Santander adds £1,000 cashback to FTB deals; Leeds BS reduces rates on ERC-free range
The purchase only products for first-time buyers with the cashback incentive include the two and five-year fixes at 85 and 90 per cent loan to value (LTV) as well as the 95 per cent LTV mortgage guarantee deals.
These have minimum loans sizes of £75,000.
The bank has also added two and five-year fixes at 80 per cent LTV to its offering, both without a fee and with a £995 fee.
These products are available for remortgages and purchases with rates beginning at 1.8 per cent for a two-year fixed remortgage with a £999 fee and 2.47 per cent for a five-year fixed purchase deal with no fee.
Products with the largest rate cuts of 0.20 per cent include the two-year fixed at 60 per cent LTV with no fee, now priced at 1.24 per cent. The five-year alternative has seen an equivalent reduction and is now priced at 1.39 per cent.
Changes will be effective from tomorrow.
Leeds Building Society cuts rates on ERC-free mortgage range
Leeds Building Society has reduced rates on its fixed rate flexit mortgages with no early repayment charges (ERCs) by 0.30 per cent.
The 75 per cent LTV deals now have rates of 1.69 per cent for a two-year fix and 1.89 per cent for a five-year fix.
Both deals come with a free standard valuation, fees assisted legal services for standard remortgages and a £999 fee.
Matt Bartle, director of products at Leeds Building Society, said: “Our flexit mortgages give our customers the freedom to adapt their mortgages to suit their changing circumstances.
“They offer the certainty of fixed mortgage payments each month with the added flexibility to make unlimited overpayments or pay off mortgages in full without any early redemption charges.”
He added: “These are uncertain times for many of us, and having this extra flexibility can really benefit borrowers, who know when they take a flexit mortgage they have the freedom to make changes later down the line.”
Natwest launches low LTV tracker and green mortgages alongside widespread rate reductions
The lender will introduce three purchase and three remortgage low LTV tracker products at 60 per cent LTV, 70 per cent LTV and 75 per cent LTV.
The tracker products have a rate of 0.98 per cent for 60 per cent LTV, which also has a cashback of £250, whilst the 70 and 75 per cent LTV products have a rate of 1.05 per cent. All the above products have a product fee of £995.
The lender’s green mortgage range includes a two and five-year fixed purchase product available between 60 per cent LTV and 85 per cent LTV.
Its two-year fixed 60 per cent LTV green mortgage purchase product has a rate of 1.01 per cent, whilst it 75 and 85 per cent LTV have a rate of 1.2 per cent and 2.21 per cent respectively. The products have a cashback of £250 and product fee of £995.
On the five-year fixed side, its 60 per cent LTV product has a rate of 1.13 per cent, and its 75 per cent LTV and 85 per cent LTV have a rate of 1.39 per cent and 2.52 per cent. The products have a cashback of £250 and product fee of £995.
The lender has made a range of rate reductions across its purchase, remortgage, first-time buyer, shared equity, Help to Buy shared equity, mortgage guarantee scheme and buy-to-let (BTL) remortgage products.
For purchase products, its two and five-year fixed product rates have been cut. One example includes its two year-fixed rate purchase product at 90 per cent LTV, which has fallen from 3.19 per cent to 2.97 per cent. It has no product fee and cashback of £250.
On the remortgage side the rates for its two and five-year fixed have been reduced, with the rate for its two-year fixed at 85 per cent LTV going from 2.42 per cent to 2.32 per cent. It is subject to a product fee of £995.
Low deposit loans
Two and five-year fixed first time buyer products have also decreased, with its two-year fixed at 85 per cent LTV being cut from 2.36 per cent to 2.21 per cent. Its five-year fixed at 85 per cent LTV will fall from 2.7 per cent to 2.52 per cent.
The lender has cut rates on select shared equity and Help to Buy shared equity purchase products with rates on two-year fixed at 60 per cent LTV reducing by 0.31 per cent to 1.74 per cent.
Natwest’s rate for its mortgage guarantee product, which is 95 per cent LTV, has been cut by 0.03 per cent to 3.86 per cent.
