Top 10 most read mortgage broker stories this week – 16/06/2019
Metro Bank became the latest lender to remove its objection to landlords hosting tenants on benefits, following the high-profile campaign initiated by landlord Helena McAleer.
Despite the case of a teacher and her partner who were denied a mortgage because of a county court judgement (CCJs) from a parking ticket, Mortgage Solutions discovered lenders are increasingly willing to ignore minor CCJs when considering applications.
The ongoing intense market competition is driving adviser interest as rates continue to fall.
And the industry is still in disbelief about the regulator’s plans to open up the market to execution-only business.
Metro Bank latest lender to remove landlord restriction for tenants on benefits
Lenders ‘ignoring’ small CCJs and looking to lend, say brokers
Halifax cuts remortgage rates by 0.35 per cent
FCA’s U-turn on mortgage advice rules is ‘utterly unfathomable’ – Bamford
Coventry BS, Newcastle BS, Ipswich BS and Pepper Money cut rates – roundup
Estate agent’s ‘misleading’ Help to Buy ad prompts regulator action
Nationwide extends remo offer period and updates broker system
Property market slowdown continues with longer sales and price corrections
PRA changes are ‘forcing landlords to take products which do not fit their plans’ – Marketwatch
Lender funding: Brokers need to do their homework and be careful who they pick – Hersch
Legal & General Mortgage Club Awards 2019 – all the winners
Seventeen winners in a range of lender and broker categories were announced including a special lifetime achievement award.
Double Olympic gold medalist James Cracknell entertained the audience and presented the awards. Look out for all the photos next week.
Here are the winners:
Best Lender for Later Life Lending sponsored by Mortgage Solutions
Leeds Building Society
Best Smaller Lender sponsored by Rostrum
Best Lender for Buy to Let sponsored by Finance Planning Group
The Mortgage Works
Best Lender for Service sponsored by Kinleigh Folkard & Hayward
Best Specialist Lender sponsored by Connect for Intermediaries
Kent Reliance for Intermediaries
Best Lender for New Build sponsored by Barratt Developments
Best Overall Lender sponsored by Mortgage Advice Bureau
Nationwide for Intermediaries
Business Development Manager of the Year sponsored by Mortgage Brain
Rachel Vernile, HSBC UK for Intermediaries
Best Lender for Partnership with Mortgage Club sponsored by Legal & General Mortgage Club
Best Broker Firm for Buy-to-Let sponsored by BM Solutions
Mortgage Advice Bureau
Best Broker Firm for New Build sponsored by Skipton Intermediaries
Best Broker Firm for Specialist Lending sponsored by OneSavings Bank
SPF Private Clients
Best Smaller Sized Firm for Overall Quality sponsored by Precise Mortgages
Best Medium Sized Firm for Overall Quality sponsored by Specialist Lending Solutions
Finance Planning Group
Best Large Firm for Overall Quality sponsored by Post Office for Intermediaries
Mortgage Advice Bureau
Best National Network Partner sponsored by Halifax Intermediaries
Lifetime Achievement sponsored by Legal & General Mortgage Club
Richard Adams – Stonebridge Group
High LTV mortgage lending reaching pre-crisis highs – Bank of England
However, it appears the central bank is not overly concerned by this, noting that consumers are far less keen to borrow and that mortgage debt is growing no faster than the overall economy.
Bank of England executive director for financial stability, strategy and risk Alex Brazier added that it would take a significant interest rate shock to push a substantial number of households into trouble for making their mortgage payments.
Easy mortgage credit conditions
Speaking at the University of Warwick, Brazier said: “Although banks have a real appetite to lend, households don’t have the appetite to borrow. Credit conditions in the mortgage market are easy and mortgage pricing competitive.
“The share of new mortgage lending at loan-to-value ratios above 90 per cent is approaching pre-crisis highs as the price of such lending falls relative to that on lower LTV mortgage lending. And yet, mortgage debt is growing no faster than the economy as a whole.
“Of course, the level of household debt is high. But the share of households with very high debt burdens is in fact very low.
He added: “In a low mortgage interest rate environment, only around one per cent of households face debt servicing costs of more than 40 per cent of their pre-tax income.
“It would take a large and sudden rise in interest rates – of up to 300 basis points – to take that fraction of households to around its historic average.”
Brazier also noted that the underlying level of economic vulnerability has returned to a standard level “after a long period in the aftermath of the financial crisis in which it was subdued as debt levels fell back”.
