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Struggling to get a mortgage? Try a broker… or a small lender

It’s mayhem in the mortgage market at the moment due to a paperwork backlog at banks and pent-up demand from the lockdown.

Lenders are making changes to their home loan deals with little or no notice to limit the amount of business they take on.

So that cheap rate you were eyeing up could quite easily be gone tomorrow. Or the terms and conditions may change suddenly, meaning you no longer qualify for a loan you thought had been secured.

Here are four other places to turn if you are caught up in the chaos…

SMALLER LENDERS

Lee Hockins, from Summit Wealth financial advisers, says: ‘It’s virtually impossible at the moment to get a mortgage at 95 per cent loan to value and there are only a small number of lenders offering 90 per cent mortgages – and none of the big ones.’

Lloyds, NatWest, Barclays, Santander, TSB and most recently HSBC have all pulled out of the market for mortgages with a deposit of 10 per cent or less, hammering first-time buyers.

The good news is that smaller regional building societies may be able to help.

Many still assess applications manually, unlike big banks which often use automated underwriting technology which can result in a computer-generated rejection.

Having your application assessed by an individual means your specific circumstances can be taken into account. Try the Buckinghamshire, the Penrith and Stafford Railway.

To find out more about how we can assist you with your Mortgage requirements, please click here to get in touch

BANK OF MUM AND DAD

Popular mortgage deals that allow parents to help their offspring on to the ladder are being cut back too.

But the Bank of Mum and Dad isn’t entirely closed.

After Lloyds shut its Lend a Hand mortgage to new applicants, the main mortgage designed for parental help is Barclays’ Family Springboard deal.

This allows a family member or friend to put at least 10 per cent of the purchase price in a savings account with the bank in place of a deposit.

Ray Boulger, of mortgage brokerage John Charcol, says: ‘The Barclays Springboard mortgage is the best of the deals for people who are getting help. It’s really good value for first-time buyers with either a small or no deposit, who has someone who wants to help but also wants to keep control of their funds.’

Tipton & Coseley Building Society has launched a Family Assist mortgage offering up to 100 per cent loan-to-value mortgages for buyers, so long as a relative has a 20 per cent charge on their own property or puts 20 per cent of the amount borrowed into a savings account.

But some are limiting the amount of outside help allowed. Nationwide recently changed the criteria for gifted deposits, so borrowers who want a 90 per cent loan-to-value mortgage can only be given 25 per cent of the deposit, meaning they have to provide the rest themselves.

A BROKER ON YOUR SIDE

With banks launching and ditching mortgage deals on an almost daily basis, a broker can really prove their worth.

Not only do they often get tipped off in advance when a deal is about to be pulled, they are clued up on the specific criteria that each lender will look for in your mortgage application – and can stop you wasting time. Brokers will also have a good idea how stretched a bank’s mortgage department will be, helping you avoid disappointment when demand is high.

TRY A LIFETIME MORTGAGE

For the over-55s who are retired or approaching retirement, an alternative option is a so-called retirement interest-only mortgage. Boulger says: ‘With these deals, the eventual sale of the property can be used as the repayment strategy.

‘So lenders assess whether you can afford the loan on the cost of paying the interest only in retirement, as opposed to a repayment deal where you have to pay back some of the capital each month.

‘The downside is that if it’s a joint application, lenders have to decide whether, after one partner dies, the surviving partner would be able to support the mortgage from the remaining income.’

Lenders offering this type of mortgage include Nationwide, Leeds, Bath, Ipswich, Loughborough and Tipton building societies.

…OR LET THE CHAOS PLAY OUT

  • Mortgage rates are expected to remain at current levels for some time – but house prices may not.
  • Many experts believe that while prices are heading up at the moment, there could be a fall back when the stamp duty holiday ends in March next year.
  • Remember, if you are buying and selling at the same time, then a fall in the market is likely to impact both ends of the deal.
  • So you may be no worse off if you wait – and find it easier to borrow the amount you need for your next mortgage.

By Sarah Bridge, The Mail on Sunday

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Brokers report buy-to-let bounce

More than half of mortgage brokers have seen an increase in buy-to-let purchase business in recent weeks, according to new research from broker forum Cherryplc.co.uk.

The survey, carried out with Click2Check, found that 57% of intermediaries have seen demand for buy-to-let purchase deals increase, compared to just under 12% who reported an increase in demand for capital raising on a remortgage.

The study found there had been an increase in the number of clients with more specialist requirements. Almost one in ten (8%) brokers saw a jump in demand for HMO purchase loans, while almost 4% have seen a rise in enquiries for lending on both multi-unit blocks of flats and holiday lets.

There has also been a rise in short-term lending popularity, with 8% of advisers working with more clients on sourcing bridging loans for refurbishment tasks.

Donna Hopton, director at Cherry, said it was clear that there has been a spike in buy-to-let activity in recent weeks.

She explained: “Whereas the buy-to-let market has been dominated by remortgage business in recent years, it is purchase enquiries that are currently keeping brokers busy. The window of opportunity for reduced Stamp Duty Land Tax will certainly be helping to drive this demand, but we are seeing that the market is generally buoyant, which is a positive sign for advisers, and the economy.”

