Competition in the market is fierce..

I've mentioned a number of new lenders launching in to the Residential and Buy to Let sectors recently, and a number of new lenders are lining up for launch over the coming months.  It is an exciting time, not just because rates are so low and activity is increasing, but because lenders are now looking at new market areas and criteria enhancements.  One such lender recently launched in to the Buy to Let sector, and whereas the normal requirement is for customers to have two or three years self employed history, this lender has no minimum term requirement at all.

Whilst rates remain low, competition in the market will remain fierce and this changed approach has become apparent across all sectors of the market, including both Bridging and Commercial.

Bridging Finance (now also known as short term lending) is money to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction. The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold - usually when downsizing: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged.

There are a myriad of other reasons for which short term lending can be applied and each application is looked at on its own merits before a lender will agree to assist. The best way to look at this is as a means to an end. These lenders will need certainty on the exit route (how will they get their money back?) and they will always insist on an agreement being in place from a traditional mortgage lender to provide a mortgage, at a given time and once any requirements have been fulfilled. So, short term lending is designed to fulfil the need or desire to act quickly. We have seen funds drawn in 48 hours from application! Beware though, this type of lending and associated fees does not come cheaply and it makes sense to exhaust all other channels first!

Commercial loans tend to be looked at by specialist lenders, geared more towards high street premises/shop fronts, development opportunities, pubs, conversions from residential to multi use properties right up to multi-million pound office blocks and  hotel complexes.

"Best time ever to take out a mortgage" say the Nationals

The national press were spouting some fantastic headlines last week.  Especially one who ran with a front page stating 'Best time ever to take out a mortgage'!  This of course was fantastic news for the lenders and also mortgage brokers, who were referenced in the article.  

But is it really the 'Best time'?  Ten year and five year fixed rate offerings are in abundance and the lowest I can remember.  What we are also seeing, and have done for some weeks now, is a fantastic rate price war on the high street.  For the right deal, right income, right borrowing percentage of the property value, we're looking at short term deals only just over the one percent mark.  If we'd have been told this would happen a year ago, we might have laughed in disbelief!  In addition, the Bank of England governor in a recent speech even alluded to a possible rate cut after suggesting inflation will become deflation, causing yet more stir across the market and pundits to push back rate rise estimations even further, well in to 2016.

So, there seems to be no right or wrong answer to the question ‘is it the Best ever time to take out a mortgage?'  There is only what is right for your individual circumstances and budgets.  One thing is for sure, rates will change and they are so daily currently!

Finally, AToM are delighted to announce the launch of a new specialist lender, Foundation Home Loans. With just a small number of launch partners, FHL will be offering Buy to Let products across the market with a number of niches including no minimum income requirements, some credit history issues considered, max age 85 at the end of the term, no credit scoring and no early redemption penalties on some products.  This is an exciting time and we welcome FHL to the market and look forward to working with them.

Falling in love.....with long term fixeds?

With ten year fixed rates now below 3% and five year fixed rates falling below 2.25%, the market is awash with activity.  But is the nation really falling in love with long term fixed rates?  Right now, I'd say no.  Despite valentines day being around the corner and Fifty Shades of Grey ready to smash all box office records this weekend (don't get why!?), people are ignoring the romance of their finances and are happy to let their biggest monthly expense carry on at a gamble and remain loyal to their current (lending) partner.!

It's surprising how many people don't review their mortgage rates frequently.  Many still believe that rates can drop further and some just really can't be bothered with the hassle to change.  The reality is that we are on a knife edge and rates are predicted to increase, but the mortgage pundits are now suggesting 2016 is more of a realistic expectation for a rate rise.  As such, many are now taking advantage of the opportunity to remortgage with a free valuation and free legal costs but are chancing their arm with a short term tracker rate (lower rates than fixed, but can fluctuate).  Whatever your risk appetite, the options available now are likely to be better and cheaper than sitting on a lenders standard variable rate or reversion rate.  Don't wait until tomorrow, seek advice and save!

Another reason people don't switch is because they think they are too complex to be helped.  In a rapidly expanding market with highly competitive rates, many lenders have looked at other ways to assist customers rather than just pay rates.  This can include criteria such as types of property, types of customer, income make up, guarantors, charges on more than one property and so on.  The likelihood is that you are not alone in your requirements and there will be a lender out there willing to assist and who probably needs you just as much as you need them!   

Small deposits, LTVs and credit scoring

You may have heard the term LTV a number of times when it comes to mortgages.  This stands for Loan to Value and effectively the definition is the amount you are borrowing compared to the value of the property.   This is especially key when a lender is a assessing your mortgage, as a higher LTV will create more of a perceived risk to the lender.  Mainly due to the fact that if house prices dropped sharply, the lender may not get their full loan amount returned, should they need to repossess the property for whatever reason.  Some lenders will charge a separate insurance for such high borrowing, normally called a Mortgage Indemnity Guarantee or Higher Lending Charge.  As such, you might find that a person who is borrowing 95% LTV and just investing a 5% deposit will attract the higher mortgage rates versus someone investing  a 25% or larger deposit.  Usually these are stepped, so up to 60% LTV, rates will be around 1% cheaper than those borrowing up to 70% LTV.  Then in turn these tend to be 1% cheaper than those borrowing up to 80% LTV,  and this will be cheaper than the next 5% LTV increase, and so on right up to 95% LTV.  So, in short, the more you can save for a deposit, the lower the interest rate you will probably receive from the outset.

This also is the same with credit scoring.  Credit scoring is one of the most widely used means to assess a customers ability to obtain a mortgage.  If you have had a number of recent credit searches for home insurance, car insurance, mobile phones, etc, this may affect your ability to achieve the best rates available to you.  In some cases it might also affect the amount of loan offered to you.  So make sure you have seen you credit report (experian, equifax, noddle), and know what appears on there.  This is your financial history to any lender and should be treated as your CV to a prospective party!  Try and keep payments up to date as anything within the last six years will probably be visible and may affect your ability to borrow.  However, if you do fail a lenders credit score, don't give up.  There are an increasing number of lenders willing to assist (depending on the nature of the decline) and they will also manually assess. A human making the decision, rather than a computer.