30 October 2014

Market slowing but rate options on the up!

The market has slowed over the last week or so.  This is surprising as we've seen many lenders reduce rates again, with some being adjusted by a huge 0.7%. The number of products now available is circa 9,000 which is more than it has been for some time.  With many short term fixed rates sub 2%, five year fixeds sub 3%, and even a ten year fixed at sub 4%, the remortgage market should be booming!

However, even with a slight slow down, there are many unusual properties being purchased.  AToM recently assisted with the purchase of a property that had been split in to seven individual flats and where the title has not been split. In essence there was only one title for seven properties.  Normally lenders stipulate a separate title for each unit.  Valued at £1.9m and a loan of £1.4m being required, many of the normal lenders declined their interest.  But, due to the customer being an experienced landlord, we managed to find a specialist lender who would accept the whole scenario. Following an in-depth valuation, confirmation of rental income achievable for each property, and normal underwriting, the lender completed quickly.   This is just one example of many complex and specialist scenarios that pass through our doors each week!

Finally, credit scoring is still creating challenges 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. Fear not, if you want a loan to value of 90% or less and you can prove income, there are lenders who do not rely on a credit score. They manually review and underwrite clean and affordable applications on an individual basis. AToM has access to a number of these lenders so don’t despair if the high street lenders say ‘no’, if you fit the above profile, give us a call to see if we can assist.

23 October 2014

AToM is a Specialist Mortgage Packager & Distributor

Those who know AToM will be aware that, in addition to arranging mortgages for the general public, we are also a specialist mortgage packager/distributor.  We look after and arrange mortgages for other mortgage brokers, estate agents and independent financial advisers nationally.  In fact, our database now reaches almost 9,000 financial intermediaries.

For some lenders, AToM acts as their administration arm, collating information, instructing valuation and processing applications right up to the issue of the mortgage offer. For other lenders, AToM is often allocated a tranche of funds to distribute for them and AToM advertises and controls the administration process.  It could be that the lender requires AToM to pilot schemes and iron out any potential system issues before the products are opened to the general mass mortgage market.  Alternatively to just use our experience and extensive market knowledge to highlight product gaps in the market which the lender can then explore further, if the funding is available!

Any mortgage broker, independent financial adviser or similar, who require these particular offerings, 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 potentially it can be cost effective for the lender.

These can be specialist lenders and not normally household names.  But this also works to your advantage when requiring someone to think 'outside the box' or needing a lender who adopts a more individual approach to each case.

Most high street 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 the usual high street lenders doors will be shut to you. Even your own bank, with whom you’ve been a loyal customer to for many years, may report back that you have a low credit score and the computer says “no”.  Consequently, they will not offer you a mortgage and there’s no arguing with their systems and technology which has, in effect,  made the decisions! 

This is a dramatically increasing scenario.

However, the emergence is with the smaller lenders who will manually assess and carry out a  manual credit search. A human being who makes the decision based on the merits of the application and has the ability to agree (or decline) based on non standard criteria or circumstances.  Don't give up just because someone says 'no' to your initial enquiries, there might be other options out there.

16 October 2014

Think of number one when it comes to your monthly mortgage costs.

SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have dropped to a ten month low and as such some lenders are passing on the reduction through their interest rate offerings.  Just in the last few days we've seen Natwest cut some rates by up to 0.39%, now offering five year fixed rates at below 3% and Halifax also cut selected rates by up to 0.4%.   I suspect others will follow suit in the coming days.  This is great news for the end customer as not only are the lenders in the midst of a rate price war, their funding costs are also lower and thus they can pass on bigger savings to you! 

So with such positive news and some fantastic rates around, it does surprise me that the Council of Mortgage Lenders (CML) has advised that remortgaging figures for August were down 4% compared to Julys figures. 

Remortgaging away from your current lender should not be looked upon negatively!  Many lenders will cover the cost of surveying your property, as well as covering the legal fees in transferring your mortgage from one lender to another.  But most of all, you should think of number one as this could save you money on your monthly budgets and, subject to terms and conditions, this can only be a good thing. 

