Brexit, uncertainty, opportunity!

Wow, February already!  Time flies.  It also brings us another month closer to Brexit.  Uncertainty remains and nobody knows what lies around the corner.  However, we’ve been through this before.  Remember the millennium bug that was going to be the ultimate in chaos, computers wouldn’t work and the world would be a worse place, etc etc?  But it didn’t and it wasn’t!  Life will continue the following day after Brexit and we can move forward, whatever the outcome.  The future might just be slightly different from beforehand, but we adjust.  That includes our financial sectors.  It had a huge downturn and readjustment back in 2007 and we lost a large number of lenders.  But, over the last 24 months a number of those same funders have reinvested in new lending platforms and opportunities have arisen again.

With uncertainty brings change!  Several lenders have recently changed rates or criteria in the market to assist customers.  

VIDA Homeloans has increased its Buy to Let loan to values from 80% to 85% for loans up to £250k for properties outside of the M25.  This now means there are three lenders in the market that only need a 15% deposit for a buy to let.

They have also increased their Residential loan to value offerings from 85% to 90% with a max loan of £400k.  A number of their rates have also dropped by up to 0.5%.  Great move from this specialist lender.

In the mainstream sector, we’ve seen changes from Virgin, Platform, TSB, Barclays, Coventry and Saffron Building Society.  Some rates up, some rates down.

Complex scenarios are on the increase.  We had one recently where the clients had built a number of properties but could not sell them for the desired price, siting Brexit as a major factor in this.  Having financed the build with development funding, this can be quite expensive if you run over the agreed timescales.  In addition, this company was running at a loss for this project, as all the building costs had been put through the accounts without the counterbalance of the properties selling to recoup funds.   Not a case many lenders would look at!  However, a lender was found who was willing to assist due to the fact that the clients had previously completed many projects like this, had a number of shareholders, and, as they were converting the properties in to Buy to Lets, this would be a long-term venture.

This is the benefit of using an independent adviser rather than anyone limited to a small selection of mortgage lenders and a restricted panel.

Mortgage prisoner? There's light at the end of the tunnel...for some.

Around 140,000 people with mortgages are currently classed as ‘mortgage prisoners’.  This means that they could be with a lender who is no longer active, or a lender who has ‘bought’ a number of clients from other lenders but who does not offer additional mortgage products once the customers current incentive rate period comes to an end.   So, effectively, the client will sit with the lender on their standard variable rate, normally a lot higher than incentive rates, and because of various reasons, they may not be able to move to another lender.  This could be due to their loan to value (amount borrowed against the value of the property), or maybe that particular lender at the time had attractive, exclusive income multiple calculations, which are no longer offered or new and stricter criteria no longer enables them to change lender. 

Many of the mortgage industry have campaigned for some time to try and assist these customers.  It seems the regulator has taken note and issued a consultation paper.  I stress, this is only at consultation stage, but it shows that this is now a concern and the regulator is seeking a way forward.  One part of the consultation entails a ‘relative’ test, rather than ‘absolute’ test.  This would check to see if the new mortgage costs would be cheaper than the current costs.  As such, the client may be able to transfer to another lender with minimal checks, underwriting and fees (normally this would be classed as a product transfer if the client was staying with the same lender and changing to a better deal).  This also assumes the new lender has made a commercial decision to see if this works for them in taking on these customers.

I can only see this truly working if all lenders in the market are ‘encouraged’ by the regulator to make this work.  Not all customers will be able to be assisted but it is a step in the right direction and that can only be good news for those who are currently paying way over what they should be.

Finally, we’re looking for staff to join our fantastic team in Horsham.  Ideally, we’re looking for mortgage brokers who have been in the market for at least a year and have a proven track record in customer service and recommending mortgage and protection products.  If this is of interest, or you know someone who is looking, please get in touch.

Don't stay on the lenders standard variable rate for the sake of it!

2019 has started as expected, with the main stay being uncertainty. Already we’ve seen three lenders stop lending or pull all of their products due to ‘costs of funding’ and ‘uncertain times ahead’.  This is all a bit ‘de ja vu’ compared to back in 2007/8 before the big ‘crash’.  However, this time we’re not on the verge of a global recession (hopefully) and once we know what lies ahead for Brexit, things should return to some normality, whatever that may be. 

Lenders want to start the year with a flurry and a number of lenders have launched limited edition products.  These are short term offers and therefore if you are looking to secure your ‘uncertainty’ for the next three to five years, there are some great deals to be had currently.

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 or sky TV, whilst letting ‘sleeping dogs lay’ when it comes to the mortgage!

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 2019, especially if you’re currently on a Standard Variable Rate, or equivalent.   These tend to be a lot higher than what’s available in the market place.

Many Lenders are offering superb remortgage opportunities with minimal costs to change, including free standard valuations and some with legal costs.  Rates are competitively low and mortgage product choice is at its highest for some time.

If there’s ever a time to review all options, now might be a good time, as after Brexit, who knows where we will be..

Thank you for voting us 'Bridging broker of the year!' - have a fantastic Christmas!

Wow, another year gone!  Time is flying by and it’s certainly a case of ‘blink and you’ll miss it’!

2018 has been pretty flat with a predicted overall mortgage volume of circa £260bn, slightly up on 2017.   Next year is predicted to be much the same, but with the current shenanigans around Brexit, who knows what will happen…  

Technology was due to take over the mortgage market and ‘Robo Advice’ predicted to be at the front of the customer experience.  Despite millions being spent, this couldn’t be further from the truth and has no defined future on the immediate horizon.  72% of all mortgages generated are via brokers/intermediaries and I can’t see this changing.  You’re entering in to the biggest debt of your life and questions need answering.  You just can’t beat the human touch!

