Social network mortgage guru?

I paid particular interest this week to a conversation occurring on Facebook.  The superb Horsham page (linked with visithorsham.co.uk) attracts over 8,000 followers who are frequently updated on requests from individuals seeking assistance or recommendations.

One such request was from an individual looking to update their mortgage and what should they do next.  There were some great recommendations of past experiences with some great local companies (thankfully including AToM!), but then there was a phrase that always scares me - use a comparison website…..

These are everywhere as we know, and they can be good for basic research, but they have a few major flaws.  Firstly, not every lender subscribes to them, so you could be missing out on some products more suited to fit your personal requirements.  Secondly, they cannot plan ahead for your specific future requirements or needs.  What if you want to move in a couple of years or are expecting some additional monies in the future that you will want to use to pay off your mortgage.  Thirdly, they certainly won’t help you with deciphering the plethora of information a lender will bombard you with, or check the mortgage offer for you or, indeed, advise you on the criteria the lender uses to decide if you fit their requirements!  As we’ve seen recently, lenders are finding every way possible to increase rates with some hiking their standard variable rates to existing customers.  Finally, they won’t explain to you that if you’re stretching yourself on this mortgage (they won’t offer you a budget planner review) and bank base rate rises in a year or two’s time, you may not be able to afford it. At this stage, best advice would be to look for something more within your financial reach.

Professional and qualified advisers have access to so much more information and have to stand behind the advice they give. Will you be able to sue your 'social network adviser’ if the advice they give turns out to be faulty or if the comparison site misses some vital information!  I doubt it, so play safe, take advice from the professionals with industry qualifications to back up their recommendations and advice. This advice will only be given after a full and thorough examination of your needs, requirements and circumstances.

Never a dull week in the Mortgage Market!

Never a dull week in the mortgage market!  I was at a presentation from a major lender late last week and who predicted Bank Base Rate won’t move for a good couple of years, but also advised us to ignore their predictions as they have been far from right over the last 3 to 4 years!  Helpful!  We also then saw reports suggesting that the Lloyds Banking Group wanted to reduce their share of the mortgage market from 28% to 25%.  This is a huge reduction.   We also saw RBS publicise a reduction in their share of gross mortgage lending from 14% in Qtr 1 2011 to 11% in Qtr 1 2012.  More signs that although the market is very busy, it is in certain areas, and not necessarily via household names. 

In other news, the Co-Operative Bank decided to withdraw its Interest Only offering entirely from all residential offerings and sadly, after five years of trying, Portillion has decided to call it a day and abandon its lending ambitions.  The latter showing it really is so difficult to launch a new lender in current climates.

Many people ask me “should we fix our mortgage rate now?”  This is a difficult question to answer and one I always answer with a question – are you a gambler?  At some point, Bank Base Rate will increase; I think we are all aware of that and it is just a question of when?  Five year fixed rates are proving popular and competitive in the current climates.  However, if you decided to take an attractively low tracker now with a view to fixing at a later date, be wary that when the BBR does increase, you can almost guarantee that fixed rates will have already been substantially increased! 

Finally, outside AToM we have a box offering ‘Property Today’ papers.  This is a good gauge to the local market and how interested people are in properties each week.  Over the last two weeks, we’ve run out of papers over the weekend (normally they last until Thursday!).  Possible signs of a buoyant local market, or just a lot of people keeping an eye on things?  Who knows…

The process is everything!

Not too much excitement on the mortgage news round this week so I thought I would recap on the mortgage process.
The mortgage process, regardless of whether you are a first time buyer, home mover or simply re-mortgaging, will be roughly the same.  On any new purchase, the selling agent will seek to agree a number of deadlines with you, including the arrangement of mortgage finance.  At this point you can shop around and should make sure that you speak to an independent mortgage brokerage who will assess your overall financial position and discuss your mortgage requirements with you.  Advisers are required by law to provide you with a Initial Disclosure Document detailing who they are; who regulates them; their scope of permissions; whether they are restricted to a small lender panel or ‘whole of market’; any fees and costs involved including any charged for advice or consultation. This document also advises how to complain if you are unhappy (now or in the future) about the advice provided.

