Big banks say no plans to discount 20/21 for self-employed; NatWest policy under review
Barclays and Halifax are sticking to their existing self-employed criteria which asks borrowers for proof of earnings for the latest two trading years. The latest tax returns cover the tax years 18/19 and 19/20 so if a borrower applied for a mortgage now, pandemic trading is not assessed. However, the banks did not divulge how they will view the 20/21 trading period or if they plan to change their policies in the future.
Barclays has confirmed that for businesses closed in 2020 it will take into account self-employed income support measures as part of income.
NatWest hinted that changes to its policy that excludes borrowers who have applied for a Self-Employment Income Support Scheme (SEISS) would soon follow.
Nationwide says it will continue to refer most of its self-employed cases to an underwriter who decides on a case by case basis what is required to support the application.
HSBC’s current approach is similar to the stance taken by Santander. The bank asks for business bank statements from January, February or March 2020 and the last 60 days’ worth of business bank statements to provide a view of pre-pandemic and current trading conditions.
Santander announced its change of policy last week. The bank moved to exclude the 2020/21 tax year for self-employed borrowers who have suffered an out of the ordinary loss of earnings.
To help brokers calculate how much their clients can borrow, the bank launched a broker-only calculator this week on its intermediary website this week.
Brokers praised the decision and called for other banks to follow.
Although none of the banks Mortgage Solutions approached were planning to adopt Santander’s approach, NatWest said changes to its policy were coming.
A NatWest spokesperson said: “We are currently reviewing our policies for self-employed customers who have applied for a SEISS grant. We are looking to update our policies and affordability calculators in the near future to better support these customers. We continue to consider other forms of income to support an application for self-employed customers such as rental, employed income or other businesses.”
A spokesperson for Nationwide said: “The impact of Covid-19 means that underwriting mortgages for self-employed borrowers is much more complex than before as a result of the difficulties in being able to fully assess long-term affordability in these uncertain times.
“Therefore most self-employed applications continue to be referred to our underwriters who will confirm on a case-by-case basis if they require additional evidence to support their assessment.”
Additional evidence includes accounts, business bank statements, work contracts, details of what government support applicants have received and details of what impact Covid-19 restrictions have had on the applicant’s business and any adaptations they made.
Record month for house purchases as March up 108 per cent YoY – HMRC
HMRC’s provisional monthly housing data revealed March residential transactions to be the highest month on record, when looking at non-seasonally adjusted figures, and 50 per cent up on the previous month.
Following the closure of the housing market at the start of the pandemic until May and June, year-on-year decreases of around 50 per cent were seen in March and April. Since then, UK residential transactions have gradually increased.
A combination of the increase in the nil-rate stamp duty threshold to £500,000 and a race to beat the original stamp duty deadline of the end of March were the driving forces behind the bumper month that saw a 108 per cent rise in transactions year-on-year, the government said.
In the Budget on 3 March, the chancellor announced the deadline for the end of the holiday would be extended until the end of June before gradually tapering off.
John Phillips, national operations director, Just Mortgages and Spicerhaart said a rise in savings built up over lockdown had also led to increased housing activity.
“The spike in property transactions in March have undoubtedly had a helping hand from the collective accumulation of additional savings during lockdown among UK households,” he said. “This is estimated to total a whopping £180bn and will be a contributory factor as to why people are relocating to larger properties with more outdoor space.
“As we look forward, this demand is only set to increase as those with smaller deposits will be entering heated waters thanks to the government’s new 95 per cent mortgage guarantee scheme.
“With the scheme affording more first-time-buyers the opportunity to get a foot on the housing ladder, we can safely hypothesise that this, coupled with the successful vaccine rollout and increased confidence in the economy, will inevitably add to the sharp-set hunger in the market.”
Nationwide opens door to bonus, overtime and commission income
The Society temporarily suspended accepting bonus, overtime and commission income at the height of the pandemic due to economic uncertainty.
However, since July last year Nationwide says it has continued to relax its criteria and expand lending. Yesterday the lender revealed it would offer a 5.5 loan-to-income multiple to qualifying first-time buyers taking a five or ten-year fixed rate up to 90 per cent loan to value. The enhanced LTI is available from 26 April.
It also increased its maximum lending term back up to 40 years.
Henry Jordan, director of mortgages at Nationwide Building Society, said: “As a responsible lender it’s important we ensure that borrowers can afford their mortgage payments both now and in the future.
