rate, tracker rate, etc, and whether they are paying interest only, or capital repayment. Unsurprisingly, almost everyone knows what it costs per month to the nearest penny!  They will haggle for a £10 discount on a new washing machine whilst letting ‘sleeping dogs lay’ when it comes to their mortgage where they might save hundreds!  It’s very easy when the promotional rate period comes to an end to keep your mortgage with the same lender, ‘brush it under the carpet’, and deal with it ‘tomorrow’.  But, we all know tomorrow never comes.  A review of what’s on offer from other Lenders could give you a nice start for 2014, especially if you’re currently on a Standard Variable Rate, or equivalent.   Many lenders are offering superb remortgage opportunities with minimal costs to change, including free standard valuations and legal costs.  Rates are competitively low and mortgage product choice is at its highest for some time.  So pull out that paperwork and have a no obligation conversation with your local, independent and whole of market mortgage advisers!

Funding for Lending to be stopped, market confidence good.

The big news of the week is the imminent withdrawal of the Funding for Lending scheme, a year earlier than planned, by the Bank of England.   The FLS scheme was launched in July 2012 and currently offers cheap loans to lenders who in return are expected to pass on lower rates to the end consumer. 

The reasoning behind the decision given is to encourage the lenders to re-focus and increase funding loans to small businesses, rather than mortgage lending.

At a period when house prices are on the increase, lenders are citing that increased volumes and Help to Buy offerings are boosting consumer confidence, the timing might not be great (please note that Help to Buy is unaffected by the FLS scheme withdrawal). 

Many suggest that this is a sure sign that the mortgage market is in a position to move forward on its own two feet.  Only time will tell!

However, should you rush and panic to secure some of the fantastic rates currently available?  This is a difficult one to answer.  The lenders have until January to request funds from the scheme and we have no intricate small print details as to the closure of the scheme or deadlines.  As we all know, rates can really only go one way and we’ve all been trying to second guess when this may occur.  I’m hoping this is not when it will kick start!   

Nationwide’s House Price Index suggests that property values increased by 0.6% in November compared to October.  The average property price is now £175k compared to £164k a year ago.

And finally, I’ve mentioned it a number of times throughout the year, but make no apology for mentioning it again!  If you have an Interest Only mortgage, do make sure you keep reviewing the options for repaying it back.  For a customer to get to the end of their mortgage term and still owe exactly the same as when they took it out, with no form of repayment apart from selling their property, creates a major headache for the lender, especially when they want their money back!  This will once again be a major part of lenders reviews in 2014, so be on top of your options, before the lender calls!  If in doubt, seek professional advice. 

Activity on the increase. So is development!

With activity on the rise, I’ve been travelling around a lot recently and enjoying the countryside whilst trying to avoid the M25 Car Park!  What I have seen is an amazing amount of building work and renovations / extensions being carried out.  Many home owners appear to be improving their current residence rather than taking the big leap of selling and moving up (or down) the ladder.  This appears consistent with the general view that there is a shortage of properties up for sale and in fact, some agents have told me that they are becoming really quite worried about stock levels in the early part of next year.

Other consumers might be making the next step, but are then renting out their current property on a Buy to Let basis rather than selling it.  Nice if you are in that lucky position!  The rental market is certainly buoyant and showing no signs of slowing down over the coming months. So a Buy to Let might provide you with a modest return for your investment and may be the start of building a little portfolio nest egg for later on life. We have noticed that this is a growing desire for many who fear that their pension arrangements may not be sufficient and that rental income may be a suitable supplement.

Lenders are still competing for business even as we move in to the final stages of the year.  Over the last week we’ve seen further launches in the 95% mortgage arena for first time buyers, lenders lowering rates in the Buy to Let sector and the specialist bridging / short term lending market has seen movements in both criteria and rate decreases. 

There are many opportunities whatever your circumstances and lenders are willing to have a conversation in order to do the right deal.  These are not always high street names, so do speak to someone who has whole of market access and not just a limited panel of lenders.   Finally, remember to always read the small print and understand all fees involved.  The lowest rate on offer may not always be the most cost effective over a period of time for you.

Funding Christmas is not for life! Are rates to go up sooner than expected?

Christmas lights are up, Christmas trees are up, Christmas adverts are on the TV and Christmas songs are being played in the shops.  Christmas really has come early this year.  I’m not a total bah humbug but just remember that if you intend to fund Christmas on credit, it will have to be repaid at some point!  I’m currently being bombarded by 0% balance transfers on credit cards and increasing credit limits, when I’m not even using them.  The temptation is huge.  The problem is, these companies need you to use their cards and they will do everything to tempt you.  However, they are also the quickest to jump should a payment be missed or late.  Be wary that one or two late or missed payments could result in a default registered against you that you may not even know about until you next apply for credit, insurance or some other financial requirement.  Christmas is for Christmas, make sure it’s not for longer..

There is a 40% chance that rates will go up in 2014, according to the new Bank of England Governor Mark Carney.  Following recent comments that rates would not rise until unemployment fell below 7 per cent, a recent report suggested that national unemployment had fallen to 7.6 per cent in the three months to September.  The Bank’s quarterly inflation report forecast now suggests that there is a 40% chance of a rise in 2014, a 60% chance in 2015 and a two-thirds chance in 2016.  
Nationwide Building Society has reported its best half year of lending for five years.  The lender advanced £14bn in the first six months up to end of Sept.  This is 37 per cent up compared to the same period in 2012.