Select buy-to-let two-year fixed remortgage products at 70 and 75 per cent LTV have been cut by 0.03 per cent from 1.84 per cent to 1.81 per cent. Both are subject to a product fee of £995.
Long-term fixes can work, but only with advisers onside – Clifford
Both new and existing lenders were talking about it, one specifically coming to market with a new proposition and rumours about more to follow.
Plus, we had the launch of Habito One with its range of long-term products. Was this to be the point where long-term fixes finally gained some serious traction?
Well, maybe. Although, since the introduction of the government’s guarantee scheme to encourage lenders into the 95 per cent loan to value (LTV) mortgage space – a product likely to appeal to the same borrower demographic as long-term fixes, namely first-timers and second-steppers – there might well be a feeling that this has stolen some of its thunder.
It can also feel that the long-term fixed-rate market has some considerable obstacles to overcome that are simply not there with other mortgages targeted at advisers servicing these types of clients.
Namely, the competitiveness of the pricing versus the lender’s risk appetite and margin objectives, plus of course the term of early repayment charges and, rather importantly, fair procuration fees.
An exercise in patience
Of course, these are not insurmountable by any means – and I’m aware of those active or wanting to be active in this sector reviewing how their propositions can deliver positive outcomes – but they will need development and buy-in from the sector, not to mention consumers.
And that may well take significant time and investment on the part of the lender and the adviser.
Advisers naturally need to determine the suitability of clients for long-term fixes. I’m certain that this will only prosper if it is an advice-led product.
This is why the intermediary market has tended to regard long-term fixed rates in the same bracket as products like current accounts or offset mortgages, in that they undoubtedly require adviser intervention and explanation before any borrower should take one out.
Match the mortgage to the client
What might on the surface look like a no-brainer to someone who might not be overly well-versed in the mortgage market, and who might respond well to an advertising-led focus on ‘never having to change your mortgage again’, may clearly be the wrong product at the wrong time for the wrong circumstances.
However, that’s not to say there isn’t a pool of borrowers for whom a long-term fixed-rate could be precisely the right outcome.
However, it is advisers who will need to show the benefits of these products, which is why I feel an adviser-focused distribution focus is the right way to go, rather than the hope that direct-to-consumer might work.
There are inherent risks in that approach and, if I were a lender, I would be much more confident knowing my product range was being distributed by professional advisers able to ascertain the suitability of the mortgage to the client.
Rather than offering it up as the best thing since sliced bread to consumers direct, only for them to find out later down the line that it was a foolish decision.
NatWest reveals 95 per cent LTV broker range
From Wednesday 2 June, the bank, which had previously only offered five per cent deposit deals through its branch and telephone network, will open up its books to mortgage brokers.
A 3.65 per cent two-year fixed rate and a 3.89 per cent deal fixed for five years are available. Both have zero arrangement fees.
The deals are cheaper than those offered through its direct-to-consumer channel which are currently priced at 3.9 per cent and 4.04 per cent for the two and five-year fixed rates respectively, according to Moneyfacts.
Alongside the 95 per cent LTV broker launch the bank will cut rates of up to 18 basis points on purchase deals and 19 basis points on remortgage rates.
NatWest adds guarantee scheme products for intermediaries from next week
The scheme will offer two and five-year fixed rates at 90 to 95 per cent loan to value with a maximum purchase price of £600,000 on a repayment basis. This comes after the bank launched the scheme direct to customers only on 19 April.
More specific details of the products will be announced on 1 June.
The launch of the scheme for brokers comes after NatWest implemented changes to its application system enabling agreements in principle with a soft footprint.
The mortgages will be available for residential mortgages, excluding second homes, new builds and buy to let. Borrowers will need to pass NatWest’s standard affordability and credit checks.
On the buy to let side, the lender will adjust its offer on 2 June, by removing the requirement for a minimum income across all application types.
NatWest Intermediary Solutions will also add a new Economic Hub for advisers, with updates providing an overview of key themes impacting the economy.
Good borrowers rejected by super-strict credit scoring on 95 per cent guarantee scheme
On the Treasury’s orders, mortgage lenders using the 95 per cent mortgage guarantee scheme can only lend to “creditworthy” borrowers.
