The Melton cuts high LTV rates and widens scope to England and Wales
The five-year fixed at 90 per cent is now 3.59 per cent, down from 3.79 per cent while the alternative at 85 per cent LTV is 2.89 per cent, from 3.09 per cent.
Both products have minimum loan amounts of £150,000, a £199 application fee and are not available on new builds and flats.
The availability of these products has also broadened since the mutual’s return to the high LTV market in November, where mortgages were limited to first-time buyers in the local Melton area.
The high LTV offerings are now eligible to buyers in England and Wales but London properties are still excluded.
Dan Atkinson, head of intermediaries at the Melton, said: “We’ve supported homeowners throughout the pandemic and to help our local first–time buyers we re-entered the high LTV market in November last year with a locally restricted product.
“To keep up with the ever increasing demand for low deposit mortgages, we’ve now removed this restriction to make our products available across the whole of England and Wales, with the exception of properties in London.”
Alternative mortgage providers are ‘window dressing’ existing products – Marketwatch
However, traditional lenders continue to be the preferred route for most brokers when advising as banks and building societies still hold the majority of mortgages in the UK.
So this week, Mortgage Solutions is asking: Do you ever bring up innovative lending solutions when advising, provided they are available through intermediaries?
Niamh Byrne, senior mortgage adviser at Financial Advice Centre
We work hard to keep on top of the changes and developments happening in our marketplace and it is a priority for us to build relationships with new and alternative lenders.
As brokers the onus is on us to keep up to date with what is happening in the market that could benefit our clients. Our clients look to us for our recommendations, so we have a responsibility to be well versed and fully researched.
However, at the moment we’re not seeing any real product innovation in the market; some of the solutions are just a different guise for joint borrower sole proprietor (JBSP) mortgages whereas others are a different guise for gifted deposits; which are widely accepted in the mainstream market.
Similar products with mainstream lenders have been available for some time. So these ‘new’ lenders are using marketing to jargon bust complex lending solutions and appeal to a wider audience.
Generally, JBSPs are reserved for clients with these needs and preference as it does not make sense to include a third party on the mortgage if it is not needed.
With the ongoing pandemic and loss or decrease in income we are seeing lots of first-time buyers priced out of the market – using alternate lending solutions such as JBSP and gifted deposits allows access for them where doors have been closed over the last 12 months.
We have already seen an uptake is JBSP mortgages and I expect this to continue until we see a more normal market.
Historically innovation in our industry is driven by lenders and their needs, not necessarily buyer’s needs. It is only through ourselves as advisers and lenders coming together that we will drive real innovation in our industry.
We would very much welcome these discussions instead of simply window dressing existing products.
Richard Campo, managing director of Rose Capital Partners
I have to admit that I am reticent to recommend any ‘innovative lending solution’ when talking to first-time buyers, or any home mover for that matter.
Perhaps it is just my age – yet again – but I have seen many, many schemes come and go since I started in mortgages in 1999.
Personally, I even think Help to Buy is problematic as it is on a par with Shared Appreciation schemes that we saw back in the 90s.
I remember very clearly trying – and failing – to get clients out of these deals well into the 00’s as they can be sticky arrangements if your income does not substantially increase. The issues are also exacerbated if house prices shoot up, as we see happening.
Some of these offerings look like a dysfunctional Tinder to me. Trying to profit from someone’s inability to get a mortgage on their own leads to a raft of moral and technical issues.
How are you going to exit this arrangement? When? How? If 2020 taught us anything, it is that the future is never what you expect it to be.
Moreover, research from the Economic Research Council in 2018 dispelled a bit of a myth of homeownership in the UK. We are a long way down the rankings compared to our European counterparts.
Decreasing homeownership is a very long term trend in the UK. We have a large, increasing population, on a little island, and last time I checked, God isn’t making any more land.
So unless the house building gap and type of home built is addressed, this trend will continue and all these ‘gimmicks’ won’t really touch the sides.
That also perhaps explains why brokers shy away from advising them as we see the pitfalls and will have to be around to pick up the pieces if and when it all goes wrong.
