Stick with your current lender?

So, your mortgage product is coming to the end of it's term.  You may have fixed for an amount of time, maybe two, three or five years.  And now your rate is due to change to the lenders variable rate, which in the main, is higher than the rate you are currently on, and your monthly payments are about to increase.  But hold on, your current lender has seen the light and decided to offer you some 'fantastic' products to keep you.  Even though you are four months out of your product change, they've given you just fourteen days to decide whether to choose a new product to stay with them.  What do you do?

One recent example a customer showed us, had some very attractive rates.  However, when we looked, the same lender was offering better rates through the intermediary sector, with the same fees, etc.  I always say do your homework, and lucky this customer did as it saved them 0.1% on the rate over a three year period.

Even though some lenders put a deadline on any new offerings, remember most are contacting you three or four months before your product changes, so there is plenty of time to review your options and choose the best one for you. 

This is the biggest debt you will ever take on, take your time and ensure you will not regret it further down the line.  Always seek advice! 

With this in mind, we've seen a lot of rate changes and reductions over the last few days.  TSB, Santander, Halifax, Harpenden Building Society, Accord, Platform, Saffron, Kensington, Virgin Money and Precise Mortgages have all made changes, to name but a few.  Key highlights include 5 year fixed rates from 1.75% up to 65% LTV, Buy to Let fixed rates from 2.99%, ExPats in Australia can now be First Time Buyers in the UK, more options for lending in to retirement and many many more positive enhancements.    Lenders want to lend!

Rates are low and delays are across the market...

Following the recent regulatory changes across the mortgage market, specifically in the Buy to Let sector, and with rates currently so low on the Residential side, it was inevitable that delays were going to occur.  A few days can be the norm, but the reality is that some lenders are now advising of delays in excess of a month to process cases.  Yes, a month!  This really becomes an issue if the lender asks you to provide further information as when this is submitted, you will normally go back to the end of the queue!  So bear this in mind if you are in a contract race to buy your dream property and the Estate Agent is badgering you to get the survey instructed.

There have been some fantastic product launches over the last week or so, including some outstanding five year fixed rates.  One example from Santander offers a fixed rate for five years for those with a 40% deposit with a rate of just 1.89%  (APRC 2.49%), which includes a free valuation and free legal costs on remortgages.  Terms and conditions apply etc.  The market is hotting up!

We've even seen a sub 1% fixed rate for two years launched this week, again for those with a 40% deposit.  However, with all things, check behind the marketing headline.  The rate may catch your eye, but if the fees are expensive and it does not include free valuation or legals, it can prove less compelling than a slightly higher rate that includes all of those benefits. 

Some rates have been reduced for those who have had historic issues.  One example, with our friends at Kensington, allows for some historic issues over two years ago and will look at rates starting from 4.34% for those with just a 10% deposit.  

A number of lenders don't use credit scoring systems and prefer a manual approach, so don't think you cannot get a mortgage until you have tried!  Always shop around to find the best deal and always check the small print!  Naturally, I would recommend speaking to a professional who can search the whole market and advise which are the most appropriate deals available to you!

Buying a Buy to Let in a Limited Company Name

It has been an interesting week in the mortgage market with many rate changes and new product launches.

Some of the more noticeable include the launch of products, from our friends at Precise Mortgages, designed to assist those looking to purchase investment properties (Buy to Lets) in a Limited Company name. With the forthcoming removal of tax relief, from April 2017, landlords will only be able to offset mortgage interest at the basic rate of tax at 20%.  This will affect higher rate tax payers, but also basic rate tax payers if they are pushed in to the higher rate bracket, perhaps as a result of their rental income.  As a result, we are seeing more and more customers look at a Ltd Company Special Purpose Vehicles to hold their investment properties and provide  more efficient tax benefits under current legislation.  Obviously, tax advice should be sought as individual circumstances vary!

Sticking within this area, AXIS Bank, a relatively new lender, have lowered their rates by as much as 0.30% for their Ltd Company mortgage offerings. We are seeing more and more lenders launch into this arena and price their products very competitively.

More mainstream lenders, such as Santander, Shawbrook Bank, Coventry Building Society and Barclays have reduced a selection of their Buy to Let rates and some of their Residential rates by up to 0.5%. 

Conversely, with lenders reducing rates and volumes for the New Year on the increase, we are seeing more people being declined.  Not necessarily due to adverse credit, but because their credit score is not as high as they thought, and they don't meet the lenders requirements as a result.

Credit scoring is one of the most widely used means to assess a customers ability to obtain a mortgage.  All credit scores include a credit search – this reviews your financial history, payments to utility suppliers, mobile phones, etc. Almost every financial institution from mobile phone companies to insurance companies will carry out a credit search before offering you their services. This can also be a negative though, as the more credit searches you have, the lower your credit score may be. 

The high street lenders, in the main, use credit scoring.  However, do your homework as many smaller lenders will offer just as attractive rates, but they will manually assess your ability to obtain a mortgage and use a human to assess your credit profile, rather than a computer aided credit score decision making system.  

