Moving forward to the challenges ahead.....and Happy Christmas!

This time last year, I was predicting that we’d have got over the shenanigans of Brexit and be moving forward in to the unknown, yet positive, challenges that lie ahead. 

How we can be no further forward still is beyond me.  But at the same time, I can’t believe the year has gone and I’m writing my last column for 2019!

The mortgage world has been pretty flat with figures estimated to be only a slight increase on 2018.  On the upside, choice of mortgage product is at it’s all time high and rates are incredibly low.  Great for the end consumer!

The festive period can be a time for reflection.  It can also be a time when many people start looking at new properties to move to. Or they may already be committed and are packing ready for the removal lorry, or they take time to review what mortgage they have and question if there is anything better out there. That is of course, if they are not simply taking a holiday, and why not?

Whatever your plans, it makes sense to review your current mortgage deal and see if there is a better option and perhaps look to secure a competitive rate for a few years. Whilst I always err on the optimistic side of a rates argument, we are entering a truly unknown era as we plan for Brexit (again) and there is no history to prompt what the immediate and longer-term implications will be.

Technology was due to take over the mortgage market in 2019 and despite millions being spent, this has only had a small impact.  Circa 72% of all mortgages generated are still via brokers/intermediaries.  You are entering into the biggest debt of your life and questions need answering.  You just can’t beat the human touch…. for now.   Many lenders have yet to evolve with the digital era and those who will win will be the ones offering quality technology, but also the human impact for those who prefer or need it.

Finally, I really appreciate you reading my column!  I’ve tried to provide an unbiased insight to what happens in the mortgage world, with a little bit of humour along the way!

A huge thank you to everyone who has instructed impact sf to source and arrange their mortgage during the past twelve months. It has been a fantastic year, including a brand name change and a new additional office in Barttelot Road!  We have a fantastic team and they are a truly hardworking and knowledgeable group of people.  Best in the business!

On behalf of all the staff and directors at impact specialist finance, we wish you and your families a very Happy Christmas and a Relaxing and Prosperous New Year!  Bring on 2020!

Have you been offered a 'Product Transfer'?

I am looking at two main categories for this week’s column. 

First off, it’s product transfers.  These are the options the lender will give you to stay with them.  So, you’ve been with your current lender through the term of your deal - normally a two year tracker ends after twenty four months, or your five year fixed rate might end on a specific end date.  Either way, the lender will normally write out to you three months in advance to offer you the next ‘big deal’.  Or is it?  I’ve had one high street lender offer a client of ours a deal 0.3% higher. To put the boot in, they are also actively offering rates 0.5% lower to new clients.  So, a client on 1.6% and wants to remain with their lender, who are offering them 1.9% to stay.  The same lender is offering new customers 1.4%!  So much for loyalty.  We had another recently where the lender wrote out and offered the clients a great deal to stay.  The client spoke to one of our mortgage advisers, who could offer a rate 0.1% lower, to stay with the SAME LENDER!  It really pays to look around and double check that you are being offered the best deal.  Plus, although the lender may not mention mortgage brokers in their renewal letter to you, nearly all lenders now offer product transfers through brokers. 

Which brings me on to my second point, choice.  It is still tough to get a mortgage in the current climate and now, more than ever, you should do your homework and speak to a ‘whole of market’ mortgage adviser and compare all mortgages available. If the person you are speaking to is not offering whole of market advice, i.e. they just review a panel of selected lenders, you may not be getting the best product for your needs and/or requirements.  For some of the larger brokers, lenders may even put one of their own underwriters in-house, so that your application can be processed within their offices.  This helps with speed, instructing valuations and dealing with queries quickly.

And remember, you can place your mortgage with whoever you like. You are under no obligation to anyone, despite what some may say! Everyone covets your business and there appears that there may be some unusual and possibly non-compliant tactics being used to gain your signature. Bedside manner counts! If you don’t like their stance, or they’re ‘forcing’ you to use them, walk away….

Are you ready for Open Banking?

Open banking seems to be the buzz phrase of the moment as the world of technology impacts the way our spending habits are analysed.  In short, you will soon be able to give permission to your Bank or Building Society, to release all details of your bank account transactions to any regulated business.  This can speed up the process of decision making when applying for loans, mortgages, etc, in comparison to just supplying your last three months paper bank statements, which is the current normal way of disclosing.  So no longer will your bank be the only one to know how much you spend on your weekly shop, utility bills and broadband!  Or of course, when you move into, and how often you use, your overdraft!  Permission can be withdrawn at any time.  Nine institutions were given a deadline of 13^th January to be ready for launch, and five have been granted an additional six weeks to be ready.  Watch this space!

