26 June 2014

Life does not end at age 70!

You may be surprised to hear this, but life does not end at age 70!  This is despite a majority of mortgage lenders requiring full repayment of their loans at this age.  Normally, a high street lender will allow a mortgage term to last until the applicants usual retirement age.  This used to be 65, officially it's now 67, but the reality is it can be much later.  As such, most lenders increased their maximum age at the end of mortgage maturity to age 70.  However, we all know that people are working a lot longer now and repayment of such a large amount of money may not be possible in these restrictive conditions.  So the option is to raise further finance to repay the original loan or sell the property.  Thankfully, the first option is less onerous as it used to be.  Many non household name lenders will look at lending to customers a lot later in life, assuming the customers can prove  their continued ability to pay.   This can take the maturity age up to age 80, 85 or even 90 and above.  If the customer has a good amount of income, a good amount of equity in the property and can satisfy the lenders affordability requirements, then a lender should be happy to lend.  This almost demands that you seek specialist advice. 

There are a number of mortgages available to those over retirement age.  We’re seeing a lot of first time buyers turn to the bank of Grandma and Granddad as the money well of Mum and Dad appears to be running a little dry!  There are various ways in which the older generation are helping the first timers.  Some are gifting deposits, to help them on to the property ladder.  With most products, the larger the deposit, the lower the interest rate. Others have agreed to the placement of a collateral charge on the parents or grandparents property.  This gives a lender more security and maybe a better credit risk rational to the deal, than originally might have been the case.  In some cases the parents have joined in to provide additional income support and bolster the overall  application.  Whichever way required, always explore the options and have a conversation with a professional as there may just be an alternative way to do the deal.

19 June 2014

Budget planning - essential to obtaining mortgage finance.

The Chancellor has recently given the Bank of England new powers to restrict Loan to Incomes and also Loan to Values.  In short, we’ve seen income multiples restricted for loans over £500k recently by a couple of lenders , to a maximum of four x income.  But the BoE now has powers to force lenders to do this.  If the BoE thinks lenders are lending too much or at too much of a risk, they have the powers to restrict the lenders offerings both on loan sizes offered to the customer or loan sizes against the value of the properties.  Personally, with the recent Mortgage Market Review (MMR) implementations across the market, these new powers could be deemed an unnecessary distraction to the lenders, especially as MMR already covers these areas and should naturally stop unaffordable loans being issued.

With MMR in mind, we are still seeing long delays across the market in customers obtaining appointments at local branches, as well as general processing delays.   Some lenders are not taking appointments for three or four weeks, are ten working days behind on processing, and we have experienced recent telephone calls taking over an hour to receive a response!  These are just on the broker side so heaven knows how customers are faring!

With all new mortgages, a budget planner will be required.  So make sure you know and can advise exactly how much you are spending on your lifestyle.  Especially make sure you know your monthly costs on food, household expenses, travel, pension and saving contributions and other likely costs such as hobbies, going to the gym, lottery direct debits and more.  Every lender will review your ability to afford your new mortgage over coming years so all direct debits and most entries on your bank statements or credit report will need to be advised.  This is so the lender can make a viable stress test on future rate rises and ensure that you will still be able to afford your mortgage at that time.  Yes, maybe there is a little guess work, but do make sure you disclose all monthly expenditure as the lender will normally want to review your bank statements and will see it all anyway!

12 June 2014

Rate rises with only one hours notice!

A number of lenders have increased rates over the last few days with one in particular only giving us one hours notice to save the existing rates for potential new customers.  Normally a lender will send round a notification advising of the impending rate increases and the timing for withdrawal of the current product offerings.  We will then need to submit a full application and pay any fees to secure the existing rates.  Most lenders will give twenty four hours notice, some a couple of days.  But one high street lender only allowed one hour to secure their rates. This meant that they did not see a 'spike' in business as people rallied to submit cases as this left no time to secure the lower rates.  In the main, these rates increased by 0.2%, but an increase is an increase.  And if a customer was not able to be contacted and engage within that hour, then the rate was lost!

Product of the week comes from Virgin Money who have launched some superb four year fixed 2.99% rates (4.4% APR) for a limited time.  For remortgages these also have free valuation and legal costs.  The lender fee is also low at just £999 and customers can overpay up to 10% per annum penalty free.   Max loan to value is 60% and the rate increases to 3.29% at 75% borrowing.

The Nationwide House Price Index suggests that house prices increased in May 2014 by 0.7% and are 11.1% higher than in May 2013.  The report also advises that the average house price now stands at £186,512.

Finally, Natwest has decided to follow the LLoyds Banking Group in capping income multiples for all loans over £500k.  Recently the lenders would have looked at a customer's affordability rather than an income multiple.  However, with immediate effect, the maximum any customer will be able to borrow with these lenders is 4 x their income for all loans over £500k.  Both have highlighted London as their main reason for changing their criteria.  Specifically that wages are not keeping pace with house price growth and forced inflationary pressures have forced these required changes...

05 June 2014

Nearly 8,000 mortgages products now on offer.

There are now nearly 8,000 mortgage products on offer.  This is a substantial increase from the same time last year and gives a good indication that lenders are actively looking to assist clients with product choice.  The majority of those visiting AToM are looking for a longer term fixed rate, although some are still happy to take a short term tracker rate and are confident that rates will not fluctuate too much in the coming months.  There are some good products with minimal set up costs that have no early redemption penalties at all.  So if you wanted to switch products later on, to a fixed rate for example, this could be done (be aware that most lenders charge product fees on fixed rates).  Some lenders even offer the ability to do both in the same mortgage offering.  Lenders are innovative when it comes to attracting a certain type of business and clientele!  But do remember that tracker rates can go up, as well as down.

With all mortgages, lenders will look closely at an individual’s recent payment profile (to credit cards, loans, mortgages, etc), how many recent exploratory credit searches have been made by financial institutions and more.  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 is the basis on which most lenders will initially decide whether to lend to you or not.  If you’ve not checked your credit file before, it is well worth a review.  Experian, Equifax and Noddle tend to be the main providers used in our market with some offering free initial trials and you can find links to these on the AToM website.

Finally, we are looking to recruit again.  Are you in the mortgage market, or have experience and fancy a new challenge?  If so, we would like to have a chat.  Pop in to the Carfax office, or please have a look at the job descriptions on our website to find out more.