Positive movements from lenders..

Lenders have been actively looking at their offerings this week and loosening their criteria, positively.  As I have said before, I think in the run up to the end of the year, we will see a number of attractive deals launched by lenders who want to build up their pipelines ahead of, what will be, a very demanding 2016.

First Time Buyers have been in the spotlight as both Nationwide and Santander focus on the higher 'loan to value' market. These products cater for those looking to purchase their first property who have a deposit as small as just 5%.  Santander's products will be launched later in the month, but Nationwide's are an attractive proposition with starting rates sub 4% and £500 cash back to help towards the costs involved in arranging a mortgage.  

Interest only mortgages have also come back on to the lenders radar.  NatWest has confirmed it will offer interest only mortgages to customers who earn over £100k per annum and who have an 'acceptable' repayment strategy.  So, this may not be open to everyone, but it is positive that lenders are looking for gaps in the market in which to attract more business.  

This also shows in recent figures released from the Bank of England confirming that lenders approved more mortgages in July, than in any month since January 2014.  This amounted to 11,766 approvals, up 8% compared to July 2014.

And finally, do you look at your financial budgets frequently?  A report from well known credit referencing agency Equifax has suggested that over 78% of mortgage people surveyed are not currently budgeting for a rate rise.  We all know rates will rise, even though the Bank of England base rate was held for the seventy eighth consecutive month this week, but nobody knows when this will happen.  Many people asked did not know how much a rate rise would cost them on a monthly basis, despite many respondents believing rates would rise over the next twelve months! 

More rate fluctuations and lenders dislike payday loans!

Rate fluctuations seem to have been rife over the last few days as lenders continue to compete for business.  Barclays have cut some Help to Buy rates by up to 0.7%, Accord Mortgages cut their five year fixed rates by up to 0.2%, both Skipton Building Society and Santander launched their lowest ever two year fixed rate deals whilst The Mortgage Works (the Buy to Let arm of Nationwide) has launched the first ten year fixed rate mortgage for Buy to Let customers.  This is all good news for the end consumer but also shows how comfortable lenders are in promoting fixed rate monies over variable rates.  To me, this is in line with the general market consensus that the Bank of England base rate is probably not going to change for some time yet.  

Affordability plays a huge part in a lenders decision to assist customers with mortgage finance.  All lenders will look at the customers ability to repay any loan both now and stress tested to higher rates in the future.  As a result, some lenders have restricted the maximum they will lend to customers depending on their deposit.

This week, we have see Woolwich cap their income multiples for all loans over 80% of the property value.  For anyone with less than a 20% deposit, income calculations will now be a maximum of 4.5 x income (previously this was up to 5.5).  This is possibly as a result of recent Bank of England stipulations that only 15% of a lenders mortgage book may be loans with more than 4.5 x income calculations.

And finally, the news streams are saying this week is one of the busiest for customers looking to take out payday loans to pay off post Christmas debts.  I can't advise you either way, but I will say that if you are looking to take out a mortgage in the next twelve months, and you have had payday loans, be aware that lenders are likely not to assist you.  Payday loans are treated much like adverse credit but lenders are more likely to accept someone with historic adverse than someone who has taken out payday loans.  Homework is therefore crucial! 

Don't Dilly Dally, otherwise you'll miss out!

The limited edition mortgage products available for ‘seven day only’ are back!  Santander, or Abbey for Intermediaries as we still know them in the broker world, have launched a number of market leading fixed rates for a limited period.  In order to bolster books and attract a wealth of new customers, these two year fixed rates are sub 2% with minimal fees and free valuation.  Although requiring a hefty deposit at 40%, they’re great products and only available for 7 day slots.  Maybe we’ll see a few others join in these quick fire offerings before the end of the financial year…

But despite the newly attractive rates, it is still tough out there.  Lloyds TSB carried out a survey of over 500 first time sellers and 65% of these suggested that raising a deposit was their biggest obstacle.  Over 22% say it’s now harder to move up the ladder than it was to get on it!

With this in mind, I turn to one of this month’s largest issues - the Bank of Ireland rate hike.   Around 13,500 existing customers will have their rates increased over the coming months.  For those with Buy to Let mortgages, rates will rise from 1.75% above Bank Base Rate (BBR) to 4.49% above BBR in May!  Those with residential Bank of Ireland mortgages will see rates increase to 3.99% plus BBR from October.

The Bank says the changes reflect the significant increase in the cost of funding these mortgages and refers to a “special condition” in its mortgage contract that permits the hike.

This has obviously angered a lot of customers, including many mortgage professionals who had mortgages from this lender.  Even more so that Bank of Ireland also fund the mortgages offered by the Post Office, who, incidentally are currently offering near market leading competitive fixed rates to new customers!  Obviously I have to be careful in what I say here, but the mortgage profession is strictly guided and assessed by a policy called ‘Treating Customers Fairly’.  Enough said I think!

 

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.

Product rates are on the up...

