69% of all mortgages written by advisers!

The importance of mortgage advice has never been greater and it is an interesting fact that, according to the Council of Mortgage Lenders, 69% of all mortgages were written through professional advisers during the second quarter of the year. This is a substantial uplift on previous quarters and there are probably a number of reasons for this including long delays we are advised are happening with some lenders both in interview availability and processing times. 

The professional mortgage adviser reviews 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 eleven days behind on post or electronic updates. A good 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 where you get what you want. Your adviser will discuss this in detail with you before you make any decision.

On a different subject, a number of mortgage lenders are looking ruefully at their performance against target for the current calendar year and casting sideways glances at their competitors. At the start of the year, no one was really sure what the effect of the 2014 Mortgage Market Review would have. A number of lenders are, allegedly, well below target and we will probably see a price war in the next few months as they look to gain ground before the year end

Rates are creeping up...

Panic Panic Panic.........ok, so that's a little dramatic!  However, we have seen a number of lenders increase rates over the last few days.  TSB, Halifax, Nationwide, Virgin Money, NatWest and Coventry Building Society are just a few who increased their rates on various product offerings.  We have seen SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) start to creep upwards and as such lenders are re-pricing accordingly.  Despite my headline, I don't believe it is really time to panic just yet.  Many pundits are suggesting middle of 2016 before we see a true rate rise.  Just keep an eye on things if you are looking for a long term bargain.

What we have seen recently are lot of enquiries to remortgage for home improvements.   Increasing the value in your property can involve large renovation, adding a room or two and a general investment in time and builders.  That said, with house prices booming in the local areas, many have decided to look at cosmetic changes.  So up-grading kitchens, bathrooms, redecorations and so on.  Whether small or large, the investment in property can bring rewards to the value and if you are staying put, reward in the satisfaction of home comfort.  Plus a potential large saving in stamp duty too versus moving home!

We have also seen an 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 interest for your debt over a longer term.  With debt management plans, or Individual Voluntary Arrangements (IVA), etc, 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 debt management plans and may not consider anyone who has been in an IVA unless it has been discharged for more than three to four years. Advice should always be sought before entering in to these types of arrangements or agreements.

Sometimes a conversation with a human being is just what is needed!

Over the last few weeks, we have seen a number of lenders who have post positive half year results.  Many stating that they have increased lending against their previous financial year.  But this is hardly surprising as many didn't want to lend (or maybe were not allowed to!) post the new regulation implementations in early 2014.  However, it is important to run with the positive news and such announcements on half yearly figures show that lenders are now keen to lend and are looking at ways to compete in an active market.  What this means is that end consumers should be able to bag a bargain for some time yet whilst rates remain low and competitive.  Some industry pundits are even stating that it will be the middle of 2016 before they expect any rate rises...

This has also resulted in a swing between the high street and niche lenders.  The smaller lenders are stealing market share from the 'super tankers' on the high street as an increasing number of consumers are requiring a manual and human assessment rather than a computer decision making system.  Despite all of the available technologies in the current climate, sometimes a conversation with a human being is just what is needed!

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.  People are selling, people are buying and many are remortgaging!  August is 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 straight forward, 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.

Finally, Nationwide House Price index has indicated that House Prices increased in July by 0.4% compared to June and 3.5% over the last twelve months.  The average house price now sits at £195,621.

New entrants to the Buy to Let market!

With the rental market continuing to be buoyant, and with no signs of declining, the mortgage market is active as lenders recognise the huge demand for Buy to Let (investment property) mortgages.   These can be from a first time landlord, right through to the experienced House of Multiple Occupation (HMO) / Student Let portfolio investor.   Deposit requirements can be as low as just 15% and as this sector has also recently been through a price war, rates are competitive (some now sub 2%) and may also come with packaged deals, such as free valuation and free legal costs.

But with so many lenders now in this sector, rates may not remain the main area of competition for much longer! Some lenders are also reviewing criteria in order to attract new business.  Many lenders historically would not allow first time landlords, anyone earning an income less than £25k per annum, those who have more than ten properties, or those who may have had previous blips on credit history, to give you a few examples.

However, we have seen recently that criteria and attitudes are being relaxed and lenders are having to compete to attract more business.  There are also a large number of new entrants to this market including Foundation Home Loans, AXIS Bank, Fleet Mortgages and Pepper Home Loans to name just a few.  Each have launched their own niche propositions and are looking to attract a certain type of Buy to Let customer.

