Marijana No Comments

How are emerging technologies changing the mortgage landscape?

Mortgage lending is expected to increase slightly in 2019 and the Bank of England may raise the base rate which means that competition on rates between lenders will continue. But there are other ways for borrowers to differentiate between lenders – apart from on price – such as customer experience, speed of service, an efficient service and making the customer journey easier.

Teleperformance, which provides digital integrated business services, has carried out some research and found that it takes 18 to 40 to days to go from mortgage application to final mortgage offer with the bulk of that being taken up by the time it takes to carry out a valuation.

The mortgage application requires original copies of utilities bills and bank statements but that slows down the process. Some lenders now accept digital versions, which is good because 69% of consumers receive paperless bank statements, and that goes up to 75% amongst 18 to 24 year olds, according to a research by ID verification software firm GBG.

Can identity data be used to speed up the mortgage application process and make it more accurate and less susceptible to fraud? Is it FCA rules or lender procedures that dictate borrowers having to produce hard documents?

There is continued growth in the use of artificial intelligence and Robotic Process Automation (RPA), which relies on data to perform repetitive and automated tasks, thus eliminating human error and freeing up humans to do other things.

Teleperformance has found that within the mortgage market, the five key metrics that influence customer decisions are brand, price, accessibility, customer experience and speed of service. The big lenders are strong in the first three but lose out in the customer journey and responsiveness offered by small lenders and fintech players.

Digitisation covers a host of other applications such as digital signatures; and does open banking, now a year old, hold the most potential for change in the mortgage market?

How far down the line is the mortgage industry with accepting electronic documentation instead of customers having to produce paper copies?

Kris Brewster, head of products, proposition & corporate communications, Skipton Building Society: We currently ask for payment documents and will accept scans but we are moving away from that and towards getting as much automation as possible into our back office processes. We use a combination of technology – automated valuations, income verification, access to data through open banking. All parts of the mortgage chain are starting to link up, even into conveyancing and Land Registry, so for us all the information is there, it’s about linking that up. I expect everyone across the industry is working on exactly the same thing.

Are consumers demanding the move from the conventional paper-based application to a more digitised process? People are used to home shopping, ordering goods online with delivery the next day. Is that shaping the way to build a lending process?

Matt Ward, head of mortgage service delivery, Santander: Very much so. I think there’s a consumer expectation that they should be able to communicate with their bank in the same way they would in any other area of their life. There’s a drive from consumers and intermediaries towards electronically submitting documentation and the challenge for the industry is to ensure we’re keeping this secure.

How much impact does regulation have on digital documentation?

Paul Clampin, chief lending officer, Landbay: The challenge is to work within the regulatory framework particularly anti-money laundering. The test for lenders is proving that the customer is who they say they are and that the security is adequate. Landbay is a fintech lender so we’re able to take applications to completion in 18 days but that’s where we have been provided with the information very early on in the process.

We’ve been able to automate large parts of the buy-to-let market because 97% is still intermediary based and they tend to do things in a formulaic process. The biggest change to the buy-to-let market and lenders generally will be the development of a single source of application data but that has not been developed fully.

How can sourcing systems and APIs move the application process on?

Paul Clampin: If all brokers use the same sourcing system for quotes and then send the application to lenders, they can immediately respond with an indicative quote on price and what information they’ll need. I think we’re a long way away from that, but something like that was piloted in 2003. I think that’s more likely to happen in the residential side or maybe the complex prime side of the market than it is for buy-to-let which has more complexities.

Andrew Asaam, director of mortgages, Virgin Money: I think that’s going to happen in 2019 and it’s going to be a game changer. It’s not for all intermediaries but scale intermediaries will get operational benefits from having a digitalised process.

Kris Brewster: We’re working on direct submission via APIs with various sourcing systems. I would expect that to be in place soon and that will be the long-term future for submission using data, cutting out the inefficiency, cutting out the rekeying and the manual work that broker admin teams have to do. There would be a strong push for that and it will take different lenders, different times to join that party but I suspect in the long run everyone will have to play in that way.

