Moving forward to the challenges ahead.....and Happy Christmas!

This time last year, I was predicting that we’d have got over the shenanigans of Brexit and be moving forward in to the unknown, yet positive, challenges that lie ahead. 

How we can be no further forward still is beyond me.  But at the same time, I can’t believe the year has gone and I’m writing my last column for 2019!

The mortgage world has been pretty flat with figures estimated to be only a slight increase on 2018.  On the upside, choice of mortgage product is at it’s all time high and rates are incredibly low.  Great for the end consumer!

The festive period can be a time for reflection.  It can also be a time when many people start looking at new properties to move to. Or they may already be committed and are packing ready for the removal lorry, or they take time to review what mortgage they have and question if there is anything better out there. That is of course, if they are not simply taking a holiday, and why not?

Whatever your plans, it makes sense to review your current mortgage deal and see if there is a better option and perhaps look to secure a competitive rate for a few years. Whilst I always err on the optimistic side of a rates argument, we are entering a truly unknown era as we plan for Brexit (again) and there is no history to prompt what the immediate and longer-term implications will be.

Technology was due to take over the mortgage market in 2019 and despite millions being spent, this has only had a small impact.  Circa 72% of all mortgages generated are still via brokers/intermediaries.  You are entering into the biggest debt of your life and questions need answering.  You just can’t beat the human touch…. for now.   Many lenders have yet to evolve with the digital era and those who will win will be the ones offering quality technology, but also the human impact for those who prefer or need it.

Finally, I really appreciate you reading my column!  I’ve tried to provide an unbiased insight to what happens in the mortgage world, with a little bit of humour along the way!

A huge thank you to everyone who has instructed impact sf to source and arrange their mortgage during the past twelve months. It has been a fantastic year, including a brand name change and a new additional office in Barttelot Road!  We have a fantastic team and they are a truly hardworking and knowledgeable group of people.  Best in the business!

On behalf of all the staff and directors at impact specialist finance, we wish you and your families a very Happy Christmas and a Relaxing and Prosperous New Year!  Bring on 2020!

Which mortgage calculator do you use?

There is a wide range of mortgage calculators and affordability calculations available which will help you to find out ‘How much can you borrow?’.  However, the only true response will be from the lender and normally only once they have carried out a credit search and reviewed your credit score.  Only a few years ago, the loan offered could easily have been up to 8 x income with the minimal of fuss.  Times have changed, and rightly so!  Those were times with little control and the lengthy recession bore testament!

Today it is so much more intense!  For example, a lender will require to know your monthly budget spend figures, right down to every direct debit on your bank statements, including council tax, insurances, mobile phones, and possibly lottery payments and gym membership!  From these monthly outgoings, the lender will look at affordability and decide from there what mortgage amount might be available to you. It maybe restrictive depending on your monthly outgoings, but it can also be very generous depending on what little outgoings you have!   The lender has a duty to make sure you can afford your mortgage today, as well as when rates rise and specifically to it being considered affordable over a 5 year period.

 

But this also means that what was once an affordable mortgage may suddenly become unaffordable due to the perception the lender has on consumer spending habits, both historically and projected for the future.  

We have seen the phasing out of income multiples and the introduction of affordability models.   So, no more straight forward 4 or 5 x income discussions.  The amount you can borrow will depend on your monthly net income against expenditure and living costs.  However, this also works positively for the right loan to value, right affordability and right customer, as lenders are willing to offer a little bit more. 

With the increase in requirements, the time taken in research prior to recommendation for a suitable mortgage product has also increased, as have the lenders own underwriting procedures.  So, beware if you are in a rush!   

Lenders to help those classed as 'mortgage prisoners'

The Financial Conduct Authority recently issued its statement around those it considers to be a ‘mortgage prisoner’.

It is estimated that around 140,000 people with mortgages are currently classed as mortgage prisoners (although some have quoted this to be as high as 500,000).  This means that the customer could be with a lender who is no longer active, or a lender who has ‘bought’ a number of customers from other lenders but who does not offer additional mortgage products once the customers current incentive (fixed) rate period comes to an end.  So, effectively, the client will sit with the lender on their standard variable rate, normally a lot higher than other available incentive rates, and because of various reasons, they may not be able to move to another lender.  This could be due to their loan to value (amount borrowed against the value of the property), or maybe that particular lender at the time had attractive, exclusive income multiple calculations, which are no longer offered, or new and stricter criteria no longer enables them to change lender. 

