The final curtain appears to have been drawn on Self Certification and Fast-Track mortgages. With preparations in place to amalgamate the Financial Services Authority (FSA) into the Bank of England in 2012, the regulator is clearing up what it considers to be a few outstanding projects. The Mortgage Market Review papers were distributed late last year and the FSA has now launched its consultation papers, following feedback from various parties.
One major proposal is that all lenders will have to prove affordability on all loans. Therefore, every mortgage applicant will be required to provide accounts or payslips and possibly bank statements so that the lender can deem the loan affordable to the consumer. With the old Self Certification mortgages and on some current ‘Fast Track’ mortgages, proof of income was not necessarily required by the lender.
Other changes also include providing proof of affordability into retirement and on interest only loans (which will be assessed as though they were on a Repayment basis). House price inflation or downsizing to a smaller property will no longer be acceptable as a suitable repayment option.
These, and a myriad of others points, are now at the consultation process and are planned to be implemented later in the year.
The Council of Mortgage Lenders has reported a great month for new lending in June, some 15% up on May and a 7% increase on June 09. However, whilst the market remains delicate, the power appears to be turning from the sellers to those who can actually raise mortgage finance. Whilst market products remains constrained, this could be very much to the benefit of the buyer. Remember, take independent advice before agreeing to proceed on a mortgage.
And finally…it’s the end of an era as Mercury FM changes to Heart FM. I’d like to personally thank all of the staff at Mercury FM for delivering a great local radio station in recent years. They certainly assisted in growing AToM’s exposure in the local area. I wish them all the very best for the future.
Showing posts with label self cert. Show all posts
Showing posts with label self cert. Show all posts
20 November 2009
Another year yet..
Every year, the mortgage industry holds an exhibition for all providers in London. The event lasts two days and it’s a good chance to meet lenders, discuss business with competitors, and review new product providers, etc. However, this year, it was somewhat of a small affair held at Olympia and only five or six out of the 60 exhibitors (normally 200+) were lenders happy to invest in promoting themselves and their product offerings! I still decided to visit and met with those who were participating and the general consensus was buoyant and one of optimism. This was until day two, when the last remaining Self Certification (no proof of income) lender withdrew from the market. If there’s one thing the market needs right now, it’s more lenders, not less! Although only lending a small amount compared to the high street names, a couple of billion is still a lot of lending in the specialist markets! Less than a week later, we’re already seeing a gap in the market which Self Cert used to fill.
The other message, repeated by various sources, was that the expectancy for new lenders to arrive and for lending to increase dramatically is still another year away. What does this mean? In short, the lenders currently lending can control the market between them. They have limited competition and, as long as they hit their own internal targets and profitability, need not reduce rates and/or fees to attract more customers. They can also keep criteria controlled and have a limited appetite to review applications that don’t quite fit their standard mould.
I’ve said it before, but it needs re-iterating again and again - if you have plans to apply for a mortgage in the not too distant future, keep your head above water. Don’t miss or make late payments to any provider. All financial institutions will base their decision initially on your credit history. If you have missed or late payments, or even a lot of recent searches (from multiple finance/mobile/car/home insurance applications), this could be detrimental to your ability to obtain finance, at a competitive rate. If you have not reviewed your credit search before, get it for free (for 30days) from the AToM website. It’s well worth a review and a good insight on how attractive you look to a lender!
The other message, repeated by various sources, was that the expectancy for new lenders to arrive and for lending to increase dramatically is still another year away. What does this mean? In short, the lenders currently lending can control the market between them. They have limited competition and, as long as they hit their own internal targets and profitability, need not reduce rates and/or fees to attract more customers. They can also keep criteria controlled and have a limited appetite to review applications that don’t quite fit their standard mould.
I’ve said it before, but it needs re-iterating again and again - if you have plans to apply for a mortgage in the not too distant future, keep your head above water. Don’t miss or make late payments to any provider. All financial institutions will base their decision initially on your credit history. If you have missed or late payments, or even a lot of recent searches (from multiple finance/mobile/car/home insurance applications), this could be detrimental to your ability to obtain finance, at a competitive rate. If you have not reviewed your credit search before, get it for free (for 30days) from the AToM website. It’s well worth a review and a good insight on how attractive you look to a lender!
13 November 2009
You could be stuck in your current property...
It has been a very mixed week in the mortgage market! Recent reports suggest that the FSA have admitted to putting increasing obstacles in front of potential new mortgage lenders. Superb! So we’re left with the small number of current lenders, and their inability to share Quantitative Easing monies received from the Government. So much for competition in the mortgage markets and the much trumpeted instructions from the Government and Bank of England for lenders to lend!