“At the height of the pandemic, with lots of economic uncertainty, particularly in the jobs market, we took the decision to suspend accepting bonus, overtime and commission payments. As we ease out of lockdown we are now in a position to relax our criteria further and support more borrowers in buying a new property.”
Hodge cuts rates and Vernon BS strikes club deal
Rate cuts of 0.20 per cent have been applied to deals up to 75 per cent loan to value (LTV) on the lender’s 50-plus suite and across the holiday let range.
A two-year discounted rate up to 75 per cent LTV has been added to Hodge’s later life selection. Discounted rates of 3.09 per cent and 3.20 per cent are available up to 60 per cent LTV and at 75 per cent LTV rates are priced at 3.19 per cent and 3.30 per cent.
Hodge recently increased its LTV from 70 per cent to 75 per cent across its later life range and increased its maximum loan size from £1m to £1.5m.
Emma Graham (pictured), business development director at Hodge, said: “The first quarter of 2021 has been a period of resetting and reassessing for our team. We have taken a long hard look at the market, listened to what brokers and their customers are asking for and have amended our proposition accordingly.”
Vernon Building Society has linked up with The Money Group’s new mortgage club, TMG Club, to give members access to its full range of mortgage products.
Head of mortgage distribution at Vernon Building Society Brendan Crowshaw said: “TMG Club is an exciting addition to the intermediary mortgage market and it’s obvious the leadership team are passionate about bringing positive change to brokers. We can’t wait to help its members find specialist and mainstream solutions for their clients.”
Hope Capital launches broker club HCC
Brokers are invited to join the club if they have placed a “substantial” amount of lending business with Hope Capital.
In return they receive a dedicated underwriter and business development manager, early access to new products and exclusive rates. Higher proc fees may be offered to members for set timeframes and exclusive products may form part of a future benefits package.
So far 16 firms have joined the club. Hope Capital has not set a target for how large it wants the membership of the club to be and will not disclose the names of the broker firms.
Sinead Moynihan (pictured), sales director at Hope Capital, said: “Inviting a selected number of brokers into The HCC is a way for us to express our gratitude and appreciation to those with whom we have worked with on a substantial number of cases.
“We wholeheartedly appreciate their support and commitment to Hope Capital and want to provide them with a range of extra benefits and solutions, which will enable the broker to achieve their client’s requirements.”
Banter and bullying or community and kindness: five brokers open up about life on social media
Whichever platform you use, a simple refresh of your timeline offers an endless stream of new posts.
For some brokers social media has offered a sense of community, strong professional networks and encouragement, while others find it unwelcoming and isolating.
What is meant as banter by one person can feel like bullying to another and experiences on a personal and professional level can have long lasting positive and negative effects on users’ behaviour.
Mortgage Solutions spoke to the Centre of Mental Health and six mortgage professionals to find out more about how social media makes them feel, what steps they have taken to protect themselves and the impact social media can have on our states of mind.
Andy Bell, deputy chief executive of the Centre for Mental Health, says: “Inevitably the pandemic has had a huge impact on our mental health.
“Living in isolation or quarantine-type conditions and coping with feelings of insecurity, particularly if you are self-employed or in some other way feeling financially insecure, can have a significant effect on our mental health.
“In some ways the use of social media could make it worse still or be an important way of helping to manage the feelings of isolation, losing a loved one, vulnerability or dealing with added pressures like home schooling.”
Community or clique?
Lots of brokers use social media platforms such as Facebook groups, Linkedin and Twitter to keep up with industry news, share work triumphs and tribulations or to ask for support or suggestions from their peers.
Theo Makris, senior financial consultant at PIA Financial Services, says his membership of a 1000-strong Facebook group for mortgage brokers has been a great source of guidance and a friendly place to ask questions.
“I can honestly say there is a comfortable experience in the group. The group hosts have tried to create a very open platform where even inexperienced advisers can ask the simplest questions,” he says.
“Out of all the social media groups I am part of it is no doubt the most enjoyable and productive.”
Rob Gill, managing director of Altura Mortgage Finance, says he too has found a lot of support from other brokers online.
He says: “At the beginning of the pandemic, people were going out of their way to be kind. If I wrote a post and it sounded like something was wrong I’d get a call from someone who’d read it making sure I was okay.”