The regulator is seeking a way forward.  As such, one area of the statement confirms that mortgage lenders can choose to carry out a modified affordability assessment where the consumer:

– has a current mortgage

– is up to date with their mortgage payments

– does not want to borrow more, other than to finance any relevant product, arrangement or intermediary fee for that mortgage

– is looking to switch to a new mortgage deal on their current property

In short, this means that there will be minimal and relaxed affordability checks and the lender must confirm that although this may result in a better rate for the customer, there may be potential risks as this is different from the normal affordability checks and assessments carried out.

Great news for those stuck with historic lenders on high rates.  But will only work if all lenders are encouraged to offer this option as it’s not mandatory.  As this can be quite complex, and only certain lenders will offer this assistance, speak to your local independent mortgage brokerage to find out more and seek professional guidance.

A large portion of the UK adult population has experienced credit problems..

The festive period is traditionally a time for giving, but for some people - especially those with a family to support - it can prove to be a difficult one to successfully manage. It is a season where we see more people, from all walks of life, seeking some form of supplementary borrowing, a factor which can generate additional monetary worries and financial stress, perhaps even leading to adverse circumstances down the line.

On a positive, more forums and sources of advice/information are readily available for people to discuss topics which may have previously been considered taboo and difficult to address. Although money matters and financial education are areas where there is certainly still room for plenty of improvement.

One recent lender issued a study to brokers on the world of adverse credit to encourage greater understanding and more open discussion around this subject matter. After all, this is an area which is not going away anytime soon. According to the lenders research, a large portion of the UK adult population has experienced some form of adverse credit. 15% of all participants surveyed reported that they had previously missed payments on credit commitments; had CCJs, defaults, secured or unsecured arrears registered on their credit file; or had entered a debt management plan (DMP) in the last three years.

The research outlined that adverse credit is most common amongst people who are the prime age to be homebuyers and remortgagers. The majority of people who experienced adverse credit in the last three years are said to be aged between 35-44 (43%). This compares to 33% who are aged between 18-34, and 23% who are 55+. It’s also important to point out that it’s not just the less affluent proportion of society who pick up adverse credit on their record. The report added that 61% of the adults who have experienced adverse credit in the last three years and are planning to buy a property in the next 12 months are associated with a higher income.

There are plenty of specialist lenders who will consider those who have had all types of credit issues, subject to terms and conditions, and rates are probably a lot lower than you would think.  As always, seek professional advice from the specialists.

Complex deals are considered depending on the clients scenario

Actually placing a mortgage with a lender is not normally difficult. The hardest part, in the recent climate, is getting the mortgage through to completion!

However, a number of lenders are happy to think outside the box and take a manual approach to lending.  One recent example was with the Harpenden Building Society who helped complete a £1 million interest only deal on a new build flat for a client in their 50’s.

The transaction was for a very upscale 19th floor new build property situated on the South Bank of the River Thames in London. It had a valuation of circa £2 million with some units in the development having restrictions to borrowers over 55’s and was above a commercial property.

As this was also over a twenty year term, this took the clients age in to retirement.  However, as the property was to be let out, the building society took this into consideration, along with their residential property and allowed the deal to proceed.  This was on the basis there was enough equity in the properties to repay the lenders loan if they needed to.

This example highlights the value attached to many building society lending propositions, in terms of their flexibility and approach to more criteria-based lending. 

But as with all funders, try not to give lenders an excuse to decline your application or refuse to lend to you. Try to pay bills on time, don’t miss payments, and especially not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision to lend to you. Lenders can re-credit search/credit score you right throughout the whole mortgage process.

Finally, we are seeing general processing delays across the market.  Some lenders are up to ten working days behind on processing and we have experienced recent telephone calls taking over an hour to receive any kind of response!  These are just on the broker side so who knows how customers are faring!  So, speak to your local (and long established) independent and whole of market brokerage and let them take the stress away from you.

Your mortgage broker should 'get to know you'...

Arranging a mortgage can take time.  But actually, the process, regardless of whether you are a first time buyer, home mover or simply re-mortgaging, will be roughly the same.  On any new purchase, the selling agent will seek to agree a number of deadlines with you, including the arrangement of mortgage finance. At this point you can shop around and should make sure that you speak to an independent mortgage brokerage who will assess your overall financial position and discuss your mortgage requirements with you.  Advisers are required to provide you with an Initial Disclosure Document detailing who they are; who regulates them; their scope of permissions; whether they are restricted to a small lender panel or ‘whole of market’; any fees and costs involved including any charged for advice or consultation.

