Goodbye 2012 - Optimistic for 2013!

I can’t believe this is my last column of 2012!  On the one hand, we could not have had a better year for sport and it makes you proud to be British with the fantastic achievements from our truly inspirational sports men and women.   On the other hand, the retail and financial sectors have had another tough ride…

We have seen the demise of retail giants and household names such as Comet and JJB.  Many others are under extreme pressure to make ends meet.  The Northern Rock brand, the first major public crash of a lender in 07, will also soon just be a name in history, replaced now by Virgin Money .

We were all optimistic and hoping for a hugely more positive year, but the reality is that lending remained pretty static, despite the requests from ‘the powers that be’, and volumes will finish not much different from those in 2011.

Interest only mortgages seem to be on their last legs as more lenders are withdrawing this option.  The ‘Funding for Lending Scheme’ has received good press and appears to have had a positive impact.  It has huge potential for 2013 and I hope this is expanded to help the smaller lenders, not just the high street big six.

Finally, who can forget that we have had MMR (Mortgage Market Review) installed upon us.  Yet more regulation for the mortgage market, due to impact us all in April 2014. Good for mortgage brokers and mortgage advice!  This is a parting gift from the FSA, as they change name to the FCA (Financial Conduct Authority), same people, possibly different location….!  Roll on next year.

Thank you for reading my column.  I really appreciate it and thrive on it being mentioned on a visit to our offices (or whilst in the Pub!) and I’m always happy to discuss a mortgage or the state of the market!   It’s been an interesting challenge this year remaining positive when markets have been so tough.  I’ve always tried to say it as it is and hope that has been beneficial in your decision making, when it comes to finding the right mortgage/company/brokerage!

Please let me know if there are any specific issues or areas you would like me to cover in coming months.  You can email me at dale@atomltd.co.uk, or call me on the above number.  I’d be delighted to discuss with you.

On behalf of everyone at AToM, we wish you and your families a very Happy Christmas and a relaxing and prosperous New Year.  We look forward to being of assistance to you in 2013…

A debt is not just for Christmas...

Following on from last week’s news on rates, Nationwide have cut some of their mortgage rates by up to 0.7% as they join the apparent ‘product price rate war’.  That is a substantial cut!  Santander for Intermediaries has launched another set of attractive rates which are only available for seven days. The message from this lender is to be quick as the funds are usually snapped up within their seven day window. That said, you don't have to complete the mortgage transaction inside that timescale.  Simply secure the funds and protect the rate.  How the market has changed!  

Another lender has withdrawn from the Interest Only mortgage sector.  I might write a separate article on this shortly as I feel that there is still a place for this type of lending for the right client profile and it seems that many lenders are choosing to ignore these quality cases.  Pretty soon it might be easier to confirm who is still offering this option!!

There are rumours that mortgage lending may become easier to obtain next year and some financial gurus are predicting an increase of up to ten billion in net lending.  That is a substantial increase although we all suspect that the lenders will not necessarily relax their underwriting criteria!  So more mortgages but strict criteria and that is why my final point this week is, again, so important. 

Christmas will be here before we know it.  Now, I don’t want to preach but please remember that credit is like your life history to a financial institution. I’m not saying don’t use credit but, if you do, then make sure you can pay it back!  If you miss a payment over the Christmas period, on any debt, it could affect your ability to obtain any type of credit next year.  Credit reports show up to the last six years of your financial history and details any missed payments to everyone from mobile phone providers, to car insurance and, of course mortgages.  To be safe make sure all payments are made on or before the due date and keep your credit file crystal clear.

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.

The Mortgage event of the Year...

The great and the good of the industry descended upon London’s ExCel last week for the annual Mortgage Business Expo.   Around 70 exhibitors offered their wares to mortgage brokers, intermediaries, financial advisers, solicitors and others who attended the largest trade mortgage event in the calendar. 

The two day extravaganza was well received in its new venue (previously Olympia) and despite the slightly longer journey, attendees enjoyed the fantastic facilities available at the gigantic centre.

Big players such as Nationwide, Virgin Money and Halifax had their latest products and rates on offer which were well received especially as most have recently been reduced.  However, noticeable absentees included Barclays, Natwest and Santander, leaving a rather large gap from the high street contingent.

This left room for the smaller, lesser known lenders to promote their offerings.  They may not be processing the volume of cases like the high street lenders, but they have a huge appetite to lend and offer niche products to cater for a variety of customer profiles.

Thriving areas also included short term funders/lenders specialising in Bridging Finance and a number of Commercial lenders were also in attendance as funding becomes somewhat more available to businesses.

Our trade association AMI (Association of Mortgage Intermediaries) held numerous seminars covering various issues including Mortgage Market updates and it’s estimated that over 1,750 people attended the two days.  Well done to the organisers!

AToM were the only Specialist Mortgage Packager/Distributor onsite who offered all areas of the mortgage finance sector.   If you follow us on twitter, you will see our stand (@atommortgages).

For those who don’t know AToM, we have a shop front in the Carfax, Horsham.  But we also process cases for lenders via exclusive products and to a database of over 8,000 mortgage brokers, intermediaries and IFAs.   In short, we are a one stop shop catering for all types of people whether it be a straight forward and clean credit history application, right through to complex deals needing a manual assessment on a product exclusive only available via AToM.  As the name suggests, All Types of Mortgages!  So why not give us a try!

Early Christmas Present - A Rate Price War!

