Thank you for voting us 'Bridging broker of the year!' - have a fantastic Christmas!

Wow, another year gone!  Time is flying by and it’s certainly a case of ‘blink and you’ll miss it’!

2018 has been pretty flat with a predicted overall mortgage volume of circa £260bn, slightly up on 2017.   Next year is predicted to be much the same, but with the current shenanigans around Brexit, who knows what will happen…  

Technology was due to take over the mortgage market and ‘Robo Advice’ predicted to be at the front of the customer experience.  Despite millions being spent, this couldn’t be further from the truth and has no defined future on the immediate horizon.  72% of all mortgages generated are via brokers/intermediaries and I can’t see this changing.  You’re entering in to the biggest debt of your life and questions need answering.  You just can’t beat the human touch!

Many lenders have yet to evolve with the digital era and those who will win will be the ones offering quality technology, but also the human impact for those who prefer or need it.

On a personal note, I really appreciate you reading my column!  Mortgages can be a dull subject and I’ve tried to provide an unbiased insight to what happens in the mortgage world, with a little bit of humour along the way!

A huge thank you to everyone who has instructed AToM to source and arrange their mortgage during the past twelve months. It has been a fantastic year and we have enjoyed substantial growth in volume, completions and headcount in the AToM team located between our two Horsham offices.  We have a fantastic team and they are a truly hardworking and knowledgeable group of people.

Finally, we were delighted to win ‘Bridging Broker of the Year’ at last weeks Mortgage Introducer Awards 2018!  We really are grateful to all who voted for us.

On behalf of all the staff and directors at AToM, we wish you and your families a very Happy Christmas and a Relaxing and Prosperous New Year!  Roll on 2019!

Coming to the end of your product term? Be wary....

As I have said before and with the run up to year end, lenders have been actively looking at their offerings and loosening their criteria, positively. Some rates have even been reduced and nearly all re-mortgage deals now come with a contribution to valuations and legal fees to keep the cost of changing lenders to a minimum.  There’s no excuse to be sitting on a high rate when you don’t need to be!

Also, BEWARE, that some lenders are sending out letters to those coming to the end of their product term offering them new rates, but giving them a deadline in which to switch.  We had one customer recently who was four months out from their current rate changing from a fixed rate and moving on to the lenders Standard Variable rate.  They were offered some great new rates to stay with the lender, but had a deadline of just two weeks in which to accept, even though the product wasn’t changing for four months!  This is not acceptable, no one should be pressured to accept a deal and we have passed this example on to the industry trade body to take on.  However, some customers might accept this and go with the deal.  What if rates decrease in the next three months?  You’d be annoyed.  Read the small print, do not panic and get expert advice. 

And finally, do you look at your financial budgets frequently?  A report from a well known credit referencing agency has suggested that over 78% of mortgage people surveyed are not currently budgeting for a rate rise.  We all know rates will rise at some point, probably after Brexit now, but nobody knows when this will happen!  Many people asked did not know how much a rate rise would cost them on a monthly basis, despite many respondents believing rates would rise over the next twelve months! A 1% rise on a £100,000 mortgage can increase the monthly payment by as much as £83.  As we go in to some months of uncertainty, and especially with regards to the cost of funding within the mortgage market, do make sure you are ready for all eventualities.

'How much can I borrow?'

‘How much can I borrow’ tends to be the most asked question of anyone at AToM!  Only a few years ago, that could easily have been up to 8 x income with the minimal of fuss subject of course to loan to value and certainty of income! Oh, how things have changed, and rightly so!  Those were times with little control and the lengthy recession subsequently bore testament!

Today it is so much more intense!  For example, a lender will require to know your monthly budget spend figures, right down to every direct debit on your bank statements, including council tax, insurances, mobile phones, lottery payments and gym membership!  From these monthly outgoings, the lender will look at affordability and decide from there what mortgage amount might be available to you.  However, on the other side, not only can it be restrictive depending on your monthly outgoings, but it can also be very generous depending on what little outgoings you have!  

The lender has a duty of care to make sure you can afford your mortgage today, as well as when rates rise and specifically to it being considered affordable over a 5 year period.

But this also means that what was once an affordable mortgage may suddenly become unaffordable due to the perception the lender has on consumer spending habits, both historically and projected for the future.  

We have seen the phasing out of income multiples and the introduction of affordability models.   So, no more straight forward 4 or 5 x income discussions.  The amount you can borrow will depend on your monthly net income set against expenditure and living costs.  

However, this also works positively for the right loan to value, right affordability and right customer, as lenders are willing to offer a little bit more if you fit their specific affordability model.  Some we’ve seen have been well in excess of 6 x income.

