16 January 2020

Mortgage borrower demands are shifting!

In recent months there has been some much-needed attention drawn to customers who have experienced some type of adverse credit. Many specialist lenders and building societies are leading the way both in terms of the education process and through some innovative and highly competitive product ranges.

There is no hiding from the fact, or should there be, that borrowing demands are shifting and many high-street lenders are struggling (or unwilling in some cases) to adapt to them. The fact is that growing levels of credit related issues are emerging. In the vast majority of cases these remain minor, but this doesn't stop concerns being raised over credit histories and consumers future ability to secure a mortgage.

Recent research from specialist lender Pepper Money suggested that the majority of people who have experienced credit problems in the last three years are worried about being declined a mortgage. Its survey found that 69% of those who are seeking a mortgage or remortgage in the next 12 months are concerned about having their application declined due to their credit history.

We have spoken to many clients who, due to their credit history, felt that they couldn’t get a mortgage or remortgage from their current lender. On the back of this, we are forming even stronger alliances with a variety of lenders to help get this message across and ensure that our staff have the knowledge and access to the types of deals which can help such borrowers to achieve their homeownership aspirations.  It's these types of fresh approaches which will enable us to assist more people with the appropriate solutions and help clients put their past credit issues behind them.

Whether it’s a CCJ, Default, IVA, payday loan, missed payments, bankruptcy or even a previous property Repossession, lenders are looking to assist clients who have had these issues.  Yes, depending on the level of adverse credit, the rate maybe slightly higher than a standard high street mortgage, but we use specialist lenders as stepping stones on the road to credit repair (obviously, all subject to terms and conditions), with the ultimate target of returning to the high street lender option as quickly as possible. 

Let’s hope that 2020 is the year that this sector of the mortgage market starts to generate headlines for the right reasons.

09 January 2020

Happy New Year! Are you financially prepared for the year ahead?

And so another year begins, have you made any resolutions?  If not, make one to review your mortgage!  Now that the election is out of the way and we have a ‘clearer’ route to Brexit, lenders will look at their strategies for the next few years and I’m sure somewhere in those plans will be reviewing their rates and offerings to maximise profitability. 

In the meantime, one lender has already reduced a 5 year fixed rate to under 1.5% with free valuation, free legals on remortgages (£300 cashback for purchases).  There will be other similar deals available, and terms obviously apply, but the fact that these rates are so low so early in the year is impressive!

Technology will play a huge part in the mortgage market over the coming few years.  I’m sure mortgages will be available through a full ‘comparison type’ model shortly.  But it does not necessarily mean it’s the right option for you.  As with some current comparison sites, some of the options provided are those that pay a referral fee to the site and may not be the most suitable for the end user (although they might pay the highest referral fee to the providing site!).

We understand that a straightforward customer who fits the high street with 2.4 children, lived at their current address for ten years, has consistent employment, no debts and wants to remortgage pound for pound, will be an ideal customer for the technology model.  However, not everyone will fit this model and thus the human touch will be required for some years yet.

And of course, this is all relying on you having a decent credit score.  You can’t turn on the TV without seeing an advert for your free credit score!  This is an assessment on all available financial information and calculates a 'score' for the lender.  It also includes a search on your overall credit history covering, in the main, all of your financial transactions over the last few years.

Most lenders credit score applications to try and assess your ability to repay any loans.  Nearly all financial institutions will register a credit search against you.  So, if you have recently updated your car insurance, home insurance, taken out a mobile contract and just got a new credit/debit card, that’s probably four searches in a short amount of time!  So even before starting the full mortgage process, have a chat with a professional adviser and seek their advice what to do and when, to enable the best chance of getting a mortgage first time.

12 December 2019

Moving forward to the challenges ahead.....and Happy Christmas!

This time last year, I was predicting that we’d have got over the shenanigans of Brexit and be moving forward in to the unknown, yet positive, challenges that lie ahead. 

How we can be no further forward still is beyond me.  But at the same time, I can’t believe the year has gone and I’m writing my last column for 2019!

The mortgage world has been pretty flat with figures estimated to be only a slight increase on 2018.  On the upside, choice of mortgage product is at it’s all time high and rates are incredibly low.  Great for the end consumer!

The festive period can be a time for reflection.  It 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?

Whatever your plans, it makes sense to review your 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 (again) and there is no history to prompt what the immediate and longer-term implications will be.

Technology was due to take over the mortgage market in 2019 and despite millions being spent, this has only had a small impact.  Circa 72% of all mortgages generated are still via brokers/intermediaries.  You are entering into the biggest debt of your life and questions need answering.  You just can’t beat the human touch…. for now.   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.

Finally, I really appreciate you reading my column!  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 impact sf to source and arrange their mortgage during the past twelve months. It has been a fantastic year, including a brand name change and a new additional office in Barttelot Road!  We have a fantastic team and they are a truly hardworking and knowledgeable group of people.  Best in the business!

On behalf of all the staff and directors at impact specialist finance, we wish you and your families a very Happy Christmas and a Relaxing and Prosperous New Year!  Bring on 2020!

05 December 2019

Which mortgage calculator do you use?

