The sun is shining, kids have broken up for Easter, inflation is down to 4%, The Bank of England base rate remains at 0.5% for the 25th consecutive month and the Council of Mortgage Lenders confirm that lending for house purchases climbed by 8% in February. Perhaps I should end my column now, on a positive!
The worrying trend seems to be the public perception of what will happen when, not if, bank base rate rises. Moneysupermarket.com has established that an alarming 17% of people surveyed feel they will be unable to afford their mortgage payments when interest rates do rise, while 6% have already put their home on the market.
According to the UK Payments Council, at the end of 2010 there were an estimated 63m credit and charge cards in the UK compared with around 62m people in the country. Total credit card debt in February 2011 was £58.5bn and the average interest rate on credit card lending is currently 18.84%, which is 18.34% above bank base rate (0.5%)!
Creditaction suggest 1 in 10 UK adults are permanently overdrawn. One third of people have moved into the red during the last 12 months and 17% of UK adults (almost 8 million people nationwide) failed to pay at least one bill over the last year, potentially putting their credit profiles at risk.
We enjoyed the company of a work experience student from a local school last week. A well educated young man. Although he knew about credit and debit cards, he had little knowledge (as is the case with many of his generation) what would happen if he missed a payment later on in life to any credit agency or even a mobile phone provider. It was a real eye opener for him!
Finally, if you have not yet nominated a local business/individual in the WSCT Business Awards 2011, please make sure you do! All businesses, large or small, need a ‘pat on the back’ and recognition for their hard work and efforts. The closing date for nominations is Friday (15th April), so be quick and vote wisely! As an aside, did you know, I have been writing this column, every week, since November 2008...?!
08 April 2011
Lenders are restricting the Interest Only option.
There has been much hype recently regarding Interest Only versus Capital and Interest (Repayment) mortgages. With an Interest Only mortgage, you only pay interest, so, at the end of your chosen term, you still owe the lender the same amount as when you began. Normally with this method, it is recommended that you contribute to a saving or investment vehicle to generate funds to repay the mortgage. This is generally optional but the Financial Services Authority (FSA) are paying great attention to this as they do not want to see customers with large debts remaining later in life.
With a Repayment mortgage, you pay both capital and interest each month. Initially, this is more expensive, but it does mean that you pay back the full loan by the end of the term, assuming you meet the lenders required payments on time.
We are seeing more and more lenders tighten their requirements on Interest Only mortgages. Nationwide and Lloyds Banking Group (including Halifax) have recently limited the maximum loan available on an Interest Only option to 75% of the property value. Above this level, Repayment is mandatory.
Some lenders charge higher interest rates if you take an Interest Only mortgage and many are trying to persuade customers to switch from this method to Repayment. Some no longer offer Interest Only at all!
Why the recent attention to these repayment options? Simply, because many borrowers who have stepped onto the property ladder chose the cheaper option promising to review their payment plans at a later date. The problem is, the ‘later date’ never seems to arrive! As we all know, people generally live to their means. Many borrowers on this scheme have no savings or viable plans to pay back the debt and this is worrying!
However, Interest Only mortgages remain practical for certain professions - people entitled to annual bonuses - the fluctuating income of self employed - employments where lump sums are received after a number of years in service are some examples.
Some lenders offer a part and part option, enabling the customer to pay some of their loan on Repayment and some on Interest Only. This serves to help many borrowers and keeps monthly payments at a lower level yet the underlying issue still remains. At the end of the mortgage term, the Interest Only element still needs to be repaid! Seek professional advice.
With a Repayment mortgage, you pay both capital and interest each month. Initially, this is more expensive, but it does mean that you pay back the full loan by the end of the term, assuming you meet the lenders required payments on time.
We are seeing more and more lenders tighten their requirements on Interest Only mortgages. Nationwide and Lloyds Banking Group (including Halifax) have recently limited the maximum loan available on an Interest Only option to 75% of the property value. Above this level, Repayment is mandatory.
Some lenders charge higher interest rates if you take an Interest Only mortgage and many are trying to persuade customers to switch from this method to Repayment. Some no longer offer Interest Only at all!
Why the recent attention to these repayment options? Simply, because many borrowers who have stepped onto the property ladder chose the cheaper option promising to review their payment plans at a later date. The problem is, the ‘later date’ never seems to arrive! As we all know, people generally live to their means. Many borrowers on this scheme have no savings or viable plans to pay back the debt and this is worrying!