A good advisor will complete a financial fact find ensuring that they fully ‘know and understand their client’s financial position and requirements.’  This is necessary before any ‘advice or recommendation’ can be provided.  Be patient as this process can be lengthy.  It is in your best interests however, ensuring that you receive the best possible advice designed to meet your personal mortgage needs and requirements. Once you’ve agreed the best mortgage for you, a decision in principle (DIP) will be completed, usually online with the chosen lender. This involves brief personal details, income disclosure and a credit search. Be wary here as too many credit searches will have a negative effect on your credit score.

DIP decisions are normally instantaneous.  Assuming success, it is then up-graded to a full application. Payment for survey is made (sometimes free) and the valuer confirms to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more detailed in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost. That said, for older properties it should be considered a worthwhile investment as it could save you thousands in the long run.


The chosen lender will require information on income, identity, proof of residency as part of their due diligence requirements.  Assuming no issues arise, a mortgage offer should be issued. Then, subject to the solicitor’s conveyancing process, you are now on the road to completing your mortgage process.

Don't be pressured to make a mortgage decision.

Some mortgage lenders are sending out letters to those coming to the end of their product term offering them new rates, but giving them a time deadline in which to switch.  We had one customer recently who was four months out from their current rate changing from a fixed rate and moving on to the lenders Standard Variable rate.  They were offered some great new rates to stay with the lender, but the way the letter was worded, suggested that there was a deadline of just two weeks in which to accept, even though their current product wasn’t changing for four months!  This is not acceptable, no one should be pressured to accept a deal.  What if rates decrease in the next three months?  You’d be annoyed.  Read the small print, do not panic and get expert advice. 

We all know life doesn't end at age 65-70 and neither should it on the high street!  Often, retired people have managed their finances successfully over the years and enter retirement mortgage free.  At the same time, many, whilst having no mortgage, also suffer from reduced income and there is a saying in our profession that it is not always wise to have everything tied up in bricks and mortar and yet have nothing to spend.  Others may wish to continue their mortgage past normal lender retirement age, whilst they may still be working.  There are schemes where equity can be turned into a mortgage (not necessarily equity release) and where off-spring may be able to assist with the repayments in order to secure and protect their inheritance whilst also ensuring a comfortable retirement for their parents.  This is not right for everyone, but it is certainly worth talking to a qualified adviser to review all possibilities.

And finally, do you look at your financial budgets frequently?  A report from a well-known credit referencing agency has suggested that over 78% of mortgage people surveyed are not currently budgeting for a rate rise.  We all know rates will rise at some point, probably after Brexit now, but nobody knows when this will happen!  Many people asked did not know how much a rate rise would cost them on a monthly basis, despite many respondents believing rates would rise over the next twelve months! A 1% rise on a £100,000 mortgage can increase the monthly payment by as much as £83.  As we go in to further months of uncertainty, and especially with regards to the cost of funding within the mortgage market, do make sure you are ready for all eventualities.

Don't be loyal to your current mortgage provider when rates are so low, think of number one!

It really appears to be a race to the bottom!  In the last few weeks, we’ve seen five year fixed rates available from 1.45% and two year fixed rates starting from just 1.19%.  Obviously, terms and conditions apply based on individual circumstances, but if you’re looking to change your current mortgage, use the uncertainty across the economy (and country!) to your advantage!  Not only are there some great rates to be had, but if it is a re-mortgage, a number of lenders will also cover your legal and valuation costs to transfer you over.

In addition, lending volumes are up!  According to UK Finance, mortgage lending (gross) in July 2019 totalled an estimated £26.1 billion, an increase of 2.9% on July 2018 and the highest since March 2016.

The Financial Conduct Authority reports that 5.5% of mortgage lending in Q2 2019 was for over 90% of the property’s value.  There are now several lenders who will consider 95% loans, so just a 5% deposit, if you know where to look!  

UK Finance also confirmed that 65,350 loans were approved for house purchase for first time buyers and home movers in July 2019.  This was 3.6% higher than the same period last year. The average (mean) loan approved for house purchase was £174,914 for first time buyers (up 2.6% on July 2018) and £231,603 for home movers (up 3.7% on July 2018).

Nationwide estimates that house prices were unchanged in August 2019 but grew by 0.6% against the 12 months before.  Whereas Halifax reports that they grew 1.8% in the year to August 2019 and that the average UK house price in August 2019 was £233,541.

Finally, when asked why people do not switch mortgage providers, the general response is because they think they are too complex to be helped.  In a 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 (self employed, etc), 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...

