Product innovation - Hero Mortgage, 95% Loan, Large income multiples and Help to Buy

Innovation is key in the current climate and we must applaud the lenders who are defining the way of the industry and providing mortgages for certain types of customer.

The main issues currently result around income multiples, loans size compared to the value of the property and catering for those over the age of 55.

Two recent examples come from one of our specialist lenders, Kensington Mortgages.  I don’t normally single out a lender, but these guys are doing a great job.

Firstly, they’ve launched the ‘hero’ mortgage. National and Govt stats suggest that:

·       Over 150,000 people are employed in the Army, Navy and RAF.

·       More than 1.5 million work in the education sector

·       Nearly 300,000 men and women are working as police officers and firefighters.

·       Over 1.7 million people work for the NHS 

They aim to help these ‘heroes’ to own their ideal home.  This can include over 5 x income and thinking outside the box when it comes to complex scenarios.

Secondly, they will cater for those with just a 5% deposit who may have had a blip or two in the past.  This can include CCJs, Defaults, Payday loans and Debt Management Plans.  Terms and conditions apply and some need to be older than twelve months. 

Help to Buy is increasingly in demand and again, it does not matter if there has been a small financial blip.  There are lenders looking to assist and will look at a wide range of customers.

Finally, we have seen a couple of lenders publish that they will consider loans of 6 x income.  The lender has a duty of care to make sure you can afford your mortgage today, as well as when rates rise, and specifically to it being considered affordable over a five year period.   We have seen the introduction of affordability models.  The amount you can borrow will depend on your monthly net income set against expenditure and living costs. 

This works positively for the right loan to value, right affordability and right customer, as lenders are willing to offer a little bit more if you fit their specific affordability model.  Some we’ve seen have been well in excess of 6 x income.  So speak to a specialist who has access to the whole market, can offer such opportunities and make the right impact!

Lending down, purchases up and are you suitably protected?

UK Finance has confirmed that mortgage lending was down 4% year on year in June, amounting to £21.9bn.  Despite this, house purchases increased nearly 3% as 48,539 approvals occurred, compared to the previous year.  This is encouraging, and we’re seeing 49% of all business coming into impact specialist finance being house purchases.  There’s certainly a lot of properties being developed currently, so this should not be surprising! 

We often associate protection needs with homeowners, but it was interesting to see recent data suggest that the majority of renters are putting themselves and their possessions at risk because they do not have vital forms of insurance in place. Research from Aviva uncovered evidence that just one in five rental households had life insurance, compared to three out of five homeowners with a mortgage. The figures are particularly concerning because the number of renters in the UK is rising, a trend driven by high house prices and other challenges which make it difficult for would-be first-time buyers to get on the housing ladder.

A further study from Sainsbury’s Bank appeared to back up this trend, finding that while 41% of homeowners had life insurance or critical illness cover, just 26% of those renting had such a policy in place.

People are very quick to insure their pet, Sky TV, their travel plans and their house contents, but forget their biggest asset and this frequently gets left to last, or until it’s too late.

Finally, from where we see it, on the front line, I would dare to suggest that consumer confidence appears to be the highest it has been for some considerable time, despite the uncertain economic climates!  July and August are never normally this busy!  It is not just one geographical area either, although does appears to have a leaning to the south. What does seem to be apparent is that the demand is for ‘all types of mortgages' for all types of people!   From the straightforward, to the complex, to the commercial shop front, to the credit issues, to the first time landlord investing in their first Buy to Let property and so much more, we are seeing many different scenarios.  Why not visit our website at www.impactsf.co.uk and review all of our financial offerings and see how we can help you.

It's the holiday period....but be wary of how you spend, if you're planning to change mortgages soon.

The holiday period is most definitely in full swing and it’s precisely why I feel the need to be a pain and reiterate that whatever is spent on credit cards has to repaid!  If you are looking to review your mortgage in the next few months and load the credit card during the holiday period, remember that lenders will use the balance and offset against your income, before working out what you can borrow. That includes interest free credit cards, loans, HP agreements and student loans. They are all taken into account.

The holiday period can also be a time when many people do one of three things in the mortgage sector. Firstly, they start looking at new properties to move to. Or they may already be committed and are packing ready for the removal lorry.  Or they take time to review what mortgage they have and question if there is anything better out there. That is of course, if they are not simply taking a holiday, and why not?

Certainly, once the holiday is over, then it makes sense to review the current mortgage deal and see if there is a better option and perhaps look to secure a competitive rate for a few years. Whilst I always err on the optimistic side of a rates argument, we are entering a truly unknown era.  Boris is now steering ‘UK PLC’ and we have never left Europe before, so there is no history to prompt what the immediate and longer term implications will be.

Therefore, take the chance to look and see if a re-mortgage to a medium to long term fixed rate might benefit you.  There are millions of people on lenders standard variable rates enjoying complete and deafening silence from their current mortgage lender.  Why the silence?  Simply because lenders are comfortable with you paying over the odds and expanding their margins! They are under no obligation to offer you a better deal when you come to the end of an incentive term and you automatically flip onto their standard variable rate. It is always worth looking for a better deal and many lenders will welcome you with free valuation and legal initiatives and a difference of 1% can save you a substantial sum over a few years.  And that might just be a nice contribution towards your next holiday!

Don't jump on the first offer. Always do your homework!

So, your mortgage is coming to the end of its product term.  You may have fixed for an amount of time, maybe two, three or five years.  And now your rate is due to change to the lenders variable rate, which in the main, is higher than the rate you are currently on, and your monthly payments are about to increase.  But hold on, your current lender has seen the light and decided to offer you some 'fantastic' products to keep you.  Even though you are four months out of your product change, they've given you just fourteen days to take the ‘new product’ and stay with them.  After this time, they can’t guarantee the ‘new product’ will be available to you.  What do you do?

