Rates being pulled quickly, have your paperwork ready!

The current climates continue to affect the mortgage market in many ways.  We’ve seen lenders pull rates quickly, decreasing rates one day and increasing them the next.  We’ve seen some lenders remove the higher LTVs (Loan to values) 95%, some removing 90% and others removing 85%.  We have seen some lenders launch limited edition products and others have not re-entered the market at all!  All signs of the times and of the fast-moving pace of the money markets. 

The only certainty seems to be uncertainty and where lenders may have previously considered clients on furlough, or those who have taken bounce back loans within their businesses, this may have changed as lenders look to ensure clients can afford the mortgage for the next six months and onwards.  Some require a letter from the client to confirm this whereas others may require to view bank statements to prove they have the funding. 

Some lenders may have previously taken all of a client’s bonus or commission when working out affordability, but more recently have reduced this to 50% of received monies.  We’ve seen one lender limit the maximum term of the mortgage to 25 years for first time buyers and change their acceptance on where deposits come from, for example - gifted deposits.  

With changes happening quickly, it is vital you get all the documentation required to the lender as quickly as possible to secure your rate and that product availability.  Especially as some lenders are receiving pre-covid volumes of business, but only with 50-70% of normal staffing levels.  This means that some lenders can be weeks behind and if you only provide certain items, you may find that you go to the back of the queue when the outstanding items required are submitted, which extends the delays. 

Most lenders will no longer prioritise the valuation of the security property.  They will assess the whole mortgage application and confirm agreement to proceed before instructing the valuation.  Be aware of this as Estate Agents need the valuation instructed asap.  Depending on the lender you go with, this could take a few weeks.

Finally, expect this to continue for some time.  Not just because of the ongoing pandemic, but also with the stamp duty temporary changes taking effect, a lot of people are trying to move before the end of March deadline.  Good for the property market, but who knows what may happen with processing, criteria and resulting inevitable delays over the coming weeks and months.

Delays, low rates and AToM at the Property Investor & Homebuyer Show

Delays, delays, delays!  With so many lenders dropping rates to all time lows, it was inevitable that their back end would not be able to cope with front ends sales!  We are finding a number of lenders are often taking one to two weeks to turn things around.  A few are much longer and we know of one that is currently taking over nine weeks to review applications.  Yes, nine weeks!  When applying for the house of your dreams and with the Estate Agent demanding a quick survey, always check with the lender to find out their service levels before putting your mortgage with them.  You might find the agents won't be happy with a substantial wait. 

The other impact, just around the corner, is the impending Election.  Based on previous experiences, many people put their home plans on hold whilst elections occur and this can also have an effect on lenders, who then reduce rates to attract more business, and so we have a spiral effect as per my earlier comment above.

On the up side, we've seen some incredible offerings from lenders.  Last week we saw the lowest five year fixed rate deal at 1.29%, which was withdrawn pretty quickly and although the rate has increased, is still a very respectable 1.59% (up to 60% of the property value and £900 fee).  We also saw one Building Society launch a 0.89% two year fixed rate deal with a £1,495 fee.  How low can they go?  The choices are currently attractive and seemingly very good for the end consumer.  As always, terms and conditions apply and are subject to individual circumstances, so seek advice!

Finally, this weekend is The Property Investor & Homebuyer Show at ExCel in London (28/29th).  If you are looking at property to rent out, this is the ideal place for obtaining up to date property market information, networking and, of course, property to buy.  It is designed to cater for all levels of property experience, so whether you are a property novice or a seasoned investor you will find the answer to your questions.  Better still, both the show and seminar programme sessions are free to enter.  AToM will be exhibiting, so if you are attending, come and say Hi

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!

You will be asked to prove you have finance in place.

