Credit scoring is not right for everyone.

I haven't mentioned it for a while, but it certainly is causing a lot of customers an issue.  Credit scoring!  This is an assessment on all available financial information and calculates a 'score' for the lender.  It also includes a search on your overall credit history covering, in the main, all of your financial transactions over the last few years.

Most lenders credit score applications to try and assess your ability to repay any loans.  This will take in to account many factors including the amount of credit you have, whether you are on the electoral role, your recent payment profile on any existing credit and the number of recent credit searches you have on file.  Nearly all financial institutions will register a credit search against you.  So, if you have recently updated your car insurance, home insurance, taken out a mobile contract and just got a new credit/debit card, that’s probably four searches in a short amount of time!  Be wary that some 'comparison sites' may have also searched you just whilst seeking a new insurance quote.

If the lenders computer says ‘no’, you will tend to find most high street lenders doors shut to you.  But fear not, if you have a reasonable deposit and can prove all income, there are lenders who do not credit score, but will manually review and underwrite affordable applications on an individual basis. 

I always suggest that you speak to an independent mortgage broker with access to whole of market mortgages.  Banks may only advise on their product range. Estate Agents ‘in-house’ mortgage advisers may only be able to offer mortgages from a select panel of lenders. Therefore, in order to get best advice, make sure you do your homework, speak to a whole of market mortgage broker who can advise on the most appropriate mortgage in the market to meet your requirements, whether this be with a credit score or just a credit search.

AToM - Best Buy to Let Distributor for HMOs 2017!

There are many awards issued throughout the year in various industries.  Some you are nominated for.  Some you can voted for yourself.  Others are awarded to celebrate the volume and quality of the business you produce.  Thankfully, the latter applies to the latest award that AToM has just received.   At a lavish awards ceremony held at the fantastic Weston Park Stately Home in the Midlands, AToM was confirmed as the Best Buy to Let Distributor for HMOs (Houses of Multiple Occupation) in 2017 from specialist lender Precise Mortgages.  This was superb recognition for the amazing and highly knowledgeable staff we have at AToM and specifically those who specialise in the Buy to Let sector.  Well done team!

I mention credit scoring/searching quite a bit, but it really is so important in the current financial world when lenders are deciding to lend to you, or not.  Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile on any existing credit.   The number of recent credit searches you have on file will also have an impact.  So, over the festive period, just be wary when getting quotes for car or home insurance, mobiles, etc that each of these will register a search against you, especially if you’re planning to review your mortgage in the near future.

We have seen a number of good product innovations during the last few weeks.  One that sticks out is that Precise Mortgages have recently launched a new buy to let that allows the customers personal income to top up any rental shortfall.  Usually the mortgage on a buy to let is calculated on the rental it achieves. Occasionally this may not achieve the loan required.  So, to allow surplus income to be used to ‘top this up’ is a great addition from Precise. 

The Buy to Let sector generally is becoming very competitive and despite an increasing number of options and new lenders launching in to the market, demand is still increasing.   Whilst first time buyers struggle to get on the property ladder (hopefully the recent stamp duty changes may help?) and savings interest rates remain low, many continue to invest long term in to property and there's no immediate reason why this should change.  However, with all of the recent tax changes on Buy to Lets, you should not only seek professional mortgage advice, but also tax advice from an accountant who understands property.  Get it right first time.  

HMOs, Ltd Company Buy to Lets and Credit scoring!

There have been a number of competitive launches this week in the Buy to Let sector.  Especially for those buying a House of Multiple Occupation, or in a limited company name.

The more noticeable includes the launch of new products from our friends at Precise Mortgages, designed to assist those looking to purchase investment properties in a Limited Company name.  With Buy to Lets, the loan tends to be calculated based on the rental income achievable. If the product is not a 5-year fixed rate, then this is required to be at a nominal rate of, circa, 5.5% and with rental required at up to 145% of that figure.  With the Precise product, the lender will use the pay rate of 3.09% to calculate the loan, as it is a fixed rate for five years, and with a 125% rental requirement, depending on individual circumstances.  This makes a huge difference to the loan available, and a fixed rate that low is an attractive deal also.

