Great time to be a First Time Buyer...

First Time Buyers are in the limelight again this week as lenders adjust criteria in order to assist.  The Saffron Building Society offers a 95% loan to value product which used to require the customer to have a twelve months rental history with a professional letting agent.  The lender has now removed this requirement entirely and the product is now available to those living with parents!  Even better news in that this product has no redemption penalties at any time, should the customer wish to change providers.

The ‘Bank of Mum & Dad’ continues to be a major player in a large number of enquiries received at AToM HQ.   Many options are available to first time buyers and parents, including guarantors, cross collateral charges (using parent’s property as additional security and grandparents in some cases!), gifted deposits or equity and more.  It is important to note that, in most cases, a guarantor must be a blood relative.

One such example causing quite a stir is provided by the Coventry Building Society.  Called the ‘step up’ mortgage, this allows parents/guardian or close relative to also add in their income when calculating the loan amount available to the applicants.  The lender then deducts the parent’s annual mortgage commitment and any other credit to reach a total loan available (this cannot exceed 7 x the First Time Buyers income).  The product requires a ten per cent deposit and all parties are named on the mortgage deed.  Other terms and conditions apply, but these show the innovative levels lenders are considering to assist people purchasing properties and, for this, they should be applauded. 

Let’s also not forget that the number of lenders now offering the Governments Help to Buy Mortgage Guarantee schemes has expanded.  Over the last few weeks, we have seen Aldermore, Woolwich (Barclays), Virgin Money and Santander all launch products to assist those with a 5% deposit.   In addition some lenders who are not on the Government Help to Buy register have also been offering good alternative product ranges, including remortgage options.

All in all, the number of options available to those with a small deposit or who are a first time buyer is on the increase and that can only be a good thing for the wider market!

Is now the right time to Fix?

Activity remains high in the financial sector.   Halifax has reduced some two year deals by up to 0.2%.  Santander have launched two year tracker rates in the region of 1.79% (40% deposit) and Woolwich (Barclays) has launched products on the Governments Help to Buy Mortgage Guarantee scheme, available up to 95% loan to value.  We’ve also heard Richard Sharp, an external member of the Bank of England’s Financial Policy Committee, suggest that now is a good time to fix in to a long term deal.  Is he right?  Who knows!   There’s no denying that five year fixed rates are incredibly attractive and we have seen some rates start to creep up on these longer term deals.  However, it is personal preference.  If you wanted the certainty of knowing your mortgage payments won’t change for the next sixty months, then they are certainly worth a review!

The New Year has seen a large increase in requests for secured loans. A secured loan is a 2nd, or subsequent charge, designed for homeowners and which allows the equity in their property to be used as security.  Loans are usually between £3.5k and now up to £2.5m!  There are also no 'up-front' fees to find although costs are added to the advance.

We tend to find that many customers looking to remortgage to raise additional funds are already on an attractive rate with their lender. To move away could be costly and they could end up on a much higher interest rate.  Depending on the amount already lent as a mortgage, compared to the value of the property, most lenders will allow a secured loan to be added as additional borrowing, right up to 95% of the property value.

The secured loan is usually repaid over a shorter term than a mortgage, circa 3-7 years, but the term can be longer, although this will increase the amount of interest repaid. Rates vary depending on the customer’s circumstances and current level of borrowings.  Always seek advice.

More offering Help to Buy as others change rates and criteria

Santander is the latest lender to launch products to assist those with a small deposit via the government backed Help to Buy Mortgage Guarantee scheme.  All products are arrangement fee free, have a free valuation and £250 cashback to help towards solicitors costs.  NatWest is also due to launch a suite of products via brokers in the coming days.  A positive start to the new year for those with small deposits!

Even lenders who are not part of the Help to Buy schemes are trying to compete.   As such, competition in the 5% deposit arena is the best it has been for some time, so do review all the options available to you.   

Other products have also seen rate movements in the last few days:   In the Buy to Let sector, Mortgage Trust (part of the Paragon group) has launched products with no early redemption penalties at all. Their rates have reduced to around the 4% mark and fees are also reasonably low at around £995.

