Welcome to the brokers blog; where we discuss the latest developments, common queries, spurious sources and the sublime, ridiculous and esoteric aspects of the mortgage industry.
Further to last week’s post, Cheltenham & Gloucester have announced a new product at 90% loan-to-Value and a reduction in their five-year fixed rates at 85% loan-to-value.
The new 5 Year fixed rate at 7.19% doesn’t look particularly appetising on paper; with a £995 arrangement fee, Early repayment charges staggered at 5% in the first two years and: 4,3 & 2% consecutively for the remaining years, a valuation fee of £300 based on a loan of £100K, with APR at 4.8% and a reversion rate currently at 2.5%, but it does reflect the general easing of criteria and willingness to lend at higher loan to value.
Again the reduction of .1% on their five-year fixed rate at 85% loan to value won’t have Mortgage Brokers dancing in the streets, but it is a small step in the right direction.
It now has a five-year fixed rate of 6.89%, a £995 arrangement fee, Early repayment charges staggered at 5% in the first two years and then 4,3 & 2% consecutively for the remaining years, a valuation fee of £300 based on a loan of £100K; APR at 4.6% and a reversion rate currently at 2.5%.
As usual, refer to the Key Facts Illustration before deciding on a Mortgage and seek independent Mortgage Advice to ensure the product is suitable.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
We do not usually charge a fee for mortgage advice, although you may pay up to 1.5% of the loan amount. Some buy-to-let and commercial loans, are not regulated by the Financial Services Authority.
In Q&A, we take a look at some of the common questions faced by mortgage brokers currently.
Question: I recently moved to the UK from abroad; when can I buy a property?
High street lenders will usually require you to have a permanent right to reside in the UK and to have been resident and working in the UK for a minimum period, often a year or perhaps up to three years.
There are exceptions to this; some private banks may be able to lend from the moment you arrive regardless of whether you have a permanent right to reside. These arrangements may be restricted to people with higher incomes (for example, £50K a year) or high levels of existing assets.
There are also a small number of lenders able to consider applicants without permanent rights to reside, i.e. those on visas. Again several will still require six to thirty-six months of residency history, but a small number can consider applications from day one.
For that reason, there isn’t a black-and-white answer to this question; so it’s usually best to seek professional mortgage advice, so if you would like to know; call us on 08454594490 and speak to a mortgage advisor.
The Bank of England announced yesterday that the bank base rate will remain static at 0.5% for another month, which is good news for the housing market, prospective borrowers and mortgage brokers.
In conjunction with massive falls in the London Interbank Offered rate recently and small falls in swap rates, the stage looks set for continued reduction in mortgage interest rates over the coming months.
HSBC and Lloyds Group announced large rate cuts in the lower loan-to-value range last week, and over the past few days, several lenders have announced changes to rates and criteria higher up the loan-to-value range.
While there has been little change in higher loan-to-value rates in the 80% and upwards category, there is a feeling among the mortgage advice community that things will now start to ease here too. Perhaps for remortgages in the first instance, but potentially for new purchases also.
Whilst it’s unlikely we will see any products at 95% for new purchase soon, things appear to be moving in the right direction, which can only be good news for homeowners and the economy at large.
The next part of my series: why you should use a mortgage broker, is the mortgage affordability calculator.
We do a little pay-per-click advertising on various search engines; this is no secret.
But it surprised me to get so many hits on the somewhat spurious term; mortgage calculator. It occurred to me that this might be people searching for their maximum loan amount rather than monthly payments.
If this is the case, and you are reading this article because you want to know how much you can borrow, let me explain something; most consumer-facing calculators for maximum loans are a waste of your time. Plain and simple.
This is particularly true with calculators on mortgage brokers’ websites or those on comparison sites.
Every lender has a different method of calculating how much of your income to consider, and how many times that income they will lend in different scenarios (such as lower amounts for smaller deposits).
They all have individual approaches to factoring in typical expenditures or calculating other commitments like credit card debt; or other loans.
They may deduct a figure for each dependent child you have; they may use a form of stress testing based on a notionally higher interest rate too.
In short, it is highly nuanced. It is extremely difficult to create a calculator that accurately reflects these subtleties; most sites present a very conservative and vastly oversimplified figure as a gimmick.
So whilst it is tempting to get a quick answer to these questions, they are rarely worthwhile having.
Even the calculators on lenders’ intermediary websites are highly dependent on individual case-by-case discussions of a client’s circumstances to ensure the figures entered will reflect the values as interpreted by the lender; it requires considerable industry experience to get even these calculators to produce accurate outcomes.
It may seem laborious to speak to a mortgage adviser, but an experienced one should be able to condense all that nuance into a relatively brief conservation; that’s the real hidden value of a human advice process.
Big shifts are happening in the mortgage market at the moment, which are affecting all mortgage advisors quite a bit.
One of the biggest trends is the growing movement towards self-execution facilitated by comparison websites.
Now I am a fan of the internet; I even support comparison websites as they have a valid role to play. But Financial Advice and Mortgage Advice are not defunct because of them, and I want to give you some points to consider in my posts this week.
I had a recent scenario of someone looking to buy a second property as an investment and repay a mortgage over a short term; of perhaps ten years.
The client was self-employed and wanted a product without any tie-ins.
Now in this scenario, he would have very high monthly payments, and it would hamper his affordability and potential maximum loan.
The best rate product for his requirements also had an offset facility, so I suggested he could increase the term, reducing the payments he had to make, therefore making the loan look more affordable.
However, as it was an offset product, he could pay as much as he liked extra, and this would then reduce the mortgage term in line with his requirements.
This meant that he would not have to make the high payments; but could do so if he wished. For a businessman in the credit crunch, that was a compelling option.
It’s a great illustration of how mortgage advice plays a very different role to a comparison site.
In this case, it wasn’t about getting a lower cost; but using the features of a product to improve his chances of getting the loan and reduce the financial risk to him and his business; without increasing the cost.
That is why a Mortgage Broker is well worth speaking to, regardless of how much experience you have with mortgages.