“That’s consistent with the Financial Policy Committee’s judgement that the degree of underlying economic vulnerability is at a standard level,” he continued.
“That judgement drives our assessment of how resilient the financial system needs to be, in particular how large should be the buffers of capital banks run with.”
Brokers sceptical over job-specific mortgages despite potential client demand – analysis
This week Kensington Mortgages launched a new range of ‘Hero Mortgages’, aimed at people working in “essential public sector services” such as firefighters, NHS staff and teachers.
The deals are available at up to five times income, and at a 55 per cent debt-to-income ratio.
Mark Arnold, chief executive officer at Kensington Mortgages, said the firm had used its data analytics to study the career trajectories of people working in these jobs to better understand their earnings level and job security.
He added: “By doing so, we have identified a new way of helping the UK’s heroes by creating specialised lending criteria. Launching this innovative product highlights our commitment to helping the heroes in our everyday lives buy their own home.”
Addressing an underserved market
Greg Cunnington, director of lender relationships and new homes at Alexander Hall, said that any innovation from lenders which meant they could increase loan to income ratios was a positve, noting there was no doubt there is client demand.
He added: “The new Kensington hero products show some really good innovation for an employment sector that is relatively under-served by lenders in terms of specific assistance such as this.
“From a risk perspective the job security of these professions is relatively stable, so you can see the attraction is also there from a lender’s risk perspective.”
He noted this was a similar attraction for lenders who offer dedicated ‘professional’ mortgages such as Clydesdale and Metro Bank as these borrowers also have a “clear pathway” for future earnings.
“As these clients know their income will increase in the medium term they often have an appetite to borrow as much as possible, so these options definitely serve the market place well,” he added.
A marketing exercise
Andy Wilson, founder of Andy Wilson Financial Services, suggested that as public sector workers may be deemed to have “safer” employment chances, it meant Kensington would feel happier loosening income restrictions.
But he warned that calling the deals ‘Hero Mortgages’ was purely a marketing exercise, riding on the back of public support for the those working in the public sector.
He continued: “While many of these workers undoubtedly do jobs a lot of us would find very challenging, they are not really any safer as mortgage borrowers than any civil servant.”
Wilson also cautioned that if these workers are not being paid enough, the answer is not to allow them to borrow more than normal.
“Their career progressions are not generally as rapid as might be seen with newly qualified ‘professionals’ such as lawyers, accountants and doctors. Here, the career progression can be rapid and pay rises move upwards just as quickly,” he added.
Is it a gimmick?
Stuart Powell, managing director of Ocean Mortgages, noted that he had used Scottish Widows’s professional mortgage range in the past, but said the rate and fees are “rarely any different to the rates offered to non-professionals”.
He suggested that while the Kensington deals seem a bit gimmicky, they will likely “catch the eye” of some people working in those professions.
“If you look at the detail of the offers, neither the rate or income multiples are market leading. These deals should be considered by a broker as part of their research if their clients are eligible.
“A good whole of market broker would do that as a matter of course,” he added.
L&G Mortgage Club adds Ipswich BS exclusive as TSB cuts rates – roundup
Legal and General Mortgage Club members will have access to a five-year fixed rate residential product, available at 95 per cent loan to value (LTV) exclusively through the mutual.
Starting from 2.99 per cent, the product has a minimum loan value of £25,000 and a maximum value of £500,000 with fees of £499, consisting of £199 upfront and £300 upon completion.
The product is aimed at helping first-time buyers with a small deposit get onto the property ladder as well as providing an option for customers looking to remortgage out of the Help to Buy or Shared Ownership schemes.
Danny Belton, head of lender relationships of Legal and General Mortgage Club (pictured), said: “It is great to see an increasing number of lenders offering 95 per cent LTV mortgages, allowing buyers with small deposits to achieve their homeownership goals and providing more options for those looking to remortgage out of either Help to Buy or shared ownership.
“Legal and General Mortgage Club has been working closely with Ipswich Building Society to develop this offering and we are excited to work together to further build and support this proposition, bringing exclusive products to our key partners.”
Richard Norrington, CEO of Ipswich BS, said: “We are delighted to offer this exclusive deal to Legal & General Mortgage Club, which is ideal for applicants purchasing with a low deposit or remortgaging with a small amount of equity in their home.
