24 February 2012

More restrictions on Interest Only loans

Interest Only remains in the Spotlight this week as Lloyds Banking Group and Leeds Building society impose restrictions on those wishing to obtain an interest only mortgage. This is following Santander's interest only loan reduction last week and Barclays/Woolwich previous to that.

Although Santander reduced the maximum LTV on interest only to 50%, they did not change their criteria. However, Lloyds Banking Group (Lloyds, Halifax, C&G) have restricted acceptable repayment plans so that, despite keeping Interest only at 75% of the property value, many
borrowers may not qualify. These repayment vehicles include providing proof of a pension pot in excess of £1m, cash savings are no longer accepted and sale of any residential property can only be used if current equity is over £50k and only 80% of current equity can be used. It is reported
that the other high street providers are not looking to follow suit. But we will see!

In more positive news, those who know AToM will know that, in addition to arranging mortgages for the general public, we are also a specialist packager/distributor looking after and arranging mortgages for other mortgage brokers, estate agents and independent financial advisers nationally. For some lenders, AToM acts as their administration arm, collating information,
instructing valuation and processing applications right up to mortgage offer status. For other lenders, AToM will often be allocated a tranche of funds to distribute for them and AToM advertises and controls the administration process. Any mortgage broker, independent financial
adviser or similar, who require these certain products, will often have to come via AToM to gain access to such products. The benefit to the lender is that AToM carry out all the work, including taking telephone calls, requesting information from employers/accountants, collating documentation, and more. So it can be cost effective for the lender.

With this in mind, we are delighted to announce our latest lending partner in this arena, called MBS Lending (part of the Melton Mowbray Building Society) and we now package and distribute products for them. This lender specialises in assisting customers who have had financial issues.
This is one area, more so in recent climates, that appears to be on the increase again and there are lenders actively looking to lend. Terms & Conditions apply and APRs will be based upon individual circumstances.

16 February 2012

The spotlight is on Interest Only...

Mortgage lending is certainly becoming interesting again! During the last week Santander reduced the maximum loan they will accept on an Interest Only basis to just 50% of the property value (down from 75%). I expect that this, partly at least, is in direct response to the growing concern that many borrowers with this type of mortgage (nationally) are predicted to come to the end of their 25 – 30 year mortgage term with the mortgage debt still at its original level and no
repayment vehicle in place. In past times, many borrowers relied upon the seemingly continual growth in property values delivering to them a large equity value. This could then be used to
allow them to trade down and still have a reasonable standard of property to look forward to. Others may have long term endowments in place, savings via ISAs, or be in a profession which pays out a nice lump sum after a specific period of service, which would redeem the interest only element.

Some lenders are starting to insist on repayment of their mortgage around age 70 regardless of the clients circumstances and others will no longer allow 'sale of property' to be an acceptable repayment option at the end of the term. If you are on an interest only scheme, perhaps it is a good time to arrange a review and see if there is a better option for you with a lender offering a cheaper rate and where you can start reducing the capital?

Lending in retirement is also a ‘hot potato’ issue for lenders and one which needs careful consideration. Often, retired people have managed their finances successfully over the years and enter retirement mortgage free. At the same time, many, whilst having no mortgage, also suffer from reduced income and there is a saying in our profession that it is not always wise to have everything tied up in bricks and mortar and yet have nothing to spend. There are schemes where equity can be turned into a mortgage (not equity release) and where off-spring may be able to assist with the repayments in order to secure and protect their inheritance whilst also ensuring a comfortable retirement for their parents. This is not right for everyone but it is certainly worth talking to a qualified advisor to review all possibilities.

09 February 2012

Short Term Lending is flourishing

The ‘Short Term Lending’ market is flourishing. Specifically geared at speedily arranged loans, normally with a monthly rate of interest and pre-agreed with an ‘exit’ route, the term
‘Bridging Finance’ is quickly becoming a household name. With many lenders in the market, offering loans up to 75% of the property value (sometimes higher with additional security offered) these types of loan are calculated and charged on a daily/monthly basis, with some even offering to roll up the interest (no committed monthly payment). Interest rates start from 0.75% per month and normally are arranged over a period of between 1 to 18 months. Most will carry a lender fee, an assessment fee, some will include early repayment charges and possibly an exit fee. However, for the right scenario, these loans provide a superb funding line.
Ideal scenarios for Bridging Finance include –

1) Chain breaking or not sold your property yet
When the chain breaks or you have not sold your property but found one you have fallen in love with, bridging finance may enable you to complete on the purchase before you have sold your existing home.
2) Refurbishment – allows you to buy and refurbish property quickly
A loan to support with the purchase of a property and then undertake the refurbishment
before it is eventually presented to a mortgage company or bank for long term re-mortgage finance, or sold.
3) Purchasing properties at auction
Short Term Loans can be arranged very quickly and can be ideal where there are tight deadlines to meet. A typical 28 day completion from purchasing an auction property is usually easily achievable. A pre-auction valuation is considered a must.
4) Funding under value purchases
A loan based on the actual value of a property and not the purchase price. Thus, when purchasing a property, under value, you may have the ability to borrow up to 90%of the cost of a property (subject to valuation) and then re-finance the transaction using a traditional lender later on.
These are just some examples, there are many others.
However, where there are positives, there can be negatives! Many lenders have set a minimum term for a property to be owned before they will allow a remortgage to occur. This is usually six months. So please ensure this is factored in to any purchase, budget calculations, etc before committing to any Short Term Funding/Bridging Finance. For more information, or to discuss a
specific scenario, please contact AToM.

02 February 2012

January was busy..

It was a very busy January and not just for new business! Many lenders are looking for gaps in the market where they can make a significant difference and offer a product aimed at a type of customer, rather than the normal open market offerings available to all. Innovation may be the key for a lenders success in 2012 as overall lending volumes are predicted to remain pretty static compared to last year.

Last week, I attended a First Time Buyer ‘round table’ event where lenders, brokers, estate agents and even the mortgage market trade body were in attendance to discuss the increasing issues faced by First Timers. There’s still no huge appetite from lenders to explore this avenue further as yet, even though everyone agreed this is a major area of concern.
Lenders expressed their continued uncertainty on house prices, which obviously affects their decisions to offer mortgages where only a small (5%+) deposit is required. Behind the scenes, there are also strict regulatory requirements on funding these specific deals. However, coincidentally, we have seen some 95% products launched this week, sub 6% and with reasonable
fees. How long they will remain in the market is another question, but for now, that’s a good step in the right direction.

We have seen many lenders increase their rates over the last week following a rise in the cost of funds. Lenders have pulled rates with little or no notice and new products have been launched at higher rates. This has been especially noticeable in the arena catering for those with missed payments, CCJs, or Defaults.

Finally, 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! To assist this, 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.