One recent example a customer showed us, had some very attractive rates.  However, when we looked, the same lender was offering better rates through the intermediary sector, with the same fees, etc.  I always say do your homework, and lucky this customer did as it saved them 0.1% on the rate over a three year period.

Even though some lenders put a deadline on any new offerings, remember most are contacting you three or four months before your product changes, so there is plenty of time to review your options and choose the best rate for you nearer the time.   This is a pretty straight forward process to arrange and normally they will have minimal paperwork and fee requirements.

As both a specialist mortgage provider, as well as whole of market (including the high street lenders), impact specialist finance has seen an increase recently in this type of transaction and why wouldn’t you stay with your current lender if they offer you a great product? 

But sometimes they don’t offer you a product at all!  It doesn’t mean they won’t!  It just means that you should find an experienced mortgage specialist who may be able to open up a door to a wide range of opportunities available to you. This is the biggest debt you have so take your time, ignore the ‘time pressures’ and ensure you seek advice, so you don’t regret it further down the line. 

'Highly Commended' by What Mortgage / Fixed rates proving popular!

Firstly, we are delighted to have been recognised and ‘highly commended’ in this year’s ‘What Mortgage?’ awards Best Mortgage Broker category.   This is a great testament to the team we have and we’re very grateful to all those who have voted for us.  We are proud to be in our 28^th year in the mortgage sector and look forward to many more!

The majority of clients visiting impact are looking for a longer-term fixed rate, although some are still happy to take a short term tracker rate and are confident that rates will not fluctuate too much in the coming months.  There are some good products available with minimal set up costs that have no early redemption penalties at all.  So if you wanted to switch products later on, to a fixed rate for example, this could be done (be aware that most lenders charge product fees on fixed rates).  Some lenders even offer the ability to do both in the same mortgage offering.  Lenders are innovative when it comes to attracting a certain type of business and clientele!  But do remember that tracker rates can go up, as well as down.  Although currently it does seem to be a ‘race to the bottom’ with regards to pricing.

We're also seeing lenders look at criteria to attract business, rather than just a low rate.  This could be a key part of the mortgage market moving forward.  A huge number of people will be ignored by computer technology and credit scoring decision making systems. But this does not mean they should not obtain mortgage finance, it just means they don't meet all of the rules entered to make that particular decision!

I often wonder if we are on the way back to as it was in 2007/8.   Rates couldn't go much lower then either and criteria played a huge part, then the ‘crash’ happened.  Fast forward to today and again rates can't get much lower and lenders are looking at gaps in the market where a criteria change or tweak might give them the competitive edge.

Who knows what’s around the corner and what will impact the market?  But in the meantime, make sure you think about number one and ensure you have the best rates available to you.

AVM, Homebuyers, Building Survey - Which valuation is right for you?

With every mortgage, the lender will require to know that they are lending money on a suitable property.  This will entail a valuation and normally a surveyor will visit the subject property.  This is a fairly basic valuation and is for the lender, paid for by the borrower, and it should not be relied upon as a guarantee that the property is sound and fit for purpose.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes.  They have no obligation to tell you what is in the report or give you a copy!

In some cases, they will not actually visit.  This is because they can often access detailed information electronically, normally called an Automated Valuation Model (AVM), where a mathematical system calculates the property’s value based on a number of comparable properties and other in-depth calculations. 

Therefore, you should always consider the benefit of an independent survey on the property you are purchasing to ensure that any and all defects are noted before signing contracts. There are two main types of survey available, aside from the standard lender mortgage valuation.

Homebuyer Report - a standard format set out by the Royal Institution of Chartered Surveyors (RICS). This will not focus on every aspect of the property as a building survey will (below), but will advise on urgent matters needing attention. It may advise if items (a leaky roof for example) might have an adverse effect on the value of the property, or if further investigations are required.

A Building Survey – an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required and provide extensive information on major or minor defects.

Both will comment on whether the agreed asking price is reasonable, whether it reflects the condition of the property and should give you peace of mind whilst making the biggest purchase of your life!

Finally, if you have any burning questions or items you would like me to discuss, I’m always looking for content ideas, so please don’t be shy to ask!  You can email me at dale@impactsf.co.uk or call me on the number above.

A computer can't listen to your mortgage needs and requirements!

With technology taking over the world, and so many transactions taking place over the internet, it might be easy to be attracted to products online.  There is so much information readily available and over 11,000 mortgage products to choose from, but these types of things can get lost in translation.  Therefore, seek advice!  Yes, it may cost you a small fee to have someone research the market on your behalf and make recommendations, having first assessed your short to long term needs and requirements.  More importantly, it could save you thousands in the long run, versus choosing the wrong products yourself. In addition, any professional will probably seek to build a long-term relationship with you and contact you at the time your current rate is coming up for renewal to ensure you have the best rates available.

It doesn't matter whether you are experienced, or if this is your first time.  Property ownership can be complicated, so explore all the options and do your homework.  There are a huge number of lenders available to you and all have competitive edges and good criteria options for the right customer.  Make sure you understand everything at the outset so that you don't regret it later!

A good independent mortgage adviser will be able to review the whole market for you and can identify the best lending options and then deal directly with the lenders central processing units, speeding up the process from application to offer. That said, even in this area we know of at least one lender that is sixteen days behind on post or electronic updates!  

An experienced adviser will listen to your specific needs and timescales and ensure that they line you up with a lender who will match both. So, if speed is crucial, then you may need to consider working with a lender where the rate may not be the keenest on the market, but they will get the deal to completion within your target timescales to ensure you get the property of your dreams.  Remember, make sure you adviser looks at the whole market, and not just a limited panel of lenders ensuring that you get the widest choice of lenders and products (including exclusive deals) available to you.