Andrew Asaam: I think we’re all digitising our processes, we’re just on different parts of the journey depending on funding and legacy systems. Digitisation of the ultimate customer journey involves signatures, documents, appointments, omni-channel with data consistency, APIs and all this will happen over the next 12 months.

Kris Brewster: One dilemma is around building systems yourself or using a partner. Thinking about the approach to APIs, it’s about getting that balance between what you own and what is with your partner. It is quite a change for a lot of lenders if we’re used to controlling all of that process ourselves.

Paul Clampin: It’s also about legacy systems. How quickly you want to move and your ability to move which determines whether you use a third party or do it yourself.

Alex Maddox, product & capital markets director, Kensington Mortgages: Risk is a key issue with third parties. How do we deal with prequalification from price comparison websites? If a customer has been prequalified with a credit check, and it’s not the credit reference agency we use internally, how do we deal with that, do we check it again? If it gets sent out to multiple lenders does everyone do their own credit check?

How advanced are lenders in respect of Robotic Process Automation (RPA) and artificial intelligence?

Matt Ward: I think quite a lot of lenders use RPAs particularly in larger organisations. We certainly use RPAs where we believe we’ve got repetitive processes, particularly those of a legacy nature where you’re moving data from one system to another. It’s a highly accurate manner in which to manage this.

Mike Sloman, SVP business development, Teleperformance: It’s quite ironic that one of the beauties of RPA is that it works best with legacy systems. When you have multiple legacy stable systems that are easy to automate it actually takes away a lot of the business case for replacing systems or putting new platforms in.

Kris Brewster: Our robotics at Skipton is in the pilot phase and we expect to be using that properly across real life processes in early 2019.

Puneet Taneja, EVP operations, BFSI at Teleperformance: The progress made on the use of robotics on the servicing side is much higher than in originations. If you look at appointment bookings today in most branches you still have a long, drawn-out process and we see opportunities for robotics to take a much more active role.

Alex Maddox: We used robotics in servicing first but we’ve now rolled it out to underwriting and even integrating with external parties to pull in data as an alternative to APIs. So it can be used everywhere but I think servicing is a good starting point, it’s a lower focus from a risk point of view.

Can RPAs help with underwriting?

Paul Clampin: I think it works more in residential because data sets are more established and more predictable than other markets such as complex buy-to-let, although standard buy-to-let might be easier.

Alex Maddox: I think it’s a journey. We’ve all been using rules-based engines to speed things up but that’s the first step on the customer journey. You need certain information to feed into those rules so how do you pull that in through robotics or APIs?

As we are a specialist lender, there will always be a lot of human interaction in every single case because our customers have some kind of complexity to their situation and it’s complexity that’s difficult to automate. But the complex part of the market is either in the top end of the buy-to-let space or is a relatively small percentage of the owner-occupied market. So there’s a lot of standard business out there that could be automated very efficiently and provide a great customer experience.

Andrew Assam: There are two challenges here. It might prove payment of rental amount but it does not factor in SVR plus 3% for stress testing requirements and the deposit raising is probably an even bigger constraint. So I think taking rental payments into account helps but I’m not sure it’s enough.

Matt Ward: Rental information will show consumers’ ability to repay, or commitment to repay, so clearly you will improve your view of them from a risk perspective.

Alex Maddox: It’s similar to the mortgage prisoner analysis where someone has exhibited an ability to pay off a certain amount but is that suitable evidence that they will be able to pay the same amount going forward? On all of our models historical payment is one of the best predictors of future payment ability, but unfortunately it doesn’t tick the regulatory box, because of the 3% interest rate stress test.

What future does robo advice have?

Kris Brewster: I would expect to see more development of robo advice or guided execution only solutions for customers particularly as remortgaging increases. There is technology to help support the advice process and there are cases that don’t necessarily need all the skill of an adviser.

