Mortgage prisoner? There's light at the end of the tunnel...for some.

Around 140,000 people with mortgages are currently classed as ‘mortgage prisoners’.  This means that they could be with a lender who is no longer active, or a lender who has ‘bought’ a number of clients from other lenders but who does not offer additional mortgage products once the customers current incentive rate period comes to an end.   So, effectively, the client will sit with the lender on their standard variable rate, normally a lot higher than incentive rates, and because of various reasons, they may not be able to move to another lender.  This could be due to their loan to value (amount borrowed against the value of the property), or maybe that particular lender at the time had attractive, exclusive income multiple calculations, which are no longer offered or new and stricter criteria no longer enables them to change lender. 

Many of the mortgage industry have campaigned for some time to try and assist these customers.  It seems the regulator has taken note and issued a consultation paper.  I stress, this is only at consultation stage, but it shows that this is now a concern and the regulator is seeking a way forward.  One part of the consultation entails a ‘relative’ test, rather than ‘absolute’ test.  This would check to see if the new mortgage costs would be cheaper than the current costs.  As such, the client may be able to transfer to another lender with minimal checks, underwriting and fees (normally this would be classed as a product transfer if the client was staying with the same lender and changing to a better deal).  This also assumes the new lender has made a commercial decision to see if this works for them in taking on these customers.

I can only see this truly working if all lenders in the market are ‘encouraged’ by the regulator to make this work.  Not all customers will be able to be assisted but it is a step in the right direction and that can only be good news for those who are currently paying way over what they should be.

Finally, we’re looking for staff to join our fantastic team in Horsham.  Ideally, we’re looking for mortgage brokers who have been in the market for at least a year and have a proven track record in customer service and recommending mortgage and protection products.  If this is of interest, or you know someone who is looking, please get in touch.

Lenders have to report statistics. Are you one of them?

According to the CML (Council of Mortgage Lenders), gross mortgage lending in January totalled an estimated £18.9bn.  This is an increase of 2% on January 2016, and down 6% from December.  There were 29,743 loans approved for house purchase in January, according to the British Bankers Association (BBA), with the average loan approved for house purchase rising to £182,500.

The Financial Conduct Authority reports that 69.75% of mortgage lending in Q3 2016 was for 75% or less of a property’s value.  Just 5.3% of lending was for mortgages over 90% of a property’s value!

Lenders are restricted on the amount they can lend in many different mortgage categories.  So for example, if a lender offers more than 4.5 x income, the maximum allowed across their business for the year will be a set percentage of business.  If this is, say 15% of business, once this target is hit, the lender will need to withdraw this offering (or dramatically increase other areas to bring the split of business back in line).  This is also the same with lending in loan to value bandings, so a percentage limit will be enforced on lenders offering over 90% loans to the value of the property and so on. 

The Office of National Statistics say that the average house price for first-time buyers was £184,973 in December 2016, which is an annual increase of 7%.

Whereas The Money Charity Statistics confirm that outstanding mortgage lending stood at £1.326 trillion at the end of January.  That means that the estimated average outstanding mortgage for the 11.1m households with mortgage debt was £119,752 in January.

As you can see, everything is a statistic.  With this in mind and with so many rate changes and reductions, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions, and more.  So don’t give them any excuses not to lend to you!  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result.  In short, your credit search / score are the basis on which most lenders will initially decide whether to lend to you or not.  The best rates will almost definitely go to those with the best credit scores.  If you’ve not checked your credit file before, it is well worth a review and most are now free.   

2013 was the foundation for a great 2014!

For my last column of the year, I’m not going to do the obligatory round up of the year!  Nor will I gasp my astonishment at how quickly the year has gone by.  What I will say is that I think that 2013 has been a year of foundations for what we all hope will be a fantastic year in 2014. 

Total lending for 2013 was predicted to be in the region of £150-160bn.  The actual figure will be nearer £170bn.  Predictions for 2014 are already being suggesting volumes will reach £190-£200bn (2007 was £370bn!).
Although the funding for lending scheme is being withdrawn in January, a year earlier than planned, the financial sector is in a strong position and one that we hope will be able to stand on its own two feet to move forward successfully over the coming months.

We have a new housing minister, who so far seems to be singing from the right hymn sheet and might be a friend to the industry, rather than predecessors who thought they knew best.  Working together is key for all sectors.

It is also reported that there are a number of lenders looking to enter the UK market who are in the process of getting their FCA authorisation.  More competition is great news for the economy and  can only be good news to the end consumer.

The only negative hanging over all of our heads is that the Bank of England base rate has to rise at some point.  The million dollar question is when?  If you are looking to review your mortgage at any time soon….don’t leave it too late.

Finally, a heartfelt thank you for reading my column over the last twelve months.  It has been an enjoyable(!) experience each week trying to provide an insight in to what happens behind the scenes in the mortgage market.  But I do love it!  No two days are the same and how can anyone not enjoy helping people reach their dream!? 

Thank you to all those who have used AToM to source and arrange their mortgage requirements.  We’ve had a fantastic year and enjoyed growth in both volume, with November amounting to just shy of £20m in lending, and staff numbers, with our headcount now over 20!  And what a great team they are.

On behalf of all the staff and directors at AToM, we wish you and your families a very Happy Christmas and Prosperous (& Relaxing) New Year!   We look forward to working with you in 2014.