Flat market predicted for 2018. although Technology will play a big part. Have a great Christmas!

So, as I pen my last column of the year, I reflect on a year that has had many ups and also many downs.  We can’t ignore the current housing shortage or the severe lack of help to first time buyers, even allowing for the recent stamp duty changes.  On the upside, and despite the bank base rate increasing, there are still plenty of good rates to be had and we’ve seen a good number of new lenders launch.  All great news.

2018 is set to be another flat market, with overall mortgage volumes estimated to remain circa £250bn.  However, with the onset of technology and more specialist requirements, the mix of the market is set to change, and many lenders will fall short of their targets, unless they evolve with the digital era.  It really is a case of watch this space as some lenders may just get left behind.

Those who will win will be the ones offering quality technology, but also the human touch for those who prefer or need it.  Sometimes, people just want to talk to people.

On a personal note, thank you for reading my column, it is appreciated. Mortgages can be a dull subject and I’ve tried to provide an unbiased insight to what happens in the mortgage world (and tried to keep it upbeat!).  However, I’m looking forward to a couple of weeks without a production deadline to meet!

Thank you to everyone who has instructed AToM to source and arrange their mortgage during the past twelve months. It has been a fantastic year and we have enjoyed substantial growth in volume, completions and headcount in the AToM team located between our two Horsham offices.  They are a truly awesome and knowledgeable group of people.

We were honoured to be nominated in a number of awards this year and win three major accolades including Best Bridging & Commercial Broker at the Mortgage Strategy awards, Best Use of Technology in the National Mortgage Adviser awards and most recent, Best HMO Distributor from Precise Mortgages.  Thank you to everyone who voted for us!

On behalf of all the staff and directors at AToM, we wish you and your families a very Happy Christmas and a Relaxing and Prosperous New Year!  Bring on 2018!

Increasing number of people look at buying 'projects'

We are seeing an increasing number of people look at buying 'projects'.  Just because a property is run down or even classed as 'uninhabitable', does not mean you cannot get a mortgage on it. Nor if you are intending to purchase a property to let out, but it's currently in an 'un-lettable' condition.  Lenders will cater for these scenarios (dependant on the exact type of works required!).  In the main, the work required needs to be cosmetic - a redecoration, maybe a new kitchen or bathroom.  Many lenders now offer 'refurbishment' loans where the work must be carried out within a period of time after purchasing the property, normally three months.  Others will allow the works to be completed, revalue the property and lend based on the newer property value.  Each lender will work on the valuers comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done! As the local area continues to become a 'new homes exhibition', there are a number of lenders also assisting customers with more private projects such as development and self builds.  Normally the customer will purchase a property in need of work, knock it down and rebuild, or extensively renovate their existing home.  Either way, the lender who funded the original purchase will need to be advised and made aware of all works as you will be altering their security! If you plan to build your own house (Self Build), the lender will issue the funds on a stage basis. Normally once the foundations have been laid, property built to eaves level, made watertight and so on.  At each stage a surveyor will review and advise the lender of progress and to release payments.  If the property has increased in value as a result, you will tend to find the lender may lend on the Gross Development Value (the end value). On a full refurbishment, again, the lender will want to know the plans and may lend in stage payments against the end value of the property, depending on the extent of the works involved. The lender will require sight of all planning permissions and estimates of costs involved before lending any funds.   Seek out a local architect to assist you with plans and costs and always make sure you set out your budgets from the outset.

Competition in the market is fierce..

I've mentioned a number of new lenders launching in to the Residential and Buy to Let sectors recently, and a number of new lenders are lining up for launch over the coming months.  It is an exciting time, not just because rates are so low and activity is increasing, but because lenders are now looking at new market areas and criteria enhancements.  One such lender recently launched in to the Buy to Let sector, and whereas the normal requirement is for customers to have two or three years self employed history, this lender has no minimum term requirement at all.

Whilst rates remain low, competition in the market will remain fierce and this changed approach has become apparent across all sectors of the market, including both Bridging and Commercial.

Bridging Finance (now 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 - usually when downsizing: 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.

There are a myriad of other reasons for which short term lending can be applied and each application is looked at on its own merits before a lender will agree to assist. The best way to look at this is as a means to an end. These lenders will need certainty on the exit route (how will they get their money back?) and they will always insist on an agreement being in place from a traditional mortgage lender to provide a mortgage, at a given time and once any requirements have been fulfilled. So, short term lending is designed to fulfil the need or desire to act quickly. We have seen funds drawn in 48 hours from application! Beware though, this type of lending and associated fees does not come cheaply and it makes sense to exhaust all other channels first!

Commercial loans tend to be looked at by specialist lenders, geared more towards high street premises/shop fronts, development opportunities, pubs, conversions from residential to multi use properties right up to multi-million pound office blocks and  hotel complexes.

Commercial and Short term options

We are noticing much greater numbers of clients looking to raise funds in the commercial sector and this is a very positive sign that confidence is returning and not just in the residential purchase or re-mortgage arenas.