Finally, one of the mortgage trade magazines suggests that the Financial Conduct Authority is in talks with 21 firms ahead of them applying for full bank licences.  Although at ‘informal pre-application’ stage, this is positive sign that funding is available and competition is likely to return to all sectors of the market.   This can only be good news for the end consumer!

Age is not an issue when it comes to mortgages.

You may have seen last week’s Watchdog where an article covered the maximum age that most high street lenders will allow customers to keep their current mortgage to.   The report, in the main, suggested that on the high street the term of a mortgage must finish when a customer’s age reaches 70.  A small number of lenders went slightly higher with one allowing a maximum age of 80.  But what happens when that age is reached and there’s still a debt outstanding?  Although the top six lenders have these stipulations, there are a further sixty other lenders who offer different criteria.  For example, we recently arranged a traditional style of mortgage for a 92 year old!  If the case is good, affordable and has a good amount of equity in the property, then there is every reason for a lender to carry on to lend to that customer.  You just need to know where to look and be happy to deal with a non – household named lender!

The rate price war has continued this week with a number of lenders lowering their two year fixed rates.   These are now at an all time low and some, for those with a 40 per cent deposit, can now offer rates in the late 1% range!

Finally, we’re seeing a lot of first time buyers turn to the bank of Grandma and Granddad as the bank of Mum and Dad appears to be running a little dry!  There are various ways in which the older generation are helping the first timers.  Some are gifting deposits, to help those get on the property ladder.  With most products, the larger the deposit, the lower the interest rate.  Others have agreed to the placement of a collateral charge on the parents or grandparents property.  This gives a lender more security and maybe a better credit risk rational to the deal, than originally might have been the case.  In some cases the parents have joined in to provide additional income support and bolster the overall application.  Whichever way required, always explore the options and have a conversation with a professional as there may just be an alternative way to do the deal.

Product innovation is welcome

Product innovation is once again at the top of my news column this week.   A company has launched a very interesting proposition for those in the Buy to Let mortgage sector.  They will allow a 20% equity withdrawal opportunity.  This can be for any legal purpose and there are no monthly repayments.  Instead, this amount is repayable on the sale of the property and any increase in property value shared with the lender.  They will allow the total loan, including the amount with the first charge lender to a maximum of 85% of the property value.   Already this has created a lot of interest by those looking to buy further properties wanting to release funds for the deposit by raising monies on existing property.   Obviously T&Cs apply, but this is another example of lenders looking to be niche suppliers!

The Nationwide House Price index has reported that UK house prices increased by 1% on October and were 5.8% higher than October 2012.  They further report that house prices, at a national level, are only now around 7% lower than they were in the height of 2007.  Confidence boosting news!

And it is so across the market.  Rates are still decreasing!  Especially in the Near Prime sector for those who have had previous financial issues with their credit.   Many lenders are 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.

Saffron back, House Prices up, Consumer confidence on the rise!

We’re delighted that the Saffron Building Society has relaunched in to the mortgage market after a few weeks rest.  The new suite of products include a 95% First Time Buyer product along with a range of other niche products such as an Expat Buy to Let, a mortgage aimed at Professionals and Contractors, a Self Build mortgage with 100% of build costs and a Buy to Let that allows light refurbishment before renting out!  All of these have no redemption penalties at any time.  Although not a house hold name, this is a really positive move from the lender and well worth a review if their products are of interest.   

The Help to Buy mortgage schemes have certainly bought back some confidence to the consumer market.  We’re also seeing some positive moves from lenders across the country as they look to help out with small deposit loans.   In addition to the Saffron previously mentioned, two other examples come from the Hanley Building Society and Cambridge Building Society.   The Hanley have reduced their 95% loan to value product interest rate by a huge 1%.  The Cambridge has now widened their product access to mortgage brokers across the whole of England allowing more people to access their 95% products. Both a welcome boost to market product offerings.

Finally, House Prices are up!  Over the year to July 2013, according to the Office of National Statistics, UK House prices had increased by 3.3%.  In London alone, there was a 9.7% increase.   Halifax said that house prices increased in August 2013 by 0.4% and Nationwide suggest in September there was an increase of 0.9%.  The average house price in England is reported to stand at £255,000 (as at July 2013).  For First Time Buyers, this is £183,000.  For sellers, Hometrack say that the average time for a property to be on the market has fallen to 7.9 weeks, the lowest for six years! 

Confidence growing as house prices rise

There may be a lot of green shoots and positive signs that consumer confidence is returning in the wider marketplace, but there are still some worrying signs that we’re still not yet out of the woods in the financial sector.  One rather alarming example is the recent issue at the Co-Operative Bank.   The Co-Op group look set to lose control of the bank over a £1.5bn rescue plan opposition, according to some reports.   Reported losses for the half year amount to over £700m and PPI miss-selling redress looks set to top £100m. These, amongst other factors, have led the bank in to reviewing urgent ways to raise capital.  Negotiations are still on going with investors at the time of writing.