Matt Ward: It’s an interesting challenge because we’ve been finding there are lots of digitally savvy customers that are capable of using online resources. If they wish to interact in this way, that’s absolutely fine, but those that are ’digitally savvy’ may not be ’mortgage savvy’. How do we know when it may be best to just put that customer straight into an advice process to make sure they have help from the outset? This is a market that everybody’s going to start to explore I would imagine.

Alex Maddox: One of the areas where AI is being used is chatbots – and that’s across finance not just in mortgages with different levels of success.

Matt Ward: It could be hybrid solutions that customers will be looking for in the future – a live chat, then a video conference with an adviser while they’re filling in their forms so they can talk things through.

Paul Clampin: The challenge with robo advice is ensuring it’s fit and proper for each individual circumstance, that’s very complicated. I don’t imagine lenders are going to use robo advice, their professional indemnity insurance would be quite interesting too.

Andrew Asaam: The regulator does want robo advice and there is a lender actively talking to the FCA about it and could be ready to launch in around three to six months. We’re being disrupted in a huge way with aggregators, fintechs, digitisation of unified services and in three to five years the industry will look very different.

How can customer retention be improved?

Kris Brewster: There’s potential to support customers post mortgage completion apart from an annual statement. We know people are not moving as often, they are home improving and borrowing more, particularly as they get into later life. I think there’s scope to improve the customer experience, and this is a new area that could be better developed.

Matt Ward: I agree. We could be more visible to the customer so they have an understanding of how they can interact with us, for example, a notification of the next deals that are available for them or reminders that they can overpay.

Alex Maddox: There’s a bunch of fintechs out there who are trying to engage with customers during the mortgage life so if lenders don’t start to engage, someone else will and you will lose your customer.

Kris Brewster: The challenge of retention is huge and I think one of the other changes is that aggregators will enter the mortgage market over the next 12 to 18 months acting somewhat like brokers but also with a lot of technology. They could do to the mortgage market what they have done to the home insurance market and disrupt it.

When interest rates start to go up some people may move into arrears. Can AI help to predict which borrowers are going to be affected and who might struggle in the future?

Alex Maddox: Our outcomes, which are based on machine learning, are the same ones that we use to predict arrears. They’re the same ones that we use to work out what headcount we need to cover arrears, based on the level of arrears that we expect. So it’s a single application that runs across the whole business.

What’s more interesting with digitalisation is identifying vulnerable customers. You have to train your staff to identify vulnerable customers early and if you can overlay technology on top of that then we should all do that.

If we can use open banking to help us really understand the customer’s true situation then we should be able to put together a better forbearance strategy working with the customer to help them out in that situation. But customers will have to be ready to open up their bank accounts to us and let us work with them or let their tax adviser work with them. The more information that is shared between the different parties the better and more successful the forbearance strategy will be.

Other points

It was also noted that speech analytics can detect people who have rung more than once to ask trigger questions such as what would be the impact on their mortgage if the rate goes up by 0.5%. You can build an algorithm that pulls up a list of people asking similar questions and red flag them.

There are systems now which alert the borrower to a better mortgage deal, even though they’re not specifically looking. It was pointed out that the deal would have to be appropriate to the individual’s circumstances which could be a challenge.

Post offer process

There was a discussion around the post offer process which can be slow with customer feedback showing frustration around valuations and particularly conveyancing. There are technology firms working to improve the visibility of the process and show the customer where they are in the journey. All well and good as far as communication is concerned but that doesn’t help the process move on if there is a weak link. If you are in a chain of five properties and one takes three months to complete, the fact that somebody else can do it in a week is irrelevant because you’ll still be waiting.

ID verification

A customer has to provide ID documentation to the estate agent, intermediary, lender and conveyancer. Could there be one ID hub instead that each part of the process can access? Regulation demands that each supplier is satisfied that their ID verification is robust but some lenders will accept the broker’s ID checks. It boils down to reliance on third parties and is that a regulatory issue or a risk appetite issue?

