SWAP rates (mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have reduced over the last few weeks. The cost of 5 year fixed monies currently resides around the 3.30% mark. The Lender then provides the product to you, the customer, at rates currently in excess of 5%. Add in an arrangement fee of circa £999 and you will understand my sceptical view that huge profit figures will be released by the Lenders later in the year when they report on their 2nd half of 2009 figures!
The surprising bit is that despite such comfortable circumstances some lenders find themselves in, they’ve not replaced staff that were sadly laid off over the last 18 months and, as such, are incurring service issues! Some are in excess of ten days behind! With property prices competitively priced and deals in need of a quick completion, before the chain collapses or someone gets gazumped, such delays could not be incurred at a worse time.
Despite these issues, some lenders are following swap rates and have reduced rates this week. Good news for those looking to purchase or remortgage (bad news for those in a hurry!). Others have tried to curtail their volume of business by tightening up on criteria, or by increasing the deposits required on their mortgage product portfolio.
First Time Buyer enquiries continue to engulf ‘AToM towers’, exploring all avenues in order to get on to the first rung of the property ladder. With rates reducing, we are also predicting that remortgage applications will increase over the next few weeks as people look to secure decent rates and ensure monthly expenditure is fixed for the foreseeable period. We’re also informed that properties are selling like hot cakes, although supply is still somewhat sparse.
Many experts are predicting the worst is over and a slow recovery has started. How slow, no one knows, but it’s not just positive talk in the market any longer, small signs are beginning to show.
14 September 2009
07 September 2009
First Time Buyers will get the ball rolling again...
First time buyer confidence is increasing. We are seeing healthy enquiry levels from first timers either on their own or using a shared ownership scheme. Lenders historically agreed mortgages based on income multiples. Some would lend up to 3.75 x income, some up to 5.1. On joint applications similar style calculations applied. Most lenders now base their decision on affordability along with a review of your credit history which details financial liabilities, previous addresses, financial associations you have with other people and much more. Credit searches provide a full financial picture to lenders, enabling them to decide if you have a good risk profile. You can access your own Experian report via the AToM website and we recommend this to any applicant looking at the mortgage market. It is well worth understanding what details a lender will be using to assess your potential borrowing capacity.
Despite the school break coming to an end with many of us breathing a sigh of relief to have survived it safely without losing too much hair, Christmas is just around the corner and will creep up quickly! Have the last few weeks been costly? Have you been ignoring your finances hoping they will go away? Are there financial decisions looming? If so, now is a good time to start reviewing them.
Recent figures from Credit Action suggest that 33,600 applications for credit have been turned down daily during the past six months. 3,036 people became redundant daily in the 3 months to the end of June. In the same period 125 properties were repossessed daily and, today, 362 people will be declared insolvent or bankrupt. Stark figures indeed!
An Equifax survey recently reported that almost 30% of consumers are turning to parents or close family members for help with debt repayments or finances. More than 50% will openly discuss their financial situation with friends and family. This being the case, it really is time to seek independent professional advice.
Despite the school break coming to an end with many of us breathing a sigh of relief to have survived it safely without losing too much hair, Christmas is just around the corner and will creep up quickly! Have the last few weeks been costly? Have you been ignoring your finances hoping they will go away? Are there financial decisions looming? If so, now is a good time to start reviewing them.
Recent figures from Credit Action suggest that 33,600 applications for credit have been turned down daily during the past six months. 3,036 people became redundant daily in the 3 months to the end of June. In the same period 125 properties were repossessed daily and, today, 362 people will be declared insolvent or bankrupt. Stark figures indeed!
An Equifax survey recently reported that almost 30% of consumers are turning to parents or close family members for help with debt repayments or finances. More than 50% will openly discuss their financial situation with friends and family. This being the case, it really is time to seek independent professional advice.
Undervalued. Lenders in control! Never....!
28/8/09 - Houses are being undervalued by mortgage lenders causing sales and re-mortgages to fall through according to research by the National Association of Estate Agents. Discrepancies between agreed sale prices and valuations are having a detrimental effect on the number of property transactions, says the association.
