"Tested in a way we've never been tested before"......and Bank Base cut by 0.5%

We’re being tested in a way that our generation has never been tested before.  These are uncertain times and no one can predict what the future days, weeks, months will bring.  The Bank of England has cut interest rates by a significant 0.5% to just 0.25% and at the time of writing, this is predicted to be cut even further.  Especially seeing that the Federal Reserve (FED) in America have just cut their rates by a full 1%.  All countries are trying to prevent a global recession, avoiding 2007/8 all over again.

All I can say at this time is keep safe and look after number one.  Get your house in order quickly.  Impact will inevitably be shutting both of our offices in Horsham to protect our staff and families, but we will continue to work from home and be available on phones, online and by webinar facilities (Microsoft Teams, etc).  Not everyone will get this horrible virus and lenders still want to lend.

Yes, it might take a little bit longer to arrange things, as home working takes effect and some, especially the banks and building society security systems and such, will experience new challenges with all of their staff working from home.  But lending will go on and right now is an ideal time to take advantage of the amazing rates and deals on offer.

Remortgaging should be a very simple process and we can guide you through the requirements and deals on offer. 

Even staying with your current lender once your current fixed rate has expired and transferring to a new rate is pretty straight forward.  We can assist with all of these, remotely and quickly.

Finally, I’ll say it again, look after number one. You will probably have some time on your hands, you have the paperwork at home and you have the superb team at Impact online and available to help you throughout the whole process.  Or just even to give you some free advice.  No one knows how long this unprecedented experience will last, so just make sure you’re in a good position to see it through.  Stay safe.

Visits to property website up 7% on January 2019.

I’ve just read that visits to Rightmove surpassed 150 million for the first time in January, making it the busiest month ever recorded. There were said to be over 152 million visits to the property portal in January, a 7% increase on January 2019. The top five busiest days ever on Rightmove were all said to be between 21st and 29^th  January, with Wednesday 29^th topping the list. There were reported to be over 5.7 million visits on that day, up 9% on the previous record set back on 24^th April 2019. Time spent by home hunters on the site was up 4%, with people spending a total of 1.17 billion minutes on there.

These are pretty remarkable numbers and ones that will hopefully relate into the prospect of rising activity levels, especially in the lead up to a usually active late Winter/early Spring period.

Unless you are incredibly lucky, you’re probably going to need a mortgage to buy your dream home.  A mortgage is the biggest debt you’re likely to ever take on, so you need to do your homework and understand more than just what the national press decide to publish about the Bank of England base rate being held at 0.75% again, or how much profit the banks are currently making! Or what a mate says in the pub!

Advice is crucial and ideally from a company who can offer ‘whole of market’ mortgages, not just products from a limited panel of lenders, like some Estate Agency chains or a Bank/Building Society who only offer their own or a limited set of products.

I guess what I am saying is think before you agree to use any in-house service of this type as overall, it may not always be in your best interests, and as this is the largest financial transaction you will be involved in at the time, it is important to feel comfortable about it.  Also, to have some independence in the event of any concerns or disputes makes great sense.

Finally, make sure you ask questions!  For example, if you’re not being offered ‘whole of market’ products and instead are being offered mortgage products from a ‘limited panel of lenders’, you may be missing out on the best product available to you. You are, after all, in the driving seat.

Fixed or Tracker rate? What's your preference?

So, do you go Fixed, or do you go Tracker?  A question we are asked many times every day!

With a fixed rate, you know that every month your mortgage payment will be exactly the same until the product period ends. Normally this can be two, three, five or ten years.  However, you will have a penalty to pay, if you decide to leave during the fixed rate product period.  Note that the mortgage product period and the term of the mortgage are two different entities.  The fixed rate product period might be for five years, but the mortgage itself might be for twenty-five years.  Make sure you understand the difference as after five years you could be moving on to the lenders Standard Variable Rate (SVR), which could be a lot higher (possibly in excess of 5%).