There is a wide range of mortgage calculators and affordability calculations available which will help you to find out ‘How much can you borrow?’.  However, the only true response will be from the lender and normally only once they have carried out a credit search and reviewed your credit score.  Only a few years ago, the loan offered could easily have been up to 8 x income with the minimal of fuss.  Times have changed, and rightly so!  Those were times with little control and the lengthy recession 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, and possibly 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. It maybe 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 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 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. 

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!   

28 November 2019

Lenders to help those classed as 'mortgage prisoners'

The Financial Conduct Authority recently issued its statement around those it considers to be a ‘mortgage prisoner’.

It is estimated that around 140,000 people with mortgages are currently classed as mortgage prisoners (although some have quoted this to be as high as 500,000).  This means that the customer could be with a lender who is no longer active, or a lender who has ‘bought’ a number of customers from other lenders but who does not offer additional mortgage products once the customers current incentive (fixed) rate period comes to an end.  So, effectively, the client will sit with the lender on their standard variable rate, normally a lot higher than other available incentive rates, and because of various reasons, they may not be able to move to another lender.  This could be due to their loan to value (amount borrowed against the value of the property), or maybe that particular lender at the time had attractive, exclusive income multiple calculations, which are no longer offered, or new and stricter criteria no longer enables them to change lender. 

The regulator is seeking a way forward.  As such, one area of the statement confirms that mortgage lenders can choose to carry out a modified affordability assessment where the consumer:

– has a current mortgage
– is up to date with their mortgage payments
– does not want to borrow more, other than to finance any relevant product, arrangement or intermediary fee for that mortgage
– is looking to switch to a new mortgage deal on their current property

In short, this means that there will be minimal and relaxed affordability checks and the lender must confirm that although this may result in a better rate for the customer, there may be potential risks as this is different from the normal affordability checks and assessments carried out.

Great news for those stuck with historic lenders on high rates.  But will only work if all lenders are encouraged to offer this option as it’s not mandatory.  As this can be quite complex, and only certain lenders will offer this assistance, speak to your local independent mortgage brokerage to find out more and seek professional guidance.

21 November 2019

A large portion of the UK adult population has experienced credit problems..

The festive period is traditionally a time for giving, but for some people - especially those with a family to support - it can prove to be a difficult one to successfully manage. It is a season where we see more people, from all walks of life, seeking some form of supplementary borrowing, a factor which can generate additional monetary worries and financial stress, perhaps even leading to adverse circumstances down the line.

On a positive, more forums and sources of advice/information are readily available for people to discuss topics which may have previously been considered taboo and difficult to address. Although money matters and financial education are areas where there is certainly still room for plenty of improvement.

One recent lender issued a study to brokers on the world of adverse credit to encourage greater understanding and more open discussion around this subject matter. After all, this is an area which is not going away anytime soon. According to the lenders research, a large portion of the UK adult population has experienced some form of adverse credit. 15% of all participants surveyed reported that they had previously missed payments on credit commitments; had CCJs, defaults, secured or unsecured arrears registered on their credit file; or had entered a debt management plan (DMP) in the last three years.

The research outlined that adverse credit is most common amongst people who are the prime age to be homebuyers and remortgagers. The majority of people who experienced adverse credit in the last three years are said to be aged between 35-44 (43%). This compares to 33% who are aged between 18-34, and 23% who are 55+. It’s also important to point out that it’s not just the less affluent proportion of society who pick up adverse credit on their record. The report added that 61% of the adults who have experienced adverse credit in the last three years and are planning to buy a property in the next 12 months are associated with a higher income.

There are plenty of specialist lenders who will consider those who have had all types of credit issues, subject to terms and conditions, and rates are probably a lot lower than you would think.  As always, seek professional advice from the specialists.

14 November 2019

Complex deals are considered depending on the clients scenario

Actually placing a mortgage with a lender is not normally difficult. The hardest part, in the recent climate, is getting the mortgage through to completion!

However, a number of lenders are happy to think outside the box and take a manual approach to lending.  One recent example was with the Harpenden Building Society who helped complete a £1 million interest only deal on a new build flat for a client in their 50’s.

The transaction was for a very upscale 19th floor new build property situated on the South Bank of the River Thames in London. It had a valuation of circa £2 million with some units in the development having restrictions to borrowers over 55’s and was above a commercial property.

As this was also over a twenty year term, this took the clients age in to retirement.  However, as the property was to be let out, the building society took this into consideration, along with their residential property and allowed the deal to proceed.  This was on the basis there was enough equity in the properties to repay the lenders loan if they needed to.

This example highlights the value attached to many building society lending propositions, in terms of their flexibility and approach to more criteria-based lending. 

But as with all funders, try not to give lenders an excuse to decline your application or refuse to lend to you. Try to pay bills on time, don’t miss payments, and especially not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision to lend to you. Lenders can re-credit search/credit score you right throughout the whole mortgage process.

Finally, we are seeing general processing delays across the market.  Some lenders 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 who knows how customers are faring!  So, speak to your local (and long established) independent and whole of market brokerage and let them take the stress away from you.