It was suggested that there could be some kind of block chain or ledger type technology that can allow information to be passed along with the case as it transfers from the first interaction right through to completion. We are quite a long way from that but it could be an interesting solution.

Risk based pricing

There was a discussion on the move from big data to small data. Organisations may be rich with data, but do they actually know their customers? If you have the right data about people this can result in risk based personalised pricing but we’re quite a way from that at the moment. Retention is the obvious place where you could start using your data to offer bespoke pricing based on risk and capital usage. It’s harder in the new business market because there’s a more competitive force.

So to conclude, technology is evolving all the time and 2019 looks like a year where even more technological development will enhance the mortgage and house buying process. From mortgage application through to back office systems and processes as well as post mortgage completion, there is a great deal of work going on behind the scenes.

Source: Mortgage Finance Gazette

Marijana No Comments

What can the mortgage market expect in 2019?

The mortgage market saw a fair amount of product innovation last year and that it likely to continue into 2019. In particular, equity release and the later life lending market is set to grow further as the older population increases. ONS figures show that in 2017, around 18.2% of the UK population were aged 65 years or over, up from 15.9% in 2007; and it is projected to grow to 20.7% by 2027.

Bank of England base rate went up twice last year to end 2018 at 0.75% – the first rises in a decade – but will the rate go up again in 2019? It is unlikely there will be any movement until we know what is happening with Brexit and even then any increases will be small and steady.

House sales have fallen in the past two years and RICS believes sales volumes will weaken by around 5% in 2019. It also thinks house price growth will continue to fade in the first half of the year and come to a standstill by mid-2019 taking the annual figures to a static 0%. Others agree that house price growth will stagnate with national estate agent Jackson-Stops predicting an average increase of 1% this year and Strutt & Parker forecast 2.5% growth.

NAEA Propertymark reports that the number of house hunters registering with estate agents is down as is the supply of housing for sale. It says almost two thirds (62%) of estate agents think the trend of renovating rather than moving will continue this year.

We have seen new lenders come into the market and more are set to enter in 2019 and they have the advantage of starting their journey with new systems. Technological development is going to be even bigger this year and we will see its impact throughout the whole housing chain. From viewing houses in the comfort of your own home to the rise in digital brokers, improvements in mortgage applications, enhancements in the surveying process and conveyancing journey.

Fintechs will work even more closely with established banks, building societies and specialist lenders. And the impact of open banking, which is still in its infancy and is a year old this month, will accelerate as more people get to understand it.

It will be a turbulent year for the UK as it withdraws from the European Union. Competition among mortgage lenders will continue as interest rates remain low and mortgage lending is likely to tick along at similar or slightly higher levels to 2018.

Source: Mortgage Finance Gazette

Marijana No Comments

First-time buyer mortgage approvals hit 10-year high despite higher UK house prices

First-time buyer mortgage approvals hit their highest level in more than 10 years in 2018, the latest data shows.

An estimated 367,038 first-time buyers took out mortgages last year, up from 362,800 in 2017, according to analysis from Yorkshire Building Society using UK Finance figures.

The number exceeded 2007 levels, when 359,000 first-time buyers secured mortgages, and is almost double the 193,300 taken out following the 2008 financial crisis.

Yorkshire Building Society strategic economist Nitesh Patel said: “Property prices have grown at a faster rate than wages over the past 12 years, which has created difficulties for first-time buyers.

“Various factors have helped to alleviate this challenging environment, although the market is still pretty tough for those wanting to become homeowners.

“However, the figures indicate that government initiatives such as stamp duty relief, Help to Buy equity loans and Help to Buy ISAs may have made an impact.

“Over the past three or four years, we’ve also seen more mortgage lenders offering 96 per cent loan-to-value mortgages, as well as strong competition driving mortgage rates down.

“This combination of factors has made buying a home more accessible in recent years. But getting onto the housing ladder is still not an easy step for many young people, as demonstrated by the increasing numbers who have received help from the bank of Mum and Dad.