With a tracker rate, this will normally be an interest rate charged in addition to the Bank of England base rate, currently 0.75%, and will move immediately any changes occur.  However, most tracker rates have no penalties to leave.  So, great if you are planning to move imminently or have bonuses due and want to repay a large lump sum off your mortgage.  They can also be cheaper than a fixed rate, but obviously have more risk of increasing rates too.  

For those sitting on the lenders SVR – WHY?!  The lenders SVR tends to be more expensive than other products available and you should act now as you’re probably paying too much as it is!  And lenders can alter their SVR when they choose.

So, in short, the fixed or tracker conundrum is down to personal choice.  A number of clients visiting impact are looking for a longer-term fixed rate for certainty and to help manage their monthly budgets.  But a number are still happy to take a short-term tracker rate and are confident that rates will not fluctuate too much in the coming months.  Either way, there are some good products available with minimal set up costs and it does seem to be a ‘race to the bottom’ with regards to pricing currently.

One thing to think about though – if you are contemplating a tracker rate for now, with the intention of changing to a fixed rate later on, be aware that if rates start to rise you might find that the fixed rates have already increased before the tracker rate even starts to.

Rates rising....and great event for Landlords

You can’t have missed the increasing press column inches regarding a possible Bank Base Rate rise recently.  Sometimes I do think we talk the market in to a direction rather than letting it take its natural path!  History suggests that we tend to see the fixed rates rise first, before the bank base itself.  Over the last week we’ve seen a number of lenders increase their fixed rates, including Nationwide, Halifax and Barclays.  Some rates have increased by up to 0.9%!  I suspect others will also follow as SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have also increased over the last week.

That said, the Bank of England has to take in to account the huge debt levels the nation currently has and that even a small base rate hike could have a significant effect on current spending levels.  However, it appears to be an issue which is gathering pace and we should watch this development closely.

Do remember that even if your rate is not up for renewal for a few months, some lenders mortgage offers are valid up to six months, so you can arrange a new rate in advance of your current rate coming to an end.   This will also ensure that you don’t move to the lenders standard variable rate, which will inevitably will be higher than your current rate, whilst looking for your next mortgage product. 

And finally, it was great to see so many people at the Landlord Property Investor and Homebuyer Show at the London ExCel last week.  It also highlighted how many people are not yet aware of the new rules surrounding portfolio landlords.  This is a large education piece and one that needs to be taken in to account asap by anyone who owns more than four properties.  Although each lender’s requirements are different, in the main, the common requirements are now a Business Plan, a Cashflow and forecast, Assets and Liabilities statements and full details on the whole portfolio including current mortgage, value, rent achieved, etc.  These new rules will take a while to bed in and as there is an increase in underwriting, I suspect delays will occur for a while, so be aware if you are in a rush!  

The Mortgage market is vibrant!

Having written this column every week since early 2009, a lot of people ask me “how do you know what to write each week, it must be difficult?” But actually, there’s so much going on, I could easily fill more than my 350 word column consistently.  The mortgage market is vibrant with both activity and positivity.  Mortgage product offerings are at their highest for some time and lenders appear to want to lend!

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 understand more than just what the national press decide to publish about the Bank of England base rate being held at 0.25% again, or how much profit the banks are currently making! Or what a mate says in the pub!

Advice is crucial and ideally from a company who can offer ‘whole of market’ mortgages, not just products from a limited panel of lenders, like some Estate Agency chains or a Bank/Building Society who only offer their own or a limited set of products. 

Most lenders have a set of rules and criteria that need to be met even before requesting a decision in principle (stage at which you are credit searched for pre-approval). For example, one lender has a debt utilisation rule at 70%. So, if you had a credit card with a £1k limit and you had a balance of £701, you will be in excess of their 70% rule which means you would be ineligible for this lender. Another stipulates you can have no more than 8 unsecured credit cards or loans at the point of application. We tend to see customers have a number of debts within this ruling, but who keep open old debts with zero balances. This can push them over the lenders stipulations. Others won’t look at gifted equity, or assist where the customer has had a break in employment in the last twelve months, or lend on properties with a flat roof, and so on.