Commercial lending was long the domain of high street banks and particularly so when all that was needed was a site meeting coupled perhaps with a good lunch with the bank manager and often the funds were quickly available!  Life has changed and the high street lenders are now more dramatically conservative in their lending with the decisions often being made at credit and risk committee level. This has opened up the market in many differing ways with a myriad of new lenders coming to market during the last few years covering almost every possibility from lock up shops to multi-million pound office blocks and hotel complexes.

There are lenders who will offer - short term lending for the swift purchase of an auction property; funds to support multi development or self-build including commercial units; funds to assist the re-mortgage of large property portfolios; funds to help buy existing businesses or extend current business portfolios or Houses of Multiple Occupation; funds to convert or extend offices or factories.  The list goes on!  In fact it is almost endless. If there is a defined, affordable commercial need, then there is likely to be a lender out there somewhere looking to write the business!

Of course, rates and terms will vary depending upon the type of commercial mortgage written. Lenders have varying degrees of risk assessment calculations and this will determine the loan to value and charging rate levels.     

So, where have all these lenders appeared from?  It is no surprise to learn that they have been there for a number of years simply awaiting the return of commercial mortgage demand. Some are subsidiaries of high street banks who have criteria which suits certain market segments.  Others may be as a result of private funders who are looking to secure a decent return for their investment as against the poor market figures at the moment.

As always, please ensure that you get professional independent advice before entering into any agreement.      

Help to Buy 2 launch bought forward!

The Prime Minister has bought forward the launch of the Help to Buy (mortgage guarantee) scheme to October, instead of January 2014.  But let’s review the small print before we all start celebrating the launch of the (some say) controversial scheme and how it may create a housing bubble.

The Help to Buy MG scheme will help people buy a home up to £600,000 with just a 5 per cent deposit.  The government will then provide the lender with a guarantee for the next 15 per cent of the property’s value, charged as an interest free equity loan to the consumer, for a fee (after year five).  A lender will offer the remaining amount as a first charge, subject to normal mortgage terms and underwriting and the scheme will be open for three years.  This is to purchase any property and is not restricted to new build properties as per the existing Help to Buy scheme.  So 5% deposit, 15% equity loan (interest free) and 80% mortgage.

Secondly, at the time of writing, many questions were still yet unanswered and only three lenders had committed to the scheme – Natwest, Royal Bank of Scotland and Halifax.  All government backed lenders..

Finally, we are led to believe that despite the doors being open for business, the actual 15% government guarantee to the lender, will still not be available prior to January 2014 and this may be a slight restriction to other lenders who might have wanted to offer these mortgages initially. 

Unfortunately, at this time, Help to Buy MG will not be available to those who have had any historic credit issues.

A similar proposition for those with a 10 per cent deposit is already on offer in the specialist sector.  A first charge lender takes a 70 per cent loan and a second lender adds a further 20 per cent as an equity share.  However, the latter has no monthly required payment, no fee after the fifth year and is only repaid once the property is sold, or client redeems early.

All of these schemes can be confusing, so always seek professional and independent advice to ensure you are getting the right deal to match your requirements.

The Mortgage event of the Year...

The great and the good of the industry descended upon London’s ExCel last week for the annual Mortgage Business Expo.   Around 70 exhibitors offered their wares to mortgage brokers, intermediaries, financial advisers, solicitors and others who attended the largest trade mortgage event in the calendar. 

The two day extravaganza was well received in its new venue (previously Olympia) and despite the slightly longer journey, attendees enjoyed the fantastic facilities available at the gigantic centre.

Big players such as Nationwide, Virgin Money and Halifax had their latest products and rates on offer which were well received especially as most have recently been reduced.  However, noticeable absentees included Barclays, Natwest and Santander, leaving a rather large gap from the high street contingent.

This left room for the smaller, lesser known lenders to promote their offerings.  They may not be processing the volume of cases like the high street lenders, but they have a huge appetite to lend and offer niche products to cater for a variety of customer profiles.

Thriving areas also included short term funders/lenders specialising in Bridging Finance and a number of Commercial lenders were also in attendance as funding becomes somewhat more available to businesses.

Our trade association AMI (Association of Mortgage Intermediaries) held numerous seminars covering various issues including Mortgage Market updates and it’s estimated that over 1,750 people attended the two days.  Well done to the organisers!

AToM were the only Specialist Mortgage Packager/Distributor onsite who offered all areas of the mortgage finance sector.   If you follow us on twitter, you will see our stand (@atommortgages).

For those who don’t know AToM, we have a shop front in the Carfax, Horsham.  But we also process cases for lenders via exclusive products and to a database of over 8,000 mortgage brokers, intermediaries and IFAs.   In short, we are a one stop shop catering for all types of people whether it be a straight forward and clean credit history application, right through to complex deals needing a manual assessment on a product exclusive only available via AToM.  As the name suggests, All Types of Mortgages!  So why not give us a try!