“For aspiring first-time buyers receiving help from their family we welcome applicants using gifted deposits, and can consider entirely gifted funds up to 95 per cent LTV with 12 months rental history or 90 per cent LTV without.”
TSB reduces rates for homebuyer and remortgage borrowers
TSB has reduced interest rates by up to 0.10 per cent on mortgages for home buyer and remortgage borrowers.
Changes include reductions of up to 0.10 per cent on selected five-year fixes for purchase and remortgage, with LTV ranging between 0 and 85 per cent.
Further reductions of up to 0.05 per cent on selected three-year fixed remortgage rates, with LTV ranging between 0 and 75 per cent.
Nick Smith, TSB’s head of mortgages, said: “At TSB we want to help more people to borrow well and these changes are an example of us doing exactly that. The interest rate reductions on our fixed rate products are a welcome step for those looking to fix their monthly payments for a longer period of time, with the added bonus of free legals or £300 cashback.”
Another cartel of estate agents accused of price-fixing by competition regulator
The firms – Michael Hardy, Prospect, Richard Worth and Romans – operated the cartel in the Berkshire area for almost seven years from September 2008 onwards.
The CMA’s investigation found that the businesses agreed they would all apply minimum commission rates for residential sales, exchanged confidential pricing information, and held meetings to ensure that all firms were “enforcing and maintaining” the agreed minimum fees.
The CMA declared that because of this price fixing, homeowners were denied the chance to find the best possible deal when selling as they could not shop around for a better rate.
As these findings are provisional, the firms now have the opportunity to respond before any final decision is reached.
Third estate agent cartel
This is the third case brought against estate agents in recent years.
In 2017 four firms in Somerset were fined more than £370,000 and saw directors banned for colluding over minimum commission rates, while in 2015 three members of the Three Counties Estate Agent Association were fined £735,000 for breaking competition law over estate agent and letting fees.
Howard Cartlidge, senior director, cartels at the CMA, said: “Estate agents who conspire to set minimum commission rates are cheating homeowners and breaking the law.
“Where we find evidence that this is happening, we will not hesitate to take action to protect people selling their home.”
Lenders praised for adopting ‘useful’ longer offer terms to combat ‘terrible’ free legals – analysis
This week Nationwide Building Society announced it was doubling the offer term on remortgage products from 90 days to 180 days.
The lender said it had made the change following feedback from brokers, as well as industry research which suggested that around a third of remortgage applications are reserved more than three months in advance of a borrower’s existing deal coming to an end.
Ian Andrew, the mutual’s intermediary relationships director, explained that the move would enable “ those looking to remortgage a longer time period in which to complete, which is particularly useful for those who wish to access a new mortgage deal at the end of their existing one,” as well as bringing it in line with purchase offers.
Countering iffy legals
Jane King, mortgage and equity release adviser at Ash Ridge Private Finance, said this was a useful facility to have, noting that when she reviews a client’s mortgage she often advises them to allow eight weeks if they want to switch lenders, mainly due to the time it takes to complete the legal work.
She continued: “Bearing in mind some of the free legal firms instructed by lenders, including Nationwide, offer a terrible service, it will at least offer a few months’ comfort if these overrun.”
Start the conversation with clients earlier
Sebastian Riemann, financial consultant at Libra Financial Planning, welcomed Nationwide’s move, noting that other mainstream lenders such as Barclays and NatWest also provide lengthier offer periods.
He said: “It means that you can contact the client sooner, and lock the rate in, allowing you to insure against negative movements in the market. It gives you the chance to speak to them before a lender might.”
He noted that now, with Brexit hanging over the market, it was particularly useful to have longer offer periods to work with.
“With Brexit, if rates change significantly, it gives clients peace of mind. With the way things stand, clients can lock in a rate now and then see what happens with Brexit. If nothing happens, they have the option to go for something different.”
However, Riemann added that longer offer periods present the potential downside of having to do twice the work should a better rate emerge closer to the time with a different lender.
Essential for purchases
Adam Hosker, founder of Bespoke Finance, suggested that it was “rare” that such a long term was needed with remortgages, but said it was great to see Nationwide joining in with what had become a “market trend”.
He added: “It is more important on purchases – especially new build – then remortgages.”
Rachel Lummis, mortgage adviser at Xpress Mortgages, said that six-month offer terms were a must in today’s market as they give much needed flexibility.