All of these are little idiosyncrasies that should be known by anyone advising on a mortgage. Thus saving time and probably unnecessary credit searches being carried out. Remember, the more credit searches you have against your name, the more likely your credit score will decrease, which may affect your ability to obtain finance. Whoever you talk to about your financial requirements, make sure you say at the outset that you do not want to be credit searched, unless you give them the authority to do so or a product has been thoroughly researched.

Home owning cheaper than renting

Some eye watering statistics from The Money Charity this week.  The Charity has reported that total mortgage lending stood at £1.35 trillion at the end of September.  This is up from £1.275 trillion in 2015.  Averaged over the 11.1m households with a mortgage equates to £118,693 in September.

The average interest rate was 2.74% and according to The Council of Mortgage Lenders, the average for new loans was 2.27%.  They also suggested that the average First Time Buyer deposit was 15% (£28k in July) and the average house price amounted to £184k (August) for first timers.  Yet First Time Buyers borrowed on average just 3.45 times their income! 

There were 40,533 loans approved for house purchase in September, according to the British Bankers Association, similar numbers to a year earlier.  The average loan approved was circa £176k. 

This is interesting as it is a common knowledge that owning a home can be cheaper than renting.  The report goes on to suggest that inclusive of all benefits, private renters spent an average of 43% of their income on rental payments.  In comparison, owner occupiers spent on average 19% of income.

And as we enter the run up to Christmas, it's also useful to note that the average interest rate on credit card lending in September was 18.49%, which is 18.24% above the Bank of England Base Rate of 0.25%!   Remember, doesn't matter which type of credit you use to fund seasonal spends, at some point they all need to be repaid!

And finally, a number of lenders including Platform (Part of Co-op), Virgin Money, Nationwide, Coventry Building Society, Barclays, Halifax and TSB have all changed rates in the last ten days.  The majority with rate cuts and attractive options for new customers including cash back for purchases and free valuation and free legals on remortgages.  There are certainly some fantastic deals available in the current climates.  So if you are thinking of reviewing your mortgage options, now might just be a good time to find that paperwork!

They say no base rate move in 2016. Now, use a broker!

As mentioned in one of my earlier columns, I could not envisage a rate rise for some time and, at the earliest the end of 2016, start of 2017.  This has now also been stated by the Bank of England who suggest that there will be no movement in base rate for the whole of 2016.  If it's correct, then good news indeed!  What this means is that lenders effectively have cheap money to lend.  In the current climate, with minimal property stock for sale, reduced activity across the market and increased targets, we will see a lot of competition and possibly rate decreases as Lenders become more focussed on attracting new business. 

This will also apply to the non high street lenders.  They will have an uphill struggle to compete with the bigger lenders in rate reductions.  Where this breed will succeed is through helping those who are rejected by the high street, for whatever reason.  As the household names usually work on a computer automated credit scoring system, not everyone will fit the mould required.  The smaller lenders have an ability to manually review an application, assess it on its merits and carry out a credit search, rather than a credit score.  Rates are not far different from those on the high street and in most cases, the process will be the same.  But having a human underwrite your application can be a big plus when other avenues may have been closed to you.

What is for sure is that obtaining professional advice from a company who is willing to stand behind their recommendations and build a relationship with you, rather than just treating you as a number, should be a key priority.  Yes it may cost a small fee, but finding the right mortgage for your needs has to be more important in the longer term.  As more and more regulations hit the mortgage industry, dealing with someone who is experienced and who has access to the whole market, rather than just a small panel of lenders, should mean that you get the appropriate advice and less stress to concern you later on.  Remember, this is the biggest debt you're ever likely to have.  It should therefore be treated with the up-most respect.

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 to rise towards the end of the year?

The Governor of the Bank of England announced last week that interest rates are to raise, probably at the end of this year or early next.  Although though this is no surprise and it is quite likely that we have all been tentatively expecting this announcement for some considerable time now, very few industry pundits have publicly agreed with this statement, at the time of writing!  