With the increase in requirements, the time taken in research prior to recommendation for a suitable mortgage product has also increased, as have the lenders own underwriting procedures.  So, beware if you are in a rush!    

Finally, the holiday period is fast approaching and do take time to dig out that paperwork and come and have a chat.  With rates so low, now might be a good time to be exploring these options and it could be a very beneficial exercise right before Christmas!

What's available for your first property purchase?

Looking at purchasing your first property?  First Time Buyers will usually require a minimum 5% deposit, but product availability increases with a 10%+ deposit.  Some lenders will allow a 5% builders deposit, but this must be confirmed as a gift and non-repayable. Some lenders will allow the deposit to come as a gift from the Bank of Mum and Dad, or an immediate family member.  This can include step family, aunts and uncles and is acceptable for first time and subsequent buyers.  The money must be a transparent gift that has originated in the EU and can be easily traced back to the originating source.  A letter from the family member will usually be required and needs to advise the gift amount, relationship the person gifting the monies is to the applicant, confirmation that it is a gift and not a loan and therefore is not repayable, confirmation that they do not currently own the property being sold and that they will not live in the property or have any interest in the property post completion. 

Some lenders may allow a loan of up to 100% of the property value if parents or another immediate family member will act as guarantor or provide additional security. Those guaranteeing, in the main, will need to show evidence of affordability for both their current residential mortgage and the one they are intending to guarantor and possibly allow a charge to be taken on their own home.

All positive indeed and that’s not even touching on the number of Help to Buy, Right to Buy and Shared Ownership schemes available.

Rates have reduced lately in a bid to assist this under-served market segment and criteria is definitely more accommodating.  Income multiples tend to be between 3.75 to 5 x joint income and terms and conditions always apply!  However, Lenders are showing a willingness to assist First Time Buyers and in the current market, that can only be a good thing.

Looking at a property project? Refurb to Let...

Looking for a property project?  Just because a property is run down or even classed as 'uninhabitable', does not mean you cannot get a mortgage on it.  Or, if you are intending to purchase a property to let out, but it's currently in an 'unlettable' condition.  Lenders will cater for these scenarios (dependant on the exact type of works required!).  In the main, the work required needs to be cosmetic - a redecoration, maybe a new kitchen or bathroom.  Many now offer 'refurbishment' loans where the work must be carried out within a period of time after purchasing the property (normally three months). 

Our good friends at Precise Mortgages have recently launched a product called the ‘refurb to let’.  This gives the flexibility of a bridging loan to carry out the works, and the certainty that the property will then go on to a buy to let mortgage once works are finished.  They will look at 75% of the property value at the outset and allow a re-mortgage up to 80% of the end value, once works have been completed.  The nice thing with this product is you have one processor to cover both parts of the underwriting, as well as just one surveyor to review the upfront property value and then again once the works are done. No mortgage repayments are required whilst the works are being completed, subject to terms and conditions of course!

There are a raft of reasons why this type of product might be taken. These could include properties needing work to meet minimum Buy to Let EPC ratings.  Or properties purchased at auction, that need work, or where they’ve been bought under value.  Or it could simply be a landlord choosing to refurbish the property to maximise the rental yield available.

Seek out a local architect to assist you with plans and costs and always make sure you set out your budgets from the outset.

Lenders will cater for all types of scenarios (dependent on the exact type of works required!).  Each lender will work on the surveyors comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done..

Complex scenarios are common in the mortgage market.

The high street lenders tend to only deal with pretty straight forward scenarios.  So, you will need to fit their standard credit score requirements, meet their standard income multiples and, in the main, simply be easy to deal with.  However, we all know that not everyone fits this ‘ideal client’ picture.

Complex scenarios are on the increase.  We had one recently where the clients had built a number of properties but could not sell them for the desired price, siting Brexit as a major factor in this.  Having financed the build with development funding, this can be quite expensive if you run over the agreed timescales.  In addition, this company was running at a loss for this project, as all the building costs had been put through the accounts without the counterbalance of the properties selling to recoup funds.   Therefore, this was not a case many lenders would look at!  However, we found a lender who was willing to assist due to the fact that the clients had previously completed many projects like this, had a number of shareholders and, as they were converting the properties in to Buy to Lets, this would be a long-term venture.   All in all, the clients interest rate changed from over 10% on the development finance, to less than 5% on the buy to let rates.  They also managed to recoup their funds and rent out the properties. 

These are just some of the benefits of using an independent mortgage brokerage and especially if they are ‘whole of market’ and have the ability to deal with any lender and are not restricted to a small panel of lenders.

Other examples include applicants with no credit: too much credit: a desire to pay up front or add additional security in the form of another property thus increasing their ability to borrow more.

