"Tested in a way we've never been tested before"......and Bank Base cut by 0.5%

We’re being tested in a way that our generation has never been tested before.  These are uncertain times and no one can predict what the future days, weeks, months will bring.  The Bank of England has cut interest rates by a significant 0.5% to just 0.25% and at the time of writing, this is predicted to be cut even further.  Especially seeing that the Federal Reserve (FED) in America have just cut their rates by a full 1%.  All countries are trying to prevent a global recession, avoiding 2007/8 all over again.

All I can say at this time is keep safe and look after number one.  Get your house in order quickly.  Impact will inevitably be shutting both of our offices in Horsham to protect our staff and families, but we will continue to work from home and be available on phones, online and by webinar facilities (Microsoft Teams, etc).  Not everyone will get this horrible virus and lenders still want to lend.

Yes, it might take a little bit longer to arrange things, as home working takes effect and some, especially the banks and building society security systems and such, will experience new challenges with all of their staff working from home.  But lending will go on and right now is an ideal time to take advantage of the amazing rates and deals on offer.

Remortgaging should be a very simple process and we can guide you through the requirements and deals on offer. 

Even staying with your current lender once your current fixed rate has expired and transferring to a new rate is pretty straight forward.  We can assist with all of these, remotely and quickly.

Finally, I’ll say it again, look after number one. You will probably have some time on your hands, you have the paperwork at home and you have the superb team at Impact online and available to help you throughout the whole process.  Or just even to give you some free advice.  No one knows how long this unprecedented experience will last, so just make sure you’re in a good position to see it through.  Stay safe.

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.   

That's it for 2015! Roll on 2016. Thanks for reading.....!

Amazingly, this is my last column of the year!  I enjoy writing each week and updating you on the mortgage world's good and bad, but I am looking forward to a couple of weeks without tight production deadlines to meet!

The door may be nearly shut on 2015 and, in many ways, I'm ready to kick it shut.  It's been a frustrating year as lenders have been neither here or there with their lending volumes and every one of them has had one eye looking over their shoulder for the regulator and the other looking forward in preparation for the new European Mortgage Credit Directives that are due to be implemented in March 2016.  Wouldn't it be nice if we could just have a couple of years without regulatory changes?

At the same time, it has been a year for building foundations for what I hope will be a fantastic 2016.  Once the new regulations have been implemented and with rates set to stay static for some while yet, mortgage lenders will be competing for business. A rate price war may happen and this can only be a good thing for the end consumer.  We will also be welcoming a number of new lenders to the market (and some returning) and this will help keep competition rife.  Good times ahead!

Finally, a heartfelt thank you for reading my columns.  I've tried to provide an unbiased weekly insight to what happens in the mortgage world (and tried to keep it upbeat!). 

Thank you to everyone who has instructed AToM to source and arrange their mortgage during the past twelve months. It has been a fantastic year and we have enjoyed substantial growth in volume, November bringing more than £30m in new applications. Also, an increase in  headcount with almost 30 in the AToM team located between our two Horsham offices! They are a truly fantastic team. 

On behalf of all the staff and directors at AToM, we wish you and your families a very Happy Christmas and a Relaxing and Prosperous New Year! 

What is a normal retirement age for mortgages?

You may have seen the Citizens Advice Bureau release research estimating that nearly 1 million people have an Interest Only mortgage with no obvious way of repaying it.  This means that come normal retirement age, the lender has the right to request repayment of their loan.  If the customer has no way of repaying this and has just continued to pay the interest over the last twenty five years, they face having their home repossessed or being forced to move out.  On the high street, the end of the loan term will normally hit those aged between 65 to 70.  This is not new news, but does highlight that people are still burying their head in the sand and hoping this will go away or the lender may be lenient.  No chance on either.  You may get a years extension, but the lender will want their money back and that you cannot avoid.

However, there are a number of lenders that recognise that 'normal retirement' age is no longer set in stone and people continue to work long in to later life.  Many will consider loans ending at the customers age of 80 (maybe to 85) and on a repayment basis, so no loan outstanding at the end of the term.  This is all subject to affordability and will depend on the loan size compared to the value of the property.  These are also not high street names and as such, rates may be slightly higher than the big super tanker, large volume producing household names that we are used to.  But at least they will consider helping out and could keep you in your home!