So, if it does happen, what will it mean?  Well, the cost of borrowing will be the first noticeable impact with any mortgage on a bank base rate tracker following the upward trend almost immediately, with variable/discounted rates likely to be closely behind.

For those on vary low tracker rates this may not initially be considered too painful if you consider that bank base rate was in the mid 5% range prior to the dramatic and sustained low rate period which is now longest in modern history.  However, to put it in perspective, given that we live in an area of high value properties and accompanying high level mortgages any rate rise may be more meaningful.  For example, a 1% increase on an interest only £200k mortgage will mean an increase of circa £2,000 per year (£167pm).  This needs to be factored into any family budget. To make matters worse, it is anticipated (by the Governor) that base rate will level out around 2.25% so this makes the maths even more important.

If you are currently on a fixed rate, no change for the term of your deal.  But, you may see your reversion rate (the rate you will move on to at the end of the fixed rate period) increase. 

However, with a reported one million people paying their mortgage by credit card and a further three million people who have never had a rate rise, any movement in bank base rate will be closely monitored to see impacts on the economy and activity as 'normalisation' begins. 

Stamp Duty changes are a good thing.

There's really only one place to start this weeks column and that's with the superb news released by the Chancellor in regard to changes to Stamp Duty.

With effect from Thursday 4th December, stamp duty will be applied as a progressive tax.  Buyers will pay no tax up to the first £125,000, they will be charged 2% on the additional portion up to £250,000, then 5% on any additional portion up to £925,000 and 10% on the additional portion up to £1.5m and 12% on any portion above.

This is a big step forward and very positive for house purchasers.  On the old scheme, a person buying a property at £300k would have paid 3% equating to £9,000.  On the new scheme, there is nothing to pay on the first £125k, 2% to pay on the £125k to £250k (£2,500), and 5% on the remaining £50k (£2,500) making the new total £5000, a saving of £4,000 in total. 

Although this is a hugely positive and much applauded move, there is still much uncertainty about customers actually being able to achieve a mortgage.  Until lenders criteria is truly relaxed and funding becomes more widely accessible, cash buyers are likely to be the main benefactors of these rewards rather than the first time buyer or home mover. 

Recent data published by the Bank of England has reported that the average Lender Standard Variable Rate, the rate that which many customers revert to after their promotional or fixed rate period ends, has risen to 4.53%.  This is up 0.16% over the last year, despite the average two year fixed rate dropping by over 0.75% in the same period and the Bank of England base rate not changing for over five years. They have also noted that the largest proportion of mortgage borrowers have not experienced a rate rise for more than five years (some for more than seven) and are concerned about the possibility of what is generally known as ‘payment shock’. For example, on a £100k mortgage a 1% rise in rate will mean a monthly increase of circa £83.33! For some, this points towards the possible need to consider a fixed rate to avoid this possibility.  Maybe time to talk to your independent mortgage adviser? 

Budget planning - essential to obtaining mortgage finance.

The Chancellor has recently given the Bank of England new powers to restrict Loan to Incomes and also Loan to Values.  In short, we’ve seen income multiples restricted for loans over £500k recently by a couple of lenders , to a maximum of four x income.  But the BoE now has powers to force lenders to do this.  If the BoE thinks lenders are lending too much or at too much of a risk, they have the powers to restrict the lenders offerings both on loan sizes offered to the customer or loan sizes against the value of the properties.  Personally, with the recent Mortgage Market Review (MMR) implementations across the market, these new powers could be deemed an unnecessary distraction to the lenders, especially as MMR already covers these areas and should naturally stop unaffordable loans being issued.

With MMR in mind, we are still seeing long delays across the market in customers obtaining appointments at local branches, as well as general processing delays.   Some lenders are not taking appointments for three or four weeks, are ten working days behind on processing, and we have experienced recent telephone calls taking over an hour to receive a response!  These are just on the broker side so heaven knows how customers are faring!