Over the last seven days, we’ve seen nearly every lender pull their products and, in the main, increase rates across the board. Is this a time to panic? I’m really not sure. Who can predict the future and what is around the corner?

Fixed rates on offer at the moment are very attractive and some pundits have suggested that if they increase, they may not come back down. The only way to be sure and secure a good rate is apply as soon as possible!

Another lender has reduced its maximum loan for interest-only mortgages from 75% to 50%
for certain repayment strategies. Clydesdale Bank say that where the repayment vehicle is either cash savings or downsizing, the maximum loan to value will now be a maximum of 50%
on interest only loans.

In a week of many changes, the most ‘interesting’ came from Santander who will now require customers to account for one-off costs such as Christmas and birthdays in their income and affordability assessments. Regular costs are already accounted for in assessments, but the lender now requires non-regular costs to also be disclosed. The old joking phrase of a lender requiring your shoe size and inside leg measurement, all of a sudden does not sound quite so far off…and, on the birthday thing....what if you are at the older end of the scale and have four or five grandchildren as well?

What this all demonstrates is that it is still a very tough market out there and in some cases, getting tougher. Many turn to the internet as it’s such a superb tool. However it can also be a disadvantage as so much information, news, products and detail can make it more confusing than planned. A good ‘old fashioned’ face to face conversation with your local specialist independent mortgage brokerage might be the answer. They will, in most cases, have a relationship with the lenders, understand their requirements and ensure all the correct information is submitted from day one. There really is no better time to utilise the expertise and staffing levels they can provide for you in what’s becoming an over informed and more recently, negative market place.

More restrictions on Interest Only loans

Interest Only remains in the Spotlight this week as Lloyds Banking Group and Leeds Building society impose restrictions on those wishing to obtain an interest only mortgage. This is following Santander's interest only loan reduction last week and Barclays/Woolwich previous to that.

Although Santander reduced the maximum LTV on interest only to 50%, they did not change their criteria. However, Lloyds Banking Group (Lloyds, Halifax, C&G) have restricted acceptable repayment plans so that, despite keeping Interest only at 75% of the property value, many
borrowers may not qualify. These repayment vehicles include providing proof of a pension pot in excess of £1m, cash savings are no longer accepted and sale of any residential property can only be used if current equity is over £50k and only 80% of current equity can be used. It is reported
that the other high street providers are not looking to follow suit. But we will see!

In more positive news, those who know AToM will know that, in addition to arranging mortgages for the general public, we are also a specialist packager/distributor looking after and arranging mortgages for other mortgage brokers, estate agents and independent financial advisers nationally. For some lenders, AToM acts as their administration arm, collating information,
instructing valuation and processing applications right up to mortgage offer status. For other lenders, AToM will often be allocated a tranche of funds to distribute for them and AToM advertises and controls the administration process. Any mortgage broker, independent financial
adviser or similar, who require these certain products, will often have to come via AToM to gain access to such products. The benefit to the lender is that AToM carry out all the work, including taking telephone calls, requesting information from employers/accountants, collating documentation, and more. So it can be cost effective for the lender.

With this in mind, we are delighted to announce our latest lending partner in this arena, called MBS Lending (part of the Melton Mowbray Building Society) and we now package and distribute products for them. This lender specialises in assisting customers who have had financial issues.
This is one area, more so in recent climates, that appears to be on the increase again and there are lenders actively looking to lend. Terms & Conditions apply and APRs will be based upon individual circumstances.

If you can, overpay!

For those lucky enough to be on a very low bank base rate tracker mortgage, you may have enjoyed a couple of ‘comfortable’ years with the bank base rate being at an all time low. However, are you one of the few on tracker rate mortgages who have taken advantage and overpaid on their monthly payments? Barclays recently carried out a survey of over 1,000 borrowers and found that only 10% were currently overpaying and 6% are planning to start overpaying this year. For those who have not yet started, this could be a missed opportunity on shaving a number of years from the term of the loan, or reducing the interest paid each month, even by just overpaying small amounts.

The Buy to Let market (investment properties) looks set to be the most competitive sector of the mortgage market as further lenders signal their intent to offer products to this area. Metro Bank, Santander and Yorkshire Building Society are just a few that have signalled their interest for later in the year. Skipton Building Society has also this week re-launched in to the Buy to Let marketplace. As First Time Buyers continue to struggle to get on the property ladder (the government First Buy Scheme may assist a few), the rental market is expected to continue its rapid growth. Interest rates for investment properties have tended to be slightly higher with larger lender fees charged for arranging these types of mortgages. However, with more lenders already competing, both rates and fees are already starting to reduce and will fall further as the market becomes crowded.

Finally, larger loan availability is also on the return. Having been somewhat restricted over the last few years, obtaining loans of £1m + have been slightly more difficult to achieve. This is set to change as Nationwide have recently increased their maximum loan to £2m at 75% of the property value and 70% above £2m on an individual case by case basis. Bank of China will also consider loans of up to £10m for the right applicants. All steps in the right direction and one might even start to get slightly excited at the increasingly positive nature of the mortgage news circulating the market of late!