These revelations are perhaps not entirely unexpected as many of the large lenders either own their own valuation companies or employ in-house valuers. They insist on using their own valuers to assess a property for mortgage purposes receiving revenue for both mortgage and valuation! Those who take a cynical view might say that this allows those large lenders to have an element of control over house prices and this now appears to be a cause of concern for the NAEA. Does it also raise the spectre of conflict of interest and good governance?
Additionally, some surveyors appear to be predicting that house prices will rise over the next three months, partly due to the current lack of supply on the housing market. RICS (Royal Institute of Chartered Surveyors) indicates that the number of properties left on estate agents’ books remains low, despite a rise in the number of new instructions for the first time since May 2007. However, they also warn that if the availability of mortgages remains constrained there is a risk that prices will fall again as the potential dual prongs of rising mortgage rates and unemployment take hold.
The Council of Mortgage Lenders points towards signs of stabilisation in the mortgage market but says that lending levels remain weak. House purchase loans accounted for £5.9bn in lending, up 23% from 36,500 in May to 45,000 in June. The CML points out, however, that this is less than half the average number of loans recorded in June over the last seven years.
That said, there are still some good deals out there so if you decide to review your own mortgage position over the weekend please do call us! Have a great Bank Holiday weekend!
These revelations are perhaps not entirely unexpected as many of the large lenders either own their own valuation companies or employ in-house valuers. They insist on using their own valuers to assess a property for mortgage purposes receiving revenue for both mortgage and valuation! Those who take a cynical view might say that this allows those large lenders to have an element of control over house prices and this now appears to be a cause of concern for the NAEA. Does it also raise the spectre of conflict of interest and good governance?
Additionally, some surveyors appear to be predicting that house prices will rise over the next three months, partly due to the current lack of supply on the housing market. RICS (Royal Institute of Chartered Surveyors) indicates that the number of properties left on estate agents’ books remains low, despite a rise in the number of new instructions for the first time since May 2007. However, they also warn that if the availability of mortgages remains constrained there is a risk that prices will fall again as the potential dual prongs of rising mortgage rates and unemployment take hold.
The Council of Mortgage Lenders points towards signs of stabilisation in the mortgage market but says that lending levels remain weak. House purchase loans accounted for £5.9bn in lending, up 23% from 36,500 in May to 45,000 in June. The CML points out, however, that this is less than half the average number of loans recorded in June over the last seven years.
That said, there are still some good deals out there so if you decide to review your own mortgage position over the weekend please do call us! Have a great Bank Holiday weekend!
Sale & Rent Back
21/8/09 - Lets start this week with some statistics: Mortgage lending is at its lowest level since March 2001 (source British Bankers Association). By the end of 2009, 360,000 mortgages are expected to be in arrears and 65,000 homes will have been repossessed (source: Council of Mortgage Lenders). Unemployment will top 3 million before this recession comes to an end (source: British Chambers of Commerce). The Government’s Mortgage Rescue Scheme, designed to help 6,000 families avoid repossession, has so far helped just 6 (source: HM Government).
So what does this all mean? Simply that there are large numbers of mortgage borrowers who may struggle to keep their heads above water, financially, during the year ahead. However, not all news is bad news and, even for those who find themselves in deep trouble, there are some options which might help them keep a roof over their heads. Out of the gloom are some positive facts which might help them relieve their position:
The UK's first ethical sale and rent back scheme was launched in May this year and which, subject to criteria , gives homeowners the ability to avoid repossession and keep a roof over their heads. The RPS Home Rescue & Buyback plan offers tenancy agreements for up to 5 years, the option for tenants to buy back property and share in any increase in market value and the added benefit of having no application or administration fees to pay. The prospective clients are not pressured into making a decision. Indeed, they are encouraged to take independent advice and are given £500 towards any legal costs this may incur. Whilst, historically, Sale and Rent Back schemes have had bad press, RPS have gone the extra mile and encouraged the Financial Services Authority to regulate their product giving potential clients additional comfort value. Contact AToM if you would like more detail on this offering.