There have been a number of new products launches for the new year as lenders seek to gain a good start to 2018.   Many lenders have lowered rates and some have reviewed their criteria in order to bring in more business, possibly allowing customers that wouldn’t have been approved towards to the end of 2017.    Always review all possible options before giving up. 

Finally, the importance of mortgage advice has never been greater. It is an interesting fact that, according to a number of industry sources, over 70% of all mortgages are written through professional advisers. There are probably many reasons for this including long delays we are advised are happening with some lenders both in interview capacity and processing times.

The majority of professional mortgage advisers review 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 over ten days behind on post or electronic updates currently!  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.  They should also contact you again when your product is up for renewal and guide you through that process, building a long-term relationship with you. 

AToM awarded 'Best Residential Mortgage Packager' 2016!

I am delighted to commence this week’s column with the fantastic news that AToM has received a national mortgage lender award!  We have been awarded ‘Best Residential Mortgage Packager’ by the lender Precise Mortgages, for the fifth year in a row!  It’s rare for lenders to issue awards, so this is really special and great recognition. We have a super team at AToM and this award is real credit to the hard work the staff have put in during the recent tough market conditions.

As a Mortgage Packager, not only do we work with the general public, but nationally too with many Accountants, Mortgage Brokers, Independent Financial Advisers and Estate Agents. With over 8,000 registered introducers on our databases, lenders use AToM to offer their mortgage products seeking quick distribution and marketing to all of the above. This often means that we see exclusive deals, new lenders and product innovations, ahead of the general marketplace.  AToM also collates information for the lenders, obtains employer or accountant references, instructs valuations, obtains mortgage offers and in some cases has the lenders own underwriters in our offices, enabling a quicker turnaround.

With this in mind, actually placing a mortgage with a lender is not normally difficult. The hardest part, in the recent climates, is getting the mortgage through to completion! To assist this, try not to give lenders an excuse to decline your application or refuse to lend to you. Try to pay bills on time, don’t miss payments, 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, or not!  Ensure you disclose everything upfront as lenders hate surprises!  Remember that lenders can re-credit search/credit score you right throughout the whole mortgage process.

So in short, we are a little bit like Doctor Who’s Tardis. The AToM shop front opens onto a business which has much, much more going on behind the scenes!

Too much information online can be confusing!

As rates continue to reduce, competition has moved at a pace on the high street.  Most of these lenders can offer attractive low rates with free valuations and free legal costs on remortgages.  This is great if you fit the lender's mould and meet their requirements.  However, if you don’t meet their requirements or if you fail the lenders credit score, where do you go next?

The easy response is a mortgage broker who not only has access to the high street lenders but the whole of the mortgage market.  

According to recent reports in the mortgage media, circa 72% of all mortgages are now arranged through a mortgage intermediary.  A good mortgage broker will not only have access to and understand the high street offerings, they will also have access to smaller building societies and other lending institutions who can think 'outside the box', manually assess applications and lend when the high street lenders might not.  This can include lending in to retirement/over age 70, lending to the complex self employed, ExPat mortgages, buy to lets, holiday homes, multiple properties on one title and so much more.

With technology taking over the world, and so many transactions taking place over the internet, it might be easy to be attracted to products online.  There is so much information readily available and over 11,000 mortgage products to choose from, but these types of things can get lost in translation.  Therefore seek advice.  Yes, it may cost you a small fee to have someone research the market on your behalf and make recommendations, having assessed your short to long term needs and requirements.  More importantly, it could save you thousands in the long run, over choosing the wrong products yourself. In addition, any professional will probably build a long term relationship with you and contact you at the time your current rate is coming up for renewal to ensure you have the best rate available.  It's good to talk..!

Increased competition in the 95% LTV market for First Time Buyers

We’ve seen another week of market movement and increased competition as lenders lower rates and loosen criteria.  There is a lot more positive activity from the lenders, however we are also seeing an increase in service times and underwriting responses resulting from increased volumes.  A few are even reporting backlogs of over a week just to look at a case!  In addition, if they then need further information in respect of the application, once received, this can then join the back of the queue again to be looked at!  Be aware of these timescales if you are in a hurry to complete.

House prices rose in March by 0.2% compared to February according to the Halifax House Price Index with the average price now sitting just below £164k. 