AToM has a vast number of lenders on its Complex Prime panel already looking at these types of difficult scenarios. These lenders may not be household names, but you’ll probably find they are extremely helpful and will look at most scenarios, manually, with no credit scoring and have an appetite to lend! Most importantly, their interest rates are mostly very competitive too!

Another budget over and some good news for First Time Buyers!

Well that was not the most of exciting of Budgets, although it could have been a lot worse.  It does seem like the spending taps have been turned slightly on, rather than off!

On the up side, Stamp Duty Relief has been extended to first time buyers purchasing shared ownership homes valued up to £500k.  Shared ownership meaning that you buy a percentage share of the property and rent the remaining amount from the housing association, normally with the option to ‘staircase’ (buy more of a share) at a later date.  This can be a good way to get onto that first step onto the property ladder, although you do need to cater for the additional rent payments and normally there are ground rents and service charges relating to the property to also take in to consideration.

The Government backed Help to Buy scheme, which was due to expire in 2021, is to be extended to 2023 for First Time Buyers.

Landlords took another hit as private residence relief on Capital Gains Tax is now only available if the landlord lives in the property with the tenant!  Landlords and tenants sharing properties is something currently not well catered for by mortgage lenders!

In other news, Virgin Money have scrapped their guarantor mortgage citing lack of use and that many lenders now prefer parents to be joint borrowers on the mortgage itself.  A number of lenders now offer joint borrower, sole proprietor mortgages.

Finally, there have been a number of changes over the last few days with some rates increasing and some decreasing.  TSB, Secure Trust Bank, Precise Mortgages, Nationwide, Family Building Society, Together Money, Kensington Mortgages, Coventry and Accord Mortgages have all issued product updates.  It is a volatile market currently and the uncertainty of Brexit is making an impact across the whole market.  Therefore, if you are looking to review your mortgage and have been offered a respectable and appropriate deal, do your homework, review all options, but don’t hang around!

HMO Licences taking up to 9 months...

If you have a House of Multiple Occupation (HMO), you should now be aware of the rules that came in to effect on 1^st October.   You also be aware that some councils are behind already on the licence applications with one rumoured to be nine months behind!

To recap - any property with five or more occupants (not all related) will now need an HMO licence, as the Licensing of Houses in Multiple Occupation Order 2018 takes impact.  

Previously, the licence applied to properties with three or more stories and five or more occupants (not related to each other).  However, it was decided to change these requirements and ultimately increase the number of properties that require a licence.

These changes impact both existing and prospective HMO landlords and full details on how to obtain licences will be available on the relevant councils’ websites, alongside other requirements the individual council may have put in place.

A minimum size for bedrooms has also been implemented and the guidance will recommend that floor space be no less than 6.51sqm for a single adult and 10.22sqm for two adults sharing.  Any room with less than 4.64sqm is not to be used as sleeping accommodation.

With the possible delays in granting the license some lenders may not be willing to assist until the approval has been actually issued.  However, speak to a specialist who has access to All Types of Mortgages as some lenders are happy to proceed once the application has been made.

Finally, also remember that the surveyor is the lenders ‘eyes’ in all financial transactions.  They will value the property for both rental possibility as well as its actual value.  As this report is for the lender, they have no obligation to tell you what is in the report or give you a copy!  If you are looking to buy a property and convert it in to an HMO, you will need to let the valuer know when they visit the property as this may change the value of the property and more importantly, the rental achievable.  This could also affect the possible loan amount that the lender will allow.

Affordability is the key to you achieving the right loan.

The lenders main area in deciding whether to lend to you, or not, is on your ability to pay the mortgage both today and also in the future.  It's difficult to detail when I have a limited word count, but in the main, lenders will stress test all mortgages against a possible rate rise and underwrite the applicants based on their ability to pay at the higher rates. 

The regulators want lenders to ensure the customer can afford their mortgage for at least the next five years.  So, for example, a shorter term deal may be stress tested at a pay rate of, lets say, 3% plus 3 percentage points higher than the prevailing rate at origination, so in this case 6%.  However, a five year (or longer) deal may be stress tested against the pay rate, which might only be 3% in current climates.  This can make quite a difference when it comes to calculating the affordable loan amount over the first five years of the loan, subject to the lenders terms and conditions.  Longer term fixed rates can also be good for the end consumer as they should get the loan they want, but also the monthly payments remain fixed for the next five or more years.

Whilst in the 'planning' frame of mind, and with so much talk about rates increasing, have you reviewed your current financial arrangements to ensure sure you are on the best deal available?  

Whether you require the security of fixing your payments for an amount of time, or whether you are a bit of a risk taker and might look at a short to a medium term tracker, right now, there are a number of attractive five year deals, and also some ten year deals currently available.  Potentially great value if you know your plans for the longer term and prefer to fix your monthly payments.