So what does this all mean? Simply that there are large numbers of mortgage borrowers who may struggle to keep their heads above water, financially, during the year ahead. However, not all news is bad news and, even for those who find themselves in deep trouble, there are some options which might help them keep a roof over their heads. Out of the gloom are some positive facts which might help them relieve their position:
The UK's first ethical sale and rent back scheme was launched in May this year and which, subject to criteria , gives homeowners the ability to avoid repossession and keep a roof over their heads. The RPS Home Rescue & Buyback plan offers tenancy agreements for up to 5 years, the option for tenants to buy back property and share in any increase in market value and the added benefit of having no application or administration fees to pay. The prospective clients are not pressured into making a decision. Indeed, they are encouraged to take independent advice and are given £500 towards any legal costs this may incur. Whilst, historically, Sale and Rent Back schemes have had bad press, RPS have gone the extra mile and encouraged the Financial Services Authority to regulate their product giving potential clients additional comfort value. Contact AToM if you would like more detail on this offering.
15 August 2009
The Mortgage Process...be clear!
This week I want to take a brief look at the mortgage process when purchasing a property. First time buyer or home mover, your mortgage application process will be roughly identical. The selling agent will look to agree a number of deadlines including the arrangement of mortgage finance. You should speak to an independent mortgage brokerage (AToM?) who will assess your financial requirements with you. They are required to provide you with an Initial Disclosure Document detailing who they are, who they are regulated by and costs involved in arranging your mortgage, including any advice or consultation fees charged. This document also advises how to complain if you are unhappy with the advice given. A good advisor will complete a financial fact find form enabling them to ‘know their client’. This is a must before any advice or recommendation can be provided. Once you’ve decided on the best mortgage for your personal requirements, a decision in principle (DIP) will be completed with the chosen lender, normally on-line. This involves brief personal details, income disclosure and a credit search on you. Be wary though, the more credit searches carried out, the more likely your credit score will decrease. The moral here is to ensure that the product is right for you before a DIP is conducted.
Once the DIP is agreed, normally instantaneously, it is then upgraded to a full application. Payment for valuation is then needed (sometimes free) and the valuer will confirm to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost.
In the meantime, the lender will probably require information on income, identity, proof of residency as part of their due diligence requirements. Assuming no issues arise with any of these, a mortgage offer should be issued. Then, subject to the conveyancing process your solicitor has to work through, you are now on the road to completion and should soon pick up the keys to your new home!
Once the DIP is agreed, normally instantaneously, it is then upgraded to a full application. Payment for valuation is then needed (sometimes free) and the valuer will confirm to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost.
In the meantime, the lender will probably require information on income, identity, proof of residency as part of their due diligence requirements. Assuming no issues arise with any of these, a mortgage offer should be issued. Then, subject to the conveyancing process your solicitor has to work through, you are now on the road to completion and should soon pick up the keys to your new home!
07 August 2009
Confidence appears to be on the increase!
Lenders have started to release their six monthly profit/loss figures this week. With HBSC and Barclays reporting £3bn in profits over the last six months, the future started to look great, especially for those anticipating large bonuses! But then came reports of losses from Northern Rock (£724m) and Lloyds Banking Group (£4bn) and with it signs that we really are not much further forward than we’d hoped.
Nationwide became the heroes of the week by lowering interest rates, some by as much as 0.5%. This was quickly followed by their specialist arm, The Mortgage Works, who major in Buy to Let mortgages, who also reduced some of their rates.
In our Carfax office, we have seen encouraging signs that people are now looking for property with more confidence than of late. Some are enquiring to find out how much they can afford whereas others are chasing interest rates whilst they remain low. Consumer confidence is definitely on the increase and this is supported by the increasing number of first time buyers exploring all avenues to try and get their foot on the property ladder. I am impressed by the increasing willingness of some lenders to accommodate first time buyers looking at shared ownership schemes. First time buyers, if eligible, can purchase a percentage of a property (between 25 and 75%) and a housing association purchases the remainder. The buyer then pays rent on the latter percentage with the option to purchase an increased share of the property later on. There are many schemes available and a good supply of properties in the area, so do review all the options available.