Jeff Knight, director of marketing at Foundation Home Loans, pointed to recent research which had suggested confidence among landlords is now higher than it has been in the last few years.

He continued: “This presents a great opportunity for landlords and it’s no surprise that many have seen this period of reduced Stamp Duty as an opportunity to grow their portfolios.”

By John Fitzsimons

Source: Mortgage Finance Gazette

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Mortgage brokers urged to diversify in wake of Covid

Mortgage brokers have been urged to branch out into specialist lending as a way to diversify against falls in mortgage activity.

Encouraging brokers to “embrace” specialist lending, Rob Barnard, director of intermediaries at Masthaven, a specialist lender, said: “I think brokers now won’t just rely on mortgage business; they won’t just rely on product transfer business. Because they’ve had a period here right at the heart of the lockdown where there wasn’t a great deal of mortgage business about”.

Statistics from the Bank of England show approvals for purchase mortgages reached 40,000 in June, up from the record low of 9,300 in May, but still below a pre-Covid level in February of 73,700.

Mr Barnard added: “One area that we found that was rebounding quicker than any was bridging. And we found that brokers wanted to find out more about the bridging sector.”

He continued: “Make sure that you’re not just dependent on mortgage business, so if this ever happened again, you’ve got more strings to your bow”.

To find out more about how we can assist you with your Mortgage requirements, please click here to get in touch

Anthony Rose, director at LDNfinance, said his firm had seen a “large increase” in clients who required a bridge, or thought it might be their “only option”.

Jamie Lewis, managing director at Affinity Mortgages, which also offers advice on bridging loans, said his firm launched a specialist lending arm in 2018 after packagers and master brokers did not meet their expectations.

Mr Lewis said: “We noticed that we as a broker were being asked for more than mortgage broking and were merrily delivering these clients to a third party business that maybe had a different working ethic to ours where the client will always come first”.

Additionally, Masthaven’s Mr Barnard predicted a change in demand for specialist lenders. He said: “Lots of people’s financial circumstances have been radically affected by the crisis. Small business owners, the self-employed, people who’ve been furloughed or who have had to take a mortgage payment holiday may all now be prospective customers for specialist lenders”.

Carl Shave, director at Just Mortgage Brokers, agreed that in the current financial and economic climate, cases previously regarded as “vanilla” were no longer necessarily as straightforward.

Likewise, LDNfinance’s Mr Rose said that the financial implications of the coronavirus for certain clients had “highlighted the need to be able to look at the full range of options, ranging from the most vanilla high street solutions all the way to the most complex bridging or private bank mortgage”.

Clayton Shipton, managing director at CLS Money, also agreed with Mr Barnard, and warned that some clients may not look elsewhere if they were unable to find a mortgage through an adviser with limited specialist knowledge.

Mr Shipton added: “It shouldn’t come down to a lottery of picking the right broker – every broker should be educated in prime and specialist lenders”.

By Chloe Cheung

Source: FT Adviser

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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

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Third Of Mortgage Brokers’ Buy To Let Business From Limited Companies

Approximately a third of mortgage brokers’ buy to let business will come from limited company clients in the next few years.

The prediction came from Mortgages for Business chief executive David Whittaker. Whittaker stated that there remained ‘considerable opportunity’ for mortgage brokers in the buy to let sector, despite a shrinking rental market.

At the Financial Services Expo in Manchester, Whittaker stated that falls in buy to let lending were beginning to stabilise but an uptick is not on the horizon. He said: ‘In 2018 we expect there to be £32 billion of gross lending, and this will fall to £28 billion in 2019. However we do believe this will have bottomed out by 2020, and a reshaped buy to let market is where advisers will do very well.’

Research from Mortgages for Business suggests that the buy to let market is currently evenly split between limited company and sole name business. However, seven out of 10 new purchases are now completed via a limited company structure proving its popularity.

According to One Savings Bank sales director Adrian Moloney, 17 lenders now offer close to 300 limited company products for mortgage brokers to choose from.

Whittaker also called for increased transparency from for buy to let lenders regarding their policies for properties that fail the new Energy Performance Certificate regulations.

The regulations that came into force on 1 April this year make it illegal for landlords to start new tenancies if a property has an EPC rating of F or G.

Whittaker said: ‘What will lenders’ position be on properties which don’t make the grade? As of now only three lenders have made their position clear on this issue. Clients will need the right EPCs on all their properties, but 4.3 per cent of properties are currently in the worst ‘G’ rating – and over 11 per cent of these are in the private rental sector so this could be a major issue.’

Source: Residential Landlord

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Most home buyers would use a mortgage broker

The majority of home movers and first-time buyers would use a broker to secure their mortgage, according to Legal & General’s Mortgage Myths campaign.

The Legal & General Mortgage Club’s research found that four out of five UK homeowners (81%) who bought a property in the last 12 months would use a broker if they were securing their mortgage again.