She added: “With a purchase it’s a no brainer that all too often three months is not going to be enough. There are several factors that can slow down the process such as the length of the chain, the conveyancing , especially with leasehold properties where the legal process is more lengthy.”
Not possible to say if Help to Buy is value for money – National Audit Office
It also highlighted that the Help to Buy premium could be as low as one per cent according to its analysis but the scheme had boosted developers’ profits and meant many people simply bought bigger homes.
Overall the government watchdog said it was unable to decide if the scheme was providing value for money until the longer-term effects on the property market have been observed and whether the government recovered its substantial investment.
In its review of Help to Buy, the NAO urged the government to undertake more analysis of how the scheme was affecting the market and whether any operational and eligibility criteria changes would increase its impact.
Information given by agents and developers to potential buyers should also be investigated to ensure it fully explains the financial risks of buying a new-build property through the scheme.
Minor Help to Buy premium
Perhaps most surprisingly, analysis conducted by the NAO indicated that buyers who used the scheme had paid less than 1 per cent more than they might have paid for a similar new-build property bought without an equity loan.
It compared prices paid for similar new-build properties in the same area with and without the scheme, and estimated that buyers supported by the scheme had paid less than 1 per cent more.
“Our estimate is significantly less than others in the public domain, which range between 5 per cent and 20 per cent,” it said.
“We found that these estimates do not compare similar properties and so do not accurately assess any additional premium paid by those using the scheme on top of the new-build premium.
“We have not, however, quantified other financial incentives that buyers of properties without the scheme might receive. Incentives on properties sold with the support of the scheme are restricted to 5 per cent of the total purchase price, but there is no restriction on incentives on new-build sales generally,” it added.
Increasing developer profits
The NAO also highlighted that the scheme has supported five of the largest developers in England to increase the overall number of properties they sell year on year, contributing to increases in annual profits which have all increased since the scheme’s start.
These five developers sold between 36 per cent and 48 per cent of their properties with the support of the scheme in 2018, it noted.
But it also flagged that some small and medium-sized developers have required more help than anticipated from Help to Buy agents to engage with the scheme.
Only minority needed the scheme
The NAO reiterated government assessments released at Budget 2018 that only 37 per cent of households said they would not have been able to buy any property without Help to Buy.
And it highlighted that the government had not set any quantified targets for the scheme, but expected that between 25 per cent and 50 per cent of sales would result in new homes being built.
However the government’s second evaluation, covering loans made between June 2015 and March 2017, concluded that the rate of building had increased by just 14.5 per cent because of the scheme
Around 81 per cent of all buyers supported by the scheme have been first-time buyers.
The Department’s independent research also found that around three-fifths of buyers could have bought a property without the support of Help to Buy, but not necessarily a property they wanted. Almost a third of all buyers could have purchased a property they wanted without the scheme.
Exposed significant market risk
NAO head Gareth Davies agreed that Help to Buy has increased home ownership and housing supply, particularly for first-time buyers.
“However, a proportion of participants could have afforded to buy a home without the government’s help. The scheme has also exposed the government to significant market risk if property values fall, as well as tying up a significant public financial capacity,” he said.
“The government’s greatest challenge now is to wean the property market off the scheme with as little impact as possible on its ambition of creating 300,000 homes a year from the mid-2020s.
“Until we can observe its longer-term effects on the property market and whether the Department has recovered its substantial investment, we cannot say whether the scheme has delivered value for money.”
The full list of recommendations made by the NAO is:
- Housing market conditions have changed since the start of the scheme. The department should assess the existing scheme against current market conditions and determine whether any changes to how it operates and criteria for eligibility would increase its impact.
- The department should consider further changes to the new scheme from 2021 to achieve other housing policy goals, for example to enact the government’s commitment to addressing the practice of developers selling new houses as leasehold.
- The department should plan a further evaluation of the scheme, either soon to inform the new scheme from 2021, or after the end of the current scheme to inform potential new initiatives to support home ownership and housing supply after 2023.
- The department should support Homes England to take appropriate enforcement action to recover money due from homeowners who have fallen into arrears.
- Homes England should continue to improve its oversight of the Help to Buy agents and its mortgage administrator Target.
- The department should review the information given by the Help to Buy agents and developers to potential buyers, to confirm that it fully explains the financial risks of buying a new-build property through the scheme.
- The department has not undertaken a detailed assessment of the impact of the scheme on the wider housing market. It should expand the scope of its next evaluation to examine such wider effects, including a potential influence on the new-build premium, and identify lessons learned for any future interventions.