Lenders using the scheme get government protection from some of the losses they may incur should the loan go bad.
Mortgage brokers argue, however, that banks with the government’s backing have set the credit score bar too high. They have reported even borrowers with an A credit rating are being declined.
Underwriting is so restrictive, brokers suspect higher-than-usual credit scoring is being applied to borrowers who have a five per cent deposit.
Simon Butler, head of mortgages, CMME, said: “Lender score cards appear to be far more stringent at higher LTVs than was the case pre-pandemic, despite the government shouldering part of the risk via the mortgage guarantee scheme.
“The summer months are a peak time for house buying and selling so the hope is that lenders relax their approach to further support the first time buyer and self-employed markets.”
On the launch of its 95 per cent mortgage deals Halifax made clear to brokers its credit score would be tougher than the one used in the past.
In an email to intermediaries, it wrote: “An enhanced credit score requirement will be applied to any applications on this scheme.”
NatWest does not accept 95 per cent LTV applications through brokers.
However Barclays said its 95 per cent credit score has been set in line with its existing policy, not higher. Nationwide said its credit score approach was aligned to its 90 per cent lending. Santander would not comment on its credit score level but said its 95 per cent lending volumes have returned to pre-pandemic levels. Santander will not offer any self-employed borrowers an LTV of more than 75 per cent.
HSBC said it worked hard to ensure its credit scoring policy was fair and appropriate to support its customers and levels of acceptance had been in line with the bank’s expectations since it launched using the mortgage guarantee scheme.
Yet getting a case past the underwriting team when the borrower has just a five per cent deposit is no mean feat, say brokers.
Simon Cutler, director, Blackdown Financial, said: “Even after an Agreement in Principle (AIP) comes through the underwriting is still really restrictive.
“To qualify for a 95 per cent mortgage your client has to have a 100 per cent clean record and a perfect credit score. Lenders like to market that they are offering these high LTV deals but when it comes to underwriting they try and trip you up.”
Richard Campo, managing director, Rose Capital Partners, says he hasn’t had many issues with not getting cases through at 95 per cent loan to value. His team order the credit report before submitting an AIP and they will not put the case through if there are any missed or late payments showing because they know it will not be approved.
But even Campo’s stringent approach to pre-qualifying borrowers does not have a 100 per cent success rate.
“We did have one case recently that was declined. It was completely squeaky clean we don’t know why it was rejected. Lenders are using tight scorecards and any wrinkle will kick it out.”
Campo said the issue may have been because the borrower worked in hospitality, although her job had not been affected by the coronavirus.
“Maybe banks are going sector specific when they decide who to lend 95 per cent to,” he added. “If I was a lender that’s what I’d do.”
Brokers agreed that to stand the best chance of getting your deal approved at 95 per cent LTV, extra leg work was needed. Support from business development managers was also invaluable.
Jane King, mortgage and equity release adviser, Ash-Ridge Private Finance said due to the high house prices in London, Surrey, Hampshire, Berkshire and Middlesex, where she advises, she is dealing with lots of enquiries from borrowers who need 95 per cent deals.
King says her first piece of advice to buyers is “prepare to cut your cloth,” because they’re not going to get an income multiple of five times their salary. After that King insists on seeing her clients’ payslips so she knows exactly how much they earn instead of using their estimation of earnings.
“You’d be amazed how many borrowers just take a stab at how much they earn, or lump in car allowance with their basic salary,” she said.
“Lenders aren’t out to trick you. The surprises come from the clients not telling you the full story.”
King says the lenders offering 95 per cent LTV have never liked adverse credit so their strict stance on clean credit is to expected. She admits, however, some of their policy decisions discount a lot of good buyers.
“Most won’t look at flats and most want PAYE borrowers and no furlough,” she said.
King praised Accord, a lender offering 95 per cent deals outside the government’s scheme, for its approach to reviewing self-employed applicants with a five per cent deposit.
She said Accord were happy to review cases for self-employed borrowers looking for a 95 per cent mortgage, and the outcome depended on the sector they work in and the condition of the accounts.