Payam Azadi, partner at Niche Advice
At the moment I’m cautious of deals like this. I believe it still has to stand up on the clients and their income.
I’m still for the idea of ‘if you’re getting, a mortgage, you should get it on your own’. Meaning your own terms and affordability.
There are products that help with a deposit for example and we’re seeing a lot more JBSP-style options on the market. I suspect that will be a bigger trend to come.
We have also seen more enquiries come through for products where multiple applicants want to use their combined income to boost affordability.
The issue with a lot of those products, however, is there are only a handful of lenders that will lend to parents willing to help out.
They won’t do it if parents are of retirement age so that might lead some borrowers down alternative routes if they don’t qualify for mainstream options.
But I think how lenders view income overall is the real challenge borrowers are coming up against.
A lot of lenders are tarring everyone with the same brush – there’s a difference between someone who’s in IT sales and someone who is a restaurant worker. Also, many won’t accept commission up to a point or are restrictive on the self-employed.
Mainstream lenders are the ones who need to have a different approach for this once-in-a-lifetime event that we are going through and lead the change.
The real question is how lenders should see income and the range of services available such as family mortgages will help but there needs to be a new approach in the next year or so.
UK equity release market to grow five times in decade – EY
The global equity release market is also set to grow significantly according to the responses of nearly 100 lenders in 13 countries including the USA, Canada, Australia, New Zealand, Germany, Ireland and Spain.
The report said the global sector could more than treble over the next 10 years from the $15bn (£10bn) currently released annually to more than $50bn (£36bn) by 2031.
It found that the most common sources of financing for equity release mortgages were banks, insurance companies and securitisations.
All equity release products in the UK were shown to have been sold through lifetime mortgages with fixed rates. Just over half were borrowed using drawdowns with the rest provided through lump sums.
A lack of customer awareness was named as the biggest barrier to equity release growth in the UK, similar to the majority of the countries surveyed.
Meanwhile, Italy, Ireland, Poland and Spain listed insufficient funding as the biggest obstacle.
Focus on standards
Steve Kyle, secretary general of EPPARG, said: “The survey report confirms that equity release providers across the globe are facing similar challenges and opportunities.
“As a global industry, we must now foster awareness of the considerable social and economic benefits that home equity release products can bring, particularly in the light of the global economic downturn triggered by the pandemic.”
He added: “We also advocate a strong focus on standards to build confidence in this innovative product among both investors and consumers.”
David Burrowes, chairman of the Equity Release Council and EPPARG board member, said: “This survey resonates with the council’s 30 years’ experience and focus on supporting customer awareness and confidence by setting and evolving standards.
“It is timely that as the most mature market globally we are closely collaborating with our European friends to encourage the growth of the global equity release market alongside good consumer outcomes.”
Saffron BS launches 90 per cent LTVs and returns to limited company lending
The products will be available through intermediaries only from today and include two mortgages for those with a 10 per cent deposit.
There is a two-year fix with a rate of 3.77 per cent and a five-year fix at 4.07 per cent for first-time buyers. Gifted deposits are accepted on these products and the society has removed the arrangement fee and added the incentive of free valuation.
For those remortgaging and home movers, there are two mortgages at 90 per cent LTV including a two-year fixed at 3.57 per cent and a five-year fix at 3.77 per cent with free valuation.
The mutual’s limited company buy-to-let relaunch follows its return to buy-to-let lending late last year. The new products include two-year and five-year fixed rate mortgages at 2.87 per cent and 3.47 per cent respectively.
The products are available at 75 per cent LTV for limited company purchases and remortgages.
Tony Hall, interim head of mortgage sales, said: “It is a pleasure to begin the new year with a tranche of new and updated products that not only expand our offering to intermediaries but have wider appeal to more clients as the market continues to shift in light of the pandemic.
“Our successful return to the 90 per cent LTV first-time buyer market in 2020 gave us the insight we needed to create a product that would offer those struggling with upfront finances a helping hand on to the property ladder.”