However, not everyone feels the same sense of community on social media, and if you’re in not in a group or clique of brokers who interact frequently, you can feel like an outsider.
One mortgage broker told Mortgage Solutions that social media can feel like a lonely place, professionally.
“Unless my tweet is controversial, I find I get minimal interaction from other advisers. Occasionally I ask other brokers for advice but I don’t get much of a response.
“There’s a big mortgage crowd on twitter who are mainly men and just engage with each together. It feels like a club and I’m not part of it.”
Thinking about how our messages are received by others is a way of showing kindness online, says Bell.
Kala Sreedharan, director of broker consulting firm Alligate Consulting, says she has limited her professional posts in recent months, and instead prefers to comment or support her colleagues with suggestions when they ask for help.
She says she has become more mindful of how her posts might be felt by her followers.
“I recently changed my mind about putting a post [on],” says Sreedharan.
“I was about to share a success story about work on Linkedin and the same day I found out that two of my ex-colleagues were made redundant and that stopped me from posting.”
She has the same attitude on her personal platforms. After a close friend suffered a miscarriage she is sensitive about sharing information about her children and how her posts are worded.
Gill says he avoids tweeting about working weekends or working late in case it makes other brokers feel under pressure to carry on working when they need a break.
He remembers feeling under pressure himself last summer after looking at social media.
“News of the stamp duty holiday had just broken but it wasn’t translating into great numbers for Altura. I was looking on Twitter and seeing everyone else was doing really well which made me think, what are we doing wrong? It depressed me for a week or two but then I picked myself up.”
After analysing his operations, Gill saw a swift turnaround in September.
Instead of posting messages about his productivity, he prefers to tweet about how he likes to relax playing tennis with his children or having a beer at the end of the day.
The unnamed broker says she always thinks how her posts will be received by others and has second guessed herself on many occasions, deciding not to post. She says for this reason her professional social media interaction is limited.
Whether you use Instagram or not, you will no doubt have heard of Instagram envy. Users scroll through posts of seemingly perfect faces, bodies, lifestyles and jobs which can lead to feelings of inadequacy or jealously.
Bell uses the term ‘the negative comparison’ effect, which leads you to think that other people are having a much better life than you are.
He says it has not yet been found to be a cause of mental illness but it can reinforce any negative feelings you have about yourself.
To protect his mental health, Makris steers well clear of the platforms where people behave in a such a way.
“I don’t use Instagram either personally or professionally because I believe it has a negative mental impact,” says Makris. “There’s a lot of ‘look at me, look what I have, look how great my life is’.
“It creates a false reality and effects people’s self-esteem, especially the young and impressionable. I feel Linkedin has started to go that way too.”
Sreedharan adopts a sceptical mindset when using social media, which she has found helps her to keep negative feelings at bay.
“People usually put forward the best version of themselves and their successes when writing a post and this includes me.
“There are hardly any people who tell the whole world about their hardships. Just the very knowledge of this has helped me regulate my emotions when reading posts and success stories of other peers in the industry. I am obviously always very happy for them, but no one has a perfect life.”
Dealing with banter and bullies
Being drawn into a twitter spat or receiving harsh comments on your posts is one of the risks of putting yourself out there on social media. But being on the receiving end of unkind comments or bullying can have more longer lasting effects.
Some brokers say they have suffered increased online harassment and bullying from inside and outside the industry and have had to resort to blocking people or closing down their accounts to protect their mental health.
The unnamed broker says she has unfollowed a mortgage professional from a large mortgage company after being targeted by nasty comments.
“Every time I posted on Twitter, he would leave a sarcastic comment. He made me feel stupid because he was a fan of using big words and I’m not because I’m dyslexic.
“Last year I felt I deserved a pat on the back for managing to get through a huge number of mortgages. As I work by myself and there was no one else around to share that with, I shared it with my followers.
“Later that day in his posts, there were sarcastic comments about people praising themselves. I didn’t need the negativity so I defriended him. But it has a longer effect on me, because I don’t feel I can share my successes anymore.”
Mobeen Akram, national new homes director at Mortgage Advice Bureau, enjoys using social media professionally but her personal experience has been tainted by online bullying causing her to withdraw.
“I love seeing support for issues such as diversity and inclusion which brings us all together and I enjoy liking and sharing topical subjects related to the mortgage market,” she says.
“But I don’t hit the like button on personal views which may offend some people.
“I keep my distance on social media. I came off Facebook and have limited my activity after being the victim of harassment from other women.”