“Despite these challenges, the first-time buyer market has bounced back following the financial crisis to outperform other sectors, such as the home moving and buy-to-let markets.

“Buying your first home remains tough for many by it’s encouraging to see first-time buyer levels at a ten-year high and climbing.”

Source: City AM

Marijana No Comments

UK mortgage approvals show first annual rise in 14 months – UK Finance

A decline in the number of mortgages approved by British high-street banks flattened out last month, with the first year-on-year rise since September 2017, figures from industry group UK Finance showed on Friday.

Britain’s housing market has slowed since the country voted to leave the European Union in June 2016, and other surveys this month have shown anxiety among consumers and businesses ahead of the planned departure on March 29.

Friday’s data showed British banks approved 39,403 mortgages for house purchase in November on a seasonally adjusted basis, down from 39,640 in October but up by 0.2 percent from November 2017 — the first annual rise in 14 months.

“The housing market is struggling for momentum in the face of still relatively limited consumer purchasing power, fragile consumer confidence and, possibly, wariness over higher interest rates,” Howard Archer, chief economist at consultants EY ITEM Club, said.

Many economists expect house prices to be flat or marginally higher next year, as weakness in London and surrounding areas weighs on faster price growth in other parts of Britain, though the Bank of England has said falls of as much as a third are possible if Brexit descends into chaos.

Prime Minister Theresa May’s minority government plans to seek parliamentary approval for her Brexit deal in the week starting Jan. 14, after scrapping a vote before Christmas due to opposition from lawmakers of all parties.

Without a deal, Britain faces major economic disruption from the reintroduction of tariffs and customs checks at its borders.

UK Finance said credit card lending picked up slightly last month, though this mostly reflected a shift in preferred payment means rather than higher borrowing, with credit cards offering better consumer protection for purchases such as holiday travel.

Net lending to non-financial businesses fell by the most since May, dropping by 656 million pounds ($829 million).

“Overall lending to businesses has remained subdued in this period of economic uncertainty,” UK Finance’s managing director for commercial finance, Stephen Pegge, said.

The Bank of England will publish November mortgage and consumer credit data from a wider range of lenders on Jan. 4.

Source: UK Reuters

Marijana No Comments

68% of brokers think Base Rate had no impact on their businesses

More than two thirds (68%) believe that the two Bank of England Base Rate increases seen since November 2017 had no impact on their business, United Trust Bank’s broker sentiment survey has found.

The Base Rate currently stands at 0.75% following an increase from 0.50% on 2 of August this year.  The rate was increased from 0.25% to 0.50% on the 2nd of November 2017.

Some 16% of brokers felt the two increases had had a positive impact on their businesses as opposed to 16% who felt they had had a negative impact.

Harley Kagan, group managing director – United Trust Bank, said: “It is encouraging to see that for a majority of brokers the two Base Rate increases have had little to no impact on their businesses over the last 12 months.

“I believe the same is broadly true from a lender perspective although expectations of higher mortgage rates to come may have been a contributing factor to a general cooling of activity in the residential property market.

“Developers and housebuilders need to be mindful of future demand and pressure on pricing when planning future projects and that, coupled with Brexit uncertainty, is causing some to take their foot off the gas with new starts.

“The Base Rate has been less than 1.0% for the best part of 10 years. Originally a measure to stave off the worst effects of the financial crisis, for many, and especially the latest generation of consumers and borrowers, ultra-low interest rates are now the norm.”

Kagan added: “As such it doesn’t take much of an increase to inject some nervousness into the market, especially for first-time buyers.

“However, a return to the interest rates seen before the credit crunch seems unlikely. Whilst a 5% Base Rate appeared reasonable in 2008, the PRA recently challenged the resilience of banks and other lenders using a 4% Base Rate for stress testing, an indication perhaps of what they believe would be an extraordinary interest rate for the current economic environment.

“Hopefully, once the nature of our future relationship with the EU is clearer and uncertainty in the economy is replaced with stability, buyers will be back in even greater numbers and housebuilders will be more encouraged to get on with tackling the UK’s inherent housing shortage.”