With all new mortgages, a budget planner will be required.  So make sure you know and can advise exactly how much you are spending on your lifestyle.  Especially make sure you know your monthly costs on food, household expenses, travel, pension and saving contributions and other likely costs such as hobbies, going to the gym, lottery direct debits and more.  Every lender will review your ability to afford your new mortgage over coming years so all direct debits and most entries on your bank statements or credit report will need to be advised.  This is so the lender can make a viable stress test on future rate rises and ensure that you will still be able to afford your mortgage at that time.  Yes, maybe there is a little guess work, but do make sure you disclose all monthly expenditure as the lender will normally want to review your bank statements and will see it all anyway!

Rumours are rife on a Bank Base Rate increase soon.

Following on from the Bank of England Governor's recent comments on a Sunday TV programme, and in fact some time beforehand, the rumour mills are rife trying to guess when we will see a Bank of England base rate rise.  The economy is so buoyant that it needs a little slowing down, apparently!  I was recently in attendance at a seminar in which five notables gave their views on when the increase may occur and the general consensus was that it could be later this year and, if not, then most definitely in the first quarter 2015. 

With this in mind, have you checked your rate and product recently?  Now might be the time for a review.  However, be wary that your local bank of building society, in some cases, are taking up to four weeks to see customers!   Some are a number of days behind on underwriting.   And the most bizarre scenario we had this week was from a surveyor.  They were happy to visit the property to carry out the normal mortgage lender valuation.  However, they were also required to carry out a homebuyers report, a more in-depth survey for the customers benefit and, to great concern, they could not conduct this at the same time and would have to return, possibly four weeks later.  Frustrating for the customer who wanted to buy quickly.  Generally the whole market is incredibly busy yet the current staffing levels just can't cope. 

Further impositions were seen this week as the Lloyds Banking Group slapped on a maximum income multiple for all loans over £500k. With immediate effect, the lender will only allow a maximum of four times income on all loans in this segment.  Described as a “targeted policy change” to address inflationary pressures in the housing market, especially London, the change applies to mortgage lending through Halifax, Lloyds, Bank of Scotland and Scottish Widows Bank.   Thankfully, there remain other opportunities in the marketplace and we are hopeful that other lenders don't feel that they have to follow the Lloyds lead. Only time will tell. 

Funding Christmas is not for life! Are rates to go up sooner than expected?

Christmas lights are up, Christmas trees are up, Christmas adverts are on the TV and Christmas songs are being played in the shops.  Christmas really has come early this year.  I’m not a total bah humbug but just remember that if you intend to fund Christmas on credit, it will have to be repaid at some point!  I’m currently being bombarded by 0% balance transfers on credit cards and increasing credit limits, when I’m not even using them.  The temptation is huge.  The problem is, these companies need you to use their cards and they will do everything to tempt you.  However, they are also the quickest to jump should a payment be missed or late.  Be wary that one or two late or missed payments could result in a default registered against you that you may not even know about until you next apply for credit, insurance or some other financial requirement.  Christmas is for Christmas, make sure it’s not for longer..

There is a 40% chance that rates will go up in 2014, according to the new Bank of England Governor Mark Carney.  Following recent comments that rates would not rise until unemployment fell below 7 per cent, a recent report suggested that national unemployment had fallen to 7.6 per cent in the three months to September.  The Bank’s quarterly inflation report forecast now suggests that there is a 40% chance of a rise in 2014, a 60% chance in 2015 and a two-thirds chance in 2016.  
Nationwide Building Society has reported its best half year of lending for five years.  The lender advanced £14bn in the first six months up to end of Sept.  This is 37 per cent up compared to the same period in 2012.

Finally, one of the mortgage trade magazines suggests that the Financial Conduct Authority is in talks with 21 firms ahead of them applying for full bank licences.  Although at ‘informal pre-application’ stage, this is positive sign that funding is available and competition is likely to return to all sectors of the market.   This can only be good news for the end consumer!

Consumer confidence appears to be high!