Buying at Auction, with short term finance

Auction purchases can be a great way of buying properties at a discount and potentially achieving quick equity growth. Typically, a property will be listed via an auction because it may be uninhabitable (think no kitchen or bathroom) or it may be that the vendors need to realise sale funds quickly and are prepared to sell the property at below market value. Buyers typically exchange contracts and pay their deposit at the auction with a requirement to complete within 3-4 weeks. The condition of the property, and the timescales required, often rule out using an ordinary mortgage.

A recent example from one of our lenders, United Trust Bank, revolved around two brothers.  They had received a cash inheritance and had decided to use it to launch careers in property investment. Both were tradesmen and having completed many refurbishments for clients, they were keen to find a property they could refurbish themselves and sell on for a profit.

They visited several auctions to gain an understanding of the process and after some solid research on a particular area, decided to bid for a semi-detached house that had been left empty for a number of years and fallen into minor disrepair. They first went through the legal pack and confirmed there were no serious underlying issues with the property. Then, after running the bridging finance numbers ahead of the auction, they successfully secured the house and paid their 10% deposit with some of their inheritance.

The auction house required the sale to be completed within 4 weeks and after a quick valuation, the brothers were able to draw the bridging facility to complete the purchase well before the deadline. The brothers had the funds to complete the intended refurbishment works.

Although light in nature, the improvement works were designed to bring the property up to an excellent standard. The works were completed quickly and within budget.

The short term bridging finance enabled the brothers to acquire an uninhabitable property within a tight deadline. In addition, the typical 12 month term, gave them time to complete the works and properly market the property to achieve their desired selling price and a successful start to their property investment career.

Such an example is not unusual and is one that can be reviewed by a number of specialist lenders.  But as always, seek professional advice and review all options available to you.

Buy to Let trends and Landlord confidence.

At the Property Investor and Homebuyers show at the London ExCel last weekend, it was a great opportunity to talk to professional landlords, as well as those looking to take their first steps onto the Buy to Let sector ladder.

With many changes and increases in taxation on profits being recently introduced along with licence requirements for houses of multiple occupation, minimum size requirements on rooms, and minimum standards for energy efficiency, etc, the Buy to Let sector has taken quite a beating! 

One of the main specialist lenders in this area, Kent Reliance, recently issued their Buy to Let Britain Report, edition nine, which looks at Buy to Let trends and the sectors confidence.

The report suggests that Brexit uncertainty and Government intervention has subdued the growth of the Private Rental Sector.  However, rents are rising at their fastest annual rate since 2017, climbing by 1.3% to £896 pcm.

Despite landlord confidence falling to it’s second-lowest level, rents are outpacing house prices with average yields rising to a two-year high (4.5%).  Yields in London are at their highest since 2015!

The report continues stating that remortgaging activity accounts for three quarters of mortgage lending in Buy to Let as landlords look to lower costs and fix mortgage rates.  Whilst 72% of all Buy to Let mortgage applications for purchasing a property are now made in a limited company name.

Since the Prudential Regulation Authority stress test rules came into effect in 2017, lenders have to work out affordability on a Buy to Let mortgage based on the rental income achievable from the property and stress the product term over a five year period, often at 145% of a nominal rate of 5.5%.  Lenders interpret the rules differently and differentiate between a Buy to Let in a personal name compared to a property brought in a limited company name. 

So, if this is an area you are looking at moving in to, seek advice (and especially tax advice) as buying in a limited company name and over a five-year fixed rate, could allow you to achieve a mortgage loan substantially higher than against in your personal name and a based on two year mortgage deal.  Terms always apply and read the small print!

Your mortgage scenario is not out of the ordinary to us!

You might think that your scenario is out of the ordinary and maybe a lender won’t look to assist you.  And you might be right, if you are purely looking at the mortgage lenders on the high street.  But we all know that not everyone fits this ‘ideal client’ picture.

Complex scenarios are on the increase and some of the smaller, more agile lenders are looking to help you.

Some lenders have recently made some criteria changes that include:

-        4 applicants and 4 incomes!  The lender will now accept using 4 incomes on an application.  This is 4.49 x the two highest salaries and then adding one each of the remaining two.

-        Joint Borrower / Sole Proprietor.  So you need Mum and Dads help in getting your first mortgage?  Not a problem.  Lenders will allow you to apply jointly with blood relatives, from both sides if needed, yet you remain the sole owner of the property.

-        Lending into later life – applicants are now catered for up to age 95!  Equity release is not always the right solution and lenders are now offering normal mortgages to those who fit their criteria with regards to affordability and right loan to values.

-        In probation?  Not a problem.  Some lenders will consider.

-        Foster care income?  Ok, this is considered if you have 12 months history

-        Secondary income / Zero hours contracts / Newly Qualified Teacher in first contract period – all considered.