Finally, when you come to the end of your product term, your current lender may write to you offering you some products to stay with them.  However, STILL do your homework and shop around.  These may look good, but there might be better options available to you elsewhere!

The maximum loan achievable on a Buy to Let is a complex calculation.

AToM exhibited at the Property Investor and Homebuyers show at the London ExCel last weekend.  It was a great opportunity to talk to professional landlords, as well as those looking to make their first steps in to the buy to let sector. 

With many changes and increases in taxation on profits being introduced over the next few years, the Buy to Let sector has taken quite a beating!  Yet with interest rates so low and demand for rented properties increasing, and no clearly defined solution to help first time buyers, I can't see these changes killing off the buy to let sector just yet!

In fact, the exhibition showed how many people were genuinely interested in looking at renting out property as a long-term investment and project. 

There’s a lot of confusion still regarding buy to lets and how lenders look at affordability.

So, to try and clarify - Since the Prudential Regulation Authority stress test rules came in to effect in 2017, lenders have to work out affordability based on the rental income achievable from the property and stress the product term over a five year period, often at 145% of a nominal rate of 5.5%.

Lenders interpret the rules differently and differentiate between a buy to let in a personal name compared to a property brought in a limited company name.

However, if the lender offers a fixed rate over a five year period, the actual pay rate can often be used, instead of the nominal rate of 5.5%.

Therefore, by way of example - A standard buy to let in a personal name, achieving a rent of £950 per month, with the calculations of 145% of 5.5%, would equate to a loan of £142,946

If we used the same example, but in a limited company name, the calculation changes to 125% of 5.5%.  A rent of £950 pm would now equate to £165,818

If we then look at the same examples, but on a five-year fixed rate, the changes in loan achievable become very apparent:

145% of 3.49% (Personal name & 5 year fixed) - a rent of £950 pm = £225,274

125% of 3.49% (Limited Co & 5 year fixed) - a rent of £950 pm = £253,333

Please note that these are examples only and every case is looked at on its own merits

With all of the recent tax changes on Buy to Lets, you should now seek professional mortgage advice, along with in-depth tax advice from an accountant who understands property, limited companies and all the new rules surrounding landlords and, where applicable, portfolio landlords.

A Bridging Loan could help you if you need something short term.

There is an abundance of choice for consumers across the mortgage market currently and this includes the bridging / short term lending sector.

Bridging Finance is the term most used for funds to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction. The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged. This can also be used for legitimate tax payments or short term business requirements.

More recently we’ve seen hesitation with new properties that would have sold with ease now coming across some delays as people decide whether to wait or not as the uncertainty of Brexit deepens. This inevitably might require the builder to look at refinancing their current and sometimes expensive development finance, whilst the properties remain on the market.

We’ve also just completed a Bridging Loan for a conversion of a Barn. The lender wanted full plans, permissions and a host of other information, but they offered short term funding with timescales of up to 18 months to get the conversion complete.

There are a myriad of other reasons for which short term lending can be applied and each application is looked at on its own merits before a lender will agree to assist. The best way to look at this is as a means to an end. These lenders will need certainty on the exit route (how will they get their money back?) and they will always insist on an agreement being in place from a traditional mortgage lender to provide a mortgage, at a given time and once any requirements have been fulfilled. Alternatively, the exit route might be from the sale of the same or another property. So, short term lending is designed to fulfill the need or desire to act quickly.

Finally, this type of funding has become more competitive over the years with some now offering rates as low as 0.44% per month for the right customer.  Obviously, individual terms and conditions apply and with these types of offerings, as always, seek professional advice!

Be aware of who is credit searching you, and when.

We have had a few customers contact us for a mortgage who have been totally unaware that they have had a number of credit searches carried out following recent searches for competitive renewal quotes on their home or car insurance via Comparison Websites.   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 similar number of credit searches on their profile.  This, in a small amount of time can have a marked effect on your credit score, and as such, affect your ability to obtain finance, so always read the small print and be aware!  

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 are no missed or late payments as these will also decrease your credit score.  In short, your credit search / score is 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.

Finally, we are seeing a lot of first time buyers turn to the bank of Grandma and Grandad 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 grandparent’s 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.

New rules for Houses of Multiple Occupation (HMOs)

Concentrating on Buy to Lets this week as yet more changes are on the horizon!  With effect from 1^st October 2018, new mandatory rules will be applicable to Houses of Multiple Occupation (HMO).  Any property with five or more occupants (not all related) will now need an HMO licence, as the Licensing of Houses in Multiple Occupation Order 2018 takes impact.  

The government undertook a consultation last year designed to help councils standardise living conditions in HMO properties.  It detailed the plans to extend the scope of licencing for HMO properties. 