If you read the national press, the ‘funding for lending’ scheme appears to be under some scrutiny.  In short, the scheme was designed to provide relatively cheap funding from the Bank of England to a number of lenders as long as they maintained or increased their net lending on mortgages (or business loans).  However, recent reports suggest that since its launch in August 2012, the FLS scheme has seen an overall decrease in net lending of 1.8bn and a £300m decrease in Q1 2013 alone. 

Other reports highlight a reduction in house purchases for April 2013.  But if you delve slightly more in to the figures, the house purchase numbers for April were 53,710, representing £8bn.  This was against 53,674 loans approved in March!  So for the sake of 36 deals, the purchase market is not in apparent ‘freefall’….!  This should not make for newsworthy headlines!  Of course the headlines did not cover that the number of approvals for remortgaging were by up by nearly 2,000 compared to the six monthly average of 28,323 to at 30,313, and £4.3bn in volume. 

From dealing on the front line, I would dare to suggest that consumer confidence in financial services appears to be the highest it has been for some years.  People are selling, people are buying and many are remortgaging!  It’s not just set to one geographical area either, although appears to be more southern based than northern, but it really is ‘all types of mortgages’!  From the straight forward, to the complex, to the commercial shop front, to the credit issues, to the first time landlord with their first investment property, we are seeing many different scenarios.  We’re even having lenders come back to us on a Monday, backtracking on their previous decline decision on the Friday, having thought about the case and it’s scenario over a weekend and now wishing to offer terms!  This really does bring a new meaning to the ‘thinking outside the box’ analogy.  

There are also a few new lenders waiting in the wings to launch and create more competition in an already increasingly competitive market.  One that we know of will be filling a current gap in the market place, and that’s all I’m currently allowed to say!  But more lenders competing for business can only be a good thing to the end consumer.

Lot's of activity in the mortgage market!

There is a lot happening in the mortgage market as we move into the last month of the year! Where have the last eleven months gone?

Good news in that lenders are looking to expand their distribution offerings to a wider market as both Kensington Mortgages and Saffron Building Society launch new products into the intermediary market. Both have various niches and are looking at a number of new products. Saffron, for example, have no redemption penalties on their products, so a customer can leave or overpay at will. These include Residential, Rent to Buy for First Time Buyers, Buy to Lets and Self Build Projects. Seek advice though!

On the other side, there was another nail in the coffin for Interest Only this week as both NatWest and Royal Bank of Scotland cease to offer new interest-only mortgages from Monday 3rd December. This does not affect existing customers or their Buy to Let mortgages.

Many lenders still offer Interest Only as an option, however we are slowly seeing it eradicated from the high street lenders. For the right situation and right scenario, Interest Only works, but it really does look like it is going to be an option only available through the smaller lenders and at a low loan to value soon.

The price war continues as we see lenders offering competitive rates, but this time on a ‘fire sale’ type basis. Santander issued some sub 2% fixed rates via brokers, for just 7 days! This has now been followed by Accord Mortgages who have launched some attractive options, but for a period of just 10 days. Do keep an eye on our shop front in the Carfax, if you are local, as we promote these opportunities in our window. If they are right for you, you will need to act fast as when they are gone, they are gone!

Finally, news just reaching me as I write this column is that the Bank of England has decided on Sir Mervyn Kings successor. Bank of Canada Governor Mark Carney will take over the post in June 2013. Personally I welcome someone external to take over the role as it does need a good shake up and a little modernisation!  However, there’s no denying that the job in hand is huge and the new Governor will need to settle in quickly to the tasks at hand, including financial stability, regulation and monetary policy.

A serious lack of consumer confidence...

Where do I start this week!?  So much negative news surrounding the world of financial services.  As I write this column, the Breaking News is that Bob Diamond has resigned as Chief Executive of Barclays, following his Chairmans departure some hours earlier.   Both following Libor (London Inter Bank Offered Rate) and Euribor, the interest rates at which banks lend to each other, fixing and interest rate swap miss-selling scandals.  Also, in relation to last week’s fine of £290m by the FSA and US authorities after it admitted that their traders manipulated Libor.  This now leaves a rather large ship with no captains to steer them.  No doubt the board will act quickly and more light will have been shed on the matter by the time this is printed.  However, the bottom line is that, allegedly, a number of other banks are also under investigation and thus, this could be just the first of many, and in addition, it‘s a further act of mistrust and will bring an increased lack of confidence to an already fragile market.