Gill says he’s found that some of his connections on social media have been uncharacteristically picking fights which he believes is an indication they are struggling.
To shield himself he’s found it easier to block or mute their posts for now but says he’s looking forward to reconnecting with them again in the future.
“I have reacted but I don’t anymore,” he says. “It’s been a revelation to not respond and walk away.”
Bell concludes by highlighting that we are all responsible for our interactions on social media and we have a duty to look after each other online.
But he emphasises in some ways we have yet to learn how to do that safely and kindly.
Nationwide ups LTI for first-time buyers
From 26 April, first-time buyers will be allowed to stretch their salaries five and half times in order to reach the mortgage amount they need to buy a home with a ten per cent deposit.
To qualify for a Helping Hand mortgage, borrowers must pick a five or ten-year fixed rate mortgage from its standard range.
A lower stress rate is combined with the 5.5 times income multiple to increase the size of the loan offered by 20 per cent. The society would not disclose the stress rate but said it was a new rate that applied specifically to this range.
The change means a first-time buyer couple with a joint income of £50,000 can now borrow up to £275,000 with Helping Hand, rather than the £225,000 they could borrow previously, assuming a ten per cent deposit and no other costs impacting affordability.
Nationwide said borrowers will be subject to “robust underwriting checks”, which includes scrutiny of the amount of unsecured debt on the credit report and a full assessment of the credit score.
If necessary a lower income multiple will offered.
Self-employed borrowers are currently excluded from the Helping Hand deals and while the range has launched to first-time buyers only Nationwide may look to extend it to home movers in the future.
To manage volumes, a minimum single annual income of £31,000 or joint earnings of £50,000 apply, which are inline with average national salaries for the typical first-time buyer age group. The minimum salaries will be kept under review.
First-time buyers using Helping Hand for enhanced affordability will have access to the standard product range, with consistent product rates, fees and features. All first-time buyers benefit from £500 cashback on completion of their mortgage.
Nationwide has set aside £1bn of lending to fund the mortgage range.
Henry Jordan, director of mortgages at Nationwide Building Society, said: “In the UK there are nearly five million private rented households, but many of these renters have dreams and aspirations of buying a home of their own.
“However, with household incomes rising at a slower rate than house prices, many first-time buyers are finding it increasingly hard to get onto the property ladder. Our new Helping Hand option supports borrowers in meeting the affordability requirements, making it easier for them to buy a home of their own.”
Nationwide is currently offering 95 per cent LTV mortgages to its existing borrowers only. It is understood the society is reviewing a wider launch but no plans are yet underway.
Age pledges to switch equity release borrowers from high cost loans
The broker wants lifetime mortgage borrowers to get in touch even if they did not take out their original equity release loan through Age as long as they have had their loan for at least 12 months.
Steve Auckland, chief executive of Age Partnership, told the Mail on Sunday the equity release industry has in the past had a “tarnished reputation”.
He added: “People felt they were being ripped off, some of the earlier products were really inflexible and the loans had high interest rates.”
High interest rates are those considered to be six per cent or more.
In February, Moneyfacts’ analysis found that the average equity release interest rate was 3.95 per cent, the lowest it has been since Moneyfacts began recording rates. The number of deals available to borrowers was also at an all time high with 488 loans on offer.
Steve Baker, Conservative MP for Wycombe and Treasury Select Committee member, told the paper: “This is a welcome step that could bring peace of mind to many elderly individuals who have found themselves, through no fault of their own, as equity release mortgage prisoners in this ultra-low interest rate environment.”
The main barrier to switching equity release deals are the punitive early repayment charges. If a borrower has taken out an equity release mortgage which has a gilt-linked early repayment charge they can pay as much as 25 per cent of their original loan in penalties to be free of the deal.
More modern lifetime mortgages come with a penalty that reduces over time like a mainstream mortgage, for example, in year one, the borrower would have a 10 per cent penalty and year ten they would pay a one per cent penalty.
The early repayment charge and Age Partnership’s fee would be factored into the cost of switching and only if there is saving after fees have been applied would the deal take place.
No fee is charged if the switch does not proceed.
Santander reveals rates ahead of 95 per cent LTV launch
From Tuesday 20 April, borrowers with a five per cent deposit will be offered a choice of three deals backed by the government’s mortgage guarantee scheme.
