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.