A good advisor will complete a financial fact find ensuring that they fully ‘know and understand their client’s financial position and requirements.’ This is necessary before any ‘advice or recommendation’ can be provided. Be patient as this process can be lengthy. It is in your best interests however, ensuring that you receive the best possible advice designed to meet your personal mortgage needs and requirements.

Once you’ve agreed the best mortgage for you, a decision in principle (DIP) will be completed, usually online with the chosen lender. This involves brief personal details, income disclosure and a credit search. Be wary here as too many credit searches will have a negative effect on your credit score. Ensure that the product and lender are right for you BEFORE a DIP is conducted.

DIP decisions are normally instantaneous. Assuming success, it is then up-graded to full application. Payment for valuation is made (sometimes free) and the valuer confirms to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more detailed in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost. That said, for older properties it should be considered a worthwhile investment as it could save you thousands in the long run.

The chosen lender will require information on income, identity, proof of residency as part of their due diligence requirements. Assuming no issues arise, a mortgage offer should be issued. Then, subject to the solicitor’s conveyancing process, you are now on the road to completion and, if it is a purchase, you should soon pick up the keys to your new home!

Enjoy the long weekend!

Consolidating debts / debt management plans ....

With most lenders increasing rates over the last couple of weeks, it was a pleasant and welcome surprise to see the Coventry Building Society reduce theirs by up to 0.3%.  The lender already had good rates and the new highlights include a low 5 year fixed rate with minimal or no fees on re-mortgages.  These are rates certainly worth exploring! 

Many prospective clients coming through the doors at AToM towers over the last few weeks have been reviewing fixed rate options.  Uncertainty is a big fear factor within the market especially with regards to the Bank of England base rate and the national press installing more confusion rather than a level of calm when it comes to interest rate predictions!

We have also seen a vast increase in customers looking to consolidate debt or even look at debt management plans. Both can sometimes cause issues. If you consolidate unsecured credit in to your mortgage, although your monthly payments may be lower, you may be paying more for your debt over a longer term.

With debt management plans (DMP), or Individual Voluntary Arrangements(IVA), again, the lower monthly payments may help in the short term, but you may well find it hard to gain an approval from a lender to refinance at a later date. Lenders tend to shy away from DMPs and may not assist anyone who has been in an IVA unless it has been discharged, normally, for more than four years.  Advice should always be sort before entering in to these types of arrangements.

At AToM, we are independent and we will happily go through the pros and cons of changing any of your financial details before proceeding to conduct any credit searches or decision in principles. You need to be clear that it’s the right deal for you. If your current deal is still the best option for you, we will suggest you stay where you are.

Figures show the true picture

This week, I thought I would show some of the figures that highlight the financial state of our  economy and the daily impact it is having on the end consumer (figure estimates from creditaction):

-          318 people are declared insolvent or bankrupt every day (based on Q4 2011 trends). This is equivalent to 1 person every 62 seconds during each working day.

-          1,473 Consumer County Court Judgements (CCJs) are issued every day (based on Q4 2011 trends). The average value of a Consumer CCJ in Q4 2011 was £2,949.

-          Citizens Advice Bureaux in England and Wales dealt with 8,518 new debt problems every working day during the year ending December 2011.

-          93 properties are repossessed every day (based on Q4 2011 trends).

-          1,896 people a day reported they had become redundant between November 2011 and January 2012.

The average household debt in the UK (including mortgages) was £56,058 in February.  The average amount owed per UK adult (including mortgages) was £29,671 in February.  This was around 123% of average earnings.

The estimated average mortgage outstanding for the 11.2m households that carry mortgage debt stood at £111,358 in February.

The typical first-time buyer deposit in January 2012 was 20% (around £30,303). The average first-time buyer borrowed 3.20 times their income and the average first-time buyer loan was an estimated £121,212.