On a much lighter note, the Help to Buy mortgage schemes have certainly bought back some confidence to the consumer market.  We’re also seeing some positive moves from lenders across the country as they look to help out with small deposit loans.   Two such examples come from the Hanley Building Society and Cambridge Building Society.   The Hanley have reduced their 95% loan to value product interest rate by a huge 1%.  The Cambridge has now widened their product access to mortgage brokers across the whole of England allowing more people to access their 95% products. Both great moves and a welcome boost to market product offerings.

Finally, House Prices are up!  Over the year to July 2013, according to the Office of National Statistics, UK House prices had increased by 3.3%.  In London alone, there was a 9.7% increase.   Halifax said that house prices increased in August 2013 by 0.4% and Nationwide suggest in September there was an increase of 0.9%.  The average house price in England is reported to stand at £255,000 (as at July 2013).  For First Time Buyers, this is £183,000.  For sellers, Hometrack say that the average time for a property to be on the market has fallen to 7.9 weeks, the lowest for six years! 

Help to Buy picks up pace

The Help to Buy Mortgage Guarantee scheme is picking up pace.  It has now officially launched with Natwest, RBS and Halifax launched some products last Friday.

We’re also informed that Santander, Barclays, Aldermore Bank, Virgin Money, One Savings Bank and Nationwide also intend to offer products for the scheme in the coming months.

Key points regarding the scheme:

• Applies to mortgages up to 95% LTV.
• Lender purchases a 15% guarantee from the government
• £600k property price maximum.
• Available for First Time Buyers and home movers for purchase of main residence only and remortgages.  NOT available for Buy to Let or second homes.
• Clients must meet the lenders standard affordability guidelines and criteria.
• Clients with a history of credit issues will NOT be eligible for the scheme.

Rates on offer from the state owned lenders start from 4.99% and require just a 5% deposit.  But do your homework on these, terms and conditions apply.   

I mentioned this briefly in a previous column, but for those who can achieve a 10% deposit, there are other options.  Rates are fixed at sub 3% and 20% of the loan will be on an equity loan basis, repayable on sale of property with no repayments or interest payments required prior to this.  So effectively, customers are paying monthly interest amounts on a 70% loan, yet have the benefits of just a 10% deposit.

Lenders are certainly looking for niche areas to lend in and are showing a great appetite to lend.

With this in mind, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions and more.  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result. Try and ensure there’s no missed or late payments as these will also decrease your credit score.  In short, your credit search / score are the basis on which most lenders will initially decide whether to lend to you or not.  If you’ve not checked your credit file before, it is well worth a review. Experian, Equifax and Noddle tend to be the main providers used in our market with some offering free initial trials and you can find links to these on the AToM website.

Commercial and Short term options

We are noticing much greater numbers of clients looking to raise funds in the commercial sector and this is a very positive sign that confidence is returning and not just in the residential purchase or re-mortgage arenas.

Commercial lending was long the domain of high street banks and particularly so when all that was needed was a site meeting coupled perhaps with a good lunch with the bank manager and often the funds were quickly available!  Life has changed and the high street lenders are now more dramatically conservative in their lending with the decisions often being made at credit and risk committee level. This has opened up the market in many differing ways with a myriad of new lenders coming to market during the last few years covering almost every possibility from lock up shops to multi-million pound office blocks and hotel complexes.

There are lenders who will offer - short term lending for the swift purchase of an auction property; funds to support multi development or self-build including commercial units; funds to assist the re-mortgage of large property portfolios; funds to help buy existing businesses or extend current business portfolios or Houses of Multiple Occupation; funds to convert or extend offices or factories.  The list goes on!  In fact it is almost endless. If there is a defined, affordable commercial need, then there is likely to be a lender out there somewhere looking to write the business!

Of course, rates and terms will vary depending upon the type of commercial mortgage written. Lenders have varying degrees of risk assessment calculations and this will determine the loan to value and charging rate levels.     

So, where have all these lenders appeared from?  It is no surprise to learn that they have been there for a number of years simply awaiting the return of commercial mortgage demand. Some are subsidiaries of high street banks who have criteria which suits certain market segments.  Others may be as a result of private funders who are looking to secure a decent return for their investment as against the poor market figures at the moment.

As always, please ensure that you get professional independent advice before entering into any agreement.      

Help to Buy 2 launch bought forward!

The Prime Minister has bought forward the launch of the Help to Buy (mortgage guarantee) scheme to October, instead of January 2014.  But let’s review the small print before we all start celebrating the launch of the (some say) controversial scheme and how it may create a housing bubble.

The Help to Buy MG scheme will help people buy a home up to £600,000 with just a 5 per cent deposit.  The government will then provide the lender with a guarantee for the next 15 per cent of the property’s value, charged as an interest free equity loan to the consumer, for a fee (after year five).  A lender will offer the remaining amount as a first charge, subject to normal mortgage terms and underwriting and the scheme will be open for three years.  This is to purchase any property and is not restricted to new build properties as per the existing Help to Buy scheme.  So 5% deposit, 15% equity loan (interest free) and 80% mortgage.

Secondly, at the time of writing, many questions were still yet unanswered and only three lenders had committed to the scheme – Natwest, Royal Bank of Scotland and Halifax.  All government backed lenders..