When buying a property, one of the most important things an estate agent will require is proof that you can actually afford to purchase the property. Usually this evidence is required early in the process and it can be via any legitimate source (ie it DOES NOT have to come from the agents internal mortgage advisers). In most cases the initial confirmation will be in the form of a decision in principle (DIP) from a mortgage lender which is where all your details have been input on to the lenders systems, a credit search completed and, subject to normal underwriting, the lender (based on the information provided thus far) has agreed to lend you the money to assist with the purchase.

The next step, once you have had your offer accepted, is to fully apply for the mortgage. This will include the lender underwriting your mortgage application, reviewing payslips/accounts, bank statements, ID and other documentation as required. The lender will also move to instruct the valuation. This is where a surveyor will go out to the subject property and confirm it is suitable security for mortgage purposes , fundamentally acting as the lenders eyes.

Once the lender is happy with the underwrite and the valuation, a mortgage offer is issued and a solicitor appointed to deal with the legal process through to completion.

In the main the process is pretty straight forward, but it can be daunting . You should be prepared for any lender to request as much information on you as possible . This enables them to make an informed decision whether or not to lend you such a large amount of money. The lender may also calculate that you can afford the mortgage over the next five years, as they anticipate rates may rise!

Finally, make sure you ask questions and are comfortable you understand everything you are signing. As you would expect there is quite a lot of paperwork involved in the mortgage process and it can be quite a read! However, this is the biggest debt you are likely to take on. Some rates will have early redemption penalties to change or switch products, so you need to get it right first time. Don't be shy to ask and if in doubt, seek independent advice.

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.

It's still tough out there..

Getting a mortgage application through a lender in the current climates can still be challenging. One day it appears relatively easy, yet the next, it’s a nightmare! So whatever you do, try to not give lenders any excuses to decline your application or refuse to lend to you. Try to pay bills on time, don’t miss payments where possible and especially not mortgage payments! Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision to lend to you. Remember that most Insurance companies and mobile phone providers carry out credit searches on people before issuing their products. Try not to incur too many searches in a short space of time. This can also be detrimental to your credit score.

When choosing who to speak to about your mortgage, ensure that the company you are talking to, whether it be a mortgage broker, or an Estate Agents in-house mortgage adviser, has access to the ‘whole of market’ and not just a fixed panel of lenders. If they do not have access to the whole of market, they may not be offering you the best deal available to meet your requirements.

Finally, for some months, a few of the smaller specialist lenders have been offering existing borrowers ‘golden goodbyes’ to assist them in remortgaging away to another Lender. This tends to be a cost effective way for the lender to lower their exposure and re-capitalise over exposed mortgage books, or so we are led to believe! In some instances, the incentive to the borrower to move away has been thousands of pounds. We are aware of some discounting by tens of thousands or up to 25% of the current loan amount! Quite simply, some lenders are happy to pay
substantial amounts to say goodbye! Other lenders have waived early redemption charges on some loans to encourage borrowers to move their mortgage elsewhere. This fad seems to be on the increase again. If your mortgage is a with a small specialist lender, who you know are no longer actively trading, a call to them could be very worthwhile and could decrease your mortgage amount, term and payments!

Know what's right..

You may have noticed that I have not had a rant for a while, but as it appears that some underhand activity appears to be starting up again I feel obliged to highlight these to both sellers and purchasers alike.

We have had customers approach us recently advising that, when they are ready to make an offer on a property, the Estate Agent has refused to forward the offer to the vendor unless the proposed purchaser obtain their mortgage facilities via the Agents own internal mortgage consultant!

This is not good for so many reasons including the main, it’s wrong! In addition, the vendor wants to sell the property and is not really concerned about which provider arranges the mortgage for their purchaser!

No one is disputing that the proposed purchaser must prove their ability to obtain finance, where applicable. Nor do I argue with the selling Agent’s right to offer their services, as competition is a healthy thing. However, the purchaser must retain the right to decide for themselves who provides their mortgage finance.

