Close shave with Self Cert....and are you covered?

We almost had the return of "Self Cert" this week!  For those of you long in the tooth, back in 07/08, many lenders offered self cert mortgages, giving customers the ability to obtain a mortgage with absolutely no proof of income or affordability.  The history since then is pretty obvious and we must give credit to the regulator for keeping these mortgages out of the market since.  However, for four days last week, one foreign lender appeared to bypass the UK regulations and offered Self Cert loans once again.  And just as quickly as they arrived, they were gone!  Was this just a test and is this the start of things to come?  Having watched the mortgage market brought to its knees and taking over 8 years to recover, let's hope not.

On a brighter note, NatWest have cut some of their rates, available through brokers, by up to 0.49%.  This covers a number of products across their range of offerings, including to First Time Buyers.  Many lenders have cut rates recently and there's even some murmurings that the Bank of England is also under pressure to cut rates, rather than increase them as the economy looks to be 'running out of steam', according to one recent article.  All of this can only be good news for the new mortgagee and budget planning!

Whilst in the 'planning' frame of mind, have you reviewed your current financial arrangements to ensure sure you are on the best deal available?   Whether you require the security of fixing your payments for an amount of time, or whether you are a bit of a risk taker and might look at a short to a medium term tracker, or a discounted option, right now, all are available at attractive rates in the mortgage market.

Other things to consider - Do you have a Will?  Statistics show that only one in three people currently have a will in place, with the remainder leaving the state to take over and determine how their assets and belongings are distributed, if they die.
Do you have Life Assurance, Mortgage Payment Protection, Accident Sickness and Unemployment cover, Critical Illness Cover, and more? Any of these products might be beneficial to your personal circumstances or needs, especially if you have children, and with competition increasing, these types of products are not as expensive as you may think.

Positive movements from lenders..

Lenders have been actively looking at their offerings this week and loosening their criteria, positively.  As I have said before, I think in the run up to the end of the year, we will see a number of attractive deals launched by lenders who want to build up their pipelines ahead of, what will be, a very demanding 2016.

First Time Buyers have been in the spotlight as both Nationwide and Santander focus on the higher 'loan to value' market. These products cater for those looking to purchase their first property who have a deposit as small as just 5%.  Santander's products will be launched later in the month, but Nationwide's are an attractive proposition with starting rates sub 4% and £500 cash back to help towards the costs involved in arranging a mortgage.  

Interest only mortgages have also come back on to the lenders radar.  NatWest has confirmed it will offer interest only mortgages to customers who earn over £100k per annum and who have an 'acceptable' repayment strategy.  So, this may not be open to everyone, but it is positive that lenders are looking for gaps in the market in which to attract more business.  

This also shows in recent figures released from the Bank of England confirming that lenders approved more mortgages in July, than in any month since January 2014.  This amounted to 11,766 approvals, up 8% compared to July 2014.

And finally, do you look at your financial budgets frequently?  A report from well known credit referencing agency Equifax has suggested that over 78% of mortgage people surveyed are not currently budgeting for a rate rise.  We all know rates will rise, even though the Bank of England base rate was held for the seventy eighth consecutive month this week, 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! 

Rates are creeping up...

Panic Panic Panic.........ok, so that's a little dramatic!  However, we have seen a number of lenders increase rates over the last few days.  TSB, Halifax, Nationwide, Virgin Money, NatWest and Coventry Building Society are just a few who increased their rates on various product offerings.  We have seen SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) start to creep upwards and as such lenders are re-pricing accordingly.  Despite my headline, I don't believe it is really time to panic just yet.  Many pundits are suggesting middle of 2016 before we see a true rate rise.  Just keep an eye on things if you are looking for a long term bargain.