Finally, we are led to believe that despite the doors being open for business, the actual 15% government guarantee to the lender, will still not be available prior to January 2014 and this may be a slight restriction to other lenders who might have wanted to offer these mortgages initially. 

Unfortunately, at this time, Help to Buy MG will not be available to those who have had any historic credit issues.

A similar proposition for those with a 10 per cent deposit is already on offer in the specialist sector.  A first charge lender takes a 70 per cent loan and a second lender adds a further 20 per cent as an equity share.  However, the latter has no monthly required payment, no fee after the fifth year and is only repaid once the property is sold, or client redeems early.

All of these schemes can be confusing, so always seek professional and independent advice to ensure you are getting the right deal to match your requirements.

Dudley launch - AToM one of the chosen few!

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.  But do review your options as rates are low.

The Dudley Building Society has launched their new mortgage lending proposition through seven key mortgage packager/distributors around the country.  We’re delighted that AToM is one of the chosen few!  The Dudley BS specialise in assisting First Time Buyers, Shared Ownership (90% of share on New Build properties), Right to Buys, Buy to Lets and more.   It’s great to see lenders expanding their propositions in to new areas and we look forward to working with them.

Buy to Let mortgages seem to be the flavour of the month.  With the rental market remaining buoyant and showing no signs of declining, lenders are reacting to the huge demand for investment/buy to let properties.  This sector has also experienced the recent mortgage price war and some big criteria changes as lenders seek to attract more of this business type.  Buy to Let properties will often provide a modest monthly return over and above the mortgage payment.  The additional amount can be used to supplement income, or, with flexible mortgages, can be used to “overpay” the mortgage and reduce the term.   Most lenders in this sector will require the rental income to exceed the mortgage payment by up to 125%.  Remember that, whatever the deal, lender terms and conditions will always apply and there are no guarantees of continued rental or capital growth.

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

Read the small print and don't get searched

Some comparison websites are causing a stir.  We’ve had a few customers contact us for a mortgage recently who have been totally unaware that they have had a number of credit searches carried out having recently searched for competitive renewal quotes on their home or car insurance.   I’m sure it will be stated somewhere in the small print, but the customers have researched a number of comparison sites and ended up with a number of credit searches on their profile.  This, in a small amount of time can have a marked affect on your credit score, and as such, affect your ability to obtain finance, so read the small print and be aware!  

The Council of Mortgage Lenders (CML) has reported that July’s figures for mortgage lending were up 12% compared to June.  This amounted to £16.7bn and compared to July last year, was an impressive 29% increase.  Positive figures indeed and it will be interesting to see August’s figures as this was also an incredibly busy month.  Interestingly, the First Time Buyer sector has proved one of the larger increases in volume, circa 5%, with an average deposit of 18% and an average loan amounting to 3.31 x income.

We’ve also seen a large increase in requests for secured loans.  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 £3.5k and £100k. There are also no 'up-front' fees to find although costs are added to the advance.

We tend to find that many customers looking to remortgage 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 3-7 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.

Right to Buy or Shared Ownership?

It’s been a very busy week in the mortgage market.  Lots of rate volatility as lenders long term fixed rates begin to creep up, along with many delays across the market as lenders struggle to cope with rising volumes as people snap up great rates before they increase!  Unfortunately, it also means that some funding levels are being fully utilised and one such example is with our good friends at the Saffron Building Society who have shut their doors temporarily for this exact reason.  They follow a number of lenders who temporarily suspended lending in early August.  But we hope to see them return in the autumn with a great new range of products for 2014.

Many lenders are looking for niches in the market and two such examples are Right to Buys and Shared Ownership schemes.

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price. This discount can be up to £75k and tenants must have been with the council for five years or more. Some lenders will allow borrowing of up to 100% and possibly slightly more if the extra funds are to be used purely for home improvements. If you resell your home within five years you will usually have to repay some, or all, of the discount you received, however remortgaging is usually allowed in this time period. This is covered under the term Pre-emption Clause.

Shared Ownership Schemes are provided through housing associations. You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association. You usually have the opportunity to purchase a bigger share of the property later on (known as ‘staircasing’). Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, so always seek advice.  Especially as some of these lenders are not household names.  This should not deter you though as these lenders have a good funding arm and an appetite to lend!

Confused by the internet "information"? .....we can help!

Considering it was a ‘holiday month’ August was a flurry of activity and caught many of us out and this was a very pleasant and great surprise!  Of those approaching AToM, many were seeking straight forward simple human assistance having become confused by the huge amount of information currently available on the internet.  The majority were after the superb low rates currently available.  However, and with this in mind, we have seen a few fixed rates increase over the last week as some volatility returned to the financial markets (as I write Nationwide Building Society, Accord Mortgages and a couple of other specialist lenders have all raised medium to long term fixed rates, some by up to 0.4%).  As mentioned in previous columns, lenders are incurring huge delays with processing and underwriting and August’s great business volumes won’t have helped clear the back logs!

Second steppers are being given a helping hand.  Some lenders are offering loans of up to 95% of the property value to get people moving up the ladder and thus freeing up properties affordable to the first time buyer sector.   Lloyds TSB’s recent research also compliments this as they report that equity levels for home movers have helped people living in their first home jump up to the next level.  Improving house prices over the last twelve months have helped.  Despite a reported 2% decrease in homemover mortgages in the first half of 2013, the same time frame that saw a nineteen per cent increase in first time buyer approvals, the average equity share position of a home mover rose from one per cent in the second half of 2012 to thirteen per cent in June 2013!

