Smaller lenders launching innovative products

A quick test to start this week!  Have you heard of the Dudley Building Society?  What about the Buckinghamshire, Harpenden, Marsden, National Counties, or Newbury Building Societies?  Not necessarily household names, but not ones to be ignored either.  We are seeing these names and a lot more like them launching innovative products.  Not necessarily looking for huge volumes, but looking to fill gaps in the market and this should be applauded.  

One such example is from our good friends at the Saffron Building Society who have a superb product aimed at First Time Buyers.  The lender is offering a 95% mortgage with no credit scoring, to those who have never owned a property.  Customers will still be credit searched but cases are reviewed on a manual assessment, rather than a computer making the decision.  There is a five year fixed rate option and the arrangement fee is just £495.  This is not just aimed at New Build properties either!  Obviously terms/conditions and other fees may apply, but this kind of innovation is exactly what the mortgage market needs! Others will look at complex deals including guarantor mortgages, shared ownership, mortgages for the self employed, contractors, professionals, all types of Buy to Lets and Self Build projects. What this all demonstrates is that there is a huge appetite to lend.  However, many consumers are turning to the internet as it’s such a superb tool.  But it can also be a disadvantage as so much information, news and in-depth product detail can make it more confusing than planned.  A good ‘old fashioned’ face to face conversation with your local specialist independent mortgage brokerage might be the answer. They will, in most cases, have a relationship with the lenders (even those you’ve never heard of!), understand their requirements and ensure all the correct information is submitted from day one.  Some even have onsite underwriters from the lenders, so can turn things around quickly and especially useful if an urgent valuation is required in a contract race scenario.  There really is no better time to utilise the expertise and staffing levels they can provide for you in what’s becoming an over informed and more recently, highly competitive market place.

Lending to those over 70yrs old is not a new thing for AToM!

Rates continue to tumble as the cost of funds remains low and lenders fight to attract your custom. During the last seven days, we have witnessed Halifax reduce some rates by up to 0.30% and Coventry Building Society reduce some of theirs by 0.20%.  Other lenders have reviewed their criteria.  For example, Kensington Mortgages will now consider 100% of a customers annual bonus when it comes to working out affordability (most lenders will only look at 50% of non guaranteed income).  New  lender, Bluestone Mortgages, have reviewed their criteria and will now accept contract workers who only have three months remaining on their contract (normally six months).  In the main, lenders are making positive changes to increase their market share.  Even if you have something you think is 'out of the ordinary' or 'impossible', do explore your options as there might be a lender out there who will assist.
 This does not exclude age either!  Many think that you cannot have a mortgage over the age of 70.  And, on the high street, this may still remain true in some cases as these lenders generally allow a mortgage term to last until the applicants retirement age.  This used to be 65, officially it's now 67, but the reality is it can be much later.  Most lenders increased their maximum age at the end of mortgage maturity to age 70.  However, we all know that people are working a lot longer now and repayment of such a large amount of money may not be possible in these restrictive conditions.  So the option is to raise further finance to repay the original loan or sell the property.  Thankfully, the first option is less onerous as it used to be.  Many non household named lenders will look at lending to customers to a lot later in life, assuming the customers can prove their continued ability to pay.   This can take the maturity age up to age 80, 85 or even 90 and above.  If the customer has a good and regular amount of income, a high level of equity in the property and can satisfy the lenders affordability requirements, then some lenders will be happy to lend.  Seek specialist advice from someone who offers a range of lenders from the 'whole of market', not just a restricted panel or the high street. 