GE Money Home Lending have launched a large loans proposition (£250k and above) for those who have had a historic financial issue in the past, including defaults, CCJs, etc.  With rates sub 3%, these are a good alternative for when the high street lender says no.  GE and some other specialist lenders are only accessible via certain mortgage brokers or distributors.   

This years Budget will be closely anticipated to see if the Chancellor will offer anything to incentivise and stimulate the market further.  Stamp duty is a key factor and would benefit from payment commencing at a higher level than current, say £250k and smaller increases as the price bands increase.  Is this too much to hope for?   

Finally, a recent report from TSB suggests that nearly 38% of house hunters are concerned they will be rejected for a mortgage.  Levels of income required topped the charts with poor credit rating being the second most common anxiety.  Always keep any eye on your credit reports.  These are your financial history to any prospective transaction and any decisions will take these in to account.  Most are free and relatively simple to understand, but most importantly will highlight any issues that may need rectifying.       

House Prices up 1.4%. Next Steppers have good options

A Happy New Year to you all!  I hope you are holding up in the blustery and rather wet conditions!

UK House prices increased 1.4% in December according to the Nationwide House Price index.  This was some 8.4% higher than in December 2012.  The index also suggests that house prices are just 5% below the peak of 2007.  However I would think the impact of the horrendous weather recently will alter the figures somewhat in January/February.  Supply and demand is still playing a major factor with housing transactions being around 25% below 2007/8 levels, but new homes being built are around 45% lower (as at Q3, 2013).

The hope for 2014 rests a lot on the opportunities and offerings that are available to First Time Buyers.  We’re seeing a number of lenders offer mortgages to those with a 5 or 10% deposit.  I expect we will see more as the year unfolds.  Competition is good and should bring rates down at this borrowing level.

However, the ‘next step’ home movers also need attractive propositions in order to move.  There are only a handful of lenders who may consider 5% deposits to those already on the property ladder.  I would hope this offering will increase in order to help the supply chain with properties being available.  If rates remain high in this sector, there will be limited properties available to First Timers, and this will have a knock on effect.

All the while First Timers have limited options, the Buy to Let rental market will continue to flourish and this is one of the most competitive parts of the mortgage market currently.  Many options are available including innovative capital raising options to assist with the purchase of further properties.  Do be advised that market pundits are predicting that whilst house prices will rise, rental values may not, depending on the area.

Finally, the Funding for Lending scheme is coming to an end and this may possibly push up rates throughout the year.  Options are still incredibly attractive at the present time.  Long term fixed rates are sub 3% depending upon loan to value levels and for remortgages many lenders will pay the standard legal and valuation fees.   This, along with news that one in 11 people in Britain fear they won't be able to afford their mortgage or rent at the end of this month, according to research by homeless charity Shelter and YouGov, should mean that the one firm New Years Resolution is to keep on top of ALL finances.   It’s good to talk and most intermediaries will offer free mortgage advice, so don’t hang around and review your options today…

2013 was the foundation for a great 2014!

For my last column of the year, I’m not going to do the obligatory round up of the year!  Nor will I gasp my astonishment at how quickly the year has gone by.  What I will say is that I think that 2013 has been a year of foundations for what we all hope will be a fantastic year in 2014. 

Total lending for 2013 was predicted to be in the region of £150-160bn.  The actual figure will be nearer £170bn.  Predictions for 2014 are already being suggesting volumes will reach £190-£200bn (2007 was £370bn!).
Although the funding for lending scheme is being withdrawn in January, a year earlier than planned, the financial sector is in a strong position and one that we hope will be able to stand on its own two feet to move forward successfully over the coming months.

We have a new housing minister, who so far seems to be singing from the right hymn sheet and might be a friend to the industry, rather than predecessors who thought they knew best.  Working together is key for all sectors.

It is also reported that there are a number of lenders looking to enter the UK market who are in the process of getting their FCA authorisation.  More competition is great news for the economy and  can only be good news to the end consumer.

The only negative hanging over all of our heads is that the Bank of England base rate has to rise at some point.  The million dollar question is when?  If you are looking to review your mortgage at any time soon….don’t leave it too late.

Finally, a heartfelt thank you for reading my column over the last twelve months.  It has been an enjoyable(!) experience each week trying to provide an insight in to what happens behind the scenes in the mortgage market.  But I do love it!  No two days are the same and how can anyone not enjoy helping people reach their dream!? 

