Lenders to help those classed as 'mortgage prisoners'

The Financial Conduct Authority recently issued its statement around those it considers to be a ‘mortgage prisoner’.

It is estimated that around 140,000 people with mortgages are currently classed as mortgage prisoners (although some have quoted this to be as high as 500,000).  This means that the customer could be with a lender who is no longer active, or a lender who has ‘bought’ a number of customers from other lenders but who does not offer additional mortgage products once the customers current incentive (fixed) 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 other available 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. 

The regulator is seeking a way forward.  As such, one area of the statement confirms that mortgage lenders can choose to carry out a modified affordability assessment where the consumer:

– has a current mortgage

– is up to date with their mortgage payments

– does not want to borrow more, other than to finance any relevant product, arrangement or intermediary fee for that mortgage

– is looking to switch to a new mortgage deal on their current property

In short, this means that there will be minimal and relaxed affordability checks and the lender must confirm that although this may result in a better rate for the customer, there may be potential risks as this is different from the normal affordability checks and assessments carried out.

Great news for those stuck with historic lenders on high rates.  But will only work if all lenders are encouraged to offer this option as it’s not mandatory.  As this can be quite complex, and only certain lenders will offer this assistance, speak to your local independent mortgage brokerage to find out more and seek professional guidance.

'Highly Commended' by What Mortgage / Fixed rates proving popular!

Firstly, we are delighted to have been recognised and ‘highly commended’ in this year’s ‘What Mortgage?’ awards Best Mortgage Broker category.   This is a great testament to the team we have and we’re very grateful to all those who have voted for us.  We are proud to be in our 28^th year in the mortgage sector and look forward to many more!

The majority of clients visiting impact are looking for a longer-term fixed rate, although some are still happy to take a short term tracker rate and are confident that rates will not fluctuate too much in the coming months.  There are some good products available with minimal set up costs that have no early redemption penalties at all.  So if you wanted to switch products later on, to a fixed rate for example, this could be done (be aware that most lenders charge product fees on fixed rates).  Some lenders even offer the ability to do both in the same mortgage offering.  Lenders are innovative when it comes to attracting a certain type of business and clientele!  But do remember that tracker rates can go up, as well as down.  Although currently it does seem to be a ‘race to the bottom’ with regards to pricing.

We're also seeing lenders look at criteria to attract business, rather than just a low rate.  This could be a key part of the mortgage market moving forward.  A huge number of people will be ignored by computer technology and credit scoring decision making systems. But this does not mean they should not obtain mortgage finance, it just means they don't meet all of the rules entered to make that particular decision!

I often wonder if we are on the way back to as it was in 2007/8.   Rates couldn't go much lower then either and criteria played a huge part, then the ‘crash’ happened.  Fast forward to today and again rates can't get much lower and lenders are looking at gaps in the market where a criteria change or tweak might give them the competitive edge.

Who knows what’s around the corner and what will impact the market?  But in the meantime, make sure you think about number one and ensure you have the best rates available to you.

Technology in the mortgage process and changes for portfolio landlords.

The mortgage press is starting to increase their commentary on the ever growing importance of technology proving itself in the mortgage sector. This includes recent adverts suggesting that a computer algorithm will ‘fix’ the mortgage market and choose the right product for you!  In time, this might become a reality!  However, given that the mortgage is the biggest financial debt you are ever likely to have, over a long period of years, you should be absolutely 100% sure that is the right product for you moving forward.  I do believe there is a place for technology in everyone’s lives, and certainly in our marketplace, however I also believe there will always remain a place for the human touch and people like to buy from people and organisations they trust.  With such a plethora of information available and such an in-depth decision to make, I can’t see that position changing for some time yet.

Rates have been in the headlines again this week.  Some pundits are filling column inches suggesting that the bank base rate will rise by the end of the year and one large bank saying it could rise to 0.75% by the end of next year. 

In comparison, this week has also seen a sub 1% fixed rate launched by Accord Mortgages, part of Yorkshire Building Society.  The two year fixed deal requires a 20% deposit.  Other initiatives include the Lloyds Banking Group who are offering a £1,000 incentive for customers who remortgage from another lender before 12^th November whilst the Clydesdale have reduced a number of competitive 2 and 5 year fixed rate products.  The threat of rate rises hang over our heads as a real possibility, but a lot of lenders are seriously ‘under target’ for the year and I suspect there will be competitive rates around for a few months yet.  Do keep an eye out as there are some great offers around.

