Right to Buy and Shared Ownership enquiries on the increase

Over the last few weeks, we’ve seen a marked increase in enquiries for both Right to Buy properties and those looking to purchase on a Shared Ownership basis.

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be up to £75k and tenants must have been with the council for five years or more.  Some lenders will allow borrowing of up to 100% and possibly slightly more if the extra funds are to be used purely for home improvements.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period.

Shared Ownership Schemes are provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, so always seek advice.

Whilst mentioning advice, there are a lot of good rates in the market currently.  Some of these are only accessible through certain brokers.  Make sure you are speaking to someone who has access to the Whole of Market and access to these superb rates as they can be withdrawn with little or no notice.  With this in mind and as mentioned in a previous write up, some lenders will launch market leading products but only for a short period, in order to attract volume business.  The latest to do this is Accord mortgages (owned by Yorkshire Bank).  Sadly by the time this goes to print, this particular set of fantastic products will be gone as they were only available for 7 days, so I will not go in to detail, but they were good and there are likely to be more soon.  Remember, despite what some say, you do not have to take your mortgage with any one source even if they insist that is the deal.  Shop around and make sure you are getting the right deal for number one!

Your payment profile is part of your application for finance

The Council of Mortgage Lenders (CML) has released figures reporting that the remortgage market had its best month for five months in April.  Gross lending was boosted by 5% from remortgage finance.  Signs that the low rates are attracting new customers and homeowners are keen to make use of the great deals currently around.

It was also good news for First Time Buyers.  46% of all house purchase loans advance in April were to those purchasing their first property.  The market is still incredibly tough, but these are signs that things are slowly improving.

With this in mind and so many rate changes and reductions, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions and more.   So don’t give them any excuses not to lend to you!  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result.  Try and ensure there’s no missed or late payments as these will also decrease your credit score.  In short, your credit search / score are the basis on which most lenders will initially decide whether to lend to you or not.  The best rates will almost definitely go to those with the best credit scores.  If you’ve not checked your credit file before, it is well worth a review.  Experian and Equifax tend to be the main two providers used in our market with both offering free initial trials and you can find links to these on the AToM website.

Finally, so you’ve done all the hard work and gone through the whole mortgage process with the lender providing you with a mortgage offer and you can now sit back and relax.  Wrong!  Although the mortgage offer has been issued, until you have completed on your new mortgage, the lender can still decline to proceed with their offering.   If you take out any finance, have lots of credit searches done or miss any payments before completion, it could be that the lender will re-credit score you before completion and uncover something that might not be to their liking.  If in doubt, seek advice. 

The Buy to Let sector is seeing rate competition.

With the rental market continuing to be buoyant, and with no signs of declining, the mortgage market is active as lenders recognise the huge demand for Buy to Let (investment property) mortgages.   These can be from a first time landlord, right through to the experienced House of Multiple Occupation (HMO) / Student Let portfolio investor.   Whatever the scenario, there will probably be a lender who will look to assist. 

This sector has also recently been through a price war, rates are competitive and may also come with package deals, such as free valuation and free legals.

But with so many lenders now in this sector, rates may not be the main area of competition any longer.  Some lenders are also reviewing criteria in order to attract new business.  Many lenders historically would not allow first time landlords, anyone earning an income less than £25k, or those who have more than ten properties, to give you a few examples. 

However, we have seen recently that criteria is being relaxed and lenders are competing to attract more business.  As such, one of the main Buy To Let lenders, BM Solutions, has recently removed their minimum income requirements.  This now means there are three or four lenders in the market who no longer require a minimum income.  They will still require proof of income to ensure affordability, should a tenant void be incurred.

Buy to Let properties will often provide a modest monthly return over and above the mortgage payment.  The additional amount can be used to supplement income, or, with flexible mortgages, can be used to “overpay” the mortgage and reduce the term.

Most lenders in this sector will require the rental income to exceed the mortgage payment by up to 125% and, after costs such as managing agents this should leave some spare cash to cover repairs, maintenance and landlords insurance. It should also enable a fund to be established to cover the mortgage payment in the event that there is no tenant in situ for a while. Remember that, whatever the deal, lender terms and conditions will always apply.                

Consumer confidence appears to be high!

If you read the national press, the ‘funding for lending’ scheme appears to be under some scrutiny.  In short, the scheme was designed to provide relatively cheap funding from the Bank of England to a number of lenders as long as they maintained or increased their net lending on mortgages (or business loans).  However, recent reports suggest that since its launch in August 2012, the FLS scheme has seen an overall decrease in net lending of 1.8bn and a £300m decrease in Q1 2013 alone. 

Other reports highlight a reduction in house purchases for April 2013.  But if you delve slightly more in to the figures, the house purchase numbers for April were 53,710, representing £8bn.  This was against 53,674 loans approved in March!  So for the sake of 36 deals, the purchase market is not in apparent ‘freefall’….!  This should not make for newsworthy headlines!  Of course the headlines did not cover that the number of approvals for remortgaging were by up by nearly 2,000 compared to the six monthly average of 28,323 to at 30,313, and £4.3bn in volume. 

From dealing on the front line, I would dare to suggest that consumer confidence in financial services appears to be the highest it has been for some years.  People are selling, people are buying and many are remortgaging!  It’s not just set to one geographical area either, although appears to be more southern based than northern, but it really is ‘all types of mortgages’!  From the straight forward, to the complex, to the commercial shop front, to the credit issues, to the first time landlord with their first investment property, we are seeing many different scenarios.  We’re even having lenders come back to us on a Monday, backtracking on their previous decline decision on the Friday, having thought about the case and it’s scenario over a weekend and now wishing to offer terms!  This really does bring a new meaning to the ‘thinking outside the box’ analogy.  

There are also a few new lenders waiting in the wings to launch and create more competition in an already increasingly competitive market.  One that we know of will be filling a current gap in the market place, and that’s all I’m currently allowed to say!  But more lenders competing for business can only be a good thing to the end consumer.