Big banks poised to launch 95 per cent government-backed mortgages
The scheme will be open to home buyers with a five per cent deposit, not just first-time buyers, for properties worth up to £600,000. It has been largely modelled on the previous Help to Buy scheme launched in 2013 to help lenders transition back in to the market, and is open to second hand properties not just new-build.
Sunak confirmed the UK’s biggest banks are poised to lend on the scheme from mid-April, include Lloyds, NatWest, Santander, Barclays and HSBC with Virgin Money readying to launch in May.
All mortgages will need to be repayment, not interest-only on a loan to value of between 91 to 95 per cent and are subject to the usual affordability rules. All participating lenders will also be required to offer a five-year fixed rate product as part of its guaranteed range of mortgages.
He said: “To quote the Prime Minister, we will turn generation rent into generation buy.”
HSBC’s head of buying a home, Michelle Andrews, said: “We’re delighted to once again be supporting the Government Help to Buy scheme. Here at HSBC UK we’re committed to supporting people to get on to, or move up the property ladder. This scheme will make a real difference in enabling more first-time buyers and home movers, with a minimum of 5 per cent deposit, to get the keys to their new home, and we’re excited to play our part in it.”
A Santander spokesperson said it had no product details yet but they would be available through intermediaries, branches and over the phone.
Mortgage broker, Hiten Ganatra, Visionary Finance said: “The mortgage guarantee scheme will help open up options within the second hand property market and it’s incredible that so many lenders are already on board and will be rolling out products by April.”
He added: “The key to success of the guarantee scheme will determined by the competitiveness of the mortgage rates being offered to those looking to use it.”
Stock market-listed mortgage broker firm Mortgage Advice Bureau is already listing the product on its website.
The scheme will be open for new mortgage applications from April 2021 to December 2022, reflecting the government view that the scarcity of high loan-to-value lending is primarily a response to the pandemic rather than a more structural problem.
The government will review the continuing need for the scheme towards the planned end date and has capped the bill for the scheme at £3.9bn.
Fears remain that the already hot property market with rising house prices driven up by the Stamp Duty Land Tax (SDLT) holiday, which has been extended today, could be driven ever-higher after this move.
Open banking proposals ‘spell the end of big, dumb mortgages’
The banks’ trade association proposed creating a new company which would oversee the functions of open banking for the long-term.
The proposed new organisation could begin operating as early as next year.
“This spells the end of big, dumb mortgage products manufactured without consideration for the end consumer,” said Dr Louise Beaumont, chair of the open finance and payments working group at TechUK.
“Mortgages will be bespoke for the individual, based on what data they choose to share with the provider. And the products will flex, as the individual’s circumstances change, again based on the flow of data,” she said.
UK Finance’s proposals follow an initial period of work by the Open Banking Implementation Entity (OBIE), which was funded by the big banks. OBIE was a response to a Competition and Markets Authority order in 2016 based on the banks not competing hard enough for customers’ business.
The nine lenders involved, known as the CMA9, were Allied Irish Banks, Bank of Ireland, Barclays, Danske, HSBC, Lloyds, Nationwide, NatWest and Santander.
Banking technology provider Yobota also welcomed the UK Finance paper — and urged the banks to address legacy system issues to support the transition.
“This is a major step forward in our journey to open finance. Mortgages, pensions and insurance products all stand to benefit from increased competition to enable consumers to make more informed decisions regarding their personal finances,” said Ammar Akhtar, chief executive at Yobota.
“We must expand the open banking model to the corners of the market that continue to be riddled with inefficiencies,” he said.
“I hope to see more emphasis on helping financial services companies bring their underlying technology into the modern era. Without modern core systems, the industry will be stuck building layers of apps on top of existing legacy systems,” Akhtar added.
Fitness apps and online retail data
The industry’s journey to open banking will likely move through the stage of open finance, then open data.
Open finance is where data is sourced from financial organisations like insurers. Open data brings in information from a wider range of sources such as fitness apps or online retailers.
