24 September 2010

Lenders are tightening up!

The Council of Mortgage Lenders has reported that gross mortgage lending reduced by 14%, to £11.4bn, for August. This is the lowest August lending figure since 2000 reducing from £13.3bn in July. Further signs that restrictive lending is rapidly becoming the norm!

The buoyant Buy to Let market has been dealt a blow this week as Lloyds Banking Group (LBG) have restricted the number of Buy to Let mortgages a single applicant can have within the group to just 3 properties with a maximum lending of £2m. This is a reduction from 9 properties and £3m previously. Portfolio owners within the group, which includes Halifax, C&G, BM Solutions, Bank of Scotland and Lloyds TSB, are now restricted to the 3 properties rule and have to look elsewhere to increase their portfolio. This move puts further pressure on the few remaining lenders offering Buy to Let mortgages and some of these are already creaking with the pressure of increased business, announcing delays of up to 20 working days.

The Bank of England has issued its justification as to why lenders have not passed on the full benefit of low interest rates to consumers. In its quarterly bulletin, the Bank indicates that some new lending rates have actually risen whilst base rate has fallen! They blame this on lenders seeking to build larger financial reserves, funding costs and credit risk balances, among other things. The report says lenders are seeking to rebuild net interest margins achieved, in part, through higher mark-ups on new lending. Perhaps one word could more easily describe these. Profit! We have seen billions of profits reported for the half year from many lending institutions so perhaps it is fair to question if this is now greed? Someone needs to get tough! The question is, if the Bank of England is happy to stand behind banks making extortionate profit: if the FSA are now to be part of the Bank and the Government has taken a side step, is there anyone left to champion the consumers cause? No doubt we will see the bankers refusing their Christmas bonuses this time in order to help the cause..

17 September 2010

The adviser should know rules and criteria

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. Despite all the recent negative press, the mortgage market is vibrant with activity!

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 0.5% again, or how much profit the banks are currently making!

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 products.

Most lenders have a set of rules and criteria that need to be met even before requesting a decision in principal (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, divide the latter by the previous and your utilisation amounts to 70.1%, 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 keep open old debts with zero balances, which push them over the stipulations. Others won’t look at unencumbered properties for remortgages, or assist where the customer sold their house within the last year and are renting, so falling between a first time buyer and a residential home owner and so on.

All of these are little idiosyncrasies that should be known by anyone advising on a mortgage. These save 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.

10 September 2010

Better options for customers.

The Bank of China this week has increased the amount they will lend compared to the property value. Residential mortgages are now offered to 80% Loan to Value (LTV), Buy to Lets up to 75% LTV and Commercial mortgages up to 70% LTV. Positive moves from a lender who distribute their mortgage products through their branch network and only five other distributors in the UK, of which AToM are one. They will also consider First Time Buyers, Home Movers and Remortgage applications. Unlike some other lenders, Bank of China will also look at flats above shops, houses of multi occupancy, new build properties and freehold flats. Some (good) potentially useful niches. We find them incredibly helpful to deal with and they have some very competitive rates.

The Nationwide House Price Index has suggested that house prices dropped by 0.9% in August, with the average house price now at £166,500. This is the second month in a row Nationwide have reported a house price decrease. Let’s hope this is not the start of a trend and stabilises shortly; although it is probable that the lower level of activity over the summer is reflected in these reported figures.

The number of mortgage products appear to be on the increase. New products being launched in August far exceeded the same period last year according to one of the industries leading sourcing systems, Mortgage Brain. In August 2009, just 5 new mortgage products were launched, however in August 2010, some 1,500 products were launched. This is good news and despite some products being withdrawn and re-launched with revised rates, 350 products were completely new. Fixed rate product offerings increased by 31%, whereas Tracker products decreased by 5%. The system also reports the total number of products available to the mortgage market now stands at around 7,600!

Is the appetite for mortgage lending beginning to reappear? Despite the inevitable doldrums reported by the national press, we’re hearing some great rumours that lenders will make a big push to lend in the last quarter of this year. Fingers crossed!