As predicted a few weeks ago, the Self Certification (no proof of income) mortgage market has been dealt a major blow. Of the two lenders left, one withdrew last week and it is likely that the ‘last man standing’ will not remain so for long. I’ve no doubt that they will withdraw possibly before the FSA’s mortgage market review request to ban Self-Cert comes in to effect earlier next year. Whilst it is probably true that there has been some abuse of this product, and lenders are not immune from responsibility, it is still suitable for the right people in the right circumstances, especially the self employed. I am concerned that the forced demise of this sector has not been carefully thought through.
UPDATE - since submitting this article on 11/11 for publishing on 13/11, the last lender offering self cert mortgages has now also withdrawn from the market.
2.5 million homeowners are living in their current properties for longer than they had originally planned, reports Unbiased.co.uk. Of those surveyed, one in four homeowners are stuck in their current property due to the fact that they have been unable to sell at the price they envisaged. Another quarter are staying longer than planned because they cannot afford the increased mortgage repayments on their next home!
And finally, with Bank Base Rate remaining at 0.5% for the umpteenth month in a row and with some attractive products available in the mortgage market, this really is a good time to look at a new mortgage. Remember, you can deal with whoever you want to! Speak to your local and independent mortgage brokerage as soon as possible to ensure you don’t miss the right product for your specific requirements. You know who to call!
As predicted a few weeks ago, the Self Certification (no proof of income) mortgage market has been dealt a major blow. Of the two lenders left, one withdrew last week and it is likely that the ‘last man standing’ will not remain so for long. I’ve no doubt that they will withdraw possibly before the FSA’s mortgage market review request to ban Self-Cert comes in to effect earlier next year. Whilst it is probably true that there has been some abuse of this product, and lenders are not immune from responsibility, it is still suitable for the right people in the right circumstances, especially the self employed. I am concerned that the forced demise of this sector has not been carefully thought through.
UPDATE - since submitting this article on 11/11 for publishing on 13/11, the last lender offering self cert mortgages has now also withdrawn from the market.
2.5 million homeowners are living in their current properties for longer than they had originally planned, reports Unbiased.co.uk. Of those surveyed, one in four homeowners are stuck in their current property due to the fact that they have been unable to sell at the price they envisaged. Another quarter are staying longer than planned because they cannot afford the increased mortgage repayments on their next home!
And finally, with Bank Base Rate remaining at 0.5% for the umpteenth month in a row and with some attractive products available in the mortgage market, this really is a good time to look at a new mortgage. Remember, you can deal with whoever you want to! Speak to your local and independent mortgage brokerage as soon as possible to ensure you don’t miss the right product for your specific requirements. You know who to call!
24 October 2009
The PM once told us we'd never had it so good....
Predictably, the major talking point in financial services is the FSA’s Mortgage Market Review. Some of the proposals include:
1) Removal of Self Certification mortgages:
Self Cert mortgages account for approximately 10% of the residential market. True, this offering has been abused by a few yet, in the main, Self Cert is a valuable product offering. Once abolished, existing customers may become trapped in their current mortgage. Possibly with a lender no longer operating meaning that they may be unable to refinance or move. At current low interest rates this may not be an issue. However, when rates increase quickly, a new mortgage may be difficult to realise and may result in customer arrears or, worse still, repossession due to lack of options. Those who are self employed and have difficulty proving income (which may come from a variety of sources) or recently established businesses will undoubtedly find it more difficult to obtain a mortgage, if at all, should these new proposals be approved.
2) Lenders to assume responsibility for a consumer’s ability to pay:
Why give credit to someone who can’t afford it? This should be happening now! I agree with this in principle but it needs to be widened to the Credit Card companies still sending out “pre-approved - sign here” forms on a daily basis. If I said yes to them all, I could be ‘quid’s in’ but could I afford the repayments…?
3) Requiring all mortgage advisers to be personally accountable to the FSA:
This one is interesting. We are already authorised and regulated by the FSA and this proposal wants us to be accountable for the mortgage you take. In effect this proposal removes the consumer’s responsibility for any transaction undertaken. Whatever happened to Caveat Emptor? Can I buy a lottery ticket and then sue the provider if I don’t win?
4) The regulation of Buy-to-Let and all Secured Lending:
Great idea and I 100 per cent agree, once authorisation and regulation of the current residential markets have been tried, tested and proven! If they were, would we be in this mess?
Obviously there are many more proposals, but I’ve so few column inches! The certainty with this review, if implemented, is that consumers will have less choice and pay more. Do you remember a PM telling us that we’d never had it so good?
