Be aware of who is credit searching you, and when.

We have had a few customers contact us for a mortgage who have been totally unaware that they have had a number of credit searches carried out following recent searches for competitive renewal quotes on their home or car insurance via Comparison Websites.   I’m sure it will be stated somewhere in the small print, but the customers have researched a number of comparison sites and ended up with a similar number of credit searches on their profile.  This, in a small amount of time can have a marked effect on your credit score, and as such, affect your ability to obtain finance, so always read the small print and be aware!  

With this in mind, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred 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 are 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.

Finally, we are seeing a lot of first time buyers turn to the bank of Grandma and Grandad as the bank 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 those get on 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 grandparent’s 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.

New rules for Houses of Multiple Occupation (HMOs)

Concentrating on Buy to Lets this week as yet more changes are on the horizon!  With effect from 1^st October 2018, new mandatory rules will be applicable to Houses of Multiple Occupation (HMO).  Any property with five or more occupants (not all related) will now need an HMO licence, as the Licensing of Houses in Multiple Occupation Order 2018 takes impact.  

The government undertook a consultation last year designed to help councils standardise living conditions in HMO properties.  It detailed the plans to extend the scope of licencing for HMO properties. 

Currently the licence applies to properties with three or more stories and five or more occupants (not related to each other).  However, it was decided to change these requirements and ultimately increase the number of properties that require a licence.

A minimum size for bedrooms has also been implemented and the guidance will recommend that floor space be no less than 6.51sqm for a single adult and 10.22sqm for two adults sharing.  Any room with less than 4.64sqm is not to be used as sleeping accommodation.

These rules are estimated to affect around 170,000 properties (on top of the existing 60,000 licenced) and landlords that fall in to the new rules must apply for a licence or temporary exemption before 1^st October.   Failure to do so will be considered a criminal offence.

These changes will impact both existing and prospective HMO landlords and full details on how to obtain licences will be available on the relevant councils’ websites, alongside other requirements the individual council may have put in place.

In other news, our good friends at Precise Mortgages have revamped their Buy to Let product ranges and rates now start from 2.99%.  They also allow rental calculations to be assessed on the pay rate on their five year fixed rates, starting from just 3.39% and some products also allow ‘top slicing’.  This means that landlords with three or more mortgage properties, may use their income to assist with affordability on the buy to let property, if the rental income does not quite cover the loan required.  This can be complex, so speak to the experts…

We are probably looking at a tough few months ahead, across all markets and sectors.

Despite Sainsburys Bank, Bluestone, Hinckley and Rugby Building Society, Kensington Mortgages and Secure Trust Bank all reducing rates on their mortgage products last week, things are still ‘interesting’ out there.

We have seen numerous retail outlets and banks recently confirm they will reduce their store or branch numbers as the ‘online v shop front’ takes another hit.   Wonga collapsed, and we’ve seen Countrywide, the UKs biggest estate agent, raising £140m in emergency cash.

As we move in to the final third of the year, I’d say we are probably looking at a tough few months ahead, across all markets and sectors. 

On the plus side, it is encouraging lenders to become more innovative and think about more innovative ways to attract new business. 

Magellan Homeloans has entered the Buy to Let sector with offerings for portfolio landlords, as well as limited company and refurbishment options.  However, the really interesting piece is that they will allow first time landlords to purchase a buy to let, with a professional landlord acting as a guarantor.  This includes Houses of Multiple Occupations and Multi-Units.  We all need advice when it comes to property, so this is a positive move.

Kensington have also launched a 5% deposit product that caters for individuals who may have had a credit blip in the past.  Their rates start from 4.64% for a two year deal and allows defaults over 36 months old and two missed payments to unsecured credit in the last 12 months.  Terms and conditions obviously apply, so seek advice!

With rates so low we have also seen a vast increase in customers looking to consolidate debt and add these to their current mortgage. This can sometimes cause issues. If you consolidate unsecured finance in to your mortgage, whilst your monthly payments may be lower, you may be paying more for your debt over a longer term. 

At AToM, we are independent, and we will happily go through the pros and cons of changing any of your financial details before proceeding to conduct any credit searches or decision in principles. You need to be clear that it’s the right deal for you. If your current deal is still the best option for you, we will suggest you stay where you are.

There are other options rather than a full remortgage.

If you are looking to raise additional funds but are already on an attractive rate with your lender, there are other options rather than a full remortgage. Depending on the amount already lent as a mortgage, compared to the value of the property, some lenders will allow a ‘secured loan’ to be added as additional borrowing, right up to 95% of the property value. 

A secured loan is a 2nd, or subsequent charge which allows the equity in a property to be used as security.  The secured loan is usually repaid over a shorter term than a mortgage, circa 1-10 years, but the term can be longer, although this will increase the amount of interest repaid.   Second charge lenders are also in the midst of a price war.  Many have reduced rates, one or two new lenders have entered the market and rates can now be below 4%.  Rates vary depending on the customer’s circumstances and current level of borrowings.  Make sure you review all options available to you and always seek advice.

Alternatively, your existing lender may allow a further advance.  This would be a separate entity to your existing mortgage and again, will be subject to affordability and so on.  Normally, you will need to have had your existing mortgage for at least six months, before applying for a further advance.

Either of these might be a better and cheaper alternative over a shorter term, than a full remortgage of your first charge.

As I’ve mentioned many times, lenders are looking more carefully at affordability, not just for now but also any potential changes that may affect your income in the next five years. Be ready for some fairly detailed questions when submitting an application!

Finally, you buy a car from a car specialist, flowers from a florist, so for all your mortgage requirements, why buy anywhere other than from your local and independent mortgage specialist?