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.

Do your mortgage homework before deciding!

A mortgage is the biggest debt you’re ever likely to take on, so do your homework and shop around, as you would for you weekly shopping!  We are always surprised that someone will announce to the world that they saved £30 off the price of, say, a fridge or cooker, yet fail to apply the same research into their mortgage!   The number of mortgages available is rising on a daily basis and rates are incredibly competitive.  But even whilst shopping around for a new mortgage, be wary that many ‘institutions’ are likely to carry out a credit search on you.  Make sure you stipulate at the outset of any mortgage conversation that you do not authorise any credit searches, until you agree you are happy to proceed with a specific product or lender.  Too many credit searches in a short amount of time could be detrimental to your credit score.  If you have not reviewed your credit search before, get it for free (30day trial period) from Credit Expert (see www.atomltd.co.uk for a link). It’s well worth a review and a good insight on how attractive you may, or may not, look to a lender.

In addition to a large increase in First Time Buyer enquiries recently, we have also seen a vast increase in customers looking to consolidate debt or even look at debt management plans.  Both can sometimes cause issues. If you consolidate unsecured credit in to your mortgage, although your monthly payments may be lower, you may be paying more for your debt over a longer term.

With debt management plans (DMP), or Individual Voluntary Arrangements(IVA), again, the lower monthly payments may help in the short term, but you may well find it hard to gain an approval from a lender to refinance at a later date.  Lenders tend to shy away from DMPs and may not assist anyone who has been in an IVA unless it has been discharged, normally, for more than three to four years.  Advice should always be sort before entering in to these types of arrangements.