He added: “Having re-entered the residential buy-to-let market at the end of 2020, we had always intended to return with a product for limited companies, and following feedback during our webinars with brokers, we decided now was the right time.”
High LTV mortgage sales fell by a third last year – Quilter
Data analysed by Quilter through a Freedom of Information request to the Financial Conduct Authority (FCA) showed that during the nine-month span, there were 54,527 mortgages sold to borrowers requiring 90-95 per cent LTV amounts.
Compared to an average of 70,788 sales at 90-95 per cent LTV during the same months in 2017, 2018 and 2019, sales were down by 22 per cent in 2020.
Last year, many lenders restricted mortgage loans to 85 per cent LTV and below so while product availability was not as scarce, only 91,323 mortgages were issued to borrowers requiring loans of 85-90 per cent LTV. This was a 26 per cent fall on the 124,052 mortgages sold in this tier in 2019.
It was also a 23 per cent drop on the average of 118,918 mortgages at 85-90 per cent LTV sold between 2017 and 2019.
For all mortgages between 85-95 per cent LTV, there were 145,850 sold last year down from 208,471 in 2019.
Gemma Harle (pictured), managing director of Quilter Financial Planning, said: “These figures illustrate how difficult 2020 has been for the first-time buyer market who typically require higher loan to value deals.
“Since the introduction of the stamp duty holiday, many mortgage brokers will tell you they have never been busier.
“However, the holiday has done little for first–time buyers who were paying little to no stamp duty anyway but have had the rug pulled out from beneath them as lenders exited the high LTV market meaning they needed a bigger deposit to get a foot on the housing ladder.”
“The next number of months may play into the hands of some first-time buyers as once the generous government support schemes to help keep people in employment and the stamp duty relief is cut it is likely that we will see a reduction in house prices making them more affordable,” she added.
Lendco completes inaugural securitisation for buy-to-let portfolio
Lendco is the joint venture between brokerage SPF Private Clients and private equity firm Cabot Square Capital. Since agreeing its first loan in September 2018, the lender has completed 1,200 loans and totalling £460m.
Simon Knight is ex-CEO of specialist lender GMAC and later mortgage broker John Charcol, which he left in 2017.
It offers mortgage lending and bridging finance to property investors and professional landlords. It currently works with a broker panel of 70 firms with a focus on high net worth individuals.
Simon Knight (pictured), managing director of Lendco, said: “We have achieved a great deal in a relatively short time but in a very measured way. Our focus is always on quality and we were delighted to get such a great reception from multiple UK and EU investors, ending up being four times oversubscribed for our inaugural securitisation.
“We aim to continue to grow Lendco in 2021 and we will need to increase our breadth of distribution to do that.”
Mark Harris, SPF Group CEO, added: “It is quite remarkable what has been achieved in two years, with Simon and his team building a lender from a standing start to £460m of completions.
“When you throw in the uncertainty over Brexit during that time and then an unprecedented global pandemic, this first securitisation is even more impressive.”
Greenfield Mortgages added to L&G panel
All of the lender’s bridging products will be available through the club and its criteria will be added to Legal & General’s SmartrCriteria tool.
Averil Wagoner (pictured), relationship manager at Greenfield Mortgages, said: “We are very pleased to be kicking off 2021 by joining L&G’s panel of specialist lenders.
“We look forward to growing our relationship with L&G Club members by providing a quick and comprehensive level of service.”
Danny Belton, head of lender relationships at Legal & General Mortgage Club, added: “Greenfield Mortgages brings over a decade of success and experience in the short-term bridging lending space.
“They offer a range of specialist products to meet the needs of buyers’ increasingly unique and changing circumstances. We’re thrilled to welcome them to the panel.”
LLLE: Lifetime mortgages for retirement villages would free up property ladder
Speaking at the session ‘Inspired solutions: the changing face of housing for an aging population’, Tom Lord, chief operating officer of Inspired Villages said a “very small proportion” of the property firm’s homes were bought using a mortgage.
He said most were purchased using the equity buyers already had in their homes.
Lord added: “If people were able to create mortgage products, anything that helps people move into these fantastic villages, this will of course [enable us to free] up the housing ladder and make more properties available.”