However, Interest Only mortgages remain practical for certain professions - people entitled to annual bonuses - the fluctuating income of self employed - employments where lump sums are received after a number of years in service are some examples.
Some lenders offer a part and part option, enabling the customer to pay some of their loan on Repayment and some on Interest Only. This serves to help many borrowers and keeps monthly payments at a lower level yet the underlying issue still remains. At the end of the mortgage term, the Interest Only element still needs to be repaid! Seek professional advice.
01 April 2011
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!
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!
25 March 2011
Complex Mortgages are not frowned upon these days!
Some while ago, I mentioned that AToM had re-launched its ‘Complex Prime’ proposition. Complex Prime looks at mortgage applications which, for whatever reason, do not fit the normal high street credit scoring/tick box mentality or need something of a more complex underwriting nature.
A recent example we came across was a young chap at the age of 76. Obviously well into retirement and enjoying a pension of around £75k per annum. Very nice! He wanted to move properties and needed a loan of around £150k to purchase a property valued at £700k. Because of his age many lenders had turned him away. And because he, according to many lenders, had no ‘earned’ income, found most doors shut. However, we were able to offer a mortgage over a 10 year term on a Capital Repayment basis, on the understanding that his wife would receive 60% of his pension income, should the unfortunate happen to the husband. The rates were competitive and fees attractive.
Another example was a gentleman looking to re-mortgage a holiday home that was only allowed to be let out for 11 months of the year. Many lenders prefer second properties to be let out on an Assured Shorthold Tenancy agreement, usually contracted for 6 months at a time and renewable. However, with holiday lets, the agreements tend to be weekly. So, again, the lenders available were restricted, but we managed to place with a small building society offering attractive rates and fees.
Other examples include applicants with no credit: too much credit: a desire to pay up front or add additional security in the form of another property increasing their ability to borrow more.
These are just some of the benefits of using an independent mortgage brokerage and especially if they are ‘whole of market’, and who can deal with any lender and are not restricted to a panel of lenders.
AToM now has seven lenders on its Complex Prime panel already looking exclusively at these scenarios, with other lenders shortly to join. These lenders may not be household names, but you’ll probably find they are extremely helpful and will look at most scenarios, manually, with no credit scoring and have an appetite to lend!
A recent example we came across was a young chap at the age of 76. Obviously well into retirement and enjoying a pension of around £75k per annum. Very nice! He wanted to move properties and needed a loan of around £150k to purchase a property valued at £700k. Because of his age many lenders had turned him away. And because he, according to many lenders, had no ‘earned’ income, found most doors shut. However, we were able to offer a mortgage over a 10 year term on a Capital Repayment basis, on the understanding that his wife would receive 60% of his pension income, should the unfortunate happen to the husband. The rates were competitive and fees attractive.
Another example was a gentleman looking to re-mortgage a holiday home that was only allowed to be let out for 11 months of the year. Many lenders prefer second properties to be let out on an Assured Shorthold Tenancy agreement, usually contracted for 6 months at a time and renewable. However, with holiday lets, the agreements tend to be weekly. So, again, the lenders available were restricted, but we managed to place with a small building society offering attractive rates and fees.
Other examples include applicants with no credit: too much credit: a desire to pay up front or add additional security in the form of another property increasing their ability to borrow more.
These are just some of the benefits of using an independent mortgage brokerage and especially if they are ‘whole of market’, and who can deal with any lender and are not restricted to a panel of lenders.
AToM now has seven lenders on its Complex Prime panel already looking exclusively at these scenarios, with other lenders shortly to join. These lenders may not be household names, but you’ll probably find they are extremely helpful and will look at most scenarios, manually, with no credit scoring and have an appetite to lend!
18 March 2011
....then we had a budget!
Outside AToM HQ, in the Carfax, we have a distribution box for the WSCT ‘Property Today’ pages. These have been taken in huge numbers over the last few weeks, which give us the impression that people are looking for properties or are monitoring house prices. It’s also been a very busy few weeks in the mortgage market, with rates fluctuating and lenders appearing to be actively lending. Many financial institutions recorded a great month for new business in February, for both purchase and remortgage applications.
