Increase in maximum loan sizes of 2.5 per cent lags house price growth – MBT
On average, the maximum loan size offered by lenders was £243,400 in May this year, up by 2.5 per cent compared to the average £237,500 in May 2020.
By comparison, average house prices were up 9.5 per cent, or £22,000 in the past year, according to the Halifax House Price Index.
The MBT Affordability Index for May further found that the spread between the minimum and maximum loan sizes offered to customers had grown to £100,900 in May 2021, up from £89,893 in May 2020.
For first-time buyers, the average maximum loan size rose by 2.7 per cent to £253,764 in May compared to April 2021. For buy-to-let investors, the rise was 3.6 per cent to £362,750 month-on-month.
Tanya Toumadj, chief executive at Mortgage Broker Tools (pictured), said: “Property prices have risen at their strongest level in nearly seven years over the last 12 months, according to the Halifax House Price Index. Mortgage lenders have increased their appetite to offer customers larger loans in the same period, but not nearly at the same rate.”
Toumadj added that the spread was growing between the largest loan sizes offered to customers by different lenders.
Over-55s finding it harder to secure desired mortgage than self-employed – MBT
In April, data showed there was at least one lender able to provide the loan requested by 70 per cent of self-employed borrowers compared to 64 per cent for those aged over 55.
Nine per cent of borrowers aged 55 and over were unable to get a mortgage of any size, while this was the case for two per cent of the self-employed.
Overall, self-employed borrowers and those aged 55 and over were having a harder time securing their requested mortgage loans in April. Across the market, lenders were able to fulfil the needs of 75 per cent of borrowers.
Loan size gap
The difference between loan sizes available to customers aged 55 and over was larger than the spread available to the whole of the market and to the self-employed.
The largest loan available on average to a customer aged 55 or over was £287,540 while the smallest loan was £147,372 – a spread of £140,168.
Meanwhile, the largest loan available to a self-employed customer was £231,206 and the smallest loan of £110,552, representing a difference of £120,654.
For the whole of market, the largest loan available on average was £245,890 and the smallest loan was £145,742, a disparity of just £100,148.
Different factors at play
Tanya Toumadj, CEO at Mortgage Broker Tools, said: “The latest MBT Affordability Index shines a light on the challenge that mortgage customers aged 55 and over face in securing the loan size they want.
“There are a lot of different factors at play here. Obviously maximum age at the end of the mortgage term, and anticipated retirement age play a significant role in how much customers will be able to borrow and lenders often have different criteria in these areas, but there are also other considerations.”
“As customers grow older, in general, they also become wealthier and many will have additional sources of income to consider from investments and pensions.
There’s a huge variation in the way that lenders underwrite these additional income sources and it means that the choice of lender can make a very significant difference to how much a customer aged 55 or over is able to borrow,” she added.
Toumadj said: “We have spoken before about the importance of whole of market research and it’s even more apparent for this group of customers.
“Every broker in the country will have a number of clients who are aged 55 or over and, if they are not using technology to research all of the affordability options, they are not giving their clients the strongest chance of achieving the loan they deserve.”
SimplyBiz Mortgages partners with MBT
Members who register for access to MBT Affordability will have free additional access to MBT Criteria Search for a limited time. The tool provides advisers with a search bar that allows advisers to research any panel lender criteria term.
Results are identified within the lenders’ own criteria guides and the exact wording is highlighted for advisers to review within the platform.
Richard Merrett, head of strategic development at SimplyBiz Mortgages, said: “With the limited housing stock available in the market, being able to give customers as much choice as possible in their home purchase is a key factor in a mortgage adviser’s ability to provide solutions, and this often starts with maximising affordability potential.
“It has become quite clear over the past 12 months that it is not always the most obvious or familiar lender which can deliver the best customer outcome.”
Tanya Toumadj (pictured), chief executive of Mortgage Broker Tools, said: “Affordability is a crucial part of the research process and more brokers are realising the importance of harnessing technology to make that process quicker, easier and more comprehensive.”
Biggest lenders outside best affordability in three-quarters of mortgage cases – MBT
Analysis of cases processed through its affordability system found that 73 per cent of applicants had to go to a lender outside of the top 10 if they wanted to maximise on their affordability.
For seven per cent of cases, the only lenders able to cater to a borrower’s needs were outside the top 10.