This comes in the wake of the technical issues at Natwest/RBS, which affected many customers across the country.  Despite the bank confirming all issues had been sorted last week, the bank still has issues and some customers, allegedly, were hit with incorrect duplicate payments on their mortgages this week.   Does make you wonder how we ever functioned without technology and, more worryingly, how totally dependent we have become on it…

And finally…the Bank of England’s latest figures suggest that gross lending secured on dwellings hit £12.2bn in May up from £11.6bn in April.  Repayments also rose from £11.4bn in April to £11.7bn in May.   House purchases fell to 51,098 in May from the 51,627 figure recorded in April and remortgage approvals also dipped from 30,799 in April to 29,244 in May.  All signs of a reduced availability of mortgage credit and with the Eurozone crisis still in the mix, and a serious dent in consumer confidence, we might not see these figures change dramatically any time soon.

2012 - a year for Specialists

A very Happy New Year to you all! Let’s hope 2012 brings us all something to be upbeat about! Although lending volumes are predicted to remain much the same as in 2011, I do predict that the mix will change slightly. We will see more specialist lenders offering products aimed at specific types of customers. This is a good thing as this will help those who may not currently be able to get a mortgage such as those with multiple incomes from various sources, those who have had financial issues, those looking to buy their Local Authority houses, and so on. Lenders may also consider more complex scenarios working on an individual basis and pricing.

The cost of borrowing funds between lenders has risen over the last few months and as such, the cost of fixed rate monies has risen. Remember, these rates are calculated on a different basis to tracker rates. In the main, the former is based on SWAP rates, the latter on Bank of England base rate. With the Euro Zone issues still hanging over all of us, the cost of borrowing funds between lenders was always likely to rise. However, some experts predict that the cost of fixed rates monies is unlikely to decrease again once risen. Back to wishing I had a crystal
ball!

Lenders have already started adjusting their product offerings. Coventry Building Society is the first to pull all of their products! At the time of writing, I have not seen the new products to be launched, so cannot comment specifically. However, lenders product withdrawals pre Christmas all resulted in higher rates. Will they follow suit, or maybe set the trend for attracting business in the ‘January Sales’?

The Nationwide House Price Index suggests that house prices declined by 0.2% in December, but
increased by 1% in 2011 as a whole. The price of a typical home is now £163,822. London saw the strongest growth in 2011 (5.5%), but less regional variation in house prices compared with previous years. The South East saw an annual growth of circa 2%.

Finally, AToM had a very good final quarter to 2011 and were pleasantly surprised at how busy we were between Christmas and New Year. Hopefully, this is a sign of good times ahead and a positive 2012 for us all.

Make sure you can pay back before you spend

Trying to remain positive in a reasonably bleak market is tough at the best of times. However, not only are the national press hinting that rates are to increase, but the Bank of England are also getting in on the act!! This week, in it's Financial Stability Report, the Bank has said wholesale funding (loans between lenders) will rise, resulting in higher mortgage rates. The report claims that the gap between funding costs and pricing has grown, making lending less profitable. It will be interesting to review that point once the end of year lender profit announcements have been released! That said, Matthew Wyles, Group Distribution Director of Nationwide has also suggested that mortgage rates would probably need to rise next year! These are very big names making these comments and we cannot afford to ignore them.

HSBC have been in the news this week as the FSA have fined them £10.5m for alleged inappropriate investment advice to elderly customers, via one of their subsidiary companies. The HSBC commercial division is also undergoing a restructure with the loss of around 330 jobs.

Good news for the Buy to Let market as Abbey for Intermediaries (part of Santander) are shortly to offer products in this arena. With few big players in this market, we welcome this giant who will shake up the competition, as in the main, the associated costs with a Buy to Let mortgage have become pretty expensive of late. We await to see their products and offerings, but anticipate these to be launched before the end of the year.