These are just some of the benefits of using an independent mortgage brokerage and especially if they are ‘whole of market’ and have the ability to deal with any lender and are not restricted to a small panel of lenders.

These lenders may not be household names, but you’ll probably find they are extremely helpful and will look at most scenarios, manually, with no credit scoring and have an appetite to lend! Most importantly, their interest rates are mostly very competitive too and make the right ‘impact’!

Shared Ownership popular outside of London

Help to Buy has benefited from an increased profile in recent times (probably due to the impending closure date!) and this has helped more FTBs recognise its attributes – which is a good thing - although it’s prudent to point out that it should not be considered an all in-compassing solution.  And, on the flip side, despite this rise in lending prominence there are still pockets within the market where it can prove valuable for a certain type of borrower which often goes overlooked.

I believe this type of product is seen by most borrowers, as being one which sits squarely in the domain of mainstream or high-street lenders. Meaning the role of specialist lenders can often go ignored, which is a shame. There are specialist lenders who can provide Help to Buy solutions for borrowers with an adverse credit history, IVA’s or even bankruptcy issues, and this is an important part of the scheme which we tend to hear very little noise around (T&Cs obviously apply!). 

The other area we are seeing increased enquiries from, especially more locally with the amount of building works taking place, is Shared Ownership.

Shared Ownership Schemes are normally provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

According to research by the Leeds Building Society, this is rising in popularity outside of London.  The report suggests that the South West has seen the greatest rise in the use of shared ownership between 2009 and 2018.  This was followed by the East Midlands and the West Midlands.  London saw the largest decline, falling from 34% to 13% over the same period.

The specialists might not be applicable for everyone, and still form a small proportion of the overall lending figures, but they should be playing a bigger role in supporting more complex or low credit scoring borrowers get a foot on the property ladder for the first time or even back onto it after falling off.

Be prepared in advance of applying for a mortgage.

When applying for finance, if you don’t appear on the electoral roll or don’t have any credit, some lenders may consider that you don’t exist, financially!  This has been a hurdle in the finance world for some time, more so now with the evolution of technology.  It seems that lenders only need to find the smallest of excuses to not agree a mortgage request.  Historically, lenders were often more amenable if an applicant could not be located on a credit search. Today, if you have no regular credit commitments or do not appear on the electoral roll at your current address, be prepared for a possible knock-back or at least the request for further proof of residency, etc.

The market has been pretty quiet this week, with only a few lenders making headlines and reducing rates. I suspect the market is still coming to terms with an unexpectedly buoyant August and preparing their offerings for a good run to the end of the year.  Rates generally are decreasing, and this makes it a good opportunity to review what’s available to you.

We are experiencing a large number of ‘complex prime’ enquiries lately. One example is for a property which is currently converted in to two properties, but where there is only one registered title.  Another example was of a full conversion of a barn into a dwelling.  One further - for tax purposes – where the customers were seeking to purchase a number of investment properties in a Limited Company name with their company structure designed purely to hold properties.  These are live examples which certainly have a lender home. They just need a bit of extra thought and the location of lenders who don’t fit the normal credit scoring mentality.

Finally, getting a mortgage through lenders in the current climates can still be challenging. One day it’s easy to get a case through, the next, it’s a nightmare!  So whatever you do, try to not give lenders any excuses to decline your application or refuse to lend to you. Try to pay bills on time, don’t miss payments where possible and, especially, not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision whether to lend to you, or not!

Looking at Buy to Let? Visit the Property Investor Show

If you are contemplating moving into the Buy to Let sector (buying a property to rent out), then I would recommend making a visit to the Property Investor show/exhibition that takes place on 4^th and 5^th October at the London ExCeL Centre.  There will be over 100 exhibitors and over 50 seminars that will assist in answering all your questions about the Buy to Let sector and the highs and lows of being a landlord.  It’s free to attend and there will also be a good (Horsham based!) mortgage adviser on site to assist with all mortgage related enquiries.  

The Buy to Let sector has been through some interesting times recently and it always seems to be this area that is targeted when it comes to tax and regulatory changes.  I always stipulate that any property investor should have a good set of experienced property professionals around them when it comes to advice and recommendations, especially with regards to in-depth tax advice from an accountant who understands property, limited companies and all the new rules surrounding landlords and, where applicable, portfolio landlords.

In addition, minimum energy efficiency standards (MEES) were introduced in April 2018.  The standards affected all new lets and tenancy renewals in the private rented sector to have a minimum energy performance rating of E.  From April 2020, this will also cover existing tenancies.   Landlords will be unable to rent properties until any works are done and the minimum rating is achieved.  