Finally, due to the increase in business volumes, we’re looking for staff to join our expanding AToM team.  If you know someone in the mortgage sales sector, with the relevant qualifications (or studying towards them) and who likes to be kept very busy, then please ask them to get in touch! 

Mortgages for purchases on the increase

The new Governor of the Bank of England, Mark Carney, gave a fairly broad hint that the bank’s base rate, currently 0.50%, will remain static for a few years yet. Some of the comment was based upon the current level of unemployment and it was suggested that, unless this rose above 7% nationally, the rate should stay low. Whilst there is no guarantee, much can happen in a short time financially as we all know, this is a real confidence boost for those people who are looking forward in terms of their borrowing requirements. This can relate to either mortgage, personal or business borrowing and the broad brush hint can be a means to boosting more confidence in all of these sectors. Of course, the downside of this is that savers may not get much of a return on their hard earned investments during a sustained low rate period.

For borrowers on a low rate base rate tracker the prediction may also be good news and for new purchasers there is every reason to feel more confident in an ability to afford a mortgage in the next few years ahead although a longer term fixed rate may still be worthy of consideration. It is never a bad thing to know what your monthly payment will be and for how long and this may be considered prudential financial planning.

We have noticed an upturn in property sales transactions in the last few weeks and have even heard that a number of properties have been the subject of multiple offers with would be purchasers vying hard to make a successful offer. None of us know if this is likely to be the norm moving forward but it is undoubtedly another pointer towards an upturn of confidence in the current market.

If you are looking to take advantage of very competitive rates in the marketplace for either a purchase or re-mortgage then ensure that you take qualified and independent advice.      

New lender launches whilst others restrict lending

I start this week with both good news and bad. The good news is that the mortgage market is really buoyant with business volumes running high. The bad news is that this is causing a number of lenders major servicing problems as they do not have the staff to handle application numbers. This was evidenced last week in an announcement from Cambridge Building Society who advised they would only accept business from their local community for the foreseeable future. Another, Buckinghamshire based Building Society has closed the doors to new business for one month whilst they catch up on their current pipeline. We are aware of other bank lending institutions who are anything up to 14 days behind but who will not go public to the frustration of those customers and their intermediaries looking to work closely with them. So here is a plea to all lenders asking them to come clean with their current position. There is no shame in being open about it and letting us all know what the real delays are helps everyone manage expectations! That said, there is more good news than bad and there are lenders still actively seeking business. We were visited last week by the CEO of one Building Society who asked if we would be able to introduce £10 million of new business during the remainder of the financial year. Their products are good and rates are quite competitive too.

More good news with a new lender hitting the mortgage market today, the first true new entrant for some time! Magellan offers a new service designed for borrowers who have experienced a one-off life event which has resulted in an adverse credit record. Providing applicants can explain and document the reasons for their financial difficulties and can demonstrate they have had a clean credit history for the last 12 months, Magellan Homeloans will consider their application. This fills a gap in the mortgage market and will, I expect, attract a deal of interest. Their products are only available through a limited number of distributors and AToM are pleased to be numbered amongst them.

Finally, it seems that house prices are continuing to rise, particularly in the South east corner of UK. If you are thinking of moving it is probably a very good time to look.

Product innovation is key, as house prices increase

As we enter the second half of the year, we have surprisingly seen some product interest rate increases.  SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have been extremely volatile over the last few weeks and have caused some concern within the mortgage market.  Rate increases do not mean a mass panic just yet as it is only a couple of lenders who have increased their rates.  However, it is something to be aware of if you are considering reviewing your mortgage options in the not too distant future.

Precise Mortgages have expanded their portfolio offerings to now include both First Time Buyers and New Build Properties. This is a positive move by the lender as they will also allow customers who have had a few credit blips in the past to apply for a mortgage.  The maximum borrowing on this type of product and for this customer type is 85% loan to value.  So effectively, a first time buyer can now purchase a new build property (including flats), having had minor issues in the past and with only a 15% deposit.  As there is currently no other product like it in the market, Precise Mortgages should be credited for their innovation and especially for helping First Time Buyers.

Finally, the positive news continues as the Nationwide House Price Index confirms an increase in the average house price for the South of England of 3%, compared to the same period in 2012.  Across the UK, this sits at 1.9% with the average house costing £168,941.  The South, especially London, has seen month on month increases and it is reported that London now sits at 5% above pre-recession prices (circa £315k average), despite the UK still around 9% below!   With the amount of building works continuing to be approved and huge demand for properties in the local area, this can only be good for consumer confidence and that house prices may continue to rise for some time yet.

Right to Buy and Shared Ownership enquiries on the increase

Over the last few weeks, we’ve seen a marked increase in enquiries for both Right to Buy properties and those looking to purchase on a Shared Ownership basis.

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be up to £75k and tenants must have been with the council for five years or more.  Some lenders will allow borrowing of up to 100% and possibly slightly more if the extra funds are to be used purely for home improvements.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period.

Shared Ownership Schemes are provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, so always seek advice.