Meanwhile, three-quarters (75%) of those intending to buy their first home with a mortgage  in the next six months would be likely to seek the advice of a broker.

Consumers are also more likely to use a mortgage broker if they have specialist circumstances:

  • 71% would be likely to seek advice from a broker if they had a poor credit rating
  • 62% would turn to use a broker if they were self-employed or worked as a contractor
  • 67% would speak to a broker about buy-to-let mortgages.

More than half (53%) of respondents who had made a recent home purchase said they used a mortgage broker because it gave them access to a wider range of mortgage deals. Consumers have access to 30,482 mortgages compared to only 3,408 products for those who go direct to a lender, according to mortgage sourcing firm Trigold.

A third (33%) of respondents said using a broker removed the hassle of filling out forms and applications, while 36% felt brokers provided them with reassurance of talking to someone.

Kevin Roberts, director of Legal & General Mortgage Club, commented: “These figures should come as a positive message for mortgage brokers across the UK, showing that there is clearly a recognition amongst consumers about the value of professional advice, whether they are an existing homeowner, a first-time buyer, a borrower with a complex income or a prospective landlord.

“However, while this is clearly positive news, there are still buyers out there that either remain unware of the role of a broker or who have misconceptions about the value they can provide. As an industry, we need to reach out to these consumers and use campaigns like Mortgage Myths to showcase the important role that brokers play in helping borrowers across the UK.”

Source: Mortgage Finance Gazette

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Three actions for mortgage brokers to take in 2018

A quick look back at 2017 shows that mortgage brokers had a lot to be thankful for.

In spite of a weaker economy, the election and Brexit uncertainty, last year was still a strong year for the mortgage market.

The industry has remained resilient in a low interest rate environment and the Autumn Budget delivered welcome news with the promise of 300,000 new homes a year, £10bn in funding for Help to Buy and the exemption of stamp duty for first-time buyers.

Brokers and lenders have been able to return to work in January with significant optimism for the year ahead. Whether it proves warranted, however, will partly depend on them.

For a start, when it comes to government announcements, we’ve seen pledges to tackle the housing crisis with thousands of new homes before.

What matters is whether it materialises in the form of houses on the ground. The whole industry should be pushing to see that it does.

In the meantime, affordability will remain a key issue in 2018.

Analysts at Hometrack recently noted that the house price-to-salary ratio in London hit a record high at 14.5 times the average wage.

Stamp duty savings pale beside the size of deposits savers still have to muster and, even if interest rates remain low, the next rise could come sooner rather than later.

Of course, brokers can help here. In fact, this just means they’re more important than ever.

But to do so they need to work hard on three fronts:

1) First, they must be clear about the value they bring.

Our recent ‘Value of a Broker’ campaign showed worrying misunderstandings about a broker’s role.

Fewer than half, for instance, knew that the broker works primarily for the borrower and more than half of consumers thought brokers offered them the access to the same products as when going directly to a bank or building society.

Advisers need to be loud and clear about the value they bring, including the access they offer to thousands more mortgage products for consumers.

2) They need to make sure they have the knowledge to make the most of opportunity.

Where buyers are struggling to raise a sufficient deposit, advisers need to be in a position to present them with all the options.

For example, could the Bank of Mum and Dad help? If they can’t afford to buy locally, could buy-to-let somewhere else offer an alternative way to secure a foot on the housing ladder? Are they aware of schemes such as Shared Ownership that could be an alternative route?

Brokers need to have a broad view of the market, be aware of all the options available to buyers and be able to tackle any misconceptions clients might have about housing schemes.

If brokers are to also fully showcase their value to consumers, they’ll need to meet growing demand from borrowers with specialist or complex circumstances. Whether that’s advising their clients on equity release or buy-to-let themselves, or referring their customers to a master broker that can offer them the support they need, in 2018 intermediaries will increasingly need to be a one-stop-shop for the consumer.

Retirement lending is only growing in importance and buy-to-let is becoming increasingly specialist, so for those who do intend to support their clients in these areas, education will remain key.

Brokers will also need to look to the growing opportunities that product transfers and remortgaging bring. Both provide a chance for brokers to really add value by saving their clients potentially thousands of pounds on their mortgage, while also deepening their relationship with the customer – stopping lenders or other brokers stepping in to take over.

Product transfers specifically are simple, quick processes that require no new underwriting. Advisers will need to ensure this is the right option for their client, but there is potential to grasp here, including for many buy-to-let clients who are yet to remortgage since the adoption of the Stamp Duty tax.

3) Finally, brokers need to ensure they make the most of technology.

That doesn’t mean they need to switch to robo-advice, but it does mean using the technology available to enhance their efficiency and service.

Whether it’s case management or digitising client and lender communications to speed up mortgage applications, brokers must grasp the opportunity technology provides.

It’s not likely to end well for those who bury their head in the sand, and by the time they try to catch up with the changes in technology, they may find it’s too late.

For those willing to embrace the opportunities in 2018, though, the coming year looks positive.

Jeremy Duncombe is director of Legal & General Mortgage Club

Source: FT Adviser