Almost all leaseholders regret their purchase – NAEA Propertymark
In its Leasehold: A Life Sentence? report the trade body discovered dismay over the state of leasehold among owners.
Around 93 per cent of leasehold homeowners said they definitely would not buy another leasehold property, while almost two-thirds (62 per cent) feel that they were mis-sold to.
The study found that 57 per cent of buyers did not actually understand what leasehold meant until after the purchase. Around one in ten read up on what it meant after the first viewing, but there remains four per cent of owners who still did not understand it.
The trade body argued this lack of understanding cannot be put down to simply not having gone through the process before, as almost half the leaseholders NAEA Propertymark spoke to had owned a property before.
The report comes in the same week that the Competition and Markets Authority announced it was conducting its own investigation into the leasehold sector.
Advice from independent voices
The report found that buyers who used an estate agent or their own solicitor were more likely to understand what being a leaseholder meant, buying from a more informed position.
In contrast, those who dealt directly with the developer or used a solicitor recommended by them felt lower levels of understanding throughout the process.
This is particularly problematic as only one in five buyers interacted with an estate agent in the process, with most dealing directly with the developer while two-thirds used the builder’s recommended solicitor.
The report stated: “Despite the convenience, this potentially limits the input of independent third parties who can help educate and inform buyers and make sure they are fully aware of the details of the contracts they are signing.”
Unexpected costs and charges
The report also lays bare the scale of unexpected fees that leaseholders are landed with.
On average, leaseholders paid £277 in ground rent when they moved in, and are currently paying £319 a year – a 15 per cent increase, even though most have only been in their properties for three or four years.
Furthermore, 45 per cent said they were unaware of escalating ground rent, with many saying they had been led to believe that ground rent would not change for at least the first couple of years in the property.
Almost half said they would not have bought the property if they knew ground rent was going to increase, with 36 per cent concerned about how they will afford any future increases.
Putting things right
NAEA Propertymark outlined a host of measures which it suggested would improve the market. These include:
- Requiring developers to adhere to the Consumer Code for Home Builders.
- Providing purchasers of new build homes with access to an ombudsman scheme.
- Requiring freeholders of leasehold properties to sign up to a redress scheme.
- Capping ground rents.
- Introducing a digital log-book for each property that is bought and sold.
- Introducing statutory regulation of the whole sector.
Purchase deals up in April as remortgages drop – UK Finance
According to the trade body’s data there were 25,450 homemover mortgages completed in April, up 6.4 per cent from the same period last year.
There was also a sharp annual rise in the number of first-time buyer deals completed in the move, from 25,370 in April 2018 to 27,370, an increase of 7.9 per cent.
The value of this lending jumped in line with the increase in loan numbers. The value of new homemover mortgages rose from £5.11bn to £5.63bn, while first-time buyer loans jumped to £4.62bn from £4.16bn.
In contrast, the number of pound-for-pound remortgages dropped notably over the period. In April there were 19,140 such remortgage deals completed, 6.2 per cent fewer than the 20,400 a year ago.
There was a slick uptick in the number of new remortgages with additional borrowing, from 18,860 to 18,890.
Overall the total number of residential remortgages dropped by 3.1 per cent over the year, while the value of that lending shifted from £7.18bn last year to £6.77bn this year.
On buy to let, there were 5,100 new purchase deals completed in the month, with 14,400 remortgages as well. This is unchanged in number and value from the same period last year.
Opportunity for advisers
David Copland, director of mortgage services at TMA, suggested that remortgages presented a huge opportunity for brokers, noting recent data from Barclays suggested there was £90bn of residential remortgages coming to the end of their terms in the coming months.
He said: “Advisers should be tapping into this area of the market sooner rather than later, engaging with those clients and reviewing their circumstances to ensure they’re on the most cost-effective product for them.”
Vikki Jefferies, proposition director at Primis, described the outlook for first-time buyers as “broadly positive”.
She continued: “Market innovations like Help to Buy have gone a long way towards helping this pool of buyers get their foot in the door – quite literally. Advisers also play a key role in helping more want-to-be homeowners to take that first step onto the ladder.”
Andrew Montlake, director of Coreco, said it was interesting that the impact of tax changes for buy-to-let borrowers “appears to have settled down”.
He added: “The buy-to-let market is not what it was but has now reached a new equilibrium.”