With the recent reduction in mortgage interest relief, since April 2017, landlords are only able to offset finance costs at the basic rate of tax at 20%.  This affects 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 such, we are seeing more and more customers look at a Ltd Company Special Purpose Vehicle 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, Landbay have launched some attractive Buy to Let tracker rates with no redemption penalties at all.  These products are great for those looking at a short term project, or perhaps where they want to re-mortgage after a short period, possibly following some works to the property, and taking money out of the increased value to reinvest in further properties, and so on.

Conversely, with lenders reducing rates and chasing completion volumes for year end, 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 customer’s ability to obtain a mortgage.  All credit scores include a credit search – this reviews your financial history, payments to utility suppliers, mobile phones, etc.  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.  

Computer says 'no'

So!  You have no credit problems: you have a good income: no debts and you are looking to buy a property or maybe remortgage.  But then, your bank, with whom you’ve been a loyal customer to for many years, reports back that you have a low credit score and the computer says “no”. They will not offer you a mortgage. This is a dramatically increasing scenario. The world of credit scoring (tick box mentality) is in our day to day finances and there’s no arguing with the lender once their technology has made the decisions.

Fear not!  There are a number of options still available to you which include lenders who will assess an application manually and seek to offer assistance to such customers. It does not just include those turned away by the high street for low credit scores. It could be a case scenario that needs a bit of lateral ‘out of the box’ thinking by an underwriter keen to say ‘yes’. This could include cross collateral security for clients who are asset rich: a sympathetic view for those who have trouble in proving ‘real’ income: customers who need guarantors: those in later life, or maybe just need someone to sit down, review the whole picture and advise on the best route to take.

As with everything you purchase, it’s always worth shopping around as although you might think you have a great deal with your current provider, there may be better products out there that you are missing out on.  And make sure you do move!  Why would you stay on the lenders variable rate, after the promotional rate had ended, if there was a more cost effective rate available with another lender saving you money?  Always think of number one.

Banks may only advise on their own product ranges. Estate Agents ‘in-house’ mortgage advisers may only be able to offer mortgages from a select panel of lenders. Therefore, in order to get best advice, make sure you do your homework, speak to a whole of market mortgage broker who can advise on the most appropriate mortgage in the market to meet your requirements.

And yes, there may be a small fee for this research and advice.  Prices vary from company to company and you can decide exactly who to deal with.  As with everything, before committing, make sure you read the terms, conditions and small print!

Credit Scoring - most lenders do it!

I haven't mentioned it for a while, but it certainly is causing a lot of customers an issue.  Credit scoring!  This is an assessment on all available financial information and calculates a 'score' for the lender.  It also includes a search on your overall credit history covering, in the main, all of your financial transactions over the last six years.

Most lenders credit score applications to try and assess your ability to repay any loans.  This will take in to account many factors including the amount of credit you have, whether you are on the electoral role, your recent payment profile on any existing credit and the number of recent credit searches you have on file.  Nearly all financial institutions will register a credit search against you.  So, if you have recently updated your car insurance, home insurance, taken out a mobile contract and just got a new credit/debit card, that’s probably four searches in a short amount of time! Be wary that some 'comparison sites' may have also searched you just whilst seeking a new insurance quote.

If the lenders computer says ‘no’, you will tend to find most high street lenders doors shut to you.  But fear not, if you have a reasonable deposit and can prove all income, there are lenders who do not credit score, but will manually review and underwrite affordable applications on an individual basis. 

I always suggest that you speak to an independent mortgage broker with access to whole of market mortgages.  Banks may only advise on their product range. Estate Agents ‘in-house’ mortgage advisers may only be able to offer mortgages from a select panel of lenders. Therefore, in order to get best advice, make sure you do your homework, speak to a whole of market mortgage broker who can advise on the most appropriate mortgage in the market to meet your requirements, whether this be with a credit score or just a credit search.