Increasing number of people look at buying 'projects'

We are seeing an increasing number of people look at buying 'projects'.  Just because a property is run down or even classed as 'uninhabitable', does not mean you cannot get a mortgage on it. Nor if you are intending to purchase a property to let out, but it's currently in an 'un-lettable' condition.  Lenders will cater for these scenarios (dependant on the exact type of works required!).  In the main, the work required needs to be cosmetic - a redecoration, maybe a new kitchen or bathroom.  Many lenders now offer 'refurbishment' loans where the work must be carried out within a period of time after purchasing the property, normally three months.  Others will allow the works to be completed, revalue the property and lend based on the newer property value.  Each lender will work on the valuers comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done! As the local area continues to become a 'new homes exhibition', there are a number of lenders also assisting customers with more private projects such as development and self builds.  Normally the customer will purchase a property in need of work, knock it down and rebuild, or extensively renovate their existing home.  Either way, the lender who funded the original purchase will need to be advised and made aware of all works as you will be altering their security! If you plan to build your own house (Self Build), the lender will issue the funds on a stage basis. Normally once the foundations have been laid, property built to eaves level, made watertight and so on.  At each stage a surveyor will review and advise the lender of progress and to release payments.  If the property has increased in value as a result, you will tend to find the lender may lend on the Gross Development Value (the end value). On a full refurbishment, again, the lender will want to know the plans and may lend in stage payments against the end value of the property, depending on the extent of the works involved. The lender will require sight of all planning permissions and estimates of costs involved before lending any funds.   Seek out a local architect to assist you with plans and costs and always make sure you set out your budgets from the outset.

Helping First Time Buyers and Contract Workers

Great to see lenders are seriously looking to assist first time buyers positively.  One example is the Saffron Building Society, who have launched a five year fixed rate under 4%, with only a £495 lender arrangement fee.  Available with just a 5% deposit, this is an attractive product to those looking to get their first property. In addition, the lender will manually assess each application, rather than rely on a computer score based decision. 

Contractors have also been targeted.  For those working on fixed term contracts, who have a minimum of 6 months left on the current contract and a good history, it is possible to get up to 90% of the property value.  In the main, the lenders will work on daily rate, multiplied by five days and forty eight weeks to work out income.  This is then used in the lenders affordability calculations.  Some lenders have no early redemption penalties so the customer can move away at any time.

In our heavily regulated marketplace, lenders main area in making a decision whether to lend, or not, is on your ability to pay the mortgage today, and also in the future.  It's difficult to detail when I have minimal words, but in the main, lenders will stress test all mortgages against a possible rate rise and underwrite the customers based on their ability to pay at the higher rates.  The regulators want lenders to ensure the customer can afford their mortgage for at least the next five years.  So, for example, a shorter term deal may be stress tested at a pay rate of 3% plus 3 percentage points higher than the prevailing rate at origination, so in this case 6%.  Whereas a five year (or longer) deal may be stress tested against the pay rate, which might only be 3% in current climates.  This can make quite a difference when it comes to calculating the affordable loan amount over the first five years of the loan, subject to the lenders terms and conditions.  Longer term fixed rates can also be good for the end consumer as they should get the loan they want, but also the monthly payments remain fixed for the next five or more years.

There are a number of attractive five year deals, some six and also ten year deals currently available.  Potentially great value if you know your plans for the longer term and prefer to fix your monthly payments.

The mortgage market has not closed! Phew!

The good news is that, despite the launch of a huge number of new regulations (Mortgage Credit Directive, MCD), in an already heavily policed mortgage market, we are still trading and lenders are still offering mortgages!  Phew!  Two to three years of preparation has paid off.  I am surprised such a huge change in our world was not covered by the national newspapers.  But then, the last big change in 2014, called MMR (Mortgage Market Review), didn't get picked up until days before launch and not much coverage there after.  Originally, that was to stop the crash of 07/08 happening again.  But the new MCD rulings bring us inline with European regulations.  Don't get me wrong, there are some worthwhile new rules, but preparing for a constant barrage of new rules over the last three to four years has been a large distraction (and extremely costly) and may have hampered the markets ability to innovate and provide mortgage options and help to customers.  Let's hope we will now see an increase in volumes and offerings from the lenders.

Following the budget, not too much to report that we didn't already know.  Yes we say goodbye to the Money Advice service, but I can't say that I'm sorry to see it go.  There's plenty of impartial and independent advice available across all sectors and the money that will be saved can be used better elsewhere.