Whilst mentioning advice, there are a lot of good rates in the market currently.  Some of these are only accessible through certain brokers.  Make sure you are speaking to someone who has access to the Whole of Market and access to these superb rates as they can be withdrawn with little or no notice.  With this in mind and as mentioned in a previous write up, some lenders will launch market leading products but only for a short period, in order to attract volume business.  The latest to do this is Accord mortgages (owned by Yorkshire Bank).  Sadly by the time this goes to print, this particular set of fantastic products will be gone as they were only available for 7 days, so I will not go in to detail, but they were good and there are likely to be more soon.  Remember, despite what some say, you do not have to take your mortgage with any one source even if they insist that is the deal.  Shop around and make sure you are getting the right deal for number one!

Your payment profile is part of your application for finance

The Council of Mortgage Lenders (CML) has released figures reporting that the remortgage market had its best month for five months in April.  Gross lending was boosted by 5% from remortgage finance.  Signs that the low rates are attracting new customers and homeowners are keen to make use of the great deals currently around.

It was also good news for First Time Buyers.  46% of all house purchase loans advance in April were to those purchasing their first property.  The market is still incredibly tough, but these are signs that things are slowly improving.

With this in mind and so many rate changes and reductions, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions and more.   So don’t give them any excuses not to lend to you!  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result.  Try and ensure there’s no missed or late payments as these will also decrease your credit score.  In short, your credit search / score are the basis on which most lenders will initially decide whether to lend to you or not.  The best rates will almost definitely go to those with the best credit scores.  If you’ve not checked your credit file before, it is well worth a review.  Experian and Equifax tend to be the main two providers used in our market with both offering free initial trials and you can find links to these on the AToM website.

Finally, so you’ve done all the hard work and gone through the whole mortgage process with the lender providing you with a mortgage offer and you can now sit back and relax.  Wrong!  Although the mortgage offer has been issued, until you have completed on your new mortgage, the lender can still decline to proceed with their offering.   If you take out any finance, have lots of credit searches done or miss any payments before completion, it could be that the lender will re-credit score you before completion and uncover something that might not be to their liking.  If in doubt, seek advice. 

The Buy to Let sector is seeing rate competition.

With the rental market continuing to be buoyant, and with no signs of declining, the mortgage market is active as lenders recognise the huge demand for Buy to Let (investment property) mortgages.   These can be from a first time landlord, right through to the experienced House of Multiple Occupation (HMO) / Student Let portfolio investor.   Whatever the scenario, there will probably be a lender who will look to assist. 

This sector has also recently been through a price war, rates are competitive and may also come with package deals, such as free valuation and free legals.

But with so many lenders now in this sector, rates may not be the main area of competition any longer.  Some lenders are also reviewing criteria in order to attract new business.  Many lenders historically would not allow first time landlords, anyone earning an income less than £25k, or those who have more than ten properties, to give you a few examples. 

However, we have seen recently that criteria is being relaxed and lenders are competing to attract more business.  As such, one of the main Buy To Let lenders, BM Solutions, has recently removed their minimum income requirements.  This now means there are three or four lenders in the market who no longer require a minimum income.  They will still require proof of income to ensure affordability, should a tenant void be incurred.

Buy to Let properties will often provide a modest monthly return over and above the mortgage payment.  The additional amount can be used to supplement income, or, with flexible mortgages, can be used to “overpay” the mortgage and reduce the term.

Most lenders in this sector will require the rental income to exceed the mortgage payment by up to 125% and, after costs such as managing agents this should leave some spare cash to cover repairs, maintenance and landlords insurance. It should also enable a fund to be established to cover the mortgage payment in the event that there is no tenant in situ for a while. Remember that, whatever the deal, lender terms and conditions will always apply.                

Consumer confidence appears to be high!

If you read the national press, the ‘funding for lending’ scheme appears to be under some scrutiny.  In short, the scheme was designed to provide relatively cheap funding from the Bank of England to a number of lenders as long as they maintained or increased their net lending on mortgages (or business loans).  However, recent reports suggest that since its launch in August 2012, the FLS scheme has seen an overall decrease in net lending of 1.8bn and a £300m decrease in Q1 2013 alone. 

Other reports highlight a reduction in house purchases for April 2013.  But if you delve slightly more in to the figures, the house purchase numbers for April were 53,710, representing £8bn.  This was against 53,674 loans approved in March!  So for the sake of 36 deals, the purchase market is not in apparent ‘freefall’….!  This should not make for newsworthy headlines!  Of course the headlines did not cover that the number of approvals for remortgaging were by up by nearly 2,000 compared to the six monthly average of 28,323 to at 30,313, and £4.3bn in volume. 

From dealing on the front line, I would dare to suggest that consumer confidence in financial services appears to be the highest it has been for some years.  People are selling, people are buying and many are remortgaging!  It’s not just set to one geographical area either, although appears to be more southern based than northern, but it really is ‘all types of mortgages’!  From the straight forward, to the complex, to the commercial shop front, to the credit issues, to the first time landlord with their first investment property, we are seeing many different scenarios.  We’re even having lenders come back to us on a Monday, backtracking on their previous decline decision on the Friday, having thought about the case and it’s scenario over a weekend and now wishing to offer terms!  This really does bring a new meaning to the ‘thinking outside the box’ analogy.  