The news comes after a survey conducted by Mortgage Brain found 58 per cent of brokers did not use lender affordability calculators when dealing with a top 10 mortgage provider.
Tanya Toumadj (pictured), CEO at Mortgage Broker Tools, said: “The UK mortgage market is wonderfully competitive and diverse environment, which means there is usually a good solution for a client if you know where to look.
“Often the best option is not found in the most obvious place and brokers who confine their research to the top 10 lenders risk missing out on the most suitable choice for their client.”
MBT to integrate Iress mortgage sourcing
The integration will be launched later this month.
MBT said the combination would enable brokers to source by affordability, rate, criteria and even current service levels depending on their client’s priority.
According to its website MBT has 65 lenders available through its residential and buy-to-let affordability sourcing, including four of the big six.
In February MBT added a free text criteria search function to its affordability offering, taking criteria details directly from more than 100 lenders’ online guides.
Meet client priorities
MBT CEO Tanya Toumadj said: “This partnership with Iress gives brokers greater control over the way they research and source the best product for their clients.
“So, for example, if borrowing as much as they can afford is the main priority for a client, followed by controlling monthly payments, a broker can research affordability first and then filter the results based on the rate and monthly payment.
“Having everything in one place is going to make the process so much easier.”
Also in February, Iress announced a partnership with Knowledge Bank that integrated its criteria search facility into the Iress Xplan platform.
Dave Miller, executive general manager of commercial at Iress, said: “Access to comprehensive yet timely research is an important part of the mortgage process, with brokers required to consider a wide range of factors when making recommendations.
“This is where technology can help make life easier and partnerships such as this with Mortgage Broker Tools are great news for brokers, as they provide a way for providers to work together to improve speed and efficiency.”
Searches for 95 per cent LTV mortgages rise as products return – MBT
Data from Mortgage Broker Tools (MBT) showed that in 48 per cent of enquiries in January, no lender was able to lend above 90 per cent LTV. In March this improved and fell to 17 per cent.
Despite the recovery in lenders able to serve borrowers requiring mortgages of 90 per cent LTV and above, they were still not achieving their desired loan amounts.
During the month, 45 per cent of customers did not receive the loan amount they needed for a mortgage of 90 per cent LTV or above.
Although provision of low deposit mortgages has got better, the sustained lack of 95 per cent LTV mortgages is still impacting demand.
The proportion of searches for 95 per cent LTV mortgages accounted for 4.9 per cent in March compared to 14.1 per cent of enquiries a year ago. However, this appeared to be picking back up as MBT data showed that so far in April, 95 per cent LTV searches were making up 10 per cent of enquiries.
Tanya Toumadj (pictured), chief executive at Mortgage Broker Tools, said: “There is strong and growing demand for high LTV mortgages and an increasing number of products available to meet that demand.
“However, it is still difficult for customers to prove eligibility for those products as, when it comes to higher LTV loans, lenders take a much stricter approach to affordability.”
She added: “There is still a spread and so thorough research of all the options is the only way for brokers to ensure they are advising on the most suitable options for their clients.”
Gatehouse Bank and trio of mutuals ranked top for BTL affordability – MBT
Tipton & Coseley Building Society took second place, Hinckley & Rugby ranked third while Interbay and Furness Building Society took the forth and fifth spots.
Based on a standard set of circumstances, these lenders offered the most generous buy-to-let loan amounts.
For top slicing, MBT found Barclays and Clydesdale Bank to be the best while Saffron Building Society and the Darlington produced strong results for expats.
For holiday lets, Ipswich Building Society and Principality Building Society were the strongest.
Tanya Toumadj (pictured), chief executive at Mortgage Broker Tools, said: “Affordability calculations are important for buy-to-let investors who want to maximise their leverage, so it’s really interesting that the top five lenders for affordability are arguably lesser-known lenders in this part of the market.
“This shows the importance of shopping around and carrying out thorough research. Every case is different and affordability results vary depending on the individual circumstances of a customer.”
Lenders tighten self-employed affordability – MBT
The number of self-employed mortgage applicants receiving at least one offer matching their affordability requirements also dipped in February.
The biggest change was the average minimum loan available, which fell by more than 18 per cent to £96,935 – reflecting a significant tightening of self-employed affordability criteria among some lenders, MBT said.