However, saving the best until last - a survey by Unbiased.co.uk has found that nearly half of all mortgage holders have failed to look at their mortgage arrangements in the last three years. 49% of borrowers admit that they have not reviewed their mortgage since the Bank of England’s Base Rate fell to 0.5% in March 2009.  Indeed, 56% of mortgage holders say that they are in fact unaware of the interest rate that they are currently paying on their deal!  Of those who do know their current rate, fixed mortgage rate holders are paying an average rate of 4.63%. However, around 42% are paying a rate of 5% or higher.  Yet, the average Mortgage Interest rate was 3.33% at the end of February!  I have to ask why?  When was the last time you reviewed your mortgage?

House prices up 2.2%! Positive news!

The Halifax House Price Index suggests that house prices increased 2.2% in March. They report
that the average house price now sits at £163,803. A spokesperson commented that the end of the Stamp Duty holiday period for First Time Buyers at the end of March probably helped
to increase sales and support prices.

A mortgage is the biggest debt you’re ever likely to take on, so do your homework and shop around, as you would for you weekly shopping! We are always surprised that someone will announce to the world that they saved £30 off the price of, say, a fridge or cooker, yet fail to apply the same research into their mortgage! If you have plans to apply for a mortgage in the
not too distant future, then keep an eye on your credit. 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 numerous credit searches (from multiple finance/mobile/car/home insurance applications), this could be detrimental to your ability to obtain finance at competitive rates. Even whilst shopping around for a new mortgage, be wary that many ‘institutions’ are likely to carry out a credit search on you. Make sure you stipulate at the outset of any mortgage conversation that you do not authorise any credit searches, until you agree you are happy to proceed with a specific product or lender. If you have not reviewed your credit search before, get it for free (30day trial period) from Credit Expert (see www.atomltd.co.uk for a link). It’s well worth a review and a good insight on how attractive you may, or may not, look to a lender.

Finally, we’ve been bombarded with visitors over the last few days as hoards of children embark on the Great Easter Bunny Hunt, organised by the Rotary Club of Horsham. It’s wonderful to see so many people taking part and obviously its superb fun for the children as they are spoilt with
chocolate, if they find the bunny’s name and carrot! We’ve also enjoyed some great enquiries from those parents who have been dragged, I mean accompanied, the children on their tour of the 24 participating shops! This event has certainly been worthwhile for all involved and created a great community spirit (ends Sunday 15th April).

Don't miss the rates, use a Broker

More mortgage product pulls this week resulting in rate increases. Both Nationwide and Accord withdrew products only giving one hours notice to book the funds. In short, this meant that we had an hour to upload a full application on to the lenders systems to book the rate and secure the funds. One minute over the deadline and the rates were lost. Add this to the recent shenanigans over booking funds with the Woolwich (limited funds released at 12am and gone by 12:01am!) and life as a mortgage broker has been far but dull of late, but incredibly long hours!

The Bank of England’s latest mortgage approval figures show mortgage lending fell by 12% in February. Loans secured on property fell from 108,767 in January worth £13.1bn to 95,976 in February worth 11.7bn. Within this figure loans for house purchase fell from 57,899 in January worth £8.7bn to 48,986 in February worth £7.1bn. I suspect March’s figures will return to an
increase as it was incredibly busy throughout the month!

In comparison, gross mortgage lending by building societies and other mutuals rose 28% year on year in February 2012, figures from the Building Societies Association data shows. New mortgage approvals were up 31% on February 2011 and with gross lending at £1.9bn. This sector of the market appears to have a huge appetite to lend and some great product innovation.

Interest only remains in the spotlight with suggestions from Unbiased.com that one in seven UK households are sitting on an interest-only mortgage with no repayment vehicle. The website suggests that 1.6m properties are simply paying off the interest each month and not repaying capital or saving anything towards paying off their mortgage debt in the future. This is a pretty scary and certainly something that requires a review and not left until ‘tomorrow’. Speak to a independer adviser and work out a repayment plan.

Finally, the Leeds Building Society are the latest to reduce interest only mortgages to 50% of the property value and the Co-Operative Bank have increased their Standard Variable Rate
(SVR) from 4.24% to 4.74%. I’m still unsure how this fits within our markets regulatory rules of ‘Treating Customers Fairly’…