Any perceived mini-recovery could possibly stall though, as we approach the forthcoming budget from Chancellor George Osborne.
The pundits have been hard at work trying to predict what the outcome will be and it is a fact that, like it or not, the Government is still faced with a huge task in getting the country back on track financially.
Figures from creditaction for March report:
- £120,660,000 is the interest the Government has to pay each day on the UK’s net debt of £2,244.2bn (which includes financial interventions).
- 212 mortgage possession claims will be issued and 163 mortgage possession orders will be made today
- 337 people every day of the year will be declared insolvent or bankrupt. This is equivalent to 1 person every 59 seconds during a working day.
- 1,603 Consumer County Court Judgements (CCJ's) were issued every day during Q4 2010 and the average judgement amount was £3,245.
Mortgage lenders took 7,900 properties into possession in Q4 2010 according to the Council of Mortgage Lenders. This equates to 87 properties being repossessed every day. In terms of payment difficulties, 169,600 mortgages ended Q4 2010 with arrears equivalent to at least 2.5% of the outstanding mortgage balance.
There are more credit cards in the UK than people according to the UK Payments Council.
The typical first-time buyer deposit in December was 23% (£35,020).
Yes, some of these figures make for grim reading, but they give an idea of the pressures the Government has to deal with in the upcoming budget and balancing the already fragile economy with the impact they will present.
Any perceived mini-recovery could possibly stall though, as we approach the forthcoming budget from Chancellor George Osborne.
The pundits have been hard at work trying to predict what the outcome will be and it is a fact that, like it or not, the Government is still faced with a huge task in getting the country back on track financially.
Figures from creditaction for March report:
- £120,660,000 is the interest the Government has to pay each day on the UK’s net debt of £2,244.2bn (which includes financial interventions).
- 212 mortgage possession claims will be issued and 163 mortgage possession orders will be made today
- 337 people every day of the year will be declared insolvent or bankrupt. This is equivalent to 1 person every 59 seconds during a working day.
- 1,603 Consumer County Court Judgements (CCJ's) were issued every day during Q4 2010 and the average judgement amount was £3,245.
Mortgage lenders took 7,900 properties into possession in Q4 2010 according to the Council of Mortgage Lenders. This equates to 87 properties being repossessed every day. In terms of payment difficulties, 169,600 mortgages ended Q4 2010 with arrears equivalent to at least 2.5% of the outstanding mortgage balance.
There are more credit cards in the UK than people according to the UK Payments Council.
The typical first-time buyer deposit in December was 23% (£35,020).
Yes, some of these figures make for grim reading, but they give an idea of the pressures the Government has to deal with in the upcoming budget and balancing the already fragile economy with the impact they will present.
11 March 2011
Why use a Mortgage Broker?
There are many mortgage lenders actively looking to increase their volume business by offering superb products and rates, but there’s also some who have good PR companies who portray a positive lending attitude.
You would think in the current climates, with mortgage volumes reasonably low, that new applications submitted to lenders would fly through and come to a quick and easy completion. Unfortunately, in some cases, it’s not so.
These are the daily trials and tribulations of dealing with some major mortgage lenders who simply do not appear to want to lend.
We’ve heard many stories recently from customers who have initially gone direct to a high street lender, but then wished they had not! Should your application meet all the requirements and the lender has no further questions or requirements, then a mortgage offer should be quickly produced.
However, if, for whatever reason, a lenders underwriter decides to request one further bit of information, or needs additional clarification, then the fun begins.
You may receive a call or an automated email detailing additional requirements and once you’ve provided the information, you enter a service standard queue (usually 48 hours) and assuming of course that the information returned does not get lost and is directed to the right department! Should the lenders underwriter decide they are happy with the additional information, your application may proceed. But, the new information provided could provoke further questions or requirements, and so the cycle begins again!
They say buying a house is the second most stressful event in your life after having children. I’d say that it’s nearly on level par in the current market conditions.
What this all demonstrates is the value of dealing with a specialist independent mortgage brokerage as we will take this painful flack on your behalf. In most cases, we will have a relationship with the lender, 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 we can provide for you. Let us take the strain on your behalf to push the mortgage through to an early completion. And, if a lender does decline to proceed, we can quickly try to find an alternative lender to suit your requirements, with the minimal of fuss.