However, when asked what impact the increases have had on the UK’s residential property market over the last 12 months, 27% believed the effect had been negative.

Nearly half (46%) expected one more increase of 0.25% between now and the end of 2019, taking the Base Rate to 1.0%, while 12% expected the rate to fall.

Source: Mortgage Introducer

Marijana No Comments

October remortgage levels reach ten year high

The remortgage market has reached its highest level in a decade bolstered by competitive rates, according to the latest UK Finance figures.

In its mortgage trends update out today (December 12), the trade body reported 50,500 homeowner remortgages completed in October, representing an increase of 23.2 percentage points on the previous year.

At a value of £9.2bn this was 22.7 percentage points higher than in October last year.

The first-time buyer market also saw reasonable growth in October, increasing by 8.2 percentage points on the same month a year earlier to reach 32,900 deals.

UK Finance found the average first-time buyer in the month was aged 30 with a gross household income of £42,000.

Jackie Bennett, director of mortgages at UK Finance, said the figures showed homeowners were taking advantage of a competitive market and locking into attractive deals.

She added: “This also reflects the large number of fixed rate mortgages coming to an end, which is expected to continue into 2019.

“There has been relatively strong growth in the number of first-time buyers, with schemes such as Help to Buy providing vital support to those getting a foot on the housing ladder.”

The government’s Help to Buy scheme was extended in the Autumn Budget, now due to end in 2023.

In keeping with recent trends, the buy-to-let purchase market continued to soften in October with 6,100 new buy-to-let home purchase mortgages completed in the month – 9 percentage points fewer than in the same month a year earlier.

As a value, this was £0.8bn of new buy-to-let purchase lending in the month, 20 percentage points down year-on-year.

However, the buy-to-let remortgage market increased to 15,700 completions – some 5.4 percentage points higher than the same month a year earlier, at a value of £2.5bn.

Jonathan Harris, director of mortgage broker Anderson Harris, said borrowers were continuing to take advantage of cheap rates, fuelled by continuing uncertainty around Brexit and the economy.

He said: “With the number of new purchases remaining subdued, lenders are focusing on where the business is and offering competitive deals to those coming off fixed-rate mortgages – this trend is set to continue into 2019.”

Mr Harris said landlords were also remortgaging as they made their property portfolios work harder and squeezed out every bit of profit they could.

He added: “First-time buyers are taking advantage of the lack of competition from landlords for smaller properties, such as one-bedroom flats, and we expect this to continue into next year.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, said whilst the figures were a little historic, they did reflect what has been seen on the high-street.

He said: “Buyers and sellers are trying to find an accommodation on price, with affordability just as important as Brexit when it comes to decision making.

“First-time buyers, in particular, are taking advantage of reduced competition from buy-to-let investors still compromised by recent tax and regulation changes.”

Mr Leaf added: “Political shenanigans seem to be more of a preoccupation among buyers in the southeast than elsewhere.

“It remains to be seen how the turmoil of the past month or so plays out in the market but the signs are so far that early new year activity will continue in a relatively subdued manner, much as it has over the past few months.”

Source: FT Adviser

Marijana No Comments

Self-employed mortgage market is ‘no fad’

Evidence of the growing sustainability of the self-employed mortgage sector has been reinforced as the latest data from Knowledge Bank’s revealed it was the most searched for criteria in the residential market.

Lenders who would accept self-employed applicants with one year’s worth of accounts have now been the top search on its Criteria Activity Tracker for three months.

Revealing its top five most searched criteria in November, Knowledge Bank also reported a strong leaning towards higher loan-to-value (LTV) mortgages – a trend which has continued from last month.

Knowledge Bank revealed ‘maximum LTV’ was one of the top five searches in six out of eight product categories within its system.

Buy-to-let

Within buy-to-let, the most commonly searched for criteria was ‘lending to limited companies’ which suggested, said Knowledge Bank, borrowers were looking for the most tax-efficient ways to enter the market.