Small deposits, LTVs and credit scoring

You may have heard the term LTV a number of times when it comes to mortgages.  This stands for Loan to Value and effectively the definition is the amount you are borrowing compared to the value of the property.   This is especially key when a lender is a assessing your mortgage, as a higher LTV will create more of a perceived risk to the lender.  Mainly due to the fact that if house prices dropped sharply, the lender may not get their full loan amount returned, should they need to repossess the property for whatever reason.  Some lenders will charge a separate insurance for such high borrowing, normally called a Mortgage Indemnity Guarantee or Higher Lending Charge.  As such, you might find that a person who is borrowing 95% LTV and just investing a 5% deposit will attract the higher mortgage rates versus someone investing  a 25% or larger deposit.  Usually these are stepped, so up to 60% LTV, rates will be around 1% cheaper than those borrowing up to 70% LTV.  Then in turn these tend to be 1% cheaper than those borrowing up to 80% LTV,  and this will be cheaper than the next 5% LTV increase, and so on right up to 95% LTV.  So, in short, the more you can save for a deposit, the lower the interest rate you will probably receive from the outset.

This also is the same with credit scoring.  Credit scoring is one of the most widely used means to assess a customers ability to obtain a mortgage.  If you have had a number of recent credit searches for home insurance, car insurance, mobile phones, etc, this may affect your ability to achieve the best rates available to you.  In some cases it might also affect the amount of loan offered to you.  So make sure you have seen you credit report (experian, equifax, noddle), and know what appears on there.  This is your financial history to any lender and should be treated as your CV to a prospective party!  Try and keep payments up to date as anything within the last six years will probably be visible and may affect your ability to borrow.  However, if you do fail a lenders credit score, don't give up.  There are an increasing number of lenders willing to assist (depending on the nature of the decline) and they will also manually assess. A human making the decision, rather than a computer. 

AToM is a Specialist Mortgage Packager & Distributor

Those who know AToM will be aware that, in addition to arranging mortgages for the general public, we are also a specialist mortgage packager/distributor.  We look after and arrange mortgages for other mortgage brokers, estate agents and independent financial advisers nationally.  In fact, our database now reaches almost 9,000 financial intermediaries.

For some lenders, AToM acts as their administration arm, collating information, instructing valuation and processing applications right up to the issue of the mortgage offer. For other lenders, AToM is often allocated a tranche of funds to distribute for them and AToM advertises and controls the administration process.  It could be that the lender requires AToM to pilot schemes and iron out any potential system issues before the products are opened to the general mass mortgage market.  Alternatively to just use our experience and extensive market knowledge to highlight product gaps in the market which the lender can then explore further, if the funding is available!

Any mortgage broker, independent financial adviser or similar, who require these particular offerings, will often have to come via AToM to gain access to such products. The benefit to the lender is that AToM carry out all the work, including taking telephone calls, requesting information from employers/accountants, collating documentation, and more. So potentially it can be cost effective for the lender.

These can be specialist lenders and not normally household names.  But this also works to your advantage when requiring someone to think 'outside the box' or needing a lender who adopts a more individual approach to each case.

Most high street lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile. If the computer says ‘no’, you will tend to find the usual high street lenders doors will be shut to you. Even your own bank, with whom you’ve been a loyal customer to for many years, may report back that you have a low credit score and the computer says “no”.  Consequently, they will not offer you a mortgage and there’s no arguing with their systems and technology which has, in effect,  made the decisions! 

This is a dramatically increasing scenario.

However, the emergence is with the smaller lenders who will manually assess and carry out a  manual credit search. A human being who makes the decision based on the merits of the application and has the ability to agree (or decline) based on non standard criteria or circumstances.  Don't give up just because someone says 'no' to your initial enquiries, there might be other options out there.

What if 'the computer says No'?

