Great products, but processing delays across the market

Supermarket giant Tesco has launched it's mortgage proposition into the intermediary sector this week.  With some very attractive tracker rates, two and five year fixed rates, I can see Tesco Bank being a popular choice in the coming months and years.  And not one mention of a club card! 

Coventry Building Society has launched a competitive ten year fixed rate mortgage.  Available to those borrowing up to 65% of the property value, rates start from 2.99% (3.6% APR) with a £999 lender completion fee, free valuation and free legal costs on remortgages.  The mortgage is also available as an offset mortgage (which allows you to offset your savings against the mortgage interest amount, terms apply) at a slightly higher 3.19% fixed rate (3.8% APR).  The long term deals are great if you know your plans for the foreseeable future.  Speak to an adviser to find out more.

Despite some of these amazing products being launched and lenders looking to attract new business, we are seeing general processing delays across the market.  Some lenders are not taking appointments for two to three weeks, some 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 heaven knows how customers are faring!

Therefore, to make the process as smooth as possible, make sure you have all details to hand at the outset.  With all new mortgages, a budget planner will be required.  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!

Lending to those over 70yrs old is not a new thing for AToM!

Rates continue to tumble as the cost of funds remains low and lenders fight to attract your custom. During the last seven days, we have witnessed Halifax reduce some rates by up to 0.30% and Coventry Building Society reduce some of theirs by 0.20%.  Other lenders have reviewed their criteria.  For example, Kensington Mortgages will now consider 100% of a customers annual bonus when it comes to working out affordability (most lenders will only look at 50% of non guaranteed income).  New  lender, Bluestone Mortgages, have reviewed their criteria and will now accept contract workers who only have three months remaining on their contract (normally six months).  In the main, lenders are making positive changes to increase their market share.  Even if you have something you think is 'out of the ordinary' or 'impossible', do explore your options as there might be a lender out there who will assist.
 This does not exclude age either!  Many think that you cannot have a mortgage over the age of 70.  And, on the high street, this may still remain true in some cases as these lenders generally allow a mortgage term to last until the applicants retirement age.  This used to be 65, officially it's now 67, but the reality is it can be much later.  Most lenders increased their maximum age at the end of mortgage maturity to age 70.  However, we all know that people are working a lot longer now and repayment of such a large amount of money may not be possible in these restrictive conditions.  So the option is to raise further finance to repay the original loan or sell the property.  Thankfully, the first option is less onerous as it used to be.  Many non household named lenders will look at lending to customers to a lot later in life, assuming the customers can prove their continued ability to pay.   This can take the maturity age up to age 80, 85 or even 90 and above.  If the customer has a good and regular amount of income, a high level of equity in the property and can satisfy the lenders affordability requirements, then some lenders will be happy to lend.  Seek specialist advice from someone who offers a range of lenders from the 'whole of market', not just a restricted panel or the high street. 

Buying a Buy to Let in a Limited Company Name

It has been an interesting week in the mortgage market with many rate changes and new product launches.

Some of the more noticeable include the launch of products, from our friends at Precise Mortgages, designed to assist those looking to purchase investment properties (Buy to Lets) in a Limited Company name. With the forthcoming removal of tax relief, from April 2017, landlords will only be able to offset mortgage interest at the basic rate of tax at 20%.  This will affect higher rate tax payers, but also basic rate tax payers if they are pushed in to the higher rate bracket, perhaps as a result of their rental income.  As a result, we are seeing more and more customers look at a Ltd Company Special Purpose Vehicles to hold their investment properties and provide  more efficient tax benefits under current legislation.  Obviously, tax advice should be sought as individual circumstances vary!

Sticking within this area, AXIS Bank, a relatively new lender, have lowered their rates by as much as 0.30% for their Ltd Company mortgage offerings. We are seeing more and more lenders launch into this arena and price their products very competitively.

More mainstream lenders, such as Santander, Shawbrook Bank, Coventry Building Society and Barclays have reduced a selection of their Buy to Let rates and some of their Residential rates by up to 0.5%. 

Conversely, with lenders reducing rates and volumes for the New Year on the increase, we are seeing more people being declined.  Not necessarily due to adverse credit, but because their credit score is not as high as they thought, and they don't meet the lenders requirements as a result.

Credit scoring is one of the most widely used means to assess a customers ability to obtain a mortgage.  All credit scores include a credit search – this reviews your financial history, payments to utility suppliers, mobile phones, etc. Almost every financial institution from mobile phone companies to insurance companies will carry out a credit search before offering you their services. This can also be a negative though, as the more credit searches you have, the lower your credit score may be. 

The high street lenders, in the main, use credit scoring.  However, do your homework as many smaller lenders will offer just as attractive rates, but they will manually assess your ability to obtain a mortgage and use a human to assess your credit profile, rather than a computer aided credit score decision making system.  

A 5 year fixed at 3.89%! Very nice!

Shortly after writing and submitting last weeks article, nearly every lender reduced their rates! It must have been something in the water, but this really does now signify a superb time to review the amazing mortgage products on offer and see if you could make savings on your current arrangements. The most noticeable headline product was from Nationwide, who launched a 5 year fixed rate at 3.89% with a product fee of £900 and a £99 booking fee. Available for loans up to 70% of the property value, this product provides exceptional value for those looking to fix their monthly payments for a reasonable amount of time. Nationwide becomes hero of the week! Perhaps, in future articles I should nominate hero and villain of the week. Perhaps not, as that would set me up to be shot at as well I guess!

Late last week, Hinckley and Rugby Building Society launched an exclusive Buy to Let product, only available through AToM. The rate is fixed at 3.99% for 2 years up to a maximum loan to value of 65%. The lender fee of £1,250 (cheap compared to many) is added to the loan within the 65%) and this is a very attractive rate for those landlords looking to fix rates for the next couple of years and maximise their income.

Godiva, the intermediary of Coventry Building Society have launched a superb 2.99% flexible rate for the life of the mortgage to 75% on either purchase or re-mortgage cases. Their booking fee is just £199 and the arrangement fee is £800 and this can be added to the advance. What makes this product even more exciting is that there are no early redemption interest charges at any time. If you are re-mortgaging the lender will cover the cost of a standard valuation (up to fee value £670) and standard legal fees too. The product is also fully flexible and should therefore appeal to many borrowers looking for both a cheap rate and flexible mortgage options.

The only thing to note with these products is that they tend to have a short shelf life, so don't delay! Talk with your independent financial advisor.