31 March 2016
Great to see lenders are seriously looking to assist first time buyers positively. One example is the Saffron Building Society, who have launched a five year fixed rate under 4%, with only a £495 lender arrangement fee. Available with just a 5% deposit, this is an attractive product to those looking to get their first property. In addition, the lender will manually assess each application, rather than rely on a computer score based decision.
Contractors have also been targeted. For those working on fixed term contracts, who have a minimum of 6 months left on the current contract and a good history, it is possible to get up to 90% of the property value. In the main, the lenders will work on daily rate, multiplied by five days and forty eight weeks to work out income. This is then used in the lenders affordability calculations. Some lenders have no early redemption penalties so the customer can move away at any time.
In our heavily regulated marketplace, lenders main area in making a decision whether to lend, or not, is on your ability to pay the mortgage today, and also in the future. It's difficult to detail when I have minimal words, but in the main, lenders will stress test all mortgages against a possible rate rise and underwrite the customers based on their ability to pay at the higher rates. The regulators want lenders to ensure the customer can afford their mortgage for at least the next five years. So, for example, a shorter term deal may be stress tested at a pay rate of 3% plus 3 percentage points higher than the prevailing rate at origination, so in this case 6%. Whereas a five year (or longer) deal may be stress tested against the pay rate, which might only be 3% in current climates. This can make quite a difference when it comes to calculating the affordable loan amount over the first five years of the loan, subject to the lenders terms and conditions. Longer term fixed rates can also be good for the end consumer as they should get the loan they want, but also the monthly payments remain fixed for the next five or more years.
There are a number of attractive five year deals, some six and also ten year deals currently available. Potentially great value if you know your plans for the longer term and prefer to fix your monthly payments.
24 March 2016
The good news is that, despite the launch of a huge number of new regulations (Mortgage Credit Directive, MCD), in an already heavily policed mortgage market, we are still trading and lenders are still offering mortgages! Phew! Two to three years of preparation has paid off. I am surprised such a huge change in our world was not covered by the national newspapers. But then, the last big change in 2014, called MMR (Mortgage Market Review), didn't get picked up until days before launch and not much coverage there after. Originally, that was to stop the crash of 07/08 happening again. But the new MCD rulings bring us inline with European regulations. Don't get me wrong, there are some worthwhile new rules, but preparing for a constant barrage of new rules over the last three to four years has been a large distraction (and extremely costly) and may have hampered the markets ability to innovate and provide mortgage options and help to customers. Let's hope we will now see an increase in volumes and offerings from the lenders.
Following the budget, not too much to report that we didn't already know. Yes we say goodbye to the Money Advice service, but I can't say that I'm sorry to see it go. There's plenty of impartial and independent advice available across all sectors and the money that will be saved can be used better elsewhere.
The new Stamp Duty Land Tax (SDLT) changes are still set to confuse people. In the main, a 3% additional fee will apply to all second properties or investment properties (Buy to Lets). But the confusion will be around the 'main residence' definition. In the pre budget release of the rulings, if you decided to rent out your current property and purchase a new one, this would have inherited the additional surcharge. However a new list of complex rules have been issued and you need to make sure you understand all the rules around the second property STDL so as not to have a 3% surprise fee to pay at a later date..
17 March 2016
Very rarely do I promote AToM in my columns, but this week is an exception! I wanted to say a huge thank you to everyone who has voted for AToM over the last few weeks in two national consumer magazines. I'm delighted that AToM have been short listed in the top six, for 'Mortgage Broker of the Year' in the Moneyfacts Awards 2016 and also 'Best Specialist Mortgage Broker' in the What Mortgage Awards 2016. Two huge accolades for our family run and owned company (now entering it's 25th year!) and great recognition to our hardworking and fabulous team of staff. We need further votes though and we would be grateful for your assistance in voting AToM as a winner. Please visit the websites to find out more. Thank you in advance.
In other news, next week is a big one for the mortgage industry as new European Directives are embedded into the
market. We are without doubt the most heavily regulated market, probably in the
world! Some would say too over
regulated, however we have to live with it, take the new rulings on board and
try to make it as straight forward as possible for you, the end customer. There's already plenty of jargon and
paperwork when arranging your mortgage.
Whether it be direct with the lender, or via a whole of market mortgage brokerage,
you need to make sure you understand everything you are taking on, so don't be
afraid to ask.
Finally, there's been quite a bit of movement on product criteria and innovation over the last week or so with various lenders. Examples include Leeds Building Society who have launched a ten year fixed rate at just 2.75%. This product comes with a £1,499 fee and is available to loans up to 65% of the property value. Whilst Saffron Building Society has launched a 5% deposit product, fixed for five years with the rate slightly under 4%. With a manual assessment, rather than a credit scoring system, this is an ideal product aimed at First Time Buyers. Obviously both products have terms and conditions that need to be reviewed, but many lenders like these are looking at ways to gain new customers, as well as increasing their market share!