This also runs in line with recent reports that the top six lenders in the UK are losing market share to the smaller lenders.  Virgin Money, Skipton and Coventry have all posted figures with a year on year increase in excess of 25%.  But where the smaller lenders are really winning is the ability to think outside the box and in some cases, manually assess your application with no credit scoring.  The smaller lenders can be more innovative and change things quickly to suit market conditions and to attract new business.  Don't be shy of a non household name, they could very well be the best lender for your next mortgage move..

Are you ready for your 'payment shock'?

In recent columns I have used the word 'panic' to describe the possible rush to secure a good mortgage deal before they vanish when rates rise, and also made comment on how lenders may be feeling in terms of possibly missing their annual lending targets. The latter should lead to some good deals which I feel sure will hit the market in the last few months of this year.

However, there is another important term I think worthy of mentioning now and this is ‘Payment Shock’. A well worn term during the mid to late 90's and one which I think Mr Jannels 'senior' may have played a part in coining! It describes the potential increase in monthly mortgage payments when an incentive period, for example a fixed rate, comes to an end and the mortgage moves to the lenders standard variable rate. It is worth reflecting that a one percent uplift on a mortgage of £200,000 may mean a monthly increase of up to £166.66 and, in many cases the rate may well increase substantially more than this.  Imagine the impact of a two or three percent rise! Not unusual if the lenders standard variable rate is in the late four percent range. 

We try to keep a listening ear open to those in our sector who are considered 'gurus' and their predictions on interest rate rises and when they will happen. In truth, no one can be certain, other than that they will rise. It is important therefore for mortgage borrowers to consider the potential of any rate increase (payment shock) and how it will affect them. A good time perhaps to consider a new fixed rate?

Finally, a commentator once wrote about consumers carefully researching prices for a new dishwasher or fridge and then shouting from the rooftops when they have saved £20 from shopping around. And, why not? Yet the financial press and advisers alike will regularly lament on the fact that borrowers will allow their monthly mortgage payments to continue regardless when they could be saving multiples of £20 every month! 

69% of all mortgages written by advisers!

The importance of mortgage advice has never been greater and it is an interesting fact that, according to the Council of Mortgage Lenders, 69% of all mortgages were written through professional advisers during the second quarter of the year. This is a substantial uplift on previous quarters and there are probably a number of reasons for this including long delays we are advised are happening with some lenders both in interview availability and processing times. 

The professional mortgage adviser reviews the whole market for you and can identify the best lending options and then deal directly with the lenders central processing units, speeding up the process from application to offer. That said, even in this area we know of at least one lender that is eleven days behind on post or electronic updates. A good adviser will listen to your specific needs and timescales and ensure that they line you up with a lender who will match both. So, if speed is crucial then you may need to consider working with a lender where the rate may not be the keenest on the market but where you get what you want. Your adviser will discuss this in detail with you before you make any decision.

On a different subject, a number of mortgage lenders are looking ruefully at their performance against target for the current calendar year and casting sideways glances at their competitors. At the start of the year, no one was really sure what the effect of the 2014 Mortgage Market Review would have. A number of lenders are, allegedly, well below target and we will probably see a price war in the next few months as they look to gain ground before the year end

Rates are creeping up...

Panic Panic Panic.........ok, so that's a little dramatic!  However, we have seen a number of lenders increase rates over the last few days.  TSB, Halifax, Nationwide, Virgin Money, NatWest and Coventry Building Society are just a few who increased their rates on various product offerings.  We have seen SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) start to creep upwards and as such lenders are re-pricing accordingly.  Despite my headline, I don't believe it is really time to panic just yet.  Many pundits are suggesting middle of 2016 before we see a true rate rise.  Just keep an eye on things if you are looking for a long term bargain.

What we have seen recently are lot of enquiries to remortgage for home improvements.   Increasing the value in your property can involve large renovation, adding a room or two and a general investment in time and builders.  That said, with house prices booming in the local areas, many have decided to look at cosmetic changes.  So up-grading kitchens, bathrooms, redecorations and so on.  Whether small or large, the investment in property can bring rewards to the value and if you are staying put, reward in the satisfaction of home comfort.  Plus a potential large saving in stamp duty too versus moving home!

