26 August 2011

What is Credit Scoring?

Credit scoring is creating havoc for mortgage applications to high street lenders. Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile. If the computer says ‘no’, you will tend to find all high street lenders doors shut to you. Even your bank, with whom you’ve been a loyal customer to for many years, reports back that you have a low credit score, the computer says “no” and they will not offer you a mortgage.

But you have no credit problems: you have a good income: no debts and you are looking to buy a property or maybe remortgage. This is a dramatically increasing scenario. The world of credit scoring (tick box mentality) has taken over and there’s no arguing with the lender once their technology has made the decisions.
All credit scores include a credit search – this reviews your financial history, payments to utility suppliers, mobile phones, etc . Every financial institution from mobile phone companies to insurance companies will carry out a credit search before offering you their services. This can also be a negative though, as the more credit searches you have, the lower your credit score maybe.

Fear not! There is light at the end of the tunnel. AToM recognised that good clients were being rejected by lenders for no apparent reason and has built up exclusive relationships with a number of lenders who will assess an application manually and seek to offer assistance to such customers. This is our alternative to ‘the computer says no’ and have found an avenue for the right deals working with lenders that not only manually underwrite cases, but who have an appetite to lend. We call this Complex Prime and it does not just include those turned away by their bank for low credit scores. It could be a case scenario that needs a bit of lateral ‘out of the box’ thinking by an underwriter keen to say ‘yes’. This could include cross collateral security for clients who are asset rich: a sympathetic view for those who have trouble in proving ‘real’ income: customers who need guarantors or maybe just need someone to sit down, review the whole picture and advise on the best route to take.

I have always suggested that you speak to an independent mortgage broker with access to whole of market mortgages. Banks may only advise on their product range. Estate Agents ‘in-house’ mortgage advisers may only be able to offer mortgages from a select panel of lenders. Therefore, in order to get best advice, make sure you do your homework, speak to a whole of market mortgage broker who can advise on the most appropriate mortgage in the market to meet your requirements, whether this be with a credit score or just a credit search.

19 August 2011

Really exciting mortgage products!

Some really exciting new mortgage products have been launched over the last week. You could even go as far to say the lenders are pretty confident that rates are not going to be fluctuating any time soon. One article I saw had a spokesperson from moneysupermarket.com suggesting the likelihood of Bank Base Rate being cut by 0.25% is greater now than it has ever been! Great for the consumer! Not so great for getting money moving around the mortgage markets!

SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have reduced over the last few weeks. The cost of 5 year fixed monies currently resides around the 1.80% mark. The Lender then provides the product to you, the customer, at rates currently in excess of 3%. In comparison, 2 year fixed rates monies stand around 1.20%.

As a result, we’ve seen a number of long term fixed rates launched over the last few weeks and the one causing great excitement (as I write) is from Coventry for Intermediaries who are offering a 2.99% fixed rate available for 2,3 or 4 years. The lenders fees range from £200 to £1800 and can be added to the loan. The lender also offers one free property valuation and free legal costs on remortgages, so keeping the cost of changing to them at a minimum. Five year fixed rates have also reduced with some lenders offering rates as low as 3.39%.

House price commentary continues to make headlines as rightmove.co.uk report a decrease of 0.1%, despite property transactions increasing by 5% in July. This is in line with Zoopla.co.uk who suggests that two in five, 39% of all properties currently for sale, have had their asking prices reduced at least once since coming on to the market. And Investec Specialist Private Bank reported a 10% increase in high valued properties during the second quarter of 2011, with over 21 thousand properties up for sale valued at £1m and over.

05 August 2011

Statistics tell the story

Of late, the mortgage market has been a very positive place with product choice rapidly on the increase. Lenders have been appearing keen to lend and some even wanting to help over and above the normal call of duty! But (and you knew it was coming!), the statistics are still showing the fragile state of our economy.
August’s creditaction figures state that:
- 331 people every day of the year will be declared insolvent or bankrupt. This is equivalent to 1 person every 60 seconds during a working day.
- 1,577 Consumer County Court Judgements (CCJs) were issued every day during Q1 2011 and the average judgement amount was £3,118.
- 220 mortgage possession claims will be issued and 160 mortgage possession orders will be made today (100 properties were repossessed every day during Q1 2011)
- 1,578 people reportedly were made redundant every day during the 3 months to end May 2011
- The UK population is projected to grow by 1,205 people a day over the next decade

However, despite all of these eye opening and, frankly, quite depressing figures, the one that really is quite unbelievable in the current climate is that, in Q1 2011, UK banks and building societies wrote off £1.89bn (£866m of that being credit card debt). This amounts to a write-off of £20.71m a day! Who said lenders have funding issues??
The average house price in the UK in May 2011 for first time buyers stood at £150,685 which is an annual decrease of 2.1%. The typical first-time buyer deposit in May was 20% (£29,874). The average first-time buyer borrowed 3.14 times their income and the average first-time buyer loan was £119,497.
As at the end of March, there were 1.3m buy-to-let mortgages outstanding, worth a total of £152 bn. By value, buy-to-let mortgages accounted for 12.3% of all mortgages.
And finally, as the summer is well underway - Barclays estimate that, over the course of the six week summer holiday period, British holidaymakers will spend a total of £1.47 billion whilst they are abroad (via debit cards and cash withdrawals). However, Barclays say that this figure is broadly the same as that for summer 2010, and suggest that this shows that consumer confidence has not totally bounced back since the end of the recession.
Next week will be more positive, honest! Sometimes, we just need a reality check!