Delays across the market....and Elephants in Horsham?

Wow, what a week!  It's good and bad news though. The good news is that the mortgage market is really buoyant with good business volumes, product choice at it's highest for some years and properties selling quickly (sometimes before they make the papers and above the asking price). 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.  One we know of is working on applications submitted three weeks ago!  We also have had delays on valuations with some surveyors taking up to two weeks to book an appointment.  Unfortunately lenders have agreements with certain surveyor companies and they have to undertake the valuation, no matter what the delay in actually carrying out the appointment.  There is no shame in being open about these delays as they should be taken in to account whether buying, or selling a property and this helps everyone manage expectations. 

That said and even with the delays, now is a good time to review your current mortgage and possibly obtain a great rate with minimal (if any) costs to change your mortgage. Whether you want to fix your monthly payments for a period of time, or you fancy a low rate tracker mortgage, or maybe both - a tracker rate with the option to fix later on, there are plenty of great products currently available.  Terms and conditions will always apply.

Finally, I have to say what a fantastic job Horsham Rotary are doing with the Elephantastic trail!  Over 150 Elephants of all sizes have been bought and decorated by local organisations.  These are now on display and children should follow the safari trails to locate the Elephants nickname with the major prize being a trip to Kenya!  There have been some amazing works of art and I'm sure they will make a lot of money for some worthwhile charities. Search "Elephantastic Horsham" to find out more. The big question is, after the Giraffes last year and Elephants this year, what will be next - Alpacas!?  

Rates to rise towards the end of the year?

The Governor of the Bank of England announced last week that interest rates are to raise, probably at the end of this year or early next.  Although though this is no surprise and it is quite likely that we have all been tentatively expecting this announcement for some considerable time now, very few industry pundits have publicly agreed with this statement, at the time of writing!  

So, if it does happen, what will it mean?  Well, the cost of borrowing will be the first noticeable impact with any mortgage on a bank base rate tracker following the upward trend almost immediately, with variable/discounted rates likely to be closely behind.

For those on vary low tracker rates this may not initially be considered too painful if you consider that bank base rate was in the mid 5% range prior to the dramatic and sustained low rate period which is now longest in modern history.  However, to put it in perspective, given that we live in an area of high value properties and accompanying high level mortgages any rate rise may be more meaningful.  For example, a 1% increase on an interest only £200k mortgage will mean an increase of circa £2,000 per year (£167pm).  This needs to be factored into any family budget. To make matters worse, it is anticipated (by the Governor) that base rate will level out around 2.25% so this makes the maths even more important.

If you are currently on a fixed rate, no change for the term of your deal.  But, you may see your reversion rate (the rate you will move on to at the end of the fixed rate period) increase. 

However, with a reported one million people paying their mortgage by credit card and a further three million people who have never had a rate rise, any movement in bank base rate will be closely monitored to see impacts on the economy and activity as 'normalisation' begins. 

Lenders are actively looking for your business.

There are now nearly 10,000 mortgage products on offer throughout the mortgage finance market. This is a substantial increase from the same time last year and gives a good indication that lenders are actively looking to assist clients with product choice.  A number of new lenders have launched and a number are also in the pipeline awaiting authorisation.

The majority of clients visiting AToM are looking for a longer term fixed rate, although some are still happy to take a short term tracker rate and are confident that rates will not fluctuate too much in the coming months.  There are some good products available with minimal set up costs that have no early redemption penalties at all.  So if you wanted to switch products later on, to a fixed rate for example, this could be done (be aware that most lenders charge product fees on fixed rates).  Some lenders even offer the ability to do both in the same mortgage offering.  Lenders are innovative when it comes to attracting a certain type of business and clientele!  But do remember that tracker rates can go up, as well as down and more recently, fixed rates have been creeping up.

With all new mortgages, a budget planner will be required.  So make sure you know and can advise exactly how much you are spending on almost every aspect of your lifestyle.  Especially make sure you know your monthly costs on food, household expenses, travel, pension and saving contributions and other likely costs such as hobbies, going to the gym, lottery direct debits and more.  Every lender will review your ability to afford your new mortgage, and they make assumptions for coming years, so all direct debits and most entries on your bank statements or credit report will need to be advised.  This is so the lender can make a viable stress test on future rate rises and ensure that you will still be able to afford your mortgage at that time.  Yes, maybe there is a little guess work, but do make sure you disclose all monthly expenditure as the lender will normally want to review your bank statements and will see it all anyway! 

Provide as much info as possible at the outset to avoid problems later on.

Mixed updates from lenders this week as some have increased rates and others have reduced them.  Fluctuations do not always correlate to the cost of the funds to the lender.  Sometimes a lender will increase rates to stem the flow of business and, where needed, allow them to catch up and bring their service levels back to within manageable levels.  A few lenders are over a week behind in processing, but the average seems to be two to three days to turn things around.   Speed is a high priority in the current climates. 

The most important thing is to provide as much information and paperwork at the outset as possible.  If a lender wants three months bank statements showing salary credits and rent or mortgage payment debits, that's what they want.  Two months will not suffice and will cause your application to be delayed!  Our world will not ever be paperless, so be prepared to present all items as required and ready to read a lot of small print!

That said, specialist lenders are becoming more accommodating to difficult and complex scenarios.  This can be on the residential side, where family may act as guarantors and allow a charge on their property in addition to the security property.  Or, it could be a non standard construction type property (as seen on TV), that may not be suited to a high street lender.  Or it could be where a landlord rents out a property to a member of their own family.  This is classed as a 'regulated buy to let' and as such, following regulation changes last year, only a few lenders will consider these mortgage applications types at present. 

Others include mortgages for the over 65s / lending in to retirement (life doesn't end at 65!).  Or development projects from first timers to experienced builders.  Many of these are happening in the local area where empty office blocks are being converted in to flats, etc. 

Whatever your requirements, there's probably a lender out there willing to consider your scenario.