Cutler singled out Skipton Building Society, another lender offering mortgages outside the mortgage guarantee scheme.
He said: “The broker has to do a good job upfront and then with the help of a BDM, who knows exactly the underwriters’ appetite, you have chance of getting it through.”
Butler said the CMME team had recently decided to complete the decision in principle far earlier in the house buying process because of the volume of declines the firm has received at high LTVs.
CMME specialises in mortgages for contractors and self-employed borrowers. “This isn’t based on any concerns with adverse credit,” he added. “We regularly receive declines or alternative lending decisions for clients with clear records and low unsecured debts.”
Nationwide launches lowest 95 per cent LTV fixed rate on market
First-time buyers and home movers are eligible for the five per cent deposit deals but self-employed borrowers will be locked out. Flats and new build properties are excluded.
From Thursday 20 May, two and five-year fixed rates and a two-year tracker are available from 3.49 per cent and will be offered outside the government’s guarantee scheme. By not using the scheme, Henry Jordan, director of mortgages, said Nationwide could offer “improved value”.
Its two-year fixes come with three fee options, 3.49 per cent with a £1,499 fee, 3.69 per cent with a £999 fee and 3.84 per cent no fee.
According to Moneyfacts the 3.49 per cent deal will be the lowest fix on the market. Platform offers the next cheapest deal which is a two-year fixed rate of 3.61 per cent with the same fee.
The same fee options apply to the five-year fixes and tracker deals. The lowest five-year fixed rate on offer from the society is 3.79 per cent. The tracker mortgage prices start at 3.59 per cent.
First-time buyers will get £500 cashback on completion.
Three new deals will be added to the 95 per cent LTV range for existing borrowers.
Nationwide withdrew from 95 per cent lending in mid June 2020 after offering the deals direct to borrowers, excluding the intermediary channel, from March. When it announced it would retreat from 95 per cent LTV, Nationwide said it was due to uncertainty in the housing market. The society said it wanted to make sure borrowers could afford their repayments and avoid the risk of negative equity.
On the society’s re-launch Jordan said: “As the UK’s biggest building society and second largest lender, supporting people into their first home is at the heart of what we do. As one of the leading lenders to first-time buyers, we feel confident returning to the 95 per cent LTV market without the need for the mortgage guarantee scheme.
“By not being part of the scheme, we can provide improved value to our members and this is demonstrated by the market-leading rates we’re announcing today.”
Back to the future as 95 per cent LTVs make a welcome return – Phillips
The government’s 95 per cent LTV mortgage guarantee is being offered only by a handful of lenders, but this is a welcome addition to the products already out there.
According to MoneyFacts, more than 100 products are back on the market already, with more coming daily.
However, we are still a long way off normality. At the start of 2020, MoneyFacts data stated there were 391 mortgages requiring a five per cent deposit.
The full return of these products may take more time, but those back on the market are having an impact.
The first few months of 2021 have been incredibly busy, and fears that the stamp duty holiday ending would result in a cliff edge seem to have been unfounded.
How long can it go on?
The question on everyone’s lips is: how long can this intense pace last?
Purchase activity has been key to demand so far this year, and this trend shows little sign of slowing down. More homes changed hands during the final three months of last year than during any quarter over the past 13 years, according to figures from HMRC.
Ahead of the initial stamp duty holiday deadline, sales agreed in March stood at almost 162,000, according to TwentyCi. This was a record since the property data company began collating figures in 2016, with the number of transactions more than a third higher than February last year.
While we cannot keep going at this historic pace, the re-introduction of 95 per cent LTV mortgages will bring more buyers to the table. And with people looking to move, the market will continue to turn, albeit at a slightly slower pace than the first quarter of 2021.
Beyond the products and criteria, the motivating factors behind people looking to move are intriguing.
The pandemic has changed the way a lot of us work, but will these changes stick once we are all allowed back into the office? The answer is probably not definitive either way.
There will be some who will work from home full-time, regardless of lockdowns. Others will go straight back into the office. And there will inevitably be those who opt for a hybrid of the two.