Many lenders have yet to evolve with the digital era and those who will win will be the ones offering quality technology, but also the human impact for those who prefer or need it.

On a personal note, I really appreciate you reading my column!  Mortgages can be a dull subject and I’ve tried to provide an unbiased insight to what happens in the mortgage world, with a little bit of humour along the way!

A huge thank you to everyone who has instructed AToM to source and arrange their mortgage during the past twelve months. It has been a fantastic year and we have enjoyed substantial growth in volume, completions and headcount in the AToM team located between our two Horsham offices.  We have a fantastic team and they are a truly hardworking and knowledgeable group of people.

Finally, we were delighted to win ‘Bridging Broker of the Year’ at last weeks Mortgage Introducer Awards 2018!  We really are grateful to all who voted for us.

On behalf of all the staff and directors at AToM, we wish you and your families a very Happy Christmas and a Relaxing and Prosperous New Year!  Roll on 2019!

Coming to the end of your product term? Be wary....

As I have said before and with the run up to year end, lenders have been actively looking at their offerings and loosening their criteria, positively. Some rates have even been reduced and nearly all re-mortgage deals now come with a contribution to valuations and legal fees to keep the cost of changing lenders to a minimum.  There’s no excuse to be sitting on a high rate when you don’t need to be!

Also, BEWARE, that some lenders are sending out letters to those coming to the end of their product term offering them new rates, but giving them a deadline in which to switch.  We had one customer recently who was four months out from their current rate changing from a fixed rate and moving on to the lenders Standard Variable rate.  They were offered some great new rates to stay with the lender, but had a deadline of just two weeks in which to accept, even though the product wasn’t changing for four months!  This is not acceptable, no one should be pressured to accept a deal and we have passed this example on to the industry trade body to take on.  However, some customers might accept this and go with the deal.  What if rates decrease in the next three months?  You’d be annoyed.  Read the small print, do not panic and get expert advice. 

And finally, do you look at your financial budgets frequently?  A report from a well known credit referencing agency has suggested that over 78% of mortgage people surveyed are not currently budgeting for a rate rise.  We all know rates will rise at some point, probably after Brexit now, but nobody knows when this will happen!  Many people asked did not know how much a rate rise would cost them on a monthly basis, despite many respondents believing rates would rise over the next twelve months! A 1% rise on a £100,000 mortgage can increase the monthly payment by as much as £83.  As we go in to some months of uncertainty, and especially with regards to the cost of funding within the mortgage market, do make sure you are ready for all eventualities.

'How much can I borrow?'

‘How much can I borrow’ tends to be the most asked question of anyone at AToM!  Only a few years ago, that could easily have been up to 8 x income with the minimal of fuss subject of course to loan to value and certainty of income! Oh, how things have changed, and rightly so!  Those were times with little control and the lengthy recession subsequently bore testament!

Today it is so much more intense!  For example, a lender will require to know your monthly budget spend figures, right down to every direct debit on your bank statements, including council tax, insurances, mobile phones, lottery payments and gym membership!  From these monthly outgoings, the lender will look at affordability and decide from there what mortgage amount might be available to you.  However, on the other side, not only can it be restrictive depending on your monthly outgoings, but it can also be very generous depending on what little outgoings you have!  

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 5 year period.

But this also means that what was once an affordable mortgage may suddenly become unaffordable due to the perception the lender has on consumer spending habits, both historically and projected for the future.  

We have seen the phasing out of income multiples and the introduction of affordability models.   So, no more straight forward 4 or 5 x income discussions.  The amount you can borrow will depend on your monthly net income set against expenditure and living costs.  

However, this also 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.

With the increase in requirements, the time taken in research prior to recommendation for a suitable mortgage product has also increased, as have the lenders own underwriting procedures.  So, beware if you are in a rush!    

Finally, the holiday period is fast approaching and do take time to dig out that paperwork and come and have a chat.  With rates so low, now might be a good time to be exploring these options and it could be a very beneficial exercise right before Christmas!

What's available for your first property purchase?

Looking at purchasing your first property?  First Time Buyers will usually require a minimum 5% deposit, but product availability increases with a 10%+ deposit.  Some lenders will allow a 5% builders deposit, but this must be confirmed as a gift and non-repayable. Some lenders will allow the deposit to come as a gift from the Bank of Mum and Dad, or an immediate family member.  This can include step family, aunts and uncles and is acceptable for first time and subsequent buyers.  The money must be a transparent gift that has originated in the EU and can be easily traced back to the originating source.  A letter from the family member will usually be required and needs to advise the gift amount, relationship the person gifting the monies is to the applicant, confirmation that it is a gift and not a loan and therefore is not repayable, confirmation that they do not currently own the property being sold and that they will not live in the property or have any interest in the property post completion. 

Some lenders may allow a loan of up to 100% of the property value if parents or another immediate family member will act as guarantor or provide additional security. Those guaranteeing, in the main, will need to show evidence of affordability for both their current residential mortgage and the one they are intending to guarantor and possibly allow a charge to be taken on their own home.

All positive indeed and that’s not even touching on the number of Help to Buy, Right to Buy and Shared Ownership schemes available.

Rates have reduced lately in a bid to assist this under-served market segment and criteria is definitely more accommodating.  Income multiples tend to be between 3.75 to 5 x joint income and terms and conditions always apply!  However, Lenders are showing a willingness to assist First Time Buyers and in the current market, that can only be a good thing.