He also said he would welcome intervention from the government in the form of a rethinking of current planning permissions.
“At the moment no specific planning class for housing with care options for retirement villages.
“The support would really free up the ability for us to progress with our growth plans as well as the rest of the sector and ensure that in years to come there is enough housing for the older demographic,” he added.
A study from Knight Frank’s senior living annual review last year found that in the UK, there were 78,383 housing with care home options compared to a population of 12.4 million people over the age of 65, meaning the retirement village market serves just 0.82 per cent of this demographic.
Retirement village lending catch 22
When asked how to get over the “catch 22” of lenders refusing to lend on villages with deferred management fees (DMFs) and other legal clauses despite them being used to make the homes more affordable, Lord said a mortgage launched by Legal & General in 2018 showed a solution was possible but more options were needed.
He added: “Whilst there is currently not a great solution for older people in the mortgage world, we’d love to understand how this can be developed. I think it’s a question that we all have to work out together.”
You can register to watch the Later Life Lending Online Event here: https://www.mortgagesolutions.co.uk/events/later-life-lending-event/venues/register-online/
Presentations will be available to watch for 30 days.
Buyer demand causes busiest December since 2016 – NAEA Propertymark
The average number of prospective buyers registered to each estate agent stood at 348 in December, down from 580 in November.
The average number of buyers indicated a slow down in activity over the year as it was the lowest recorded since the reopening of the property market in May.
First-time buyer numbers were stable in December as 23 per cent of properties were sold to those stepping on to the property ladder, a dip from 24 per cent the month before.
However, sales made to first-time buyers declined by five per cent compared to the same month last year.
Sales agreed in December also fell month-on-month to eight per branch, compared to 13 in November. Despite this, it was still the highest number of agreed sales recorded for the month of December in 14 years.
Demand vs supply
The drop in demand coincided with a decrease in housing supply in December, with an average of 33 available properties per branch down from 40 the month before.
Furthermore, 67 per cent of properties sold for less than their asking price suggesting sellers were repricing to attract buyers and transact before the stamp duty holiday deadline.
Just five per cent of properties sold for more than the asking price in December, down from 10 per cent in November.
Mark Hayward, chief policy advisor at Propertymark, said: “The number of potential buyers in the market fell significantly in December after Novembers’ record high.
“While we would ordinarily expect to see a lull over the festive period, these numbers show that the tightening of lockdown restrictions, coupled with the reality that many individuals would no longer meet the stamp duty deadline, has exacerbated this.”
Pressure leading to failed sales
Hayward added: “As we approach the stamp duty, land transaction tax and land and building transaction tax cliff edges on the 31 March, we are increasingly concerned about the pressure this is placing on the property industry with more than two-thirds of estate agents expecting to see an increase in failed sales due to buyers realising their sales will not complete ahead of the deadline.
“It’s important that action is taken now to prevent this and support the property sector.”
Two and five-year mortgage rate gap at lowest since 2013 – Moneyfacts
This was the year that followed the launch of the Funding for Lending scheme in 2012, which Moneyfacts said suggested the current low base rate environment and heightened borrower demand showed lenders were open for business.
Last year, the average rate for a two-year fixed last year was 2.28 per cent while a five-year fixed was 2.55 per cent.
The analysis also revealed that as of today, the difference between the average rates for the two mortgage terms was still nominal with a gap of 0.17 per cent. While there has been an overall increase since last year, the current average rate for a two-year fixed is 2.52 per cent and a five-year fixed is 2.69 per cent.
Eleanor Williams, spokesperson at Moneyfacts.co.uk, said: “Historically, two-year fixed products have been popular with borrowers, however while the economy remains full of uncertainty, some may find themselves ultimately better off with a five-year fixed rate mortgage.
“Although five-year deals generally carry higher rates than their two-year equivalents – as borrowers are effectively purchasing the longer-term stability and protection from future interest rate increases these provide – with the gap between the two options currently so low, this may be an opportune time to secure the peace of mind a longer-term fixed rate can bring.”