Whichever way people work, the genie is now out of the bottle, and that means there will be those who no longer need to live near the office, or who now need an extra bedroom to work from. This will continue driving the desire for moves throughout the year.
Push and pull of city life
What shouldn’t be overlooked is the impact of refinancing.
There are due to be more than 700,000 residential fixed-rate mortgages reaching maturity in 2021. While it can be easy to focus on new business, particularly with the number of buyers looking for mortgages, brokers should ensure they are in contact with existing clients to make sure they have the advice they need.
The return of 95 per cent LTV lending is a welcome reminder of the pre-pandemic world, but what has changed is the needs and desires of clients.
It remains to be seen if we fall back to the old ways in a few years as we move away from the pandemic. Perhaps this will see another rush on the housing market as everyone looks to move back to cities to be close to the office once again.
What’s clear is that, even with a DeLorean, this housing rush does not look set to end anytime soon.
Virgin launches mortgage guarantee fixes up to 15 years; TSB adjusts rates
At 95 per cent LTV, there is a five-year fixed with a rate of 3.99 per cent, a 10-year fixed priced at 4.19 per cent and a 15-year fixed priced at 4.39 per cent.
All products have no fee and come with £300 cashback for purchases or £500 for first-time buyers. It offers free valuation and free legals on remortgages.
The products are also portable.
The deals are available on properties with a maximum value of £600,000 and for a maximum term of 30 years. They are eligible on houses, flats and maisonettes.
Virgin warned the products could be withdrawn at a short notice.
The lender also changed criteria on its products at 90 per cent LTV.
The maximum term has increased from 30 to 35 years and the maximum property value has also been lifted from £500,000 to £600,000.
It now also accepts flats and maisonettes but they must be in buildings shorter than four storeys and must not be ex-local authority or Ministry of Defence.
Sarah Green, head of customer acquisition, group mortgages at Virgin Money said: “The mortgage guarantee scheme addresses an important consumer need and Virgin Money’s participation in the scheme demonstrates our commitment to the UK housing market.
“We want to continue to build our support for people’s home ownership ambitions, including those with smaller deposits.”
TSB product changes
TSB has added fee-free two-year fixed first-time buyer and purchase products to its range at 0-85 per cent LTV.
Rates vary from 1.64 per cent at 60 per cent LTV and 2.99 per cent at 80-85 per cent LTV.
It has also introduced two-year fixed, fee-free deals, for remortgages up to 90 per cent LTV including a product priced at 0.99 per cent.
The low rate deal is the 60 per cent LTV remortgage with a £1,495 fee. Otherwise, rates range from 1.69 per cent up to 60 per cent LTV with a £999 fee and 3.64 per cent for a fee-free deal at 85-90 per cent LTV.
Elsewhere, the bank has reduced rates on its two-year fixes across 0-90 per cent LTVs by as much as 15 basis points. Two-year fixed remortgages up to 85 per cent have seen reductions of up to 10 basis points.
Meanwhile, its two and five-year fixed shared equity remortgages have had rates increased by up to 50 basis points.
These are now priced between 1.54 per cent – for the two-year fixed at 60 per cent LTV for the £995 fee-paying product – and 2.39 per cent for the five-year fixed at 60-75 per cent LTV with no fee.
Virgin Money reveals 95 per cent LTV mortgage guarantee criteria
The mortgages will be eligible for purchases and remortgages but cannot be used for capital raising.
It will be accepted on houses, flats or maisonettes with a maximum property value of £600,000. As with the rest of the mortgages under this scheme, new builds will not be permitted.
Properties must be in buildings with four storeys or fewer and must not be ex-local authority or ex-ministry of defence.
A maximum mortgage term of 30 years will be offered. Applicants must not have equity in any other properties.
Sarah Green, head of customer acquisition, group mortgages at Virgin Money, said: “Virgin Money are excited to announce our support for customers looking for low deposit mortgages.
“It’s encouraging to see that the government’s mortgage guarantee scheme is off to a such a strong start and we are pleased to be offering a wide choice of products to new and next time buyers as well as remortgage customers.”