You would think in the current climates, with mortgage volumes reasonably low, that new applications submitted to lenders would fly through and come to a quick and easy completion. Unfortunately, in some cases, it’s not so.
These are the daily trials and tribulations of dealing with some major mortgage lenders who simply do not appear to want to lend.
We’ve heard many stories recently from customers who have initially gone direct to a high street lender, but then wished they had not! Should your application meet all the requirements and the lender has no further questions or requirements, then a mortgage offer should be quickly produced.
However, if, for whatever reason, a lenders underwriter decides to request one further bit of information, or needs additional clarification, then the fun begins.
You may receive a call or an automated email detailing additional requirements and once you’ve provided the information, you enter a service standard queue (usually 48 hours) and assuming of course that the information returned does not get lost and is directed to the right department! Should the lenders underwriter decide they are happy with the additional information, your application may proceed. But, the new information provided could provoke further questions or requirements, and so the cycle begins again!
They say buying a house is the second most stressful event in your life after having children. I’d say that it’s nearly on level par in the current market conditions.
What this all demonstrates is the value of dealing with a specialist independent mortgage brokerage as we will take this painful flack on your behalf. In most cases, we will have a relationship with the lender, 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 we can provide for you. Let us take the strain on your behalf to push the mortgage through to an early completion. And, if a lender does decline to proceed, we can quickly try to find an alternative lender to suit your requirements, with the minimal of fuss.
04 March 2011
Fantastic February!
The Bank of England’s January lending figures report that the number of remortgages rose to 33,498. This is nearly 10% above the six month average. These statistics suggest an increasing wariness of future mortgage rates and in addition, the fact that fixed rate mortgage interest rates were relatively low in January.
Mortgages for property purchases also increased, to 45,723, slightly below the six month average of 46,686. Total lending to individuals increased by £1.5bn.
I suspect these figures to be vastly different for February as some lenders increased fixed rates due to the fluctuation in the money markets and many customers will have raced to secure low rates before they were withdrawn.
Nationwide has reported that house prices increased by 0.3% in February with the average UK house price now standing at £161k. This is 0.1% lower than this time last year. The lack of first time buyers and easily accessible mortgages are still major factors with regards to prices and activity in the housing market.
AToM had a fantastic February for new business received. Applications were up 68% compared to February 2010 and resulted in our best month since June 2009 for new business. This was mainly due to our top four lenders – GE Money, who offer mortgages to the employed with some allowance for previous credit problems. Bank of China, who had a market leading lifetime tracker rate residential mortgage (they also cater for Buy to Lets). Platform (part of the Co-operative Bank Plc) who are actively lending in the Buy to Let market, with small arrangement fees. And AToM’s “Complex Prime”, a number of funders who look to assist those who have been declined by the high street lenders credit scoring systems for no apparent reason. This could include not being on the voters role, having to little (or too much) credit, securing a charge on more than one property, lending into retirement and many other reasons. Whatever your mortgage requirements, speak to an independent mortgage adviser!
Mortgages for property purchases also increased, to 45,723, slightly below the six month average of 46,686. Total lending to individuals increased by £1.5bn.
I suspect these figures to be vastly different for February as some lenders increased fixed rates due to the fluctuation in the money markets and many customers will have raced to secure low rates before they were withdrawn.
Nationwide has reported that house prices increased by 0.3% in February with the average UK house price now standing at £161k. This is 0.1% lower than this time last year. The lack of first time buyers and easily accessible mortgages are still major factors with regards to prices and activity in the housing market.
AToM had a fantastic February for new business received. Applications were up 68% compared to February 2010 and resulted in our best month since June 2009 for new business. This was mainly due to our top four lenders – GE Money, who offer mortgages to the employed with some allowance for previous credit problems. Bank of China, who had a market leading lifetime tracker rate residential mortgage (they also cater for Buy to Lets). Platform (part of the Co-operative Bank Plc) who are actively lending in the Buy to Let market, with small arrangement fees. And AToM’s “Complex Prime”, a number of funders who look to assist those who have been declined by the high street lenders credit scoring systems for no apparent reason. This could include not being on the voters role, having to little (or too much) credit, securing a charge on more than one property, lending into retirement and many other reasons. Whatever your mortgage requirements, speak to an independent mortgage adviser!
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