On the upside, the availability of Buy to Let mortgages is at its highest for some time with loans available up to 85% of the property value and five-year fixed rate deals, with only three year redemption penalties recently being launched.  One lender has recently launched two-year rates from 1.99% and five-year deals from 2.99%.  Terms and conditions obviously apply and every case is looked at and underwritten on its own merits

With interest rates so low and demand for rented properties increasing, and no clearly defined solution to help first time buyers, I can only see this sector growing over the foreseeable future.   

Looking to build, renovate or extend?

You can’t miss the vast amount of building work going on locally.  In the main, it is by large property developers/builders, but we are receiving enquiries for those privately looking to build their own dream home or renovate and extend their existing properties.   This can also include knocking down the property and building a new one in the same location.  These are normally called Self Build Mortgages or Development Projects.

If you are considering these, have a chat with a local architect first to see if your plans are realistic possibilities. They will have a good idea as to what the local Council Planning Officers will accept and of course, what they will reject!  Lenders then may look to lend funds on a stage payment basis. Stage one might be the foundations, stage two might be ground level and so on.  Each stage would require sign off by the building inspector, and often the lenders own valuer, then funds would be released.  The lender may not lend the full build amount, so be prepared to put in a reasonable deposit, especially at outset to demonstrate your own commitment. 

For extensions and renovations, it may well depend on the size of the work and what funds are required.  If you are altering the property substantially, rebuilding etc, you will tend to find that only specialist lenders will take these on and in some instances, these may be on a short-term basis.

Development Finance and Bridging Finance (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: 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, and so on.

Beware though, these lenders will need certainty on the exit route (how will they get their money back?) and with this type of lending and associated fees, it can be more expensive than a normal mortgage. Therefore it makes sense to exhaust all other possible options available to you before going down this route.

Bank of Mum & Dad now 10th largest lender in the UK!

First Time Buyers trying to get on the property ladder will turn to the Bank of Mum and Dad to borrow more than £6.3bn this year, according to a report from Legal & General.  This equates to  being the equivalent of the country's tenth biggest mortgage lender!

The average parental contribution for homebuyers this year is £24,100, according to L&G.  This is up by more than £6,000 compared to last year.

The report also suggested that thousands of UK buyers were reliant on their parents to either get onto the housing ladder in the first place, or upgrade to a larger home.  Almost a fifth of those who said they had, or would help a family member buy a home, said it was because they felt it was their personal responsibility to help out.

The financial services firm also warned that parents' generosity could hurt their standard of living in retirement.

First Time Buyers currently have a good number of options available to them, including mortgages up to 95% of the property value and where possible, parental guarantor mortgages.   This includes ‘Joint Borrower, Sole Proprietor’ arrangements.

We've also seen a marked increase recently in enquiries for Right to Buy properties and those looking to purchase on a Shared Ownership basis:

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be substantial, and applicants must have been a public sector tenant for at least three years.  Some lenders will allow borrowing of up to 100% of the purchase price.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period. 

Shared Ownership Schemes are normally provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, even those who may have had financial credit blips in the past.  So, always seek advice.

Lenders reject 33% of customers using comparison sites

It’s always a little surprising when 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 according to Experian this week, lenders are rejecting 33% of customers using comparison sites as they do not meet their full lending criteria. Some 11,000 people were included in the analysis which examined eligibility inquiries made on price comparison websites and digital broker channels.  Its analysis also found that just 3.5% of people searching for a mortgage were eligible for every deal on the market.

With this in mind, a vast number of people still don’t think they can get a mortgage.  With so much negativity in the media, it is not surprising that many people think they have no options. But this couldn’t be further from the truth. There are more lenders and products available now than there has been for some time. Therefore, more options and choice for customers that may not have been eligible for a mortgage in previous times. This often does not include high street lenders though. These lenders could include a small building society located in a small village anywhere in the UK. Having access to a whole of market mortgage broker is the only way you’ll gain access to such a possibility.

The bottom line is that a mortgage is the biggest debt you’re likely to ever take on, so you need to do your homework and always seek professional advice.

Product innovation - Hero Mortgage, 95% Loan, Large income multiples and Help to Buy

Innovation is key in the current climate and we must applaud the lenders who are defining the way of the industry and providing mortgages for certain types of customer.

The main issues currently result around income multiples, loans size compared to the value of the property and catering for those over the age of 55.

Two recent examples come from one of our specialist lenders, Kensington Mortgages.  I don’t normally single out a lender, but these guys are doing a great job.