There are also a few new lenders waiting in the wings to launch and create more competition in an already increasingly competitive market.  One that we know of will be filling a current gap in the market place, and that’s all I’m currently allowed to say!  But more lenders competing for business can only be a good thing to the end consumer.

Short Term Finance

The ‘Short Term Lending’ market continues to grow at a rapid pace.  Specifically geared at fast financial assistance, perhaps to purchase a property at auction or to enable a new purchase prior to sale of an existing property.  This is normally with a monthly interest rate and with a pre-agreed ‘exit’ route.

The term ‘Bridging Finance’ is quickly becoming a household name but most lenders now like to title it under the banner of Short Term Lending.  Many lenders in this sector of the mortgage market will offer loans up to 75% of the property value (sometimes higher with additional security offered). The loan is usually calculated and charged on a monthly basis and, in all fairness, can be quite pricey! Some of the lenders are happy to allow a 'roll up' of interest (no committed monthly payment) with the full debt settled at redemption.  Interest rates start from, circa 0.69% 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 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 on at profit.

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 often six months.  So please ensure this is factored in to any purchase, budget calculations and financial requirements before committing to any Short Term Funding/Bridging Finance.  For more information, or to discuss a specific scenario, please contact us!

Lenders look for opportunities

Interest Only mortgages have been hitting the headlines once again.  This time after our regulator, the Financial Conduct Authority (FCA), have carried out a thematic review on interest only across the market.

The report highlights that 2.6m residential interest only mortgages represented 29.4% of all residential mortgages in December 2011.  It is also estimated that 12% of residential interest only mortgages are currently in negative equity (value of property less than the loan borrowed).  

Most believe that in the height of the 2007/08 market boom, many interest only mortgages were taken out, without a repayment vehicle in place (historically endowments, more recently ISA’s, etc).  But with so many not having plans in place, this is a potentially huge problem on the horizon for the FCA and lenders to deal with over the coming years/decades.  

For a customer to get to the end of their mortgage term and still owe exactly the same as when they took it out, with no form of repaying the loan apart from selling their property, creates a major headache for the lender, especially when they want their money back!  This is also part of the reason as to why so many lenders have recently moved away from interest only all together.

In addition, most high street lenders will only lend until normal retirement age, so those looking to extend their loan beyond normal retirement age, may only find a small number of mortgage lender options.

However, some lenders are seeing this as an opportunity.   One such lender has targeted the over 65s and provided a solution to the ‘lending in retirement’ conundrum.   As long as the loan is below 50% of the property value, affordable within 4 x salary/pension/income with £150k equity in the property, then a long term interest only mortgage may be possible (not equity release).

This may also apply to those who, whilst having no mortgage, have suffered from reduced income and need to review options. Product innovation is providing schemes where equity can be turned into a mortgage and where off-spring may be able to assist with the repayments in order to secure and protect their inheritance whilst also ensuring a comfortable retirement for their parents. This is not right for everyone but it is certainly worth talking to a qualified advisor to review all possibilities.

Halifax help First Time Buyers

A helping hand for First Time Buyers this week as Halifax for Intermediaries launched a promotion where they will pay the Stamp Duty for all properties with a value between £125k and £250k.  With products available to customers with a minimum 10% deposit, this is a nice move by the lender, especially as this is not restricted to just ‘new build’ properties.

Nationwide’s House Price Index suggested that the typical value of a house declined by 0.1% between March and April, with the typical UK home now being worth £165,586.  This is still 0.9% higher than April 2012.

With this in mind, lenders require a valuation to be carried out, by their approved valuers, on every mortgage.  This report is for the lender only and should not be relied upon when purchasing a property, as it does not go far enough.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes and an increasing number of these are now done by a ‘drive by’, so the valuer may not even enter the property!  They have no obligation to tell you what is in the report, or give you a copy!  Therefore you should always consider the benefit of an independent and more in depth survey on the property you are purchasing to ensure all defects are noted before signing contracts.  The extra few hundred pounds cost upfront could save you thousands later on.

Mortgage approvals were up 5 per cent in March, compared to February report the Bank of England.  House purchases rose 3 per cent to £8bn and remortgaging up 9 per cent to £4.1bn.  Positive signs and shows how attractive the current rates are in the market.  We are seeing a huge amount of long term fixed rates being snapped up.  Criteria is also being relaxed slightly as lenders target volume business.  If you don’t think you can get a mortgage, have a chat with a local independent mortgage brokerage as you may just be surprised with how they respond!

Volumes on the up!

The mortgage market is incredibly busy and frantic with activity.  This can only be welcoming news as we all thrive on a competitive market which provides the end consumer with a great choice of products and great mortgage rates!

A huge thank you to all who have let AToM take care of their mortgage requirements over the last few months.  April was our best month for new business and also completions for over four years!  So thank you again, we really do appreciate it.  In fact, levels have been so constant that we are now looking to recruit, so do please review our careers page on our website if this might be of interest.  Plug over!

With the increased volumes of business, we are seeing an increase in the range of property types.  The government are obviously promoting new build properties and you can’t miss the amount of building works taking shape around the Horsham area.  However, on a smaller scale, many run down or derelict houses are being snapped up and converted in to more modern dwellings, or split in to a number of properties.   We are seeing a big demand for mortgages on houses that have been converted in to a number of flats and this is also true for old pubs and offices.  Beware though that some lenders treat these as newbuild and new build flats are of a limited appetite to some lenders in the current climates.