We have also seen an increase in customers looking to consolidate debt or even look at debt management plans.  Both can sometimes cause issues. If you consolidate unsecured credit in to your mortgage, although your monthly payments may be lower, you may be paying more interest for your debt over a longer term.  With debt management plans, or Individual Voluntary Arrangements (IVA), etc, again, the lower monthly payments may help in the short term, but you may well find it hard to gain an approval from a lender to refinance at a later date.  Lenders tend to shy away from debt management plans and may not consider anyone who has been in an IVA unless it has been discharged for more than three to four years. Advice should always be sought before entering in to these types of arrangements or agreements.

Delays across the market....and Elephants in Horsham?

Wow, what a week!  It's good and bad news though. The good news is that the mortgage market is really buoyant with good business volumes, product choice at it's highest for some years and properties selling quickly (sometimes before they make the papers and above the asking price). The bad news is that this is causing a number of lenders major servicing problems as they do not have the staff to handle application numbers.  One we know of is working on applications submitted three weeks ago!  We also have had delays on valuations with some surveyors taking up to two weeks to book an appointment.  Unfortunately lenders have agreements with certain surveyor companies and they have to undertake the valuation, no matter what the delay in actually carrying out the appointment.  There is no shame in being open about these delays as they should be taken in to account whether buying, or selling a property and this helps everyone manage expectations. 

That said and even with the delays, now is a good time to review your current mortgage and possibly obtain a great rate with minimal (if any) costs to change your mortgage. Whether you want to fix your monthly payments for a period of time, or you fancy a low rate tracker mortgage, or maybe both - a tracker rate with the option to fix later on, there are plenty of great products currently available.  Terms and conditions will always apply.

Finally, I have to say what a fantastic job Horsham Rotary are doing with the Elephantastic trail!  Over 150 Elephants of all sizes have been bought and decorated by local organisations.  These are now on display and children should follow the safari trails to locate the Elephants nickname with the major prize being a trip to Kenya!  There have been some amazing works of art and I'm sure they will make a lot of money for some worthwhile charities. Search "Elephantastic Horsham" to find out more. The big question is, after the Giraffes last year and Elephants this year, what will be next - Alpacas!?  

Mortgages for purchases on the increase

The new Governor of the Bank of England, Mark Carney, gave a fairly broad hint that the bank’s base rate, currently 0.50%, will remain static for a few years yet. Some of the comment was based upon the current level of unemployment and it was suggested that, unless this rose above 7% nationally, the rate should stay low. Whilst there is no guarantee, much can happen in a short time financially as we all know, this is a real confidence boost for those people who are looking forward in terms of their borrowing requirements. This can relate to either mortgage, personal or business borrowing and the broad brush hint can be a means to boosting more confidence in all of these sectors. Of course, the downside of this is that savers may not get much of a return on their hard earned investments during a sustained low rate period.

For borrowers on a low rate base rate tracker the prediction may also be good news and for new purchasers there is every reason to feel more confident in an ability to afford a mortgage in the next few years ahead although a longer term fixed rate may still be worthy of consideration. It is never a bad thing to know what your monthly payment will be and for how long and this may be considered prudential financial planning.

We have noticed an upturn in property sales transactions in the last few weeks and have even heard that a number of properties have been the subject of multiple offers with would be purchasers vying hard to make a successful offer. None of us know if this is likely to be the norm moving forward but it is undoubtedly another pointer towards an upturn of confidence in the current market.

If you are looking to take advantage of very competitive rates in the marketplace for either a purchase or re-mortgage then ensure that you take qualified and independent advice.      

Competition for those with low deposits

Lenders are at last starting to recognise the importance of high loan to value loans for both first time and subsequent mortgage applicants. One such lender has chosen a limited panel of broker companies to distribute their new 95% loan to value product to home movers, first time buyers and those seeking to re-mortgage. We are delighted that AToM has been chosen for this purpose. This product is not restricted to new build properties, like most other 5% deposit products recently launched by some lenders, and it is not subject to credit scoring or early redemption penalties. The only stipulation is that those moving or remortgaging have had a mortgage for at least twelve months and any first time buyers must have been renting for the last twelve months. If this product is of interest, be quick as I suspect the demand will be huge for this products and funds will utilised quickly.