Firstly, they’ve launched the ‘hero’ mortgage. National and Govt stats suggest that:

·       Over 150,000 people are employed in the Army, Navy and RAF.

·       More than 1.5 million work in the education sector

·       Nearly 300,000 men and women are working as police officers and firefighters.

·       Over 1.7 million people work for the NHS 

They aim to help these ‘heroes’ to own their ideal home.  This can include over 5 x income and thinking outside the box when it comes to complex scenarios.

Secondly, they will cater for those with just a 5% deposit who may have had a blip or two in the past.  This can include CCJs, Defaults, Payday loans and Debt Management Plans.  Terms and conditions apply and some need to be older than twelve months. 

Help to Buy is increasingly in demand and again, it does not matter if there has been a small financial blip.  There are lenders looking to assist and will look at a wide range of customers.

Finally, we have seen a couple of lenders publish that they will consider loans of 6 x income.  The lender has a duty of care to make sure you can afford your mortgage today, as well as when rates rise, and specifically to it being considered affordable over a five year period.   We have seen the introduction of affordability models.  The amount you can borrow will depend on your monthly net income set against expenditure and living costs. 

This works positively for the right loan to value, right affordability and right customer, as lenders are willing to offer a little bit more if you fit their specific affordability model.  Some we’ve seen have been well in excess of 6 x income.  So speak to a specialist who has access to the whole market, can offer such opportunities and make the right impact!

Lending down, purchases up and are you suitably protected?

UK Finance has confirmed that mortgage lending was down 4% year on year in June, amounting to £21.9bn.  Despite this, house purchases increased nearly 3% as 48,539 approvals occurred, compared to the previous year.  This is encouraging, and we’re seeing 49% of all business coming into impact specialist finance being house purchases.  There’s certainly a lot of properties being developed currently, so this should not be surprising! 

We often associate protection needs with homeowners, but it was interesting to see recent data suggest that the majority of renters are putting themselves and their possessions at risk because they do not have vital forms of insurance in place. Research from Aviva uncovered evidence that just one in five rental households had life insurance, compared to three out of five homeowners with a mortgage. The figures are particularly concerning because the number of renters in the UK is rising, a trend driven by high house prices and other challenges which make it difficult for would-be first-time buyers to get on the housing ladder.

A further study from Sainsbury’s Bank appeared to back up this trend, finding that while 41% of homeowners had life insurance or critical illness cover, just 26% of those renting had such a policy in place.

People are very quick to insure their pet, Sky TV, their travel plans and their house contents, but forget their biggest asset and this frequently gets left to last, or until it’s too late.

Finally, from where we see it, on the front line, I would dare to suggest that consumer confidence appears to be the highest it has been for some considerable time, despite the uncertain economic climates!  July and August are never normally this busy!  It is not just one geographical area either, although does appears to have a leaning to the south. What does seem to be apparent is that the demand is for ‘all types of mortgages' for all types of people!   From the straightforward, to the complex, to the commercial shop front, to the credit issues, to the first time landlord investing in their first Buy to Let property and so much more, we are seeing many different scenarios.  Why not visit our website at www.impactsf.co.uk and review all of our financial offerings and see how we can help you.

It's the holiday period....but be wary of how you spend, if you're planning to change mortgages soon.

The holiday period is most definitely in full swing and it’s precisely why I feel the need to be a pain and reiterate that whatever is spent on credit cards has to repaid!  If you are looking to review your mortgage in the next few months and load the credit card during the holiday period, remember that lenders will use the balance and offset against your income, before working out what you can borrow. That includes interest free credit cards, loans, HP agreements and student loans. They are all taken into account.

The holiday period can also be a time when many people do one of three things in the mortgage sector. Firstly, they start looking at new properties to move to. Or they may already be committed and are packing ready for the removal lorry.  Or they take time to review what mortgage they have and question if there is anything better out there. That is of course, if they are not simply taking a holiday, and why not?

Certainly, once the holiday is over, then it makes sense to review the current mortgage deal and see if there is a better option and perhaps look to secure a competitive rate for a few years. Whilst I always err on the optimistic side of a rates argument, we are entering a truly unknown era.  Boris is now steering ‘UK PLC’ and we have never left Europe before, so there is no history to prompt what the immediate and longer term implications will be.