Currently the licence applies to properties with three or more stories and five or more occupants (not related to each other).  However, it was decided to change these requirements and ultimately increase the number of properties that require a licence.

A minimum size for bedrooms has also been implemented and the guidance will recommend that floor space be no less than 6.51sqm for a single adult and 10.22sqm for two adults sharing.  Any room with less than 4.64sqm is not to be used as sleeping accommodation.

These rules are estimated to affect around 170,000 properties (on top of the existing 60,000 licenced) and landlords that fall in to the new rules must apply for a licence or temporary exemption before 1^st October.   Failure to do so will be considered a criminal offence.

These changes will impact both existing and prospective HMO landlords and full details on how to obtain licences will be available on the relevant councils’ websites, alongside other requirements the individual council may have put in place.

In other news, our good friends at Precise Mortgages have revamped their Buy to Let product ranges and rates now start from 2.99%.  They also allow rental calculations to be assessed on the pay rate on their five year fixed rates, starting from just 3.39% and some products also allow ‘top slicing’.  This means that landlords with three or more mortgage properties, may use their income to assist with affordability on the buy to let property, if the rental income does not quite cover the loan required.  This can be complex, so speak to the experts…

We are probably looking at a tough few months ahead, across all markets and sectors.

Despite Sainsburys Bank, Bluestone, Hinckley and Rugby Building Society, Kensington Mortgages and Secure Trust Bank all reducing rates on their mortgage products last week, things are still ‘interesting’ out there.

We have seen numerous retail outlets and banks recently confirm they will reduce their store or branch numbers as the ‘online v shop front’ takes another hit.   Wonga collapsed, and we’ve seen Countrywide, the UKs biggest estate agent, raising £140m in emergency cash.

As we move in to the final third of the year, I’d say we are probably looking at a tough few months ahead, across all markets and sectors. 

On the plus side, it is encouraging lenders to become more innovative and think about more innovative ways to attract new business. 

Magellan Homeloans has entered the Buy to Let sector with offerings for portfolio landlords, as well as limited company and refurbishment options.  However, the really interesting piece is that they will allow first time landlords to purchase a buy to let, with a professional landlord acting as a guarantor.  This includes Houses of Multiple Occupations and Multi-Units.  We all need advice when it comes to property, so this is a positive move.

Kensington have also launched a 5% deposit product that caters for individuals who may have had a credit blip in the past.  Their rates start from 4.64% for a two year deal and allows defaults over 36 months old and two missed payments to unsecured credit in the last 12 months.  Terms and conditions obviously apply, so seek advice!

With rates so low we have also seen a vast increase in customers looking to consolidate debt and add these to their current mortgage. This can sometimes cause issues. If you consolidate unsecured finance in to your mortgage, whilst your monthly payments may be lower, you may be paying more for your debt over a longer term. 

At AToM, we are independent, and we will happily go through the pros and cons of changing any of your financial details before proceeding to conduct any credit searches or decision in principles. You need to be clear that it’s the right deal for you. If your current deal is still the best option for you, we will suggest you stay where you are.

There are other options rather than a full remortgage.

If you are looking to raise additional funds but are already on an attractive rate with your lender, there are other options rather than a full remortgage. Depending on the amount already lent as a mortgage, compared to the value of the property, some lenders will allow a ‘secured loan’ to be added as additional borrowing, right up to 95% of the property value. 

A secured loan is a 2nd, or subsequent charge which allows the equity in a property to be used as security.  The secured loan is usually repaid over a shorter term than a mortgage, circa 1-10 years, but the term can be longer, although this will increase the amount of interest repaid.   Second charge lenders are also in the midst of a price war.  Many have reduced rates, one or two new lenders have entered the market and rates can now be below 4%.  Rates vary depending on the customer’s circumstances and current level of borrowings.  Make sure you review all options available to you and always seek advice.

Alternatively, your existing lender may allow a further advance.  This would be a separate entity to your existing mortgage and again, will be subject to affordability and so on.  Normally, you will need to have had your existing mortgage for at least six months, before applying for a further advance.

Either of these might be a better and cheaper alternative over a shorter term, than a full remortgage of your first charge.

As I’ve mentioned many times, lenders are looking more carefully at affordability, not just for now but also any potential changes that may affect your income in the next five years. Be ready for some fairly detailed questions when submitting an application!

Finally, you buy a car from a car specialist, flowers from a florist, so for all your mortgage requirements, why buy anywhere other than from your local and independent mortgage specialist?

We are entering a truly unknown era as we plan for Brexit, is it time to fix?

As we move in to August (where has the year gone?), 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 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 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 as we plan for Brexit and 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 our exit.

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 their current lenders standard variable rates with little contact from their mortgage lender. Why? Simply because lenders are comfortable with you paying over the odds and expanding their margins!  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 the coming months and years.