 

The Second Charge Secured Loan market has seen huge growth recently. March saw a 17% increase on February, breaking the £35m barrier for the first time in nearly four years, according to the Secured Loan Index. Many who require a loan to carry out home improvements or for other luxury items, but are currently sitting on very low lenders variable rates are opting to add on a second charge to their current property (sits behind the first charge mortgage). Right for certain people but rates start from around 5.5%, so will need to ensure it’s beneficial in the short to medium term compared with a complete remortgage to another lender/rate.

Finally, recent figures from creditaction show that the actual state of the financial economy is still extremely fragile:

- The average amount owed per UK adult (including mortgages) was £28,981 in February. This was around 118% of average earnings.

- The estimated average outstanding mortgage for the 11.3m households that carry mortgage debt stood at £112,153 in February.

- 277 people are declared insolvent or bankrupt every day (based on Q4 2012 trends). This is equivalent to one person every 5 minutes 12 seconds.

- 84 properties are repossessed every day (Every 17 mins)

- 1,454 people a day reported they had become redundant between November 2012 and January 2013.

- Citizens Advice Bureau in England and Wales dealt with 8,192 debt problems every working day during the year ending December 2012.

Stark figures, but we all need reminding occasionally and always worth reviewing your own finances to ensure you’re paying the best rates and where possible, have plans in place to account for all eventualities.

 

Lot's of activity in the mortgage market!

There is a lot happening in the mortgage market as we move into the last month of the year! Where have the last eleven months gone?

Good news in that lenders are looking to expand their distribution offerings to a wider market as both Kensington Mortgages and Saffron Building Society launch new products into the intermediary market. Both have various niches and are looking at a number of new products. Saffron, for example, have no redemption penalties on their products, so a customer can leave or overpay at will. These include Residential, Rent to Buy for First Time Buyers, Buy to Lets and Self Build Projects. Seek advice though!

On the other side, there was another nail in the coffin for Interest Only this week as both NatWest and Royal Bank of Scotland cease to offer new interest-only mortgages from Monday 3rd December. This does not affect existing customers or their Buy to Let mortgages.

Many lenders still offer Interest Only as an option, however we are slowly seeing it eradicated from the high street lenders. For the right situation and right scenario, Interest Only works, but it really does look like it is going to be an option only available through the smaller lenders and at a low loan to value soon.

The price war continues as we see lenders offering competitive rates, but this time on a ‘fire sale’ type basis. Santander issued some sub 2% fixed rates via brokers, for just 7 days! This has now been followed by Accord Mortgages who have launched some attractive options, but for a period of just 10 days. Do keep an eye on our shop front in the Carfax, if you are local, as we promote these opportunities in our window. If they are right for you, you will need to act fast as when they are gone, they are gone!

Finally, news just reaching me as I write this column is that the Bank of England has decided on Sir Mervyn Kings successor. Bank of Canada Governor Mark Carney will take over the post in June 2013. Personally I welcome someone external to take over the role as it does need a good shake up and a little modernisation!  However, there’s no denying that the job in hand is huge and the new Governor will need to settle in quickly to the tasks at hand, including financial stability, regulation and monetary policy.

The Mortgage event of the Year...

The great and the good of the industry descended upon London’s ExCel last week for the annual Mortgage Business Expo.   Around 70 exhibitors offered their wares to mortgage brokers, intermediaries, financial advisers, solicitors and others who attended the largest trade mortgage event in the calendar. 

The two day extravaganza was well received in its new venue (previously Olympia) and despite the slightly longer journey, attendees enjoyed the fantastic facilities available at the gigantic centre.

Big players such as Nationwide, Virgin Money and Halifax had their latest products and rates on offer which were well received especially as most have recently been reduced.  However, noticeable absentees included Barclays, Natwest and Santander, leaving a rather large gap from the high street contingent.

This left room for the smaller, lesser known lenders to promote their offerings.  They may not be processing the volume of cases like the high street lenders, but they have a huge appetite to lend and offer niche products to cater for a variety of customer profiles.

Thriving areas also included short term funders/lenders specialising in Bridging Finance and a number of Commercial lenders were also in attendance as funding becomes somewhat more available to businesses.

Our trade association AMI (Association of Mortgage Intermediaries) held numerous seminars covering various issues including Mortgage Market updates and it’s estimated that over 1,750 people attended the two days.  Well done to the organisers!

