While the news will be different, the themes remain constant; new lenders coming to market, old ones pulling back, regulation and criteria getting tighter and then loosening off – government initiatives to boost demand for housing and then initiatives to tackle the shortage of homes they have just created.
You’ve heard it all before, and we’ll forgive you for rolling your eyes when the latest solution to fix home buyers’ woes is announced with vigour by the prevailing PM.
Well now it’s your turn to set the record straight. Mortgage Solutions took its Supper Club to Southampton, to ask a group of local mortgage intermediaries, hosted by Leeds Building Society, to uncover the reality behind the housing headlines in 2016.
New lender launches
The new lenders which arrived on the market in 2016 had failed to make an impression on the Southampton brokers. Perhaps too early and with many launching with tightly-controlled distribution, but none of the intermediaries had heard of Vida Homeloans and The Mortgage Lender, last years’ new players, nor of New Street Mortgages, part of the Northview Group which owns Kensington. However, Pepper and Bluestone, on the other hand, were new entrants praised for bringing a ‘valuable contribution to the market’.
Both lenders have been around for over a year, giving them to time to market and establish themselves more than the other newbies but their willingness to accept applications from contractors and the ease at which brokers can get through to underwriters to discuss their cases was what singled this pair out as the ones to watch, the brokers say.
“Give us lenders that consider net and gross profits rather than salary and dividends,” was one request from the group.
What you know about Modern Methods of Construction, the latest saviour of the housing crisis
Modern Methods of Construction (MMC) aim to reduce the amount of time it takes to construct a house on site, by building most of it off site. According to government-commissioned reviews, it is the direction house building needs to take if the UK wants to solve its supply crisis, but the concept was met by the Supper Club attendees with skepticism. “Do you mean pre-fab housing”, asked one broker, and yes that’s what we meant.
The problem is, those companies producing modular homes, as they would prefer them to be described, want to dissociate themselves from the images of post-war pre-fab housing, which had a shorter shelf life than bricks and mortar and were nigh on impossible to secure a mortgage on. However, as the Southampton brokers pointed out, “you can call it what you want but they are pre-fabricated homes nonetheless”. What they want to know, is not how easy it is to build them, but how easy it is to sell them on.
Questions being fired around the table were; “What will the resale market be like for these properties; who will lend on them, and, they are apparently supposed to outlive bricks and mortar but what guarantees are there that they will?”
Your biggest challenge
In Southampton, as in many towns and cities across the UK, the toughest market to service is first-time buyers. It seems the majority of intermediaries dining with us say gifted deposits were now the only way first-time buyers were able to get on the bottom rung of the property ladder. Those going for a 95% LTV mortgage went through a ‘sit and pray’ process as all income and outgoings were chewed over by the lender’s affordability calculator. Those without external help, were trying to buddy up in order to buy a home, which can be problematic when one applicant does not intend to live in the property.
The lenders stealing your hearts and making life easier
Skipton Building Society, say the Southampton brokers, has a great approach to underwriting applications from self-employed borrowers and is open to ignoring minor glitches in credit history.
Leeds’ stance on holiday lets was celebrated for being straight forward; ‘very impressive’ was the verdict. Halifax and Barclays, meanwhile, are the go-to lenders for speed.
Of the smaller lenders, namely the building society set, the brokers singled out Darlington, Newbury and Buckinghamshire for praise. The Darlington’s acceptance of applicants paid in dollars and euros had helped out one of the brokers around the table. The Bucks, says another, was serving the 95% loan-to-value (LTV) borrower who falls outside the Halifax and NatWest model . The Newbury was labelled ‘easy to deal with’.
Where do the opportunities lie?
The importance of developing technology to engage with customers online and raising your digital presence were heavily tipped as the areas of business brokers should have been focusing on in 2016 to achieve growth over the next few years. Our Southampton brokers, however, told us their focus had been on up-skilling in preparation for the explosion of lending they saw coming down the line in the later life and equity release sectors. Later life, they say, is where the market will see real growth in the next 10 years.
There was a lot of interest in the announcement that Shawbrook was developing a range of mortgages for borrowers aged 55 and over which would allow them to extend their interest-only loan by remortgaging to the challenger bank over a term of five to 15 years.
Several brokers around the table had taken the equity release qualifications recently. In Southampton, we were told, a lot of mortgage customers were on interest only with no repayment vehicle and would only become aware that they were facing a problem in five or 10 years’ time. The brokers predicted a rise in demand for part-and-part options and lifetime mortgages, they told us, will increase in popularity.
We would like to thank all our brokers and hosts for their time and an insightful debate.
Adrienne Wareham, Monet Financial Management
Jason Abbott, Birch Financial Services
Kevin Banting, Oak Grange Mortgages
Stacey Gulliver, Moneysprite
Steven Hulbert, Cadde Wealth Protection
Yda Nevitt, Contractor Mortgages
Tim Burrows, Oak Grange Mortgages
Iain Cartlidge, Mortgage Solutions
Victoria Hartley, Mortgage Solutions
Samantha Partington, Mortgage Solutions
Mark Collar, Leeds Building Society
Andy Millard, Leeds Building Society
The Grand Harbour hotel, Southampton.