An Independent Mortgage Adviser will review the whole market for you, not just a limited few lenders.

With technology taking over the world, and so many transactions taking place over the internet, it might be easy to be attracted to products online.  There is so much information readily available and over 11,000 mortgage products to choose from, but these types of things can get lost in translation.  Therefore, seek advice!  Yes, it may cost you a small fee to have someone research the market on your behalf and make recommendations, having first assessed your short to long term needs and requirements.  More importantly, it could save you thousands in the long run, versus choosing the wrong products yourself. In addition, any professional will probably seek to build a long term relationship with you and contact you at the time your current rate is coming up for renewal to ensure you have the best rates available. 

It doesn't matter whether you are experienced, or if this is your first time.  Property ownership can be complicated, so explore all the options and do your homework.  There are a huge number of lenders available to you and all have competitive edges and good criteria options for the right customer.  Make sure you understand everything at the outset so that you don't regret it later!

A good independent mortgage adviser will be able to review the whole market for you and can identify the best lending options and then deal directly with the lenders central processing units, speeding up the process from application to offer. That said, even in this area we know of at least one lender that is thirteen days behind on post or electronic updates!   An experienced adviser will listen to your specific needs and timescales and ensure that they line you up with a lender who will match both. So, if speed is crucial, then you may need to consider working with a lender where the rate may not be the keenest on the market, but they will get the deal to completion within your target timescales to ensure you get the property of your dreams.  Remember, make sure you adviser looks at the whole market, and not just a limited panel of lenders ensuring that you get the widest choice of lenders and products available to you.

Looking at purchasing your first property?

Looking at purchasing your first property?  Then this week’s column should be of interest as there’s a number of ways to help you get on to the property ladder that may not be widely known.

First Time Buyers will usually require a minimum 5% deposit, but product availability increases with a 10%+ deposit.  Some lenders will allow a 5% builders deposit, but this must be confirmed as a gift and non-repayable. Some lenders will allow the deposit to come as a gift from the Bank of Mum and Dad, or an immediate family member.  This can include step family, aunts and uncles and is acceptable for first time and subsequent buyers.  The money must be a transparent gift that has originated in the EU and can be easily traced back to the originating source.   A letter from the family member will usually be required and needs to advise the gift amount, relationship the person gifting the monies is to the applicant, confirmation that it is a gift and not a loan and therefore is not repayable, confirmation that they do not currently own the property being sold and that they will not live in the property or have any interest in the property post completion. 

Some lenders may allow a loan of up to 100% of the property value if parents or another immediate family member will act as guarantor or provide additional security. Those guaranteeing, in the main, will need to show evidence of affordability for both their current residential mortgage and the one they are intending to guarantor and possibly allow a charge to be taken on their own home.

All positive indeed and that’s not even touching on the number of Help to Buy, Right to Buy and Shared Ownership schemes available.

Rates have reduced lately in a bid to assist this underserved market segment and criteria is definitely more accommodating.  Income multiples tend to be between 3.75 to 4.5 x joint income and terms and conditions always apply!  However, Lenders are showing a willingness to assist First Time Buyers and in the current market, that can only be a good thing.

AToM’s chairman Vic Jannels picks up ‘Service to the Industry’ award!

I start this week with some fantastic news in the AToM’s chairman Vic Jannels was awarded his second accolade of the year as he picked up ‘Service to the Industry’ at last week’s Specialist Finance Introducer Awards 2018.   The event, held at Madison in St Pauls, London, was attended by over two hundred of the industry’s finest and hosted by Homes Under the Hammer and I’m a Celebrity’s Martin Roberts.  AToM’s system, OMS (One Mortgage System), also picked up ‘Best use of Technology’ and ‘Product Innovation’.  Awesome news and well done team!

The market is pretty quiet currently, apart from the odd ‘cabinet reshuffle’ here and there and at the time of writing, we’re about to get our 17^th housing minister in 20 years!  Mind blowing.

What we are seeing, despite heavy rumours of a bank of England base rate increase possibly as soon as August, is lenders reducing their current rates.  The holiday period is inevitably quieter, although add this to an already quiet market, and lenders need to attract customers to keep on track to hit their annual targets.

Just in the last week, we’ve seen Halifax, NatWest, Platform and TSB all reduce selected rates and our friends at Secure Trust launch a 90% LTV product that caters for those who have had a credit blip in the past.  There are some great rates and options around currently.