Finally, if you have more than four buy to let properties, the way a lender underwrites your application is changing.  As previously advised, from 30^th September the new Prudential Regulatory Authority rules come in to effect and lenders will ask for increasing amounts of information regarding your portfolio and finances.  Be prepared and always speak to a specialist!  

Remortgage before Christmas?

Now is the time I tend to get asked "can I re-mortgage before Christmas"?  In short, yes, this should be possible.  However many lenders are 5-10 working days behind in their underwriting of applications (some are longer!) and there are also delays in getting a surveyor out to see your property (effectively the 'eyes' of the lender).  So the quicker you get the wheels in motion, the more likely you are to get the process completed in time for Christmas.  Rates are so low currently and lenders are desperate to do business, but the reality is staffing levels are still some way short of where they need to be and the lenders are creaking with the volume of business.  However, rates are fantastic so if it is something you are considering, do review your options sooner rather than later.

Product choice is the best it has been for some time and this is across all sectors, not just the residential market.  As the high street lenders creak at the seams, this also means that many more customers are being turned away, for whatever reason.  Smaller and more manual assessment lenders have realised this demand for assistance and can offer help in a number of ways.  Whether it is catering for those who might have had a historic credit blip;  those looking to buy a property for investment; those looking for shared ownership; those looking for a property with a commercial element or those looking for someone to 'think outside the box'………there are many possible funding line options, if you know where to find them.  The human decision making process is making a comeback!

Finally, the Nationwide House Price Index has reported that house prices rose just 0.5% in October 2014.  They also suggest that the market has 'lost momentum' as the annual house price growth change has dropped from 9.4% in September to 9% in October.  NHPI suggest that the average house price now sits at £189,333.

Active lenders are not just a household name or brand!

I might even be bold enough to start this week’s column by saying the market has turned a huge corner and is on a substantial climb out of the doldrums!  Wow, what a week it has been.  Competition is rife amongst all lenders, from well known high street names; right through to lenders you’ve never heard of; to those funding commercial mortgages; to those specialising in secured second charges; to those looking at investment properties / buy to lets and to those who offer mortgages for complex scenarios that need a little thinking about, outside of the box.

Rates are reducing all across the market and headline grabbers are now sub 2% for a two year fixed and around 2.7% for a five year fixed.  T&Cs apply obviously, but watch out for the fees.  They range from £1,500 to £1,999 and although the rates are great, they might not be the best in the market, if priced over the term period.  For example, a slightly higher rate, with lower fee and free remortgage package (free valuation and solicitors) might work out more cost effective over the same period.   Always review the APR, the rate your mortgage reverts to after the promotional period and always seek professional advice. 

Active lenders are not just those with a household name or brand.  Many smaller funders / lenders located in various parts of the country have money to lend, and at good rates, if you know where to find them.  So don’t be drawn to a lender just because you know their brand.

With this in mind, figures released recently suggest that lending via Building Societies rose 30% in 2012 with net lending of £6.5bn.  And it’s not just for those with a large deposit as almost half of the sectors lending was against 75% of the property value and above.  In addition, Building Societies are more flexible than banks and can manually assess cases, taking a view of the whole scenario rather than a tick box decision.  First Time Buyers, Self Build, Shared Ownership, Home Movers, Buy to Let, Credit Repair and Let to Buys, are just some of the active areas for such institutions. 

Lenders are showing an appetite to lend!

2011 has started with a bang! The Bank of China have reduced their Residential Life Time Tracker rate to just 1.80% above the Bank of England Base Rate. Currently, the pay rate is 2.30% (APR 2.50%). This is available to home movers, those re-mortgaging and also to First Time Buyers, up to a maximum loan of 80% of the property value. A very good rate and a positive step forward from this lender.

BM Solutions, part of the Lloyds Banking Group, have launched some fixed rate Buy to Let mortgages with arrangement fees of just 1.5%. Compared to some in the market, the fees alone might save up to 2% in costs! Many believe the Buy to Let / Investment property market will boom in 2011.