A flurry of activity in the mortgage market this week as a number of lenders reduce their rates.   Virgin Money, Natwest, Accord Mortgages and Platform are a few of the lenders who have cut various rates in their product offerings.  This follows decreases in both LIBOR and SWAP rates (in the main, measures against which banks lend each other money).  This is good for the end consumer and I’ve even heard whispers that this could lead indirectly to a Bank Base Rate cut shortly.  Who knows, as uncertainty seems to the only certainty in the financial sector!  Personally, I’m not sure a cut is a good thing right now, but with many companies struggling to survive and some big casualties (JJB the most recent noticeable), it will be welcomed by all those on sitting on a bank base rate tracker.

I mention credit scoring/searching quite a bit, but it really is so important in the current financial world when deciding to lend to you, or not!  Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile on any existing credit.   The number of recent credit searches you have on file will also have an impact.  Nearly all financial institutions will register a search against you.  So, if you have recently updated your car insurance, home insurance, taken out a mobile contract and just got a new credit/debit card, that’s probably four searches in a short amount of time!

If the computer says ‘no’, you will tend to find most high street lenders doors shut to you.  But fear not, if you have a reasonable deposit and can prove all income, there are lenders who do not credit score, but will manually review and underwrite affordable applications on an individual basis.  AToM has access to a number of these lenders so don’t despair if the high street lender’s computer says no, give us a call to see if we can assist.

What is Credit Scoring?

Credit scoring is creating havoc for mortgage applications to high street lenders. Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile. If the computer says ‘no’, you will tend to find all high street lenders doors shut to you. Even your bank, with whom you’ve been a loyal customer to for many years, reports back that you have a low credit score, the computer says “no” and they will not offer you a mortgage.

But you have no credit problems: you have a good income: no debts and you are looking to buy a property or maybe remortgage. This is a dramatically increasing scenario. The world of credit scoring (tick box mentality) has taken over and there’s no arguing with the lender once their technology has made the decisions.
All credit scores include a credit search – this reviews your financial history, payments to utility suppliers, mobile phones, etc . 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 maybe.

Fear not! There is light at the end of the tunnel. AToM recognised that good clients were being rejected by lenders for no apparent reason and has built up exclusive relationships with a number of lenders who will assess an application manually and seek to offer assistance to such customers. This is our alternative to ‘the computer says no’ and have found an avenue for the right deals working with lenders that not only manually underwrite cases, but who have an appetite to lend. We call this Complex Prime and it does not just include those turned away by their bank for low credit scores. It could be a case scenario that needs a bit of lateral ‘out of the box’ thinking by an underwriter keen to say ‘yes’. This could include cross collateral security for clients who are asset rich: a sympathetic view for those who have trouble in proving ‘real’ income: customers who need guarantors or maybe just need someone to sit down, review the whole picture and advise on the best route to take.

I have always suggested that you speak to an independent mortgage broker with access to whole of market mortgages. Banks may only advise on their product range. Estate Agents ‘in-house’ mortgage advisers may only be able to offer mortgages from a select panel of lenders. Therefore, in order to get best advice, make sure you do your homework, speak to a whole of market mortgage broker who can advise on the most appropriate mortgage in the market to meet your requirements, whether this be with a credit score or just a credit search.

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!

June was a great month, but was it a fluke?

AToM can report a bumper month for new business in June. Our best month for mortgage applications and completions for over a year! Fantastic news which shows that, even in a dire market, consumers are turning to independent mortgage advisers for assistance for advice and support. Now, more than ever, independent advice is key. There are many mortgage options available, but finding the right one to suit your requirements can be difficult, especially as some lenders only offer their special mortgage products through a select panel of distributors, like AToM.

Despite such positive news, market conditions, and national debt statistics for June, from creditaction, do not paint a pretty picture. In brief:

- 107 properties were repossessed daily during Q1, 2010
- 203 mortgage possession claims will be issued and 158 mortgage possession orders will be made today
- 391 people are declared insolvent or bankrupt every day. Equivalent to 1 person every 51 seconds during the working day.
- 1,000 people seek some form of formal debt rescheduling every working day.
- 1,896 people were made redundant every day during the 3 months to end April 2010.
- £131.5m is the interest the Government pays each day on the UK’s net debt of £903bn. Estimated to rise to £182m a day in 2015-16!
- Shelter estimate that more than one million householders have used credit cards to pay their mortgage or rent in the last 12 months and moneysupermarket.com advises that almost 5m UK adults regularly use their credit card to pay household bills. Another 2.5m withdraw money using their cards!