Finally, valuations on properties to be mortgaged come in various guises. Every mortgage lender will require a valuation on the property although, in some cases, they will not actually visit. This is because they can often access detailed information electronically.  Remember that this fairly basic valuation is for the lender, at your cost, and should not be relied upon as a guarantee that the property is sound and fit for purpose.  Seek a more detailed survey if you have any doubts.  Recently, and with a lack of stock readily available, we are seeing valuers ‘down value’ a property.  Just because it’s been sold at £330k, does it mean it’s worth that price or has it been sold to the highest bidder.  Always do your home work before the valuer goes out, as if he says its only worth £300k, then you’ll have to find the difference from your own pocket as the lender will only lend against the lower of the purchase price or valuation. 

You have some adverse credit and the high street lenders have said no. What next?

So, you have a default? A CCJ?  Missed a payment or two here and there?  Yes, then the high street lenders will probably say they can’t help, but there’s plenty of others who will. 

These days, competition is very strong across the market and this includes helping those who have had a credit blip or two in the past.  Some lenders may even go right up to 90% of the property value for the right customer.  And, this might be surprising, but rates start in the early to mid 2%s range on some products.

Don’t despair, there are lenders out there who, subject to terms and conditions, will probably look at your scenario and have seen it all before. 

To make the process as smooth as possible, make sure you have all details to hand at the outset.  When was the default / CCJ, is it satisfied, why did it occur, etc?  Disclose absolutely everything upfront. 

With all new mortgages, a budget planner will be required.  Make sure you know and can advise exactly how much you are spending on 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 both now, and over 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. 

Finally, despite some of these amazing products being available and lenders looking to attract new business, we are seeing general processing delays across the market.  Some lenders are not taking appointments for two to three weeks, some are up to ten working days behind on processing, and we have experienced recent telephone calls taking over an hour to receive any kind of response!  These are just on the broker side so heaven knows how customers are faring!  With some complex deals, these are not available directly, so speak to your local (and long established) independent brokerage and let them take the stress away from you.

With Open Banking now available, don't give the lenders a reason not to lend.

There’s been a lot of talk recently about new technology, especially regarding the new ‘open banking’ opportunities and how your private transactions will come under scrutiny by lenders decision making computers, after you’ve given permission of course!

The idea is that the lender can review your incomes, outgoings and all other financial items just from delving in to your account, via open banking.  Big brother indeed.  The aim is to speed up the financial transaction and allow institutions to access your data at the touch of a button, as well as providing more competition and innovation to financial services.

The downside is that whatever is in your bank statements, lenders must take it into account when deciding whether to lend to you, or not.  There’s no hiding and now no apparent limit on time to be reviewed.  Currently lenders tend to look at just the last 3 months bank statements, but with open banking data at their fingertips, this could be unlimited moving forward.

With this in mind and so many recent rate and criteria changes, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions and more.  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.  

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 ‘binding’ 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 after the mortgage offer has been issued and before completion, it could be that the lender will re-credit score you before completion, especially with the now easily available open banking access, and uncover something that might not be to their liking or mortgage conditions.  Always seek professional advice.

AToM Chairman awarded 'Outstanding Contribution' at Specialist Lending Awards 2018

I start this week with some fantastic news!  AToM’s Chairman and Founder (and my father!) Victor Jannels, received an award for his ‘Outstanding Contribution’ to the mortgage industry last week. The British Specialist Lending Awards ceremony was held at the spectacular London Waldorf Hotel and Vic was truly surprised and delighted, thanking everyone for their kind support and nominations.  Well done VJ!

In other news, the market is reported to be pretty flat currently, some estimating the impact on April was as much as 25% lower in property transactions than during March 2018.  

With this in mind, it’s good to see a number of lenders making changes to criteria or launching new products to try and offset the downturn.

One such lender, Kensington Mortgages has increased its loan to value (LTV) to 90% of the property value up to £1m loans, including options for those who might have had a credit blip previously.  This also includes new build flats and right to buy flats.  For those with a 20% deposit, the loan can go as high as £2m.

Staying with Kensington Mortgages, they’ve also added Limited Company mortgages to their Buy to Let options, up to 80% LTV, and offer a simpler process with limited company investors only being assessed on the property portfolio of the company.  Terms and conditions apply!

Rates have increased slightly though with Moneyfacts, the data provider, suggesting that the average cost of a two year fixed rate has risen to a twelve month high of 2.52%.  Whilst five year fixes remain the most popular in recent months, demand for shorter deals has been rising.  Changing SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) has seen a number of lenders reprice upwards over the last week or so, and although not directly linked, this is despite the Bank of England base rate remaining at 0.5%. 

This should encourage anyone considering reviewing their mortgage options in the not too distant future, to possibly consider it sooner as the ‘rate hike’ hints keep coming!  Always seek advice! 

Aldermore have launched a fantastic lending in to later life proposition.

I’ve mentioned lending in to later life a number of times over the last few weeks.  It’s a market that is heavily underserved and one that a number of lenders are looking to assist over the coming months.  At the moment, it’s a product range only really offered by the smaller lenders who can think on a case by case basis and take all things in to consideration. However, just recently, some of the larger lenders are realising what a huge market this is and are taking action.