However, with regards to fixed rates, we’ve seen some lenders already increasing their product rate offerings. Whether ‘to fix or not to fix’ your mortgage rate, will be an ongoing debate throughout 2011.

Lenders are showing an appetite to lend. One lender on the AToM panel has allocated a tranche of £10m in funding to be distributed in January. This is great news for the market and in addition, this lender does not credit score. So if a high street lender has declined your application due to a low credit score, or because you don’t fit their particular requirements, you may be exactly the type of customer our lender is looking for. However, please note that they are not looking for those who have had previous credit issues.

Finally, First Time Buyers are likely to be in need of most support throughout 2011. So far, there have been some small glimmers of hope with a couple of lenders revamping their 90% loan to value products, so requiring just a 10% deposit but this is still not enough! The interest rates are relatively high and as such the monthly payments on this type of mortgage won’t be attractive to many prospective borrowers. Those with a higher deposit will attract a lower interest rate. But in current climates, that tends to be difficult to achieve. More still needs to be done to help first timers get onto the property ladder and I hope that lenders take action to assist. Sooner, rather than later.

Market leading rates for a very limited time!

With Bank Base Rate held for the 20th month at a record low of 0.50%, the question on everyone’s lips continues to be, when it will it rise? We all believe it will, but have no idea when. Many pundits are suggesting that the BBR will now stay low for at least 12 months. However, a few, believe it will rise much sooner and even one of the Monetary Policy Committee has pushed consistently for a raise over the last few months, although they were out-voted by other members. So, the real conundrum in the run up to Christmas and New Year remains…to fix or not to fix?

We are seeing some really competitive rates being offered and some lenders are even providing market leading products with minimal costs for a mere number of days – fire sales! Two lenders recently launched fantastic products only available for a period of 8 days! This causes mayhem and pandemonium within the industry as intermediaries race to submit customer’s applications in time to meet the deadlines and secure these rates.

The BBR being held is good news for anyone with a mortgage on a base rate tracker or discounted rate facility. Bad news for savers though and particularly those who geared their investments and savings to provide for them in retirement. It is hard to know how this can be overcome as the only route for better savings income is higher rates. It is a Catch 22 situation!

This week sees the great and the mighty of the mortgage industry meeting together at Olympia 2 for Mortgage Business Expo 2010. This two day event consists of lenders and ancillary businesses showing their wares and seeking to establish increased business relationships and volumes. The Financial Services Authority will be there and they will be presenting their report on the forthcoming Mortgage Market Review. This is their latest initiative designed to provide the consumer with yet greater protection and more qualified advice and choice. I suspect that the presentation will be 'lively' as not all in the profession, particularly those who are set in their ways, are happy with the changes proposed. Watch this space!

Are you loyal to your current Lender?

The Bank of England has released figures reporting that 49,815 loan approvals for house purchases occurred in May, slightly lower than April’s figures and below the last six month average of 51,856.

May’s remortgage approvals were also lower than Aprils at 25,759, and below the six month average of 26,443.

Neither report is much of a surprise due to the uncertainty of the emergency budget held in early June and the limited availability of attractive long term mortgage products. I suspect Junes figures may be little better.

The Land Registry House Price Index has confirmed that house prices dropped by 0.2% from April to May this year despite an annual rise of 8.2%.
The average property price in England and Wales is now £165,314 with all regions experiencing increases in their average property values over the last 12 months. London has had the biggest increase of 14.2% while the North East saw just 1.8%. The South East also had the biggest monthly rise at 0.9%. Great news for sellers, not so much for purchasers.

However, now that we know the full details and probable impact of the emergency budget, the pundits are predicting that we could see a bank base rate rise in the 3rd quarter of this year.

So, with rates relatively low and some longer term fixed rates being launched recently, now is probably a good time to review your current mortgage and see what options are available.

Most lenders want new customers, but are less likely to offer you attractive options to stay with them. This, in the main, is due to the different fees and charges that can be added to the new mortgage at the outset. In the current climate, the lenders bottom line tends to be more profitable with new clients, rather than old. So don’t feel loyal, if a better option is with another lender, then think of number one!
However, we’re still stuck with the fact that many lenders do not want to lend in huge volumes. Therefore, you may find that actually getting a mortgage becomes the main obstacle and you may have to stay with your current lender anyway! Seek advice……