The new Stamp Duty Land Tax (SDLT) changes are still set to confuse people.  In the main, a 3% additional fee will apply to all second properties or investment properties (Buy to Lets).  But the confusion will be around the 'main residence' definition.  In the pre budget release of the rulings, if you decided to rent out your current property and purchase a new one, this would have inherited the additional surcharge. However a new list of complex rules have been issued and you need to make sure you understand all the rules around the second property STDL so as not to have a 3% surprise fee to pay at a later date..

 

We would be grateful for your assistance in voting AToM as a winner!

Very rarely do I promote AToM in my columns, but this week is an exception!  I wanted to say a huge thank you to everyone who has voted for AToM over the last few weeks in two national consumer magazines.  I'm delighted that AToM have been short listed in the top six, for 'Mortgage Broker of the Year' in the Moneyfacts Awards 2016 and also 'Best Specialist Mortgage Broker' in the What Mortgage Awards 2016.  Two huge accolades for our family run and owned company (now entering it's 25th year!) and great recognition to our hardworking and fabulous  team of staff.  We need further votes though and we would be grateful for your assistance in voting AToM as a winner.  Please visit the websites to find out more.  Thank you in advance.

In other news, next week is a big one for the mortgage industry as new European Directives are embedded into the UK mortgage market. We are without doubt the most heavily regulated market, probably in the world!  Some would say too over regulated, however we have to live with it, take the new rulings on board and try to make it as straight forward as possible for you, the end customer.  There's already plenty of jargon and paperwork when arranging your mortgage.  Whether it be direct with the lender, or via a whole of market mortgage brokerage, you need to make sure you understand everything you are taking on, so don't be afraid to ask. 

Finally, there's been quite a bit of movement on product criteria and innovation over the last week or so with various lenders.  Examples include Leeds Building Society who have launched a ten year fixed rate at just 2.75%.  This product comes with a £1,499 fee and is available to loans up to 65% of the property value.  Whilst Saffron Building Society has launched a 5% deposit product, fixed for five years with the rate slightly under 4%.  With a manual assessment, rather than a credit scoring system, this is an ideal product aimed at First Time Buyers.  Obviously both products have terms and conditions that need to be reviewed, but many lenders like these are looking at ways to gain new customers, as well as increasing their market share!  

  

Close shave with Self Cert....and are you covered?

We almost had the return of "Self Cert" this week!  For those of you long in the tooth, back in 07/08, many lenders offered self cert mortgages, giving customers the ability to obtain a mortgage with absolutely no proof of income or affordability.  The history since then is pretty obvious and we must give credit to the regulator for keeping these mortgages out of the market since.  However, for four days last week, one foreign lender appeared to bypass the UK regulations and offered Self Cert loans once again.  And just as quickly as they arrived, they were gone!  Was this just a test and is this the start of things to come?  Having watched the mortgage market brought to its knees and taking over 8 years to recover, let's hope not.

On a brighter note, NatWest have cut some of their rates, available through brokers, by up to 0.49%.  This covers a number of products across their range of offerings, including to First Time Buyers.  Many lenders have cut rates recently and there's even some murmurings that the Bank of England is also under pressure to cut rates, rather than increase them as the economy looks to be 'running out of steam', according to one recent article.  All of this can only be good news for the new mortgagee and budget planning!

Whilst in the 'planning' frame of mind, have you reviewed your current financial arrangements to ensure sure you are on the best deal available?   Whether you require the security of fixing your payments for an amount of time, or whether you are a bit of a risk taker and might look at a short to a medium term tracker, or a discounted option, right now, all are available at attractive rates in the mortgage market.

Other things to consider - Do you have a Will?  Statistics show that only one in three people currently have a will in place, with the remainder leaving the state to take over and determine how their assets and belongings are distributed, if they die.
Do you have Life Assurance, Mortgage Payment Protection, Accident Sickness and Unemployment cover, Critical Illness Cover, and more? Any of these products might be beneficial to your personal circumstances or needs, especially if you have children, and with competition increasing, these types of products are not as expensive as you may think.