On the high street, some lenders will now consider applications from those over 55 and allow a term up to their 80^th or 85^th birthdays.  At this point, the mortgage must be repaid.

So credit to Aldermore, a ‘challenger bank’, who have looked at what is on offer, taken many considerations in to account and launched a true alternative to Equity Release in the form of a ‘Lending in to Later Life’ product. 

The key highlights are that you can apply up to a maximum age of 85!  They will allow a mortgage term up to your 99^th birthday and they will consider Interest Only.  They will also consider allowing retired borrowers to remortgage their interest only loan when it comes to an end, using the sale of their property as a means of repaying the debt.

In order to qualify for the interest only option, borrowers must have a minimum of 40% equity in their property and can choose from a range of two, three, five and ten year fixed rate deals.  There is also a variable rate option and if on a repayment basis, the loan can be offered up to 75% of the property value, subject to terms and affordability.

This product will also allow home owners to release capital to help family members with deposits for new properties, release equity to help with future income requirements, pay existing debts, or help with inheritance tax planning, and so on.

Revised rules from the regulators will now allow retired individuals to use their home as repayment of interest only debt, which was restricted only a few years ago.  Therefore, this great Aldermore launch could be the first of many to come... and with only four companies in the UK having access to its limited launch, AToM is delighted to be able to offer this product.       

Two million people have their mortgage on a lenders Standard Variable Rate!

It is estimated that over two million people have their mortgage currently sitting on the lenders Standard Variable Rate.  These are the findings of the Financial Conduct Authority’s interim review of the mortgage market competition.  The regulator found that consumers are more likely to stay with their existing lender, rather than move to a new lender where the rates could be cheaper.   

Although, close to half of those currently on an SVR would not benefit from switching, as they are already on a good rate, or close to the end of their mortgage term.

Interestingly, and worryingly, the report also estimates that over 260,000 borrowers are with lenders who are not authorised to offer them new mortgage products! This is because the lenders ‘sold on’ the customers mortgages to another institution. This is obviously concerning as customers are paying over what they need to and may not be able to move to a better lender.

However, it is surprising how many people don't review their mortgage rate frequently.  Many still believe that rates can drop further and some just really can't be bothered with the hassle to change.  The reality is that we are on a knife edge and rates are predicted to increase further, but the mortgage pundits are now suggesting later in 2018 is more of a realistic expectation for the next rate rise.  As such, many are now taking advantage of the opportunity to remortgage with a free valuation and free legal costs but are chancing their arm with a short-term tracker rate (lower rates than fixed, but can fluctuate).  Whatever your risk appetite, the options available now are likely to be better and cheaper than sitting on a lenders standard variable rate.

Another reason people don't switch is because they think they are too complex to be helped.  In a rapidly expanding market with highly competitive rates, many lenders have looked at other ways to assist customers rather than just pay rates.  This can include criteria such as types of property, types of customer, income make up, guarantors, charges on more than one property and so on.  The likelihood is that you are not alone in your requirements and there will be a lender out there willing to assist and who probably needs you just as much as you need them… 

Market is flat, but competition is high. What about a bridging loan?

With well over 11,000 mortgage products on offer throughout the mortgage finance market, competition is fierce.  However, the actual market itself is pretty flat and seems to be taking some time to recover from the two week Easter break!

Lenders are actively looking to assist clients with great product options and despite some longer deals increasing in rates, quite a few have been reduced to try and attract new business.

What we have seen recently are a lot of enquiries to remortgage for home improvements.  Increasing the value in your property can involve large renovation, adding a room or two and a general investment in time and builders.  Or smaller cosmetic changes such as up-grading kitchens, bathrooms, redecorations and so on.  Whether large or small, the investment in property can bring rewards to the value and if you are staying put, reward in the satisfaction of home comfort.  Plus, a potential large saving in stamp duty too, versus moving home!

Whilst rates remain relatively low, and this has become apparent across all sectors of the market including both Bridging and Commercial, the consumer has choice.

Bridging Finance (now also known as short term lending) is money to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction. The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold - usually when downsizing: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged.

There are a myriad of other reasons for which short term lending can be applied and each application is looked at on its own merits before a lender will agree to assist. The best way to look at this is as a means to an end. These lenders will need certainty on the exit route (how will they get their money back?) and they will always insist on an agreement being in place from a traditional mortgage lender to provide a mortgage, at a given time and once any requirements have been fulfilled. So, short term lending is designed to fulfil the need or desire to act quickly. We have seen funds drawn in 48 hours from application! Beware though, this type of lending is not the cheapest and always seek professional advice.