Therefore, take the chance to look and see if a re-mortgage to a medium to long term fixed rate might benefit you.  There are millions of people on lenders standard variable rates enjoying complete and deafening silence from their current mortgage lender.  Why the silence?  Simply because lenders are comfortable with you paying over the odds and expanding their margins! They are under no obligation to offer you a better deal when you come to the end of an incentive term and you automatically flip onto their standard variable rate. It is always worth looking for a better deal and many lenders will welcome you with free valuation and legal initiatives and a difference of 1% can save you a substantial sum over a few years.  And that might just be a nice contribution towards your next holiday!

Don't jump on the first offer. Always do your homework!

So, your mortgage is coming to the end of its product term.  You may have fixed for an amount of time, maybe two, three or five years.  And now your rate is due to change to the lenders variable rate, which in the main, is higher than the rate you are currently on, and your monthly payments are about to increase.  But hold on, your current lender has seen the light and decided to offer you some 'fantastic' products to keep you.  Even though you are four months out of your product change, they've given you just fourteen days to take the ‘new product’ and stay with them.  After this time, they can’t guarantee the ‘new product’ will be available to you.  What do you do?

One recent example a customer showed us, had some very attractive rates.  However, when we looked, the same lender was offering better rates through the intermediary sector, with the same fees, etc.  I always say do your homework, and lucky this customer did as it saved them 0.1% on the rate over a three year period.

Even though some lenders put a deadline on any new offerings, remember most are contacting you three or four months before your product changes, so there is plenty of time to review your options and choose the best rate for you nearer the time.   This is a pretty straight forward process to arrange and normally they will have minimal paperwork and fee requirements.

As both a specialist mortgage provider, as well as whole of market (including the high street lenders), impact specialist finance has seen an increase recently in this type of transaction and why wouldn’t you stay with your current lender if they offer you a great product? 

But sometimes they don’t offer you a product at all!  It doesn’t mean they won’t!  It just means that you should find an experienced mortgage specialist who may be able to open up a door to a wide range of opportunities available to you. This is the biggest debt you have so take your time, ignore the ‘time pressures’ and ensure you seek advice, so you don’t regret it further down the line. 

'Highly Commended' by What Mortgage / Fixed rates proving popular!

Firstly, we are delighted to have been recognised and ‘highly commended’ in this year’s ‘What Mortgage?’ awards Best Mortgage Broker category.   This is a great testament to the team we have and we’re very grateful to all those who have voted for us.  We are proud to be in our 28^th year in the mortgage sector and look forward to many more!

The majority of clients visiting impact 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 available 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.  Although currently it does seem to be a ‘race to the bottom’ with regards to pricing.

We're also seeing lenders look at criteria to attract business, rather than just a low rate.  This could be a key part of the mortgage market moving forward.  A huge number of people will be ignored by computer technology and credit scoring decision making systems. But this does not mean they should not obtain mortgage finance, it just means they don't meet all of the rules entered to make that particular decision!

I often wonder if we are on the way back to as it was in 2007/8.   Rates couldn't go much lower then either and criteria played a huge part, then the ‘crash’ happened.  Fast forward to today and again rates can't get much lower and lenders are looking at gaps in the market where a criteria change or tweak might give them the competitive edge.

Who knows what’s around the corner and what will impact the market?  But in the meantime, make sure you think about number one and ensure you have the best rates available to you.

AVM, Homebuyers, Building Survey - Which valuation is right for you?

With every mortgage, the lender will require to know that they are lending money on a suitable property.  This will entail a valuation and normally a surveyor will visit the subject property.  This is a fairly basic valuation and is for the lender, paid for by the borrower, and it should not be relied upon as a guarantee that the property is sound and fit for purpose.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes.  They have no obligation to tell you what is in the report or give you a copy!

In some cases, they will not actually visit.  This is because they can often access detailed information electronically, normally called an Automated Valuation Model (AVM), where a mathematical system calculates the property’s value based on a number of comparable properties and other in-depth calculations. 

Therefore, you should always consider the benefit of an independent survey on the property you are purchasing to ensure that any and all defects are noted before signing contracts. There are two main types of survey available, aside from the standard lender mortgage valuation.

Homebuyer Report - a standard format set out by the Royal Institution of Chartered Surveyors (RICS). This will not focus on every aspect of the property as a building survey will (below), but will advise on urgent matters needing attention. It may advise if items (a leaky roof for example) might have an adverse effect on the value of the property, or if further investigations are required.

A Building Survey – an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required and provide extensive information on major or minor defects.

Both will comment on whether the agreed asking price is reasonable, whether it reflects the condition of the property and should give you peace of mind whilst making the biggest purchase of your life!

Finally, if you have any burning questions or items you would like me to discuss, I’m always looking for content ideas, so please don’t be shy to ask!  You can email me at dale@impactsf.co.uk or call me on the number above.