25 February 2011

Fixed rates are on the up!

The mortgage market has been very volatile over the last few days and the cost of fixed rate monies (SWAP Rates) have increased rapidly. This has meant many lenders have withdrawn products with little notice and subsequently increased their rates. The most notable being Nationwide who increased fixed rates by 0.30%. Others are expected to follow suit.

So it begs the question, if fixed rates are on the increase and inflation is on its way to an estimated 5% (was 4% in January), when will the Bank of England increase its base rate? The pressure is certainly on to contain inflation and avoid larger and more damaging rate rises in the future. The pundits had previously predicted a rise in May; however, this could now be bought forward. One member of the MPC (monetary policy committee) has even suggested this week that there should be an immediate small rise. Keep an eye on the press, but if you’re looking to change your mortgage onto a fixed rate, don’t delay!

The Financial Services Authority (FSA) has been flexing their muscles with lenders recently. DB Mortgages, part of the Deutsche Bank Group have been fined £840k for irresponsible lending practices and unfair treatment of those who fell in to arrears. DB Mortgages specialised in the sub prime arena offering mortgages to customers who had CCJ's, Defaults, etc. It is understood that £1.5m has been put aside for customers redress. Despite the sub prime lender crash of 2006/7 (lenders effectively withdrew entirely from assisting those with financial issues), there are lenders today actively lending in this arena assisting those with credit impairments (albeit with stricter lending regulations than in 2007!).

Finally, if you are a Halifax mortgage holder, and took a mortgage between September 2004 and September 2007 via their Bank of Scotland brand, you might be interested to note that Lloyds Banking Group, their parent company, is making a provision of £500m for goodwill payments in relation to an agreement with the FSA over wording that could have caused confusion in mortgage offers sent out during this period. I won’t go in to the specific details but suffice to say you don’t need to do anything as, from April, they will be contacting over 600,000 customers who may have been affected.

18 February 2011

Still tough for First Time Buyers...or is it?

First Time Buyers are hitting the press again, with reports from rightmove.co.uk suggesting that first timers now account for less than a quarter of all potential house purchases in the UK.

However, lenders are beginning to take on this problem. Many are launching products specifically aimed at First Time Buyers and some of the major builders are also looking at ways to get people on to the property ladder. Even the government has recognised that there is an issue and is holding talks with Lenders, Builders and other industry leaders this week to try and find a solution. Although, with the recent major financial cuts across the country, one wonders how this area might be financially supported.

First Time Buyers will usually require a minimum 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, again as long as it is confirmed this is non repayable.

Rates have reduced lately, with the likes of Santander, NatWest, and a few others lowering interest rates on their 90% products in a bid to assist. However, you are still looking circa 6% interest rates for a fixed rate and most lenders now require the mortgage repayment method to be capital and interest, rather than just interest only for those borrowing more than 75% of the property value.

Some lenders will allow a loan of up to 95% of the property value, if parents or another immediate family member will act as guarantor. 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.

Even some Building Societies are offering 90% loans, with possibly higher levels to existing long term account holders. Customers, in the main, need to be located near to the branch of the lender. Variable and tracker rates are also being offered (circa 4.5%) depending on the lender. Income multiples tend to be slightly restrictive though with some offering 2.50 to 3 x joint income, or up to 3.75 x single income. However, they are showing a willingness to assist First Time Buyers and in the current market, that can only be a good thing.

11 February 2011

Buy to Let increased to 85% LTV

Kensington mortgages have launched an 85% loan to value product for Buy to Lets (investment properties for letting out). They will consider First Time Buyers looking to become first time landlords and now also allow applications on new build flats. Good niches and a bold statement of intent to lend! They are currently the only lender requiring a 15% deposit for Buy to Lets, but I expect others will follow suit shortly.

I was astounded to see recent figures from creditaction reporting that Banks and Building Societies had written off £9.9bn of loans to individuals over the last 12 months (end of Q3 2010). That’s nearly £20m a day! In addition, the Government is paying a jaw dropping £120m a day in interest alone on the UK’s net debt (£889bn excluding financial interventions). These are scary figures indeed. But to add to the reality, individuals currently owe more than the entire country has produced during the last four quarters. It’s therefore no wonder that the lending market is in the state it’s in and provides some understanding in to the pressures facing the Government and Bank of England when considering rate changes.

As I write this article a few days before the paper is printed, I am unable to comment on this week’s Monetary Policy Committee (MPC) decision on whether or not to increase the Bank Base Rate. However, out of the nine MPC members for January, two voted for an increase. This is an increase on previous months and we may not be too far away from seeing a rate increase. Some estimates suggest May.

Finally, there has been speculation in the financial press lately regarding the Mortgage Market Review (MMR) which is an FSA initiative to make, in their words, the mortgage market more professional and transparent. Much of this, together with another of their initiatives is the Regulatory Distribution Review (RDR) part of which is designed to encourage our sector towards a fee charging route in all financial advice areas whereas, today, most income for advisors is from introductory fees incorporated in the product sold, paid by the providing financial institution. Watch this space in months to come but it seems fair in many ways that, given the professional qualifications mortgage advisors now need to obtain to give advice, a fee reward is not unreasonable for the amount of work and research undertaken in advising and recommending a mortgage product.

04 February 2011

New mortgage business up 83%

The Bank of England has reported that mortgage lending in December dropped to the lowest level in two years and Nationwide has reported house prices dropped by 0.1% in January, the first fall recorded by the lender since Aug 2009. Neither of these articles is worth further comment though as there are many positives to concentrate on!

The Buy to Let market was given another boost this week with Platform (the intermediary lending arm of the Co-operative Bank) revamping rates and launching new products. If you’re looking to purchase a property for investment purposes, this lender is well worth a look. Tracker rates start from 3.89% (APR 5%) and only have a £995 arrangement fee (some lenders charge up to 3.5% of the loan amount). These products also have free legal costs for those looking at re-mortgaging existing Buy to Let properties. AToM is one of a small number of distribution partners in the UK chosen by this lender to offer these products.

On the Residential side, one of our local Business Development Managers, from a major high street lender informed us that their remortgage business had increased 7% over the last week and now accounted for 46% of their business. At the same time, those who applied for mortgages requesting a fixed rate product were up 9% on previous weeks.

And finally, January’s new mortgage business received at AToM amassed to an 83% increase, compared to the same period in 2010. Many customers are fixing their rates in anticipation of a possible bank base rate rise, but some are also taking advantage of the attractive bank base rate trackers currently available. Others have more complex scenarios that they needed assistance with, which the high street lenders would not normally entertain. Despite what you read in the national press, we are seeing an appetite from lenders to lend, an increasing willingness to be helpful and, most importantly, approval of applications. Long may that continue!