Finally, it’s just round the corner and will be on us all before we know it. Christmas is a time for
joy, cheer, laughter, happiness and credit… Not that I want to preach, but credit is your life history to a financial institution. I’m not saying don’t use credit, but make sure you can pay it back! If you miss a payment over the Christmas period on any debt, it could affect your ability to
obtain any type of credit next year. Credit reports may show the last six, yes SIX years of your financial history.

Buy to Let increased to 85% LTV

Kensington mortgages have launched an 85% loan to value product for Buy to Lets (investment properties for letting out). They will consider First Time Buyers looking to become first time landlords and now also allow applications on new build flats. Good niches and a bold statement of intent to lend! They are currently the only lender requiring a 15% deposit for Buy to Lets, but I expect others will follow suit shortly.

I was astounded to see recent figures from creditaction reporting that Banks and Building Societies had written off £9.9bn of loans to individuals over the last 12 months (end of Q3 2010). That’s nearly £20m a day! In addition, the Government is paying a jaw dropping £120m a day in interest alone on the UK’s net debt (£889bn excluding financial interventions). These are scary figures indeed. But to add to the reality, individuals currently owe more than the entire country has produced during the last four quarters. It’s therefore no wonder that the lending market is in the state it’s in and provides some understanding in to the pressures facing the Government and Bank of England when considering rate changes.

As I write this article a few days before the paper is printed, I am unable to comment on this week’s Monetary Policy Committee (MPC) decision on whether or not to increase the Bank Base Rate. However, out of the nine MPC members for January, two voted for an increase. This is an increase on previous months and we may not be too far away from seeing a rate increase. Some estimates suggest May.

Finally, there has been speculation in the financial press lately regarding the Mortgage Market Review (MMR) which is an FSA initiative to make, in their words, the mortgage market more professional and transparent. Much of this, together with another of their initiatives is the Regulatory Distribution Review (RDR) part of which is designed to encourage our sector towards a fee charging route in all financial advice areas whereas, today, most income for advisors is from introductory fees incorporated in the product sold, paid by the providing financial institution. Watch this space in months to come but it seems fair in many ways that, given the professional qualifications mortgage advisors now need to obtain to give advice, a fee reward is not unreasonable for the amount of work and research undertaken in advising and recommending a mortgage product.

Under pressure...!

SWAP rates (mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have risen sharply over the last week. As a result, some lenders have withdrawn fixed rates and launched new products with higher interest rates. Many are predicting that whilst tracker rates (following the Bank of England Base Rate, BBR) will remain pretty low, fixed rate products, once raised, will not come back down. This is despite the BBR remaining at 0.50% for yet another month. The pressure of rising inflation (3.7% in December) is said to be worrying the money markets and pushing up SWAP rates. In addition, rising inflation puts pressure on to the Bank of England to raise interest rates to curb spending. Are we set for a BBR increase in February? Should you fix before it’s too late?

We are three weeks in to the New Year and that can only mean one thing - the arrival of bank statements, credit card bills, store card bills, and so on, showing the Christmas spends. Depressing, I know! But I can’t stress how important it is to make payments, even if it’s the minimum required. If you miss a payment to any financial institution, this will affect your credit score and could affect your ability to obtain a mortgage, whether you are a first time buyer, home mover or looking to remortgage.

Specialist lenders will look at those with missed payments (to unsecured credit), defaults, and/or CCJs, however these lenders price for risk and as such their interest rates are somewhat higher than those offered on the high street.

These lenders tend not to be household names and carry out a manual underwriting approach, rather than a credit scoring decision. Deposit requirements are a minimum of 20% depending on the customer’s credit issues. The higher the financial issues, the higher the deposit required and the higher the interest rate offered. Rates range from early 5%s and go right up to and over 10%. Each application is assessed on its own merits and individual circumstances may differ. For further information and detailed terms and conditions, speak to your local independent mortgage brokers!