1) Removal of Self Certification mortgages:
Self Cert mortgages account for approximately 10% of the residential market. True, this offering has been abused by a few yet, in the main, Self Cert is a valuable product offering. Once abolished, existing customers may become trapped in their current mortgage. Possibly with a lender no longer operating meaning that they may be unable to refinance or move. At current low interest rates this may not be an issue. However, when rates increase quickly, a new mortgage may be difficult to realise and may result in customer arrears or, worse still, repossession due to lack of options. Those who are self employed and have difficulty proving income (which may come from a variety of sources) or recently established businesses will undoubtedly find it more difficult to obtain a mortgage, if at all, should these new proposals be approved.
2) Lenders to assume responsibility for a consumer’s ability to pay:
Why give credit to someone who can’t afford it? This should be happening now! I agree with this in principle but it needs to be widened to the Credit Card companies still sending out “pre-approved - sign here” forms on a daily basis. If I said yes to them all, I could be ‘quid’s in’ but could I afford the repayments…?
3) Requiring all mortgage advisers to be personally accountable to the FSA:
This one is interesting. We are already authorised and regulated by the FSA and this proposal wants us to be accountable for the mortgage you take. In effect this proposal removes the consumer’s responsibility for any transaction undertaken. Whatever happened to Caveat Emptor? Can I buy a lottery ticket and then sue the provider if I don’t win?
4) The regulation of Buy-to-Let and all Secured Lending:
Great idea and I 100 per cent agree, once authorisation and regulation of the current residential markets have been tried, tested and proven! If they were, would we be in this mess?
Obviously there are many more proposals, but I’ve so few column inches! The certainty with this review, if implemented, is that consumers will have less choice and pay more. Do you remember a PM telling us that we’d never had it so good?
16 October 2009
Buy and be quick! | Bye bye Self Cert?
It may have slipped your mind, but we’re only a couple of months away from…the stamp duty threshold increase! Oh and Christmas! This means that if you are looking to purchase a property priced between £125k & £175k, unless you complete the purchase before the end of the year, you could be paying out a further £1,250 to £1,750 in stamp duty costs. This is of course unless the property is in a ‘disadvantaged area’ in which case the Stamp Duty threshold decreases to £150k, rather than £125k. The clarification on a ‘disadvantaged area’ on the HM Revenue and Customs website is ‘residential, mixed use residential element’. Good, glad that clears that up then!
The Self Certification (no proof of income) market seems to have its days numbered as The Mortgage Works (specialist arm of the Nationwide) withdrew all its Self Cert products last week. This only leaves a few Lenders remaining in this arena and they will not want an increase in business from this sector. With speculation rising in the market that the FSA are looking to remove Self Cert altogether, Lenders will be currently reviewing the risks and their exposure in this category and I suspect more will withdraw in due course. It’s a shame as Self Cert is ideal for many customers with self employed income and, especially in the current climates, where people have two or more jobs with income not readily provable. On top of this, the removal of such a category could also trap existing borrowers into their current mortgage.
Finally, the Bank of England base rate is set to remain below 2% until 2014, according to the Centre for Economics and Business Research. The CEBR is predicting that interest rates will stay at 0.5% until at least 2011. If correct, this is great news for those on tracker rates. In fact, a few lenders have launched products for customers to start on a tracker rate and, if the Bank base rate was to increase, allows a switch to a fixed rate (for a minimal fee!) at any time during the tracker period (conditions apply!). Good to see some Lenders assisting with innovative products!
The Self Certification (no proof of income) market seems to have its days numbered as The Mortgage Works (specialist arm of the Nationwide) withdrew all its Self Cert products last week. This only leaves a few Lenders remaining in this arena and they will not want an increase in business from this sector. With speculation rising in the market that the FSA are looking to remove Self Cert altogether, Lenders will be currently reviewing the risks and their exposure in this category and I suspect more will withdraw in due course. It’s a shame as Self Cert is ideal for many customers with self employed income and, especially in the current climates, where people have two or more jobs with income not readily provable. On top of this, the removal of such a category could also trap existing borrowers into their current mortgage.
Finally, the Bank of England base rate is set to remain below 2% until 2014, according to the Centre for Economics and Business Research. The CEBR is predicting that interest rates will stay at 0.5% until at least 2011. If correct, this is great news for those on tracker rates. In fact, a few lenders have launched products for customers to start on a tracker rate and, if the Bank base rate was to increase, allows a switch to a fixed rate (for a minimal fee!) at any time during the tracker period (conditions apply!). Good to see some Lenders assisting with innovative products!
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