04 September 2010

Kids are back to school - make use of your spare time

The kids are back to school, the holidays are over and you may (or may not) be looking forward to peace and quiet and having some time on your hands. However, as the final few months of the year race towards us, maybe it’s time to start thinking about 2011 and what trials and tribulation this may bring. Without doubt, the only certainty in the current financial markets is uncertainty. When will bank base rate rise? Who really knows what is happening with house prices? Will 2011 lending become further restricted as the banks scrape and save(!)to pay back the £300bn lent to them via the Special Liquidity Scheme? All of these lean towards ensuring you review your current financial arrangements and ensuring you are on the best deal to see you through the medium to long term. 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 or discounted option, right now, both are available at attractive rates in the mortgage market. A quick review with an independent mortgage advisor who has access to the whole of market mortgage rates could be time very well spent.

On the other hand, we’re also seeing a vast increase in those purchasing a property for investment purposes. The Buy to Let market is rapidly increasing again as people turn to renting rather than purchasing in the current climate. Mainly due to their ineligibility to obtain a mortgage for whatever reason. Investors see this as a great opportunity to increase their investment property portfolios and taking advantage of the great rates in the market. Be advised though, if this is something of interest, lenders tend to charge large arrangement fees for setting up the Buy to Let mortgage and you may be eventually be subject to Capital Gains Tax at a later date, on any profit made on disposal of the property.

Your credit history is the lenders decision maker.

27/8/10 - Dale is away on holiday this week so it has fallen to 'the old man' to scribe and comment on the market. So here goes........

All of the mainstream lenders tend to use a system of credit scoring when deciding if they want to lend to new applicants and even the smallest of 'blips' can cause a lender to decline even best cases. It is crucial that you make all payments to any provider on time. Be it mobile phone, utility provider or lender. They are all prone to putting a black mark on your credit file if you are just a few days late. Some will do so even if you are one day late. So be vigilant, as any such misdemeanour can affect your credit rating. Whilst on this subject, we suggest to clients that they consider subscribing to one of the credit report providers such as Credit Expert or Equifax. Why? Well, a good friend recently applied to a bank to support his son as guarantor. The bank declined my friend who was certain that he had a pristine credit rating. Upon examination, it was found that someone had cloned a credit card and was using credit in his name but not paying back! We managed to resolve this, eventually, but it was a sobering exercise.

Some financial commentators are again talking about a double dip recession. Is this going to happen and if it does, where will it leave the financial services market? There is no doubt that much of the recession was exacerbated by well known TV pundits who seemed to delight in the fame that it brought them. My take on this is that confidence breeds confidence so lets hope that this time we see presenters talking the market up.

The Buy to Let market is enjoying resurgence. Landlords have more tenant applicants than houses available. Of course, this is geographically spread with some areas faring better than others. In turn, first time buyers are still finding it difficult to get on the ladder and parental support is more necessary than ever before.

A lot of mortgage activity!

20/8/10 - Despite being in the midst of the holiday season, there is certainly a lot of mortgage activity happening! AToM have seen a huge increase in enquiries for re-mortgages as customers look to refinance existing deals on to better rates or raise capital to purchase other properties or for home improvements. There’s no better time to review the market as there are some competitive rates currently available. Especially fixed rates which cater for those looking to stabilise their monthly mortgage payments for a specified term. We have recently been allocated a tranch of fixed rate funds at 3.99% for 3 years (5.2% APR) by one lender. This includes free standard legal costs on re-mortgages, or £250 cash back on purchases with no early redemption charges payable after the fixed rate term. This product is available up to 80% of the property value. Terms and conditions apply and please feel free to request full details from us.

We have also seen a vast increase in customers looking to consolidate debt or even look at debt management plans. Both can sometimes cause issues. If you consolidate unsecured credit in to your mortgage, although your monthly payments may be lower, you may be paying more for your debt over a longer term. And with debt management plans, or Individual Voluntary Arrangements(IVA), etc, again, the lower monthly payments may help in the short term, but you may well find it hard to gain an approval from a lender to refinance at a later date. Lenders tend to shy away from debt management plans and may not touch anyone who has been in an IVA unless it has been discharged for more than four years. Advice should always be sort before entering in to these types of arrangements.

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.

Whatever you do remember to check what terms and conditions apply and also remember that your home may be repossessed if you do not keep up repayments on your mortgage.