Is there anything brokers can do to help mortgage prisoners right now?
Examining the issue in this week’s Market Watch are:
Dominik Lipnicki, director of Your Mortgage Decisions
Mortgage prisoners face a double injustice at the moment. Not only are they locked out of the remortgage market by most lenders but they are also footing the bill for those fortunate enough to qualify for cheaper deals.
Can brokers do anything to help? The answer is yes. And help we must.
These clients were highly sought after by the lenders only a few years ago and it is unfair and unwise to ditch them now.
It is a broker’s duty not to give up the search for a better deal for these borrowers. In return, they will be extremely satisfied and grateful customers.
Some of the best business comes from recommendations from clients just like these.
So how do we do it?
In depth knowledge of the market place is the only way. Brokers must be true experts on all lenders’ schemes and criteria.
Keep up to date with all changes and do not rely on mortgage sourcing software alone.
Just as the best lawyers use every clause and every loophole in the book to the best advantage of their clients, so must brokers use every last lending criteria available to provide a lifeline to mortgage prisoners.”
Helen Lacey, spokeswoman for Which?
The swing from feast to famine in the availability of mortgages has left a legacy of ‘mortgage prisoners’ – consumers who are unable to switch provider and access some of the better rates.
Recent increases in Standard Variable Rates show that lenders have few qualms about exploiting their captive customers. But, what can brokers do for these customers?
People may not be able to move lender, but brokers could look at what deals are available from their lender to existing customers.
Find out if people are aware of the potential for interest rate rises and the fact that some firms will be able to increase rates regardless of whether the Bank of England increases the base rate.
If the consumer is near to a cut-off point, in terms of Loan to Value which would allow them to access better rates, find out if they have any savings which they could divert to mortgage repayment. And is the valuation of their house up to date?
If the consumer needs to move house for a new job, there may be schemes offered by their existing lender which would enable them to do so.
Unfortunately the banks’ legacy of irresponsible lending will take many years to fix. Brokers may be able to help some consumers, but ultimately only the regulator can protect ‘mortgage prisoners’ from a long sentence of poor deals.
Nigel Stockton, financial services director at Countrywide
The majority of customers who are on interest-only plan to downsize after using the property as ‘home’ for a number of years.
To my knowledge, no lenders are complaining about people having no way out and being forced to lend to them into retirement, despite a larger volume coming off interest-only at the end of term.
I don’t want to sound complacent as the numbers are set to increase significantly over the coming years given the majority of loans in 2002 were interest-only.
Customers should be approached to see if they want to change to capital and repayment for the last 10 years of term. Even minor capital payments can have a big impact over 120 months of repayment and brokers are uniquely placed to give advice on the options open to the client.
The payment shock of moving away from interest-only is bad enough, but the added stress of taking on a larger loan can tip the balance. It is these clients that become the prisoners.
Again, good brokers should look at the best way of financing this and offering good advice and options. However, no one is underestimating how hard this will be and the threat of being trapped lingers.