At 3.99 per cent, borrowers can opt for a two-year tracker or a three-year fixed rate mortgage. At 4.09 per cent families can fix for longer with a five-year deal.
Five-year fixed rates are a compulsory requirement for lenders using the mortgage guarantee.
None of the 95 per cent mortgage deals come with a product fee and all have a free valuation.
Borrowers who want to buy a new-build property will need to use the Help to Buy equity loan scheme. The Help to Buy equity loan scheme is now only available to first-time buyers.
Repayment mortgages only will be offered on houses priced up to £600,000 or flats and leasehold properties up to £400,000. Under the terms of the scheme, all deals are open to first-time buyers and homemovers.
Brad Fordham (pictured), head of mortgages at Santander, said: “We know that buying a home is expensive and finding the money for a deposit and the upfront costs can sometimes prove a barrier to potential homeowners.
“We’re pleased to be part of the government’s mortgage guarantee scheme by offering customers a range of 95 per cent LTV mortgages with the additional support of no upfront fees and a free valuation.”
Chancellor Rishi Sunak announced the 95 per cent mortgage guarantee scheme during the March Budget.
Under the terms of the scheme, the government will guarantee the amount of the mortgage lending over 80 per cent, which is 15 per cent of the 95 per cent loan to value mortgage.
Borrowers will be subject to Santander’s normal affordability checks. The mortgage deals are available through the intermediary and direct channels.
Santander launching self-employed mortgage calculator as brokers call for more banks to follow
From Tuesday, brokers will exclusively be able to use the calculator for ‘Covid-affected’ clients who want to disregard their 2020/21 accounts because the pandemic has damaged their earnings, to find out how much the bank is prepared to lend.
The bank has changed its lending policy to exclude the 2020/21 tax year for self-employed borrowers who have suffered an out of the ordinary loss of earnings.
Covid-affected, said Santander, also refers to borrowers who have relied on one of the government’s support measures such as the Self-Employment Income Support Scheme or the Coronavirus Business Interuption Loan Scheme, or a tax deferral.
The lender said it will be taking into account future Covid-19-related liabilities and they will be treated as a business commitment.
An additional layer of criteria means that to be accepted under Santander’s Covid-19 accounts exception, businesses must have been trading for at least 90 days after reopening.
Santander revealed its criteria changes to brokers yesterday, and has been praised by the broker industry for its approach.
However, there are concerns over the impact it will have on the bank’s service levels.
Business as usual for 2020/21
If borrowers want to use their 2020/21 earnings, head of business development mortgage division, Graham Sellars said it was business as usual and brokers do not need to call unless they needed support.
Speaking to Mortgage Solutions, Sellars (pictured) said: “Half of Santander’s self-employed borrowers have not seen any impact on their businesses.
“The other half have been affected in varying ways, from being shut throughout each lockdown like hairdressers, for example, or just losing earnings in the first lockdown like tradesmen for instance. Whatever the scale of the damage, we see 2020/21 as an aberration, and not a normal trading period.”
Brokers want to see more lenders follow Santander’s lead.
Simon Butler, head of mortgages at CMME, said: “This is a strong indication from one of the UK’s largest lenders that they value the self-employed sector.
“Last year had a detrimental impact on the finances of many small businesses and the attitude across the mortgage industry has been excessively cautious at times, rather than supportive of business owners.
“We hope other lenders take note of this and review their individual criteria as there are many ways to approach adversity, as Santander have shown this week.”
Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, also welcomed the move but had reservations over how the policy would be applied in practice.
“This is a good idea overall. The self-employed have had a bit of a tough year for reasons outside of their control due to the current conditions so it will allow them to provide figures for when their businesses were running under normal trading conditions.
“Having said that, Santander will still take a view of what their likely future trading will be post-Covid and not all will pass muster, but I think it is a fairer way of judging income and so I think it’s a very pragmatic approach.”
Sebastian Murphy, head of mortgage finance at JLM was concerned that Santander’s keenness for brokers to talk through cases and a move towards more manual underwriting may put its service levels under pressure.
“This is a really positive step and hopefully other banks will join them but the communication to brokers could have been better.
“I do have concerns that this decision will drive their service levels down to the levels we had to deal with when they were underwriting self-employed applications last year.”
Until the calculator is live the bank has asked that brokers call it to discuss Covid-affected cases.
Borrowers not using a broker will need to contact the bank to discuss their circumstances.