What we have seen recently are lot of enquiries to remortgage for home improvements.   Increasing the value in your property can involve large renovation, adding a room or two and a general investment in time and builders.  That said, with house prices booming in the local areas, many have decided to look at cosmetic changes.  So up-grading kitchens, bathrooms, redecorations and so on.  Whether small or large, the investment in property can bring rewards to the value and if you are staying put, reward in the satisfaction of home comfort.  Plus a potential large saving in stamp duty too versus moving home!

We have also seen an increase in customers looking to consolidate debt or even look at debt management plans.  Both can sometimes cause issues. If you consolidate unsecured credit in to your mortgage, although your monthly payments may be lower, you may be paying more interest for your debt over a longer term.  With debt management plans, or Individual Voluntary Arrangements (IVA), etc, again, the lower monthly payments may help in the short term, but you may well find it hard to gain an approval from a lender to refinance at a later date.  Lenders tend to shy away from debt management plans and may not consider anyone who has been in an IVA unless it has been discharged for more than three to four years. Advice should always be sought before entering in to these types of arrangements or agreements.

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..

Rate rises with only one hours notice!

A number of lenders have increased rates over the last few days with one in particular only giving us one hours notice to save the existing rates for potential new customers.  Normally a lender will send round a notification advising of the impending rate increases and the timing for withdrawal of the current product offerings.  We will then need to submit a full application and pay any fees to secure the existing rates.  Most lenders will give twenty four hours notice, some a couple of days.  But one high street lender only allowed one hour to secure their rates. This meant that they did not see a 'spike' in business as people rallied to submit cases as this left no time to secure the lower rates.  In the main, these rates increased by 0.2%, but an increase is an increase.  And if a customer was not able to be contacted and engage within that hour, then the rate was lost!

Product of the week comes from Virgin Money who have launched some superb four year fixed 2.99% rates (4.4% APR) for a limited time.  For remortgages these also have free valuation and legal costs.  The lender fee is also low at just £999 and customers can overpay up to 10% per annum penalty free.   Max loan to value is 60% and the rate increases to 3.29% at 75% borrowing.

The Nationwide House Price Index suggests that house prices increased in May 2014 by 0.7% and are 11.1% higher than in May 2013.  The report also advises that the average house price now stands at £186,512.

Finally, Natwest has decided to follow the LLoyds Banking Group in capping income multiples for all loans over £500k.  Recently the lenders would have looked at a customer's affordability rather than an income multiple.  However, with immediate effect, the maximum any customer will be able to borrow with these lenders is 4 x their income for all loans over £500k.  Both have highlighted London as their main reason for changing their criteria.  Specifically that wages are not keeping pace with house price growth and forced inflationary pressures have forced these required changes...

More offering Help to Buy as others change rates and criteria

Santander is the latest lender to launch products to assist those with a small deposit via the government backed Help to Buy Mortgage Guarantee scheme.  All products are arrangement fee free, have a free valuation and £250 cashback to help towards solicitors costs.  NatWest is also due to launch a suite of products via brokers in the coming days.  A positive start to the new year for those with small deposits!

Even lenders who are not part of the Help to Buy schemes are trying to compete.   As such, competition in the 5% deposit arena is the best it has been for some time, so do review all the options available to you.   

Other products have also seen rate movements in the last few days:   In the Buy to Let sector, Mortgage Trust (part of the Paragon group) has launched products with no early redemption penalties at all. Their rates have reduced to around the 4% mark and fees are also reasonably low at around £995.

GE Money Home Lending have launched a large loans proposition (£250k and above) for those who have had a historic financial issue in the past, including defaults, CCJs, etc.  With rates sub 3%, these are a good alternative for when the high street lender says no.  GE and some other specialist lenders are only accessible via certain mortgage brokers or distributors.   

This years Budget will be closely anticipated to see if the Chancellor will offer anything to incentivise and stimulate the market further.  Stamp duty is a key factor and would benefit from payment commencing at a higher level than current, say £250k and smaller increases as the price bands increase.  Is this too much to hope for?   