Others are converting outbuildings in to guest or ‘granny flats’ or building annexes on to the side of existing properties.  Both these and the converted flats will be subject to the valuers comments when they visit the property and can be subject to the relevant leaseholds being in place. 

Where two properties are on one title and not split in to separate titles, be advised that these may not be acceptable to many lenders and you will need to seek a specialist lender.

Holiday homes are also on the increase.  Where these are in the UK, lenders will help, but in most cases they must be restriction free.  Some have restrictions such as ‘can only be sold to people living in the area’ or ‘can only be let out 11 months of the year’.   For those looking to purchase properties abroad be aware that although rates are pretty low throughout Europe, deposits required can be quite substantial.

Have you heard of......

A quick test to start this week!  Have you heard of the Mansfield Building Society?  What about the Saffron, Manchester, Buckinghamshire, Furness, Shepshed, or the Stafford Railway Building Society?  Not necessarily household names, but not ones to be ignored either.  We are seeing these names and a lot more like them launching 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 an option 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 and an ideal solution for when the normal mortgage is coming to an end and the existing lender has requested their funds are repaid.  Remember, this is a standard mortgage and not a lifetime/equity release type solution.

What this all demonstrates is that there is an appetite to lend in a still very tough market.  However, many consumers are turning to the internet as it’s such a superb tool.  But it can also be a disadvantage as so much information, news, product 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 (even those you’ve never heard of!), 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, highly competitive market place.

Competition for those with low deposits

Lenders are at last starting to recognise the importance of high loan to value loans for both first time and subsequent mortgage applicants. One such lender has chosen a limited panel of broker companies to distribute their new 95% loan to value product to home movers, first time buyers and those seeking to re-mortgage. We are delighted that AToM has been chosen for this purpose. This product is not restricted to new build properties, like most other 5% deposit products recently launched by some lenders, and it is not subject to credit scoring or early redemption penalties. The only stipulation is that those moving or remortgaging have had a mortgage for at least twelve months and any first time buyers must have been renting for the last twelve months. If this product is of interest, be quick as I suspect the demand will be huge for this products and funds will utilised quickly.

 

The Second Charge Secured Loan market has seen huge growth recently. March saw a 17% increase on February, breaking the £35m barrier for the first time in nearly four years, according to the Secured Loan Index. 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). Right for certain people but rates start from around 5.5%, so will need to ensure it’s beneficial in the short to medium term compared with a complete remortgage to another lender/rate.

Finally, recent figures from creditaction show that the actual state of the financial economy is still extremely fragile:

- The average amount owed per UK adult (including mortgages) was £28,981 in February. This was around 118% of average earnings.

- The estimated average outstanding mortgage for the 11.3m households that carry mortgage debt stood at £112,153 in February.

- 277 people are declared insolvent or bankrupt every day (based on Q4 2012 trends). This is equivalent to one person every 5 minutes 12 seconds.

- 84 properties are repossessed every day (Every 17 mins)

- 1,454 people a day reported they had become redundant between November 2012 and January 2013.

- Citizens Advice Bureau in England and Wales dealt with 8,192 debt problems every working day during the year ending December 2012.

Stark figures, but we all need reminding occasionally and always worth reviewing your own finances to ensure you’re paying the best rates and where possible, have plans in place to account for all eventualities.

 

Increased competition in the 95% LTV market for First Time Buyers

We’ve seen another week of market movement and increased competition as lenders lower rates and loosen criteria.  There is a lot more positive activity from the lenders, however we are also seeing an increase in service times and underwriting responses resulting from increased volumes.  A few are even reporting backlogs of over a week just to look at a case!  In addition, if they then need further information in respect of the application, once received, this can then join the back of the queue again to be looked at!  Be aware of these timescales if you are in a hurry to complete.

House prices rose in March by 0.2% compared to February according to the Halifax House Price Index with the average price now sitting just below £164k. 

Our good friends at the Saffron Building Society have launched a superb product aimed at First Time Buyers.  The lender is offering a 95% mortgage with no credit scoring, to those who have never owned a property.  Customers will still be credit searched but cases are reviewed on a manual assessment, rather than a computer making the decision.  There are no early redemption penalties and the arrangement fee is just £495.  This is not just aimed at New Build properties either!  Obviously terms/conditions and other fees may apply, but this kind of innovation is exactly what the mortgage market needs!

Although not household names, specialist lenders like Saffron have money to lend and a desire to create products to assist gaps in the mortgage market.  For instance, the usual requirement on the self employed is 2 or 3 years accounts and possibly the SA302 returns from the Inland Revenue. Some specialist lenders, for the right deposit, will allow just 1 years accounts to prove income, normally with an accountant projection for the second full year and probably up to six months personal and business bank statements.

This is the beauty of using a mortgage broker.  They will have access to many lenders that you have probably never heard of and products that are not usually visible to the public eye. On average, a good mortgage broker will have access to over 6,000 mortgage products, from a huge number of lenders.  As with everything you purchase, it’s always worth shopping around as although you might think you have a great deal with your current provider, there may be better products out there that you are missing out on.