Thank you to all those who have used AToM to source and arrange their mortgage requirements.  We’ve had a fantastic year and enjoyed growth in both volume, with November amounting to just shy of £20m in lending, and staff numbers, with our headcount now over 20!  And what a great team they are.

On behalf of all the staff and directors at AToM, we wish you and your families a very Happy Christmas and Prosperous (& Relaxing) New Year!   We look forward to working with you in 2014.

More lenders offering Help to Buy. Activity at AToM huge!

There has been substantial mortgage activity happening across the country as we roll towards the Christmas break and festivities.  November was AToM’s second best month over the last four years for new business levels!  This is slightly unusual for this time of year, but then nothing surprises us any more in the current climates!  I certainly shall not complain at being very busy but do express our heartfelt thank you to all those who are using AToM and making use of some of the fantastic exclusive mortgage products available via our Horsham branch!

It is good to see that more lenders are offering the Help to Buy schemes.  Virgin Money is the latest to launch products through the Government’s Help to Buy Mortgage Guarantee.   Virgin Money will offer customers with smaller deposits two year fixed fee saver deals up to 95% of the property value.  In addition, all of their 90% and 95% deals now come without a product fee, and remortgage deals are available up to 90% of the property value.  The first challenger bank to join the initiative, Aldermore Bank will launch with the scheme on December 16^th.  Obviously terms and conditions apply and APRs will be dependent on the product chosen.

It always surprises me how few people actually know what rate they are on, the type of mortgage, i.e., fixed rate, tracker rate, etc, and whether they are paying interest only, or capital repayment. Unsurprisingly, almost everyone knows what it costs per month to the nearest penny!  They will haggle for a £10 discount on a new washing machine whilst letting ‘sleeping dogs lay’ when it comes to their mortgage where they might save hundreds!  It’s very easy when the promotional rate period comes to an end to keep your mortgage with the same lender, ‘brush it under the carpet’, and deal with it ‘tomorrow’.  But, we all know tomorrow never comes.  A review of what’s on offer from other Lenders could give you a nice start for 2014, especially if you’re currently on a Standard Variable Rate, or equivalent.   Many lenders are offering superb remortgage opportunities with minimal costs to change, including free standard valuations and legal costs.  Rates are competitively low and mortgage product choice is at its highest for some time.  So pull out that paperwork and have a no obligation conversation with your local, independent and whole of market mortgage advisers!

Funding for Lending to be stopped, market confidence good.

The big news of the week is the imminent withdrawal of the Funding for Lending scheme, a year earlier than planned, by the Bank of England.   The FLS scheme was launched in July 2012 and currently offers cheap loans to lenders who in return are expected to pass on lower rates to the end consumer. 

The reasoning behind the decision given is to encourage the lenders to re-focus and increase funding loans to small businesses, rather than mortgage lending.

At a period when house prices are on the increase, lenders are citing that increased volumes and Help to Buy offerings are boosting consumer confidence, the timing might not be great (please note that Help to Buy is unaffected by the FLS scheme withdrawal). 

Many suggest that this is a sure sign that the mortgage market is in a position to move forward on its own two feet.  Only time will tell!

However, should you rush and panic to secure some of the fantastic rates currently available?  This is a difficult one to answer.  The lenders have until January to request funds from the scheme and we have no intricate small print details as to the closure of the scheme or deadlines.  As we all know, rates can really only go one way and we’ve all been trying to second guess when this may occur.  I’m hoping this is not when it will kick start!   

Nationwide’s House Price Index suggests that property values increased by 0.6% in November compared to October.  The average property price is now £175k compared to £164k a year ago.

And finally, I’ve mentioned it a number of times throughout the year, but make no apology for mentioning it again!  If you have an Interest Only mortgage, do make sure you keep reviewing the options for repaying it back.  For a customer to get to the end of their mortgage term and still owe exactly the same as when they took it out, with no form of repayment apart from selling their property, creates a major headache for the lender, especially when they want their money back!  This will once again be a major part of lenders reviews in 2014, so be on top of your options, before the lender calls!  If in doubt, seek professional advice.