Finally, we were visited by one lender this week, who had ‘mothballed’ themselves about a year ago and who have now indicated that they will be rejoining the lending arena in the not to distant future and more surprisingly, they are currently looking to employ up to 10 new staff! Positive news and fingers crossed that this is the beginning of a new era.
Nationwide became the heroes of the week by lowering interest rates, some by as much as 0.5%. This was quickly followed by their specialist arm, The Mortgage Works, who major in Buy to Let mortgages, who also reduced some of their rates.
In our Carfax office, we have seen encouraging signs that people are now looking for property with more confidence than of late. Some are enquiring to find out how much they can afford whereas others are chasing interest rates whilst they remain low. Consumer confidence is definitely on the increase and this is supported by the increasing number of first time buyers exploring all avenues to try and get their foot on the property ladder. I am impressed by the increasing willingness of some lenders to accommodate first time buyers looking at shared ownership schemes. First time buyers, if eligible, can purchase a percentage of a property (between 25 and 75%) and a housing association purchases the remainder. The buyer then pays rent on the latter percentage with the option to purchase an increased share of the property later on. There are many schemes available and a good supply of properties in the area, so do review all the options available.
Finally, we were visited by one lender this week, who had ‘mothballed’ themselves about a year ago and who have now indicated that they will be rejoining the lending arena in the not to distant future and more surprisingly, they are currently looking to employ up to 10 new staff! Positive news and fingers crossed that this is the beginning of a new era.
04 August 2009
Lenders meeting could be good news?
31/7/09 - The Government Open Market Homebuy scheme funding for 2009/10 has now been allocated. Eligible beneficiaries were able to take out a mortgage to fund part of their property purchase and a low-interest equity loan to cover the rest. Claiming to have assisted 6,000 households in 2008, no one is quite sure how many households have had funds allocated to them for this scheme period. It is thought that the government will now concentrate on first time buyers and new build properties, through the schemes Homebuy Direct and New Build Homebuy.
The Land Registry has released figures suggesting that house prices rose in June by 0.1%, complimenting the earlier released Nationwide reports of a 0.9% increase. But let’s not forget the Halifax release commenting on a 0.5% decrease! As I’ve said before, until these three report a simultaneous increase in house prices for a consecutive 3 month period, we can’t start jumping around just yet!
Not much to report on rates this week. Perhaps the lenders felt they deserved a holiday and have taken their kids away, expecting us hardworking independent mortgage brokers to be away also? No such luck. But good news in that rates seem to have stabilised for now!
And whilst on the subject of lenders, I was pleasantly impressed with Alastair Darlings meeting with all the major banks to sternly express his wishes that they lend more to consumers and businesses. Sadly, this is the second or third time they’ve met and we’ve not seen lending at sufficient levels to drive recovery in the property market since either previous meeting, so I’m not holding much hope! However, this time the threat of bringing in a competitions inquiry, if lending does not increase, has been raised. Although this struck me as funny, as I thought it was the gentlemen in question that sped up and agreed the merging and acquisitions of such ‘super banks’ at the outset?
The Land Registry has released figures suggesting that house prices rose in June by 0.1%, complimenting the earlier released Nationwide reports of a 0.9% increase. But let’s not forget the Halifax release commenting on a 0.5% decrease! As I’ve said before, until these three report a simultaneous increase in house prices for a consecutive 3 month period, we can’t start jumping around just yet!
Not much to report on rates this week. Perhaps the lenders felt they deserved a holiday and have taken their kids away, expecting us hardworking independent mortgage brokers to be away also? No such luck. But good news in that rates seem to have stabilised for now!
And whilst on the subject of lenders, I was pleasantly impressed with Alastair Darlings meeting with all the major banks to sternly express his wishes that they lend more to consumers and businesses. Sadly, this is the second or third time they’ve met and we’ve not seen lending at sufficient levels to drive recovery in the property market since either previous meeting, so I’m not holding much hope! However, this time the threat of bringing in a competitions inquiry, if lending does not increase, has been raised. Although this struck me as funny, as I thought it was the gentlemen in question that sped up and agreed the merging and acquisitions of such ‘super banks’ at the outset?
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