AToM were the only Specialist Mortgage Packager/Distributor onsite who offered all areas of the mortgage finance sector.   If you follow us on twitter, you will see our stand (@atommortgages).

For those who don’t know AToM, we have a shop front in the Carfax, Horsham.  But we also process cases for lenders via exclusive products and to a database of over 8,000 mortgage brokers, intermediaries and IFAs.   In short, we are a one stop shop catering for all types of people whether it be a straight forward and clean credit history application, right through to complex deals needing a manual assessment on a product exclusive only available via AToM.  As the name suggests, All Types of Mortgages!  So why not give us a try!

Credit Rating Downgrades...

Lots of news this week surrounding banks and how some have had their credit ratings downgraded by ratings agency, Moody’s.  These moves are a consequence of the on-going Eurozone crisis and weak economic performances.  Despite low interest rates and falling LIBOR (London InterBank Offered Rate), the impact on the costs of borrowing funds, for the banks that have been downgraded, will increase.  And of course, the increase will only be passed in one direction - the end consumer.

Royal Bank of Scotland, Barclays and HSBC were three banks in the UK among the downgrades, which ranged from one to three notches.  Moody’s also downgraded 28 Spanish banks, including giant Banco Santander.  Three were downgraded by one notch, 11 downgraded by two notches, 10 banks by three and six banks by four notches! 

The Council of Mortgage Lenders has reported that the number of first-time buyer loans dropped by 48% in April, compared to March.  They put this as a result of the Stamp Duty concession coming to an end.   According to the latest figures, 12,600 loans were advanced to first-time buyers in April with the average loan being £98,000 and first-time buyers typically borrowed 3.12 times their income (down from 3.34 in March).

According to zoopla.co.uk, it’s cheaper to own than rent!  It now costs 14% more per month on average to rent a home compared to servicing a mortgage on an equivalent property, say the property website.

And finally…. AToM has been heavily involved in the local Set4Success initiative.  Working in partnership with Horsham District Council, Horsham Rotary Club, Horsham Schools and local businesses, Set4Success assists Horsham District’s young sportspeople with funding for training and competing.   It was great to see so many people at South Lodge recently as the sporting achievements of 21 young local sports people were celebrated, with special guest Sophia Warner, Paralympic sprint champion, presenting the Awards.  AToM are delighted to be a founding business sponsor of this charity.  Patrons include Chris Nash, Gemma Spofforth, Sarah-Jane Honeywell, Dave Benson-Philips, Lord Lytton and others!  To find out more or to see how you can get involved, visit www.set4success.org

Social network mortgage guru?

I paid particular interest this week to a conversation occurring on Facebook.  The superb Horsham page (linked with visithorsham.co.uk) attracts over 8,000 followers who are frequently updated on requests from individuals seeking assistance or recommendations.

One such request was from an individual looking to update their mortgage and what should they do next.  There were some great recommendations of past experiences with some great local companies (thankfully including AToM!), but then there was a phrase that always scares me - use a comparison website…..

These are everywhere as we know, and they can be good for basic research, but they have a few major flaws.  Firstly, not every lender subscribes to them, so you could be missing out on some products more suited to fit your personal requirements.  Secondly, they cannot plan ahead for your specific future requirements or needs.  What if you want to move in a couple of years or are expecting some additional monies in the future that you will want to use to pay off your mortgage.  Thirdly, they certainly won’t help you with deciphering the plethora of information a lender will bombard you with, or check the mortgage offer for you or, indeed, advise you on the criteria the lender uses to decide if you fit their requirements!  As we’ve seen recently, lenders are finding every way possible to increase rates with some hiking their standard variable rates to existing customers.  Finally, they won’t explain to you that if you’re stretching yourself on this mortgage (they won’t offer you a budget planner review) and bank base rate rises in a year or two’s time, you may not be able to afford it. At this stage, best advice would be to look for something more within your financial reach.

Professional and qualified advisers have access to so much more information and have to stand behind the advice they give. Will you be able to sue your 'social network adviser’ if the advice they give turns out to be faulty or if the comparison site misses some vital information!  I doubt it, so play safe, take advice from the professionals with industry qualifications to back up their recommendations and advice. This advice will only be given after a full and thorough examination of your needs, requirements and circumstances.