Finally, a recent report from TSB suggests that nearly 38% of house hunters are concerned they will be rejected for a mortgage.  Levels of income required topped the charts with poor credit rating being the second most common anxiety.  Always keep any eye on your credit reports.  These are your financial history to any prospective transaction and any decisions will take these in to account.  Most are free and relatively simple to understand, but most importantly will highlight any issues that may need rectifying.       

Competition is a good thing for the end consumer

As the world’s eyes are diverted from the on-going banking and financial issues and redirected to the biggest sporting event in the world, it makes you wonder how much business will be lost due to people sneaking off and watching the Olympics!  I’m sure I’m overdue a sick day or two! 

Competition is also taking place in the mortgage finance arena as we witness some rate wars taking place, which can only be a good thing for the end consumer.

For those on an attractive lender standard variable rate, but who need to raise a small amount of funds, a secured loan might be an option.  Secured loans tend to be a ‘second’ charge on your property and provide an alternative way to release equity from your home whilst leaving your current mortgage in place.  Various lenders operate in this arena and strong competition has bought rates down to below 7%.  Rates are subject to circumstances and terms and conditions, etc.

In the first charge arena, we have seen HSBC promote a sub 3% rate fixed for 5 years.  Santander quickly followed and, through brokers, also offered a free valuation and free legals on their 3 year sub 3% fixed re-mortgage product.  Natwest have also joined the front runners and launched a sub 3% fixed for 5 years, through the intermediary sector.  All subject to terms and conditions and individual circumstances, etc!  Others cutting rates include Accord Mortgages by up to 0.6%, Nationwide by up to 0.4% and Halifax by up to 0.5%.  Great to see!  Definitely worth a review with someone who can access the whole of market, if you’re looking to change your mortgage.

And finally (and I had to end on an Olympic note!) if you are lucky enough to own a property near the main Olympic sites in London, Lloyds research suggests that homeowners have seen the value of their home rise by nearly £70,000 since the winning bid was announced in 2005.  The average house price across the 14 postal districts closest to the main site for the London 2012 Olympic/Paralympics Games stood at £273k in March 2012, an increase of 33% from July 2005s average of £206k.

Switch and Fix on Buy to Let!

More movement in the mortgage market this week as yet more lenders have decreased rates and a pricing war seems to be unfolding in the longer term fixed rate offerings. One lender, Accord Mortgages, have reduced their 5 year fixed rate to just 3.84%, available to 75% of the property value and with a lender fee of just £995. They have also reduced their 2 year fixed to 2.79%, also with a £995 fee.

Loans of 90% of the property value and over also seem to have been targeted this week as lenders seek to assist those with small deposits. The rates are reasonably priced, but as more and more lenders re-enter this arena, with sensible lending, the rates will decrease. One example is Kensington Mortgages, funded by Investec, who offer First Time Buyers a 2 year fixed rate at 5.99% with a £699 fee and a free valuation, with a 10% deposit required. For home movers, the rate is 5.79% with a £999 fee. The benefit with Kensington is they do not credit score, compared to many others. Certainly an area to keep an eye on over the coming weeks.

The Buy to Let (BTL) market has also seen huge changes as Natwest cut some rates by 1.4%, Mortgage Trust (part of Paragon group) launch 18 new BTL products, some starting from sub 4% and The Mortgage Works (part of Nationwide) launch a 2.99% tracker and allow ‘switch to fix’ on all of their Buy to Let trackers.

The Switch to Fix option is now available on both Residential and Buy to Let mortgages via certain providers. It is a great product offering allowing you to have the best of both worlds. Take a low base rate tracker and enjoy the Bank of England base rate whilst low, and when you feel you want to fix your monthly payments for a medium to longer term, transfer to a fixed rate with the same lender. Sounds great, but just beware that the lender may charge a product fee for the fixed rate and of course, you will only have access to those fixed rates available at the time of the switch. Terms and conditions apply!