There was also a focus on entering the sector too, with ‘first-time landlord’ and ‘first-time buyers’ being amongst the most popular searches.

Residential

Within residential mortgages, the top search was for lenders who would accept self-employed applicants with only one year’s accounts. This is the third month it has appeared as the most common search.

Knowledge Bank said it highlighted the self-employed market was ‘certainly no fad’ but a sustained borrower segment.

Help-to-buy and equity loan schemes also made it into the top five searches for the first time in 2018, highlighting the diversity of borrower requirement brokers face on a daily basis.

Equity release

In the equity release sector the top search was for early repayment charges. Knowledge Bank said this reflected the burgeoning product options in the equity release sector and the desire for borrowers to understand any restrictions, should they find an alternative loan solution in the future.

Comment

Nicola Firth, CEO of Knowledge Bank, said its tracker showed activity at the ‘coal face’ of broker activity.

She added: “As we approach the end of the year the pressure on brokers to find lenders for their clients’ mortgage needs becomes more and more intense.

“As a result it’s crucial that no time is wasted trying to pair borrowers with lenders whose criteria simply excludes them.

“As you can see from this month’s activity tracker although some searches remain popular from month to month new search topics are regularly breaking into the top five.

“This is partly due to ever-changing and complex borrower requirements and also as a result of product innovation from lenders that opens up borrowing opportunities. With this constant change it’s crucial that brokers use the tools at their disposal to make their advice process even more focused and productive.”

Top five searches performed by brokers on Knowledge Bank by brokers during November 2018 (Source: Knowledge Bank):

RESIDENTIAL BUY-TO-LET SECOND CHARGE EQUITY RELEASE
1 Self Employed – 1 year’s accounts Lending to limited companies Maximum loan to value Early repayment charges
2 Maximum loan to value First time landlord Debt Management Plan (DMP) – Ongoing / Current Minimum borrowing / loan amount
3 Maximum age at end of term / loan to age First time buyers Interest Only Downsizing protection option
4 Overtime – fluctuating Requirement to be a homeowner / owner occupier Maximum borrowing / loan amount Home reversion plans – early vacancy guarantee
5 Help to buy / equity loan scheme Maximum loan to value Consumer buy to lets Ex-council / Local Authority houses
SELF BUILD BRIDGING OVERSEAS COMMERCIAL
1 Maximum loan to value Regulated bridging Self-employed – Director / Limited company Semi-commercial properties
2 Accountant’s letter / certificate – accepted Maximum LTV for bridging Lending to limited companies Maximum loan to value
3 Stage payment type – advance Development bridging – maximum loan to cost Minimum income – interest only / part and part single applicant Commercial Investment Mortgages
4 Retained / additional property in the background Bridging – maximum borrowing / loan amount Limited company to a sole trader Commercial owner occupier
5 Self Employed – 1 Years Accounts Minimum borrowing / loan amount Buy-to-let Planning permissions

Source: Mortgage Finance Gazette

Marijana No Comments

Buyers and banks ignoring Brexit concerns as mortgage lending hits highest level since January

Mortgage approvals for house purchase have hit their highest levels since January.

Banks approved 67,086 home loans in October, up 2% on a monthly basis, according to Bank of England data on mortgage lending.

Remortgage approvals, which had previously dominated the market, were flat at 49,339.

It backs up estimates by banking trade body UK Finance earlier this week that mortgage lending for house purchase had hit a three-month high.

Commenting on the data, Kevin Roberts, director at the Legal and General Mortgage Club, said: “There’s no doubt that Brexit and the ongoing political uncertainty has made some buyers and potential sellers act with caution, despite the current low interest rate environment.

“However, with its growing choice and flexibility, the mortgage market continues to entice borrowers looking for competitive deals.”

Source: Property Industry Eye

Marijana No Comments

Brokers see fall in mortgage business

Mortgage brokers have seen the biggest drop in business volumes in more than two years, according to the latest Mortgage Market Tracker from the Intermediary Mortgage Lenders Association (IMLA).