The price war continues as three more lenders reduce their rates.  Nationwide, Virgin Money and Precise Mortgages have all cut rates as they try to lure customers to their attractive propositions.   

This is really great news for the end customer as there are some very attractive and competitive rates out there in the run up to Christmas.  Highlights across the market include 5 year fixed rates at sub 3% rates and shorter 2 or 3 year fixeds with minimal or no fees.  This really is a great time to review rates and see if a change of mortgage lender will save you money.

It’s not just the prime side the rate war is affecting.  For those who have had previous financial issues with their credit, the lenders who cater for this sector (normally called Near Prime) have also lowered rates as demand increases for these types of mortgages.   

There are many lenders re-lending in this arena and they will cater for a missed mortgage payment in the last 12 months, historic defaults, County Court Judgements (CCJs).  A limited few will also consider those who are discharged bankrupts, had IVAs or who are in a debt management plan.

There’s no denying that this area of the market took a battering back in 2007 as many, many lenders who offered these types of mortgages were shut down or mothballed.  However, the regulatory lending restrictions are now more stringent than back then and the new breed (some never really left) have a whole new outlook on the term ‘responsible lending’.  But where there is demand, there will always be supply.  Rates range from late 3%s, right up to double figures depending on individual circumstances.

Finally, the Near Prime lender tends to be a ‘stepping stone’.  Most issues usually disappear from a credit search after a few years.  Therefore, the aim would normally be to cater for current requirements on a short to medium term basis with the longer term outlook being structured to enable the customer to get back onto high street mortgage offerings, as quickly and cost effectively as possible.  Terms and conditions always apply and always best to seek professional advice.

Try to not give lenders any excuses to decline your application

Getting a mortgage application through a lender in the current climate can be challenging.  One day it appears relatively easy, yet the next, it’s a nightmare!  So whatever you do, try to not give lenders any excuses to decline your application or refuse to lend to you.  Try to pay bills on time, don’t miss payments of any type and especially not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision to lend to you.  Remember that many Insurance companies and mobile phone providers carry out credit searches on people before issuing their products.  Try not to incur too many searches in a short space of time as this can also be detrimental to your credit score.

 I haven’t reported on figures for a while, so I’ve highlighted a few stark reminders of the current state of the financials, estimated by creditaction, for November:

-          299 people are declared insolvent or bankrupt every day. This is equivalent to one person every 4 minutes 49 seconds.

-          93 properties are repossessed every day

-          1,432 people a day reported they had become redundant between June and August 2012.

-          1,170 Consumer County Court Judgements (CCJ’s) are issued every day (based on Q2 2012 trends). The average value of a Consumer CCJ in Q2 2012 was £3,217.

-          Citizens Advice Bureaux in England and Wales dealt with 8,465 new debt problems every working day during the year ending June 2012.

-           Average household debt in the UK (including mortgages) was £53,785 in September.

These are eye openers, but there are some that are really amazing:

-           the UK's total interest repayments on personal debt over a 12 month period would have been £60.3 billion.  This is equivalent to £165 million per day!  Just interest payments!

-          UK Banks and Building Societies wrote-off £5.3 billion of loans to individuals over the 4 quarters to Q2 2012.  In Q2 2012 itself they wrote-off £1.15 billion (of which £567 million was credit card debt) amounting to a daily write-off of £12.52m.

I know these are a grim read, but sometimes we need a gentle reminder of what’s what.  It also might help those who were looking to load up their credit cards on Christmas spending, and worry about it later, remember that these need to be repaid!!  Don’t become a statistic..

Anyone selling mortgages must be qualified!

After several years of consultations, panic by various areas of the market and the odd debate here and there, the Financial Services Authority (FSA) have issued their final policy rules following their Mortgage Market Review (MMR).

Some might argue this is badly timed with the market still in dire retraction from the crashes of 07/08 and no real recovery since then.  But at the same time these rulings are needed to ensure that the same issues cannot happen again, once we get back to some normality in the lending arena.

With many consultation papers previously issued to the market for responses, the final policy rulings are not of much surprise and we must not forget, are to ensure the best interest of the end consumer.

I thought I would try and highlight a few of the rulings that caught my eye and which must be adhered to (mostly from April 2014):

-          Anyone selling mortgages must hold the relevant mortgage qualifications
-          Firms must act ‘in the customers best interests’
-          Lenders are to be responsible for customer’s affordability and for verifying customer’s income.
-          All ‘interactive sales’, those completed face to face or over the phone, are to be treated as ‘advised sales’.  So, whoever sells the product is deemed responsible, whether it be your bank, broker or other suitably qualified individual. 
-          Stress testing must be carried out for future rate increases.  If you cannot afford an increase in rate, you are unlikely to be given that current product.
-          Interest only survives, but only for customers who present a credible repayment vehicle.
-          Concessionary rates offered by lenders cannot be removed because of payment problems.

These are just a few cherry picked from the 300+ pages of the MMR and I’m glad we have near 18 months to review, digest and act upon the rest!   

With an estimated cost in the region of £70m to implement the changes, this is not a cheap exercise, but the cost of market failures has obviously been substantially more, so anything that will prevent such issues happening again must be welcomed.

Many lenders have already restricted lending policies and reduced exposures to higher risk products, so the real issues will revolve around how Banks and other lenders handle the ‘advised sale’ requirements.  We shall have to wait and see.  In the meantime, this is already in action at your local independent and whole of market mortgage brokerages….!