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.