The National Association of Estate Agents (NAEA) is the UK's leading professional body for Estate Agents. Most of the independent Agents in Horsham are registered with the body and adhere to the code of conduct - The Property Ombudsman Code of Practice for Residential Sales. Section 6 states:

By law you must not discriminate, or threaten to discriminate, against a prospective buyer of the seller’s property because that person declines to accept that you will (directly or indirectly) provide services to them. Discrimination includes – but is not limited to – the following: - making it a condition that the person wanting to buy the property must use any other service provided by you or anyone else - failing to tell the seller of an offer to buy the property.

Purchasing a home is probably the largest monetary event you will ever incur and you need to be 100% happy in all aspects of the whole transaction. For more information, go to www.naea.co.uk and see if the Agent you are looking to use is subscribing to adhere to these rules and regulations.

Finally, beware, as not all Estate Agents internal mortgage consultants can offer ‘whole of market’ mortgages. Make sure you ask the question! If you’re not being offered ‘whole of market’ 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.

Volumes have been increasing but the World Cup may slow it down..

Signs that the market is still not fully on the road to recovery have been reaffirmed this week as both Northern Rock and NatWest Intermediary Solutions reported that circa 600 jobs are to go. The cut backs are further proof that although positive signs have been outweighing the negatives recently, we cannot overlook the underlying financial instability issues endemic within the financial industry. And, of course, we all wait with baited breath to see what impact the forthcoming emergency budget will bring. The coalition government have been left with a huge debt/financial crisis to pick the bones out of and it appears to be much worse than we all imagined. No doubt we will get to know the full picture on the 22nd June.

In the meantime, we have been receiving a higher volume of mortgage applications for purchase transactions from across the country. The removal of HIPS does appear to have had some impact. Those looking to sell seem to be more active and yet there are some great deals to be had for purchasers whilst house prices remain relatively low in some areas.

However, with this in mind, market activity is predicted to lull during the World Cup and just as the market is showing signs of momentum. This is something we could do with out in the current climate. Obviously, I hope England win the tournament, but it would be nice if the housing market rides on the wave of success too! That said, pundits are predicting an increase in activity of up to 8% after the World Cup has finished.

Finally, as market activity has been buoyant over the last few weeks, so has the underhand tactics of some of the corporate Estate Agency chains in the area. We hear first hand from customers who have been ‘told’ to use to the internal Mortgage Adviser (who may not offer whole of market products) or their mortgage offer will not be put forward to the vendors. This is a clear breach of the Code of Practice for Residential Estate Agents. To review all the Rules and Code of Practice, visit www.naea.co.uk . They are an interesting read and certainly something you should review before entering the house buying process so you know your rights.

Things that gripe..

As we commence our fourth week in the Carfax hub of Horsham, my eyes have been opened to a number of interesting issues. Some which really require comment and others which perhaps I should just let pass me by! That said, and this might perhaps go against my better judgement normally, I want to take the rather risqué route and speak my mind on one particular issue which is of concern to me. One which, in the current climate, is unfortunate and can be detrimental to the house buying public.
I accept that it is a tough market out there and that everyone needs to firstly attract business and then convert what they can. If this is conducted professionally you can retain a customer for life. However, if it is done aggressively you can just as easily lose face and this can be very bad for business! We have lots of long term friends in the house sales sector and find that, in our view, the majority of these do work hard to provide a superb service. But, it appears that one or two may sometimes go a little bit over the top. It is both understandable, and sensible, that when a purchaser puts forward an offer for a property, the selling agent will require evidence that they can afford the transaction and obtain a mortgage. Quite right too! However, when the purchaser is then told that their offer will not be put forward to the vendor unless they place their mortgage through the selling agents own advisers, then this is surely not good or fair practice, in any sense!
Whinge over, and on to more positive matters. Properties appear to be selling and the general level of confidence is increasing in the market almost daily. The Conservatives will dismantle the Financial Services Authority (FSA) if they get into power next year. Not sure if that is a good or bad thing (just in case anyone from the FSA reads this column!). Have a good weekend!