And the average maximum loan available to self-employed mortgage applicants dropped by just over two per cent to £216,000 in February.
This meant the spread between the average minimum available loan size and the average maximum available loan size widened to more than £119,000.
“For brokers who only try one or two lenders, this can give a false impression that their clients have no chance of achieving the loan size they require,” MBT added.
Meanwhile, just two-thirds of self-employed cases processed through MBT Affordability had at least one affordability option, down from 71 per cent in January.
Instead, 31 per cent of cases were deemed to be unaffordable based on the required loan amount and lenders were unable to lend on two per cent of cases.
However across the whole of the market, 79 per cent of cases were affordable in February, slightly down from the peak of 80 per cent in January.
And there was at least one lender able to meet the loan requirements of 86 per cent of first-time buyers, 84 per cent of remortgage customers and 81 per cent of home movers.
‘Complex affordability landscape’
Tanya Toumadj, CEO at Mortgage Broker Tools, said: “The self-employed continue to face a complex affordability landscape as more lenders tighten criteria for mortgage applicants in this group and the number of options reduces.
“However, it’s important to remember there was at least one affordable option for more than two thirds of self-employed cases processed through the MBT Affordability platform in February.
“The message here is that the choice of lender makes a big difference to the amount a self-employed mortgage applicant can borrow, so brokers need to make sure they are considering all of the affordability options to ensure they are providing their clients with the most suitable recommendations.”
BTL lenders offer far wider range of loan values – MBT
The spread in buy-to-let (BTL) is £214,466, with the average maximum loan size £346,153 and the average minimum £131,687.
In residential, the spread is less than half of BTL at £99,475, based on an average maximum £235,475 and minimum £136,000.
This means that while residential loan values available to borrowers are more concentrated, those from BTL lenders can be far more varied depending on the lender chosen.
MBT’s analysis found the residential market is also more frequently affected by changes in the affordability landscape compared to buy-to-let, meaning identifying the right lender is particularly critical for buy-to-let clients.
“Our data shows that choice of lender for landlord clients can make a huge difference to the size of loan they are able to access,” said Tanya Toumadj, chief executive at Mortgage Broker Tools (pictured).
“Carrying out thorough affordability research is just as important in buy-to-let as for residential clients. The affordability landscape may be more stable in this part of the market, with fewer tweaks and changes to calculations, but the consequences of not choosing the right lender are more significant.”
“Many investors are keen to maximise leverage to make greater use of their capital, so it’s important for brokers to be able to easily identify lenders providing larger loans.
“Choosing the wrong lender could limit a landlord’s options and significantly impact the success of their investment strategy,” Toumadj said.
More first-time buyers securing desired mortgages in February – MBT
This was an improvement on the mortgages available to first-time buyers before the pandemic hit the property market. In February last year, 71 per cent of lenders were able to meet the borrowing needs of this segment.
Unsurprisingly, it was also up from a low in May when the effects of Covid-19 led to a restriction in product availability for first-time buyers. At this point just 59 per cent of lenders were able to fulfil first-timers’ needs.
The average maximum loan made available to those buying their first home also rose to £237,500 up from a record low of £230,555 in January.
Although fewer lenders were able to serve the requirements of first-time buyers a year ago, the maximum loan available was down compared to the average of £256,915 in February 2020.
Those remortgaging in February were given an average of £188,000, down from £192,065 the month before. The proportion of lenders able to meet their borrowing needs also dropped to 84 per cent from 86 per cent.
For home movers, the average maximum loan provided by lenders was £237,803, a marginal decline from £239,995 the previous month. The proportion of lenders willing to meet their loan requirements remained flat at 81 per cent compared to 82 per cent in January.
Tanya Toumadj (pictured), CEO at Mortgage Broker Tools, said: “First-time buyers have had reason to be cheerful in recent weeks and the launch of the mortgage guarantee scheme will open up new options for potential buyers who have only a small deposit.
“However, it’s important to remember that any buyers hoping to borrow 95 per cent loan to value (LTV) under the scheme will need to demonstrate that they can afford the loan and so the state of the affordability landscape will play a big role in the success of the initiative.”
She added: “This is something that we’ll be monitoring closely with the MBT Affordability Index over the coming months.”