Scary figures! The recent emergency budget is trying to tackle the scale of some of these and only time will tell if it succeeds.

In the meantime, remember that financial institutions evaluate your mortgage application based on your credit history. In fact, insurance companies will also credit search you before agreeing to cover you. Most will use either Experian or Equifax to review your financial status. In short, every financial outlay you have, or have had, will be reported. If you have too much credit, not enough credit, or missed payments on any credit or utilities (including Gas bills or Mobile phones), you may find that mortgage availability to you will be limited.

The return of Exclusive mortgage products!

Lenders are returning to the market! Hooray! Importantly, they are also providing exclusive products again. AToM has an exclusive 2 year fixed product at 3.35% (5.2%APR) up to 75% of the value of the property for both purchase and remortgage. We have £5m to allocate, so if this is of interest, please contact us for terms and conditions. Move quickly as £5m will not last long!

A new lender entered the market last week. Drawbridge Financial have a real appetite to lend and will look at applications on a case by case basis. They specialise in HMO’s (houses of multiple occupation such as student lets), refurbishment loans, short term bridging finance, commercial finance and more. With loans from £50k up to £15m available, this is an attractive portfolio.

The Building Societies Association has reported that only 49% of consumers think now is a good time to buy a property. The barrier seems to be the lack of mortgage finance. With funds easing, I would argue that it is a good time to get onto the housing ladder. What we can be sure of is that house prices are currently low in most areas. Mortgage interest rates are low currently but are likely to rise towards the end of this year and, probably, throughout next year too. So, to purchase a property when prices and rates are on the low side looks like a good prospect.

Meanwhile, credit scoring is creating havoc for mortgage applications to high street lenders. Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile. If the computer says ‘no’, you will tend to find all high street lenders doors shut to you. Fear not, if your credit history is clean, if you want a loan to value of 75% or less and you can prove income, there are lenders who do not credit score, but will manually review and underwrite clean and affordable applications on an individual basis. AToM has access to six of these lenders so don’t despair if the high street lenders say ‘no’, if you fit the above profile, give us a call to see if we can assist.

Why am I being declined a mortgage?

So! You have no credit problems: you have a good income: no debts and you are looking to buy a property or maybe remortgage. But then, your bank, with whom you’ve been a loyal customer to for many years, reports back that you have a low credit score and the computer says “no”. They will not offer you a mortgage. This is a dramatically increasing scenario. The world of credit scoring (tick box mentality) has taken over and there’s no arguing with the lender once their technology has made the decisions.

Fear not! There is light at the end of the tunnel. AToM recognised that good clients were being rejected by lenders for no apparent reason and has built up exclusive relationships with five lenders who will assess an application manually and seek to offer assistance to such customers. This is our alternative to ‘the computer says no’ and have found an avenue for the right deals working with lenders that not only manually underwrite cases, but who have an appetite to lend. We call this Complex Prime and it does not just include those turned away by their bank for low credit scores. It could be a case scenario that needs a bit of lateral ‘out of the box’ thinking by an underwriter keen to say ‘yes’. This could include cross collateral security for clients who are asset rich: a sympathetic view for those who have trouble in proving ‘real’ income: customers who need guarantors or maybe just need someone to sit down, review the whole picture and advise on the best route to take.

I have always suggested that you speak to an independent mortgage broker with access to whole of market mortgages. Banks may only advise on their product range. Estate Agents ‘in-house’ mortgage advisers may only be able to offer mortgages from a select panel of lenders. Therefore, in order to get best advice, make sure you do your homework, speak to a whole of market mortgage broker who can advise on the most appropriate mortgage in the market to meet your requirements.