60% of people don’t believe that they would be able to get a mortgage.

A recent survey from Masthaven Bank has revealed that over 60% of people don’t believe that they would be able to get a mortgage. On top of that, some 50% of current homeowners surveyed feel that they would also struggle to get a mortgage. This leads Masthaven to believe that large numbers feel like mortgage prisoners. Masthaven’s ‘Game of Loans’ report comprised of two surveys of over 2,000 UK adults, in January and July 2017. It found that almost two thirds of people polled believe that getting a mortgage is about ‘box ticking’ and does not take into account the reality of someone’s situation. Age is also a contentious issue with nearly three in four (74%) people surveyed saying they feel that meeting repayment criteria should determine mortgage eligibility, not age. Moreover, three in five (60%) of those surveyed believes that everyone who can afford the repayments when they retire should be eligible for a mortgage. 

This is a consistency across the market. With so much negativity in the media, it is not surprising that many people think they have no options. But this couldn’t be further from the truth. There are more lenders and products available now than there has been for some time. Therefore, more options and choice for customers that may not have been eligible for a mortgage in previous times. This often does not include high street lenders though. These lenders could include a small building society located in a small village anywhere in the UK. Having access to a whole of market mortgage broker is the only way you’ll gain access to such a possibility. 

In addition, and specifically aimed at those over age 55, Shawbrook Bank have recently launched a mortgage lending in to later life. Allowing interest only, this product assists clients in keeping their savings in place for longer, enables them to stay in their cherished home for up to an additional fifteen years and could allow them to raise additional funds, where affordability allows. Customers can also overpay the mortgage and there are no early repayment charges. 

When did you last review your current deal?

As we move deeper into the holiday period, I feel the need to be a pain and reiterate that whatever is spent on credit cards has to repaid! If, you are looking to review your mortgage in the next few months and load the credit card balance built up during the holiday period, remember that lenders will use the balance and offset against your income, before working out what you can borrow. That includes interest free credit cards, loans and also HP agreement and student loans. They are all taken in to account.

The holiday period can also be a time when many people do one of three things in the mortgage sector. Firstly, they start looking at new properties to move to. Or they may already be committed and are packing ready for the removal lorry, or they take time to review what mortgage they have and question if there is anything better out there. That is of course, if they are not simply taking a holiday, and why not?

Certainly, once the holiday is over, then it makes sense to review the current mortgage deal and see if there is a better option and perhaps look to secure a competitive rate for a few years. Whilst I always err on the optimistic side of a rates argument, we are entering a truly unknown era. We have never left the EEC before and so there is no history to prompt what the immediate and longer term implications will be. It may well be that we need to be prudent and a medium to long term fixed rate will allow the head to drop comfortably onto the pillow each night if rates do rise as a result of Brexit.

So take the chance to look and see if a re-mortgage to a fixed rate might benefit you. Actually, it is wise to consider this anyway as there are millions of people on lenders standard variable rates enjoying complete and deafening silence from their current mortgage lender. Why the silence? Simply because lenders are comfortable with you paying over the odds and expanding their margins! They are under no obligation to offer you a better deal when you come to the end of an incentive term and you automatically flip onto their variable rate. It is worth looking for a better deal and many lenders will welcome you with free valuation and legal initiatives and a difference of 1% can save you a substantial sum over few years.

The Mortgage market is vibrant!

Having written this column every week since early 2009, a lot of people ask me “how do you know what to write each week, it must be difficult?” But actually, there’s so much going on, I could easily fill more than my 350 word column consistently.  The mortgage market is vibrant with both activity and positivity.  Mortgage product offerings are at their highest for some time and lenders appear to want to lend!

The bottom line is that a mortgage is the biggest debt you’re likely to ever take on, so you need to do your homework and understand more than just what the national press decide to publish about the Bank of England base rate being held at 0.25% again, or how much profit the banks are currently making! Or what a mate says in the pub!

Advice is crucial and ideally from a company who can offer ‘whole of market’ mortgages, not just products from a limited panel of lenders, like some Estate Agency chains or a Bank/Building Society who only offer their own or a limited set of products. 

Most lenders have a set of rules and criteria that need to be met even before requesting a decision in principle (stage at which you are credit searched for pre-approval). For example, one lender has a debt utilisation rule at 70%. So, if you had a credit card with a £1k limit and you had a balance of £701, you will be in excess of their 70% rule which means you would be ineligible for this lender. Another stipulates you can have no more than 8 unsecured credit cards or loans at the point of application. We tend to see customers have a number of debts within this ruling, but who keep open old debts with zero balances. This can push them over the lenders stipulations. Others won’t look at gifted equity, or assist where the customer has had a break in employment in the last twelve months, or lend on properties with a flat roof, and so on.

All of these are little idiosyncrasies that should be known by anyone advising on a mortgage. Thus saving time and probably unnecessary credit searches being carried out. Remember, the more credit searches you have against your name, the more likely your credit score will decrease, which may affect your ability to obtain finance. Whoever you talk to about your financial requirements, make sure you say at the outset that you do not want to be credit searched, unless you give them the authority to do so or a product has been thoroughly researched.

A swing between the high street lenders and the more niche market

During the last few weeks, we have seen several lenders who have posted positive half year results.  Many of them stating that they have increased lending against their previous financial year results.  But this is hardly surprising as many didn't really want to lend heavily last year.  However, it is important to run with the positive news and such announcements for half yearly figures show that lenders are keen to lend and are looking at ways to compete in an active market.  What this means is that end consumers should be able to bag a bargain for some time yet whilst rates remain low and competitive.  Some industry pundits are even stating that it will be late 2018 or early 2019 before they expect any rate rises...

These results have also resulted in something of a swing between the high street and niche lenders.  The smaller lenders are stealing market share from the 'super tankers' on the high street as an increasing number of consumers are requiring a manual and human assessment rather than a computer decision making system.  Despite all of the available technologies in the current climate, sometimes a conversation with a human being is just what is needed!  And you’ll be surprised at what some of the smaller lenders can do, including lending into retirement, up to six times income, cross collateral charges on numerous properties and more.

From where we see it, on the front line, I would dare to suggest that consumer confidence appears to be the highest it has been for some considerable time.  People are selling, people are buying and many are remortgaging!  July and August are never normally this busy!  It is not just one geographical area either, although does appears to have a leaning to the south. What does seem to be apparent is that the demand is for ‘all types of mortgages' for all types of people!   From the straight forward, to the complex, to the commercial shop front, to the credit issues, to the first time landlord investing in their first Buy to Let property and so much more, we are seeing many different scenarios.