Our good friends at the Saffron Building Society have launched a superb product aimed at First Time Buyers.  The lender is offering a 95% mortgage with no credit scoring, to those who have never owned a property.  Customers will still be credit searched but cases are reviewed on a manual assessment, rather than a computer making the decision.  There are no early redemption penalties and the arrangement fee is just £495.  This is not just aimed at New Build properties either!  Obviously terms/conditions and other fees may apply, but this kind of innovation is exactly what the mortgage market needs!

Although not household names, specialist lenders like Saffron have money to lend and a desire to create products to assist gaps in the mortgage market.  For instance, the usual requirement on the self employed is 2 or 3 years accounts and possibly the SA302 returns from the Inland Revenue. Some specialist lenders, for the right deposit, will allow just 1 years accounts to prove income, normally with an accountant projection for the second full year and probably up to six months personal and business bank statements.

This is the beauty of using a mortgage broker.  They will have access to many lenders that you have probably never heard of and products that are not usually visible to the public eye. On average, a good mortgage broker will have access to over 6,000 mortgage products, from a huge number of lenders.  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.

Low rates, high fees?

The old saying goes ‘don’t believe everything you read’ (apart from this column of course!).  There’s a lot of very good marketing and PR taking place in the mortgage market as lenders try to increase business volumes and attract new customers in the last quarter of the year.  But are things as the headline suggests?

Even Watchdog touched on the promotion of certain products from lenders offering low rates but with the relevant lender arrangement fees ‘soaring by up to 70%’!

As I keep saying, a mortgage is the biggest debt you are likely to ever take on and you need to do your homework, check the fees and do your sums! 

That’s the benefit of using a professional mortgage brokerage that will look at the overall cost to you over a period of time, not just the promotional rate from day one.  If it’s a 5 year fixed rate deal, they will look at all the rates available and recommend according to the most cost efficient over the five years. It is crucial to take into account the lenders upfront fees, arrangement fees, booking fees, reversion rates (the rate you will be allocated after the 5 year ends), and any costs in changing your mortgage thereafter.   And, of course, ensure that you use an advisor that can access thousands of mortgages available, at the same time, to cost compare and save you traipsing around all the banks and building societies to see their individual offerings.

Watchdog also suggested that the average person changes their mortgage once every seven years!?  That was a shock to me.  Again, a reputable mortgage brokerage would seek to review mortgages a lot quicker than this.  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 and show no loyalty.  You can be certain that lenders will not remain loyal to you when it comes to raising rates as we have witnessed with a number of recent increases in Standard Variable Rates.  Seek advice and save money!

Interest Only takes another blow

Over the last few months I’ve mentioned Interest Only quite a bit.  Interest Only is one option to pay your mortgage, but it does exactly as it says, you only pay the interest on the loan.  So at the end of the term, say 25 years, you still owe exactly what you started with.   Normally a savings plan is also set up to build funds over time to match the mortgage amount at the end of the term.

This might be right for certain individuals who have careers that pay out a lump sum after a term, or for someone who gets many bonuses.  But unfortunately, that will no longer be a mortgage option you can get through Nationwide.  They have pulled out of offering Interest Only across their entire range of products.  The country’s biggest Building Society has said that it has taken the decision to remove this option as they were only processing 3% on this type of product.   In the scheme of things, very small and what happened to customer choice? 

The mortgage market is awaiting the imminent final release of the FSAs Mortgage Market Review (MMR) which highlights areas due for change and implementation of stricter rules across the market.  Interest Only was mentioned in the consultation stages, but it does appear that an over-reaction has occurred across the market place with many lenders restricting the amount that could be borrowed on Interest Only and Nationwide’s move could/will lead to others following suit and removing the option entirely.  No one wants to be the last man standing!

There’s no denying that this product has sadly been abused by some across the country in order to keep customers costs down and no suitable repayment vehicle being set up.  However, not all should be tarred with the same brush.  Many customers have reasonably performing endowments and investment returns that will repay any Interest Only mortgages and cause no risk at all, mainly thanks to the advice, recommendation and the brokers ‘knowing their customer’.  

In addition, lenders are consistently writing to all customers on Interest Only to ensure that a suitable repayment plan is in place and those who are no nearer to the end of their term should have sorted alternative arrangements.  Are you one of them?  Act now.

Without doubt this move has sent shockwaves through the industry and if others do follow suit, many customers could simply become mortgage prisoners with nowhere to go.