The average number of cases brokers handle on an annual basis dropped by 10% in Q3 2018, from 90 to 81 cases. This is the largest quarterly drop since Q1 2016, when annual average cases fell 11% (82 to 72 cases) in Q1 2016 (Chart 1).

For the first time since 2016, the percentage of brokers who professed to be “very confident” about their own business’ fell, from 68% to 60%.

The drop in mortgage broker activity reflects the drop in the number of mortgage purchase completions on a year-on-year basis. According to UK Finance statistics, the number of first-time buyer, homemovers and buy-to-let investors in Q3 2018 all fell compared to a year ago (Table 1).

Table 1: Number of loans completed, quarterly

Type of loan Number of loans Q3 2017 Number of loans Q2 2018 Number of loans Q3 2018 Percentage change YoY
FTB   96,700 92,900 96,200 -0.5%
Homemover
104,900
89,200 100,000 -4.7%
Remortgage
111,100
113,800 120,800 8.7%
BTL
19,700
15,900 16,700 -15.3%
BTL Remortgage
39,300
41,400 40,800 3.8%

Source: UK Finance

Conversely, remortgage activity continues to remain strong. Quarterly figures for residential remortgages were up more than 6%, annual remortgage activity for both residential and BTL loans grew compared with Q3 2017.

Separate IMLA research also suggests that fewer brokers are feeling positive about the mortgage market in 2018.  In H1 2018, a third of brokers (33%) felt the current market would “improve a little” but by H2 2018 that had fallen to just a fifth of brokers (20%).

The quarterly IMLA Mortgage Market Tracker – which uses data from BVA BDRC– found that for those who move forward with a property transaction, the market continues to work well with nearly nine in 10 (88%) of all mortgage applications via intermediaries leading to offers.

Kate Davies, executive director of IMLA, commented: “These latest survey results show that sentiment among buyers and movers is currently at a low point.  Whilst the Brexit negotiations remain so complex and uncertain, many people may be adopting a ‘wait and see’ approach before moving forward with a property purchase.

“While the national uncertainty doesn’t help the prospects of our mortgage brokers, it’s encouraging to see that when an intermediary does apply for a loan on their client’s behalf, they are being accepted. Mortgages going from application to offer remain at more than two-year highs as intermediary lenders continue to find solutions for clients.”

Source: Mortgage Finance Gazette

Marijana No Comments

House purchase mortgage approvals hit a three-month high

Home buyers have received some long-awaited good news as mortgage approvals for house purchase increased for the first time in three months, banks claim – but are they being driven by the return of 100% deposit “supersized mortgages?”

Lending data from trade body UK Finance shows mortgage approvals for house purchase were up 3.6% annually and 21.2% on a monthly basis to 45,289 during October.

Lending to home buyers had been falling since July 2018 and hit a six-month low in September.

The boost seems to have come at the expense of remortgaging, with approvals in this area down 13.5% year-on-year to 33,505.

The value of gross mortgage lending across the market in October was up 5.6% to £25.5bn.

It comes amid reports of the return of controversial “supersized mortgages,” which require little or no deposit and were seen as a cause of the 2008 financial crisis.

Comparison website Moneyfacts lists 16 different 100% loan-to-value mortgages that don’t require any deposit but do need a guarantor, which is usually a family member or a charge placed on another property or someone’s savings.

Bank of England data shows that a quarter of mortgages are now for 4.5 times someone’s salary or higher, compared with a fifth just three years ago.

Debt charities and mortgage brokers have warned it is important that borrowers aren’t stretched too far.

However, UK Finance doesn’t seem concerned.

A spokesman told the Daily Mail: “High loan-to-income mortgages are only likely to be available to those who have good prospects for wage increases, such as those in certain professional roles.

“Before they are able to offer any mortgage, lenders must undertake a strict affordability assessment in accordance with the rules outlined by the regulator.”

Source: Property Industry Eye