Buy to Let properties will often provide a modest monthly return over and above the mortgage payment.  The additional amount can be used to supplement income, or, with flexible mortgages, can be used to "overpay" the mortgage and reduce the term.

Most lenders in this sector will require the rental income to exceed the mortgage payment by up to 125%, normally at a marginal rate of circa 5% and, after costs such as managing agents, this should leave some spare cash to cover repairs, maintenance and landlords insurance. It should also enable a fund to be established to cover the mortgage payment in the event that there is no tenant in situ for a while. Remember that, whatever the deal, lender terms and conditions will always apply.

Delays across the market....and Elephants in Horsham?

Wow, what a week!  It's good and bad news though. The good news is that the mortgage market is really buoyant with good business volumes, product choice at it's highest for some years and properties selling quickly (sometimes before they make the papers and above the asking price). The bad news is that this is causing a number of lenders major servicing problems as they do not have the staff to handle application numbers.  One we know of is working on applications submitted three weeks ago!  We also have had delays on valuations with some surveyors taking up to two weeks to book an appointment.  Unfortunately lenders have agreements with certain surveyor companies and they have to undertake the valuation, no matter what the delay in actually carrying out the appointment.  There is no shame in being open about these delays as they should be taken in to account whether buying, or selling a property and this helps everyone manage expectations. 

That said and even with the delays, now is a good time to review your current mortgage and possibly obtain a great rate with minimal (if any) costs to change your mortgage. Whether you want to fix your monthly payments for a period of time, or you fancy a low rate tracker mortgage, or maybe both - a tracker rate with the option to fix later on, there are plenty of great products currently available.  Terms and conditions will always apply.

Finally, I have to say what a fantastic job Horsham Rotary are doing with the Elephantastic trail!  Over 150 Elephants of all sizes have been bought and decorated by local organisations.  These are now on display and children should follow the safari trails to locate the Elephants nickname with the major prize being a trip to Kenya!  There have been some amazing works of art and I'm sure they will make a lot of money for some worthwhile charities. Search "Elephantastic Horsham" to find out more. The big question is, after the Giraffes last year and Elephants this year, what will be next - Alpacas!?  

Rates to rise towards the end of the year?

The Governor of the Bank of England announced last week that interest rates are to raise, probably at the end of this year or early next.  Although though this is no surprise and it is quite likely that we have all been tentatively expecting this announcement for some considerable time now, very few industry pundits have publicly agreed with this statement, at the time of writing!  

So, if it does happen, what will it mean?  Well, the cost of borrowing will be the first noticeable impact with any mortgage on a bank base rate tracker following the upward trend almost immediately, with variable/discounted rates likely to be closely behind.

For those on vary low tracker rates this may not initially be considered too painful if you consider that bank base rate was in the mid 5% range prior to the dramatic and sustained low rate period which is now longest in modern history.  However, to put it in perspective, given that we live in an area of high value properties and accompanying high level mortgages any rate rise may be more meaningful.  For example, a 1% increase on an interest only £200k mortgage will mean an increase of circa £2,000 per year (£167pm).  This needs to be factored into any family budget. To make matters worse, it is anticipated (by the Governor) that base rate will level out around 2.25% so this makes the maths even more important.

If you are currently on a fixed rate, no change for the term of your deal.  But, you may see your reversion rate (the rate you will move on to at the end of the fixed rate period) increase. 

However, with a reported one million people paying their mortgage by credit card and a further three million people who have never had a rate rise, any movement in bank base rate will be closely monitored to see impacts on the economy and activity as 'normalisation' begins. 

Lenders are actively looking for your business.

There are now nearly 10,000 mortgage products on offer throughout the mortgage finance market. This is a substantial increase from the same time last year and gives a good indication that lenders are actively looking to assist clients with product choice.  A number of new lenders have launched and a number are also in the pipeline awaiting authorisation.

The majority of clients visiting AToM 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 and more recently, fixed rates have been creeping up.

With all new mortgages, a budget planner will be required.  So make sure you know and can advise exactly how much you are spending on almost every aspect of your lifestyle.  Especially make sure you know your monthly costs on food, household expenses, travel, pension and saving contributions and other likely costs such as hobbies, going to the gym, lottery direct debits and more.  Every lender will review your ability to afford your new mortgage, and they make assumptions for coming years, so all direct debits and most entries on your bank statements or credit report will need to be advised.  This is so the lender can make a viable stress test on future rate rises and ensure that you will still be able to afford your mortgage at that time.  Yes, maybe there is a little guess work, but do make sure you disclose all monthly expenditure as the lender will normally want to review your bank statements and will see it all anyway!