The CML reported that First Time Buyers and Buy to Let investors were both up in August, by 3% and 13% respectively.

The National Association of Estate Agents also reported that Augusts figures showed that just 3% of all recorded sales were to buyers aged 18 to 30 years old.  This is the lowest level since August 2013 and possibly shows that many First Timers are getting older and just don't have available funds for deposits.  Or are they still struggling to get mortgage finance?  With the options available to AToM for First Time Buyers, with deposits as low as 5%, at an all time high, I'll stick with the former!  Seek advice..

09 October 2014

Secured Loans market is in a period of change

The second charge secured loans market is under a period of change and has been since April 2014 when responsibility for the regulation of consumer credit transferred to the FCA.  But there's also an EU Directive due to be implemented in 2016.  In short, when a customer wants to remortgage to raise additional funds, the intermediary/broker will need to demonstrate the best outcome for the customer and not only look at a full remortgage on a first charge basis, but compare with an appropriate secured second charge loan allowing the customer to keep the existing mortgage.  Although the Directive is still a way off, the FCA principles already apply to firms and individuals so best outcomes and best practice for borrowers are at the forefront of any advice and recommendation.

In fairness, and depending on the reasons for the capital raising, there are numerous examples of borrowers being better off with a secured loan rather than moving their existing mortgage, especially if it's an interest only mortgage.  In addition, those who are self employed with minimal accounts, have historic adverse credit or need a greater flexibility than that offered by first charge mortgage lenders, may have no other option than to look at a second charge on their property. 

So be prepared moving forward, if you want to raise some additional funds on your property, you will be presented with a standard remortgage first charge illustration as well as a secured second charge alternative. With rates now starting from below 5% on a second charge loan, this may not be a bad thing.

At the beginning of October, as mentioned in some previous articles, the Bank of England has enforced capping restrictions to lenders.  Funders will now only be allowed to lend up to 15% of their loan book at more than 4.5 times income.  No one knows the true effect this will have to funds available in the market generally, only time will tell. 

Finally, it is really good to see a new lender coming to market.  Fleet Mortgages, a new Buy to Let lender is set to launch in November.  The management team are no strangers to the market as many have been involved in various lending guises previously and we certainly welcome a fresh outlook and further funding in the market.  I wish them every success.

02 October 2014

Lenders will consider all types of customers.

Over recent weeks, I've been reporting on the apparent 'interest rate war' currently taking place between lenders assisting First Time Buyers, Residential mortgages and the Buy to Let sectors.  But this is also happening in the ‘Near Prime’ arena. I’m calling it ‘Near Prime’, but it has many other names including, Sub Prime, Credit Repair, Almost Prime, Adverse and so on.  In short, it’s the area of mortgages that cater for those who have had some sort of financial issue in the past.

There are many lenders lending in this arena and they will cater for a missed mortgage payment in the last 12 months, Defaults, County Court Judgements (CCJs), discharged bankrupts/IVAs and those who are in a debt management plan.

There’s no denying that this area of the market took a battering back in 2007 as many, many lenders who offered these types of mortgages were shut down or mothballed. However, the regulatory lending restrictions are now more stringent than back then and the new breed (some never really left) have a whole new outlook on the term ‘responsible lending’.  Where there is demand, there will always be supply.

Rates start from the late 2%s and go right up to the early 6%s, depending on individual circumstances. Lenders will lend up to 85% of the property value in the main and will cater for both employed and self employed.

Financial issues do adversely affect credit scores (the normal assessment process used by a lender to decide whether to lend or not), and as such, some Near Prime lenders will manually review on a credit search, rather than resort to a credit score.

Of course, a lender will only consider those who have endeavoured to right the financial issues of the past. They will not entertain those who continue to flout good financial management.

Finally, the Near Prime lender is a ‘stepping stone’. Most issues tend to disappear from a credit search after a few years. Therefore, the aim would normally be to cater for current requirements on a short to medium term basis with the longer term outlook being structured to enable the customer to get back onto high street mortgage offerings, as quickly and cost effectively as possible.