What if 'the computer says No'?

A flurry of activity in the mortgage market this week as a number of lenders reduce their rates.   Virgin Money, Natwest, Accord Mortgages and Platform are a few of the lenders who have cut various rates in their product offerings.  This follows decreases in both LIBOR and SWAP rates (in the main, measures against which banks lend each other money).  This is good for the end consumer and I’ve even heard whispers that this could lead indirectly to a Bank Base Rate cut shortly.  Who knows, as uncertainty seems to the only certainty in the financial sector!  Personally, I’m not sure a cut is a good thing right now, but with many companies struggling to survive and some big casualties (JJB the most recent noticeable), it will be welcomed by all those on sitting on a bank base rate tracker.

I mention credit scoring/searching quite a bit, but it really is so important in the current financial world when deciding to lend to you, or not!  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 on any existing credit.   The number of recent credit searches you have on file will also have an impact.  Nearly all financial institutions will register a 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!

If the computer says ‘no’, you will tend to find most high street lenders doors shut to you.  But fear not, if you have a reasonable deposit and can prove all income, there are lenders who do not credit score, but will manually review and underwrite affordable applications on an individual basis.  AToM has access to a number of these lenders so don’t despair if the high street lender’s computer says no, give us a call to see if we can assist.

Much has changed since 2007...

Someone said to me this week its five years since Northern Rock crashed the ‘mortgage boom’ party and to be honest, I did ponder on where those years have gone!  Much has changed since 07 and lenders now appear to be run by their credit risk personnel, who in turn report to the Financial Services Authority, our regulators.   Let’s be honest, most feel that the FSA now run the lenders too!  As a directly authorised mortgage intermediary, we have had our fair share of ‘guidance’ by the regulator and with the fees involved just to trade in the mortgage market, it’s no surprise that so many have jumped ship and started new careers.  However, what this has left is huge gaps and I often wonder where the market will be in two or three years time as many more retire and fresh blood seems to be so scarce on the horizon.  What will be will be!  But in the meantime, there’s no substitute for honest, transparent professional advice and recommendation, based on your exact needs and requirements.   Online computer systems just can’t compete with that!

Halifax has launched a 5.89% (APR 6.1%) seven year fixed rate mortgage up to 90 per cent of the property value, exclusively for first time buyers.  There is no product fee and customers are eligible to receive £500 towards their moving costs.  Might be right for some very cautious people who like to fix payments long term.  However, rates are lower on shorter term fixes and with rates predicted to be static for some time, alternative products at the end of the short term are likely to still be more competitive.  But, the principle of trying to help First Time Buyers is to be applauded.

Finally, the 2^nd Charge Secured Loan market showed huge growth in July.  Second charge mortgage lending shot up by 11% according to the latest figures from the Finance & Leasing Association.   Many who require a loan to carry out home improvements or for other luxury items, but are currently sitting on very low lenders variable rates are opting to add on a second charge to their current property (sits behind the first charge mortgage).  Again, right for certain people but rates start from 6.9%, so will need to ensure its beneficial in the short to medium term compared with a complete remortgage to another lender/rate.

Act quickly - once they're gone, they're gone!

The summer is over, the kids are back to school and the post holiday credit card statements are on their way!   Ok, so a bit negative, but don’t panic when they arrive.  Debt Management Plans and Payday loans look like an attractive solution and they will be right for some people, however most mortgage lenders are not favourable to these arrangements.  If you are looking to change your mortgage, think twice before committing to such a plan.   Consolidating debts into one monthly payment via a secured loan or even a total remortgage may be a better option.  Obviously securing short term debt in to a longer term loan will inevitably increase the amount of interest paid and professional advice should be sought before going this route. 

Some lenders have been trying to boost mortgage volumes by launching products for a limited amount of time.  Accord Mortgages launched some superb products for a period of 10 days only.   These included cash back, free valuation, low arrangement fees and great rates.  A number of lenders took this approach around this time last year and maybe this is the start of things to come.  Watch this space and act quickly!  Once they’re gone, they’re gone.

Other lenders have made movements in the mortgage market over the last week or so, including rate reductions by Co-Op Bank, Tesco Bank, Santander, Coventry, Virgin Money and Skipton, to name but a few.  Lenders want your business, so make sure you shop around and do your homework.

August was a superb month for AToM.   Completion numbers, those taking out mortgage loans, were the best for nearly four years!  Thank you to all those who have been using AToM’s services, we really do appreciate it. 

Buy to Let takes a hit

The Buy to Let market has been hit hard this week as two of the major players make significant changes to their criteria.

BM Solutions (part of the Lloyds Banking Group) have withdrawn their House to House product.  What does this mean?  Well, the majority of investment mortgages, or better known as Buy to Lets work on a required rental calculation.  Most use a 125% rule.  Therefore the rental payment must be 125% of the monthly mortgage payment, usually based on the actual interest pay rate.  If the rental payment was short in calculation, then the loan offered would be reduced to fit.

The now defunct House to House product ignored this requirement and looked at the Buy to Let using the customer’s income and expenditure.  It was one of the only products in the market that offered this option and was incredibly useful for properties where rental coverage did not cover the mortgage payments by the required rental calculation.  The lender would consider the customers income when considering loan amounts.

The Mortgage Works (part of Nationwide) have also made a number of changes to their Buy to Let offerings.  These include the withdrawal of their regulated Buy to Let offering.   A regulated Buy to Let is where a sizeable portion of the property is rented out to a family member.  They have also withdrawn the option for clients to buy a property from a relative. 

With property prices still low, First Time Buyers struggling to get on the property ladder and returns on savings still relatively unattractive, many have invested in property as a long term investment.  This area of the mortgage market has been buoyant and as such, many lenders are incurring service issues.  So these are substantial moves by two major lenders begging the question if this is the start of more negative things to come?   Let’s hope not!