“Open banking is a world leading innovation with huge potential to make our financial lives much safer and more convenient,” said a spokesperson for UK Finance.
“It provides a secure way for financial information to be shared across different finance providers with customers’ consent. This can enable services such as account aggregation, where customers can see all their accounts with different providers in one place, as well as the ability to make direct payments through a third party provider from a bank or building society account.
“Open banking can also facilitate services that help customers shop around for banking and credit services, or to support lending decisions through credit analysis,” the spokesperson said.
The move is expected to result in better outcomes for customers specifically by stimulating competition.
“Open banking has a rich and valuable future, building from humble beginnings in the banking sphere to open finance and through to the rich, sunlit uplands of open data. This means an ever-richer suite of data to pull into ever-more valuable services — hyper-personalised, predictive and pre-emptive services,” said Dr Beaumont.
“It’s time to to unleash your imagination and think about the data you need to create genuinely valuable services and to leave lumpen, inflexible products behind,” she said.
New enabling organisation
The UK Finance paper, Open bank futures: blueprint and transition plan, lays out ideas for structuring and funding the new enabling organisation and describes the potential scope of its activity.
Its proposed overall purpose is, “to help consumers, small business and corporates to benefit from an efficient, safe and reliable open data and payments market, and to provide a platform to support financial institutions to meet regulatory requirements.”
The paper sets out the proposed functions of new entity, such as holding and maintaining technical standards, providing core services such as a help desk and directory, enabling regulatory compliance, acting as an effective point of escalation and resolution, and advocating for open data and payments.
The organisation’s key performance indicators are outlined too.
They are: widespread adoption of open data and payments propositions, highly secure and reliable provision of services, keeping the UK at the forefront of innovation in open application programming interface (API) propositions, ensuring those in vulnerable situations are able to experience equal benefits of open data and payments propositions, and preventing poor customer outcomes.
NatWest and Halifax cut rates; Platform caps maximum LTI – round-up
Two-year fixed purchase mortgages have seen rates cut up to 10 basis points. The fee-free product at 85 per cent loan to value (LTV) has dropped from 2.93 to 2.83 per cent. The fee-free offering at 90 per cent LTV has decreased from 3.48 to 3.43 per cent.
Remortgaging borrowers fixing for two years have seen rate reductions. These include the £0 fee product at 75 per cent LTV, on which rates have reduced by 11 basis points to 1.78 per cent.
At 90 per cent LTV, two-year fixed remortgages have seen cuts of 0.15 per cent to, respectively, 3.24 per cent and 3.44 per cent for the £995 paying and fee-free products.
For borrowers fixing for five years, the fee-free purchase product at 85 per cent LTV has been cut to 3.07 per cent from 3.15 per cent.
Brokers wanting to secure current rates have until 10.30pm tomorrow to produce mortgage illustrations and submit applications online. If brokers are unable to submit applications due to technical issues that cannot be resolved over the phone, they must submit a paper application and email their business development manager by midday.
Platform caps maximum LTI
Platform has reduced the LTV its maximum income multiplier can be considered for from 75 per cent LTV to 70 per cent LTV.
Borrowers requiring loans up to the threshold can borrow up to 4.85x their income while anyone with requirements above 70 per cent LTV and those using Help to Buy will have borrowing capped at 4.49x their income.
The change applies to applications submitted from 1 March.
Platform has re-introduced its Help to Buy mortgages at 60 per cent LTV and 75 per cent LTV with two and five-year fixes.
All products have £500 cashback and free valuations. At 60 per cent LTV, rates for both two and five-year fixes with a £999 fee are 1.79 per cent. At 75 per cent LTV, rates are 1.95 per cent.
For fee-free Help to Buy products, rates are 2.02 per cent at 60 per cent LTV and 2.2 per cent at 75 per cent LTV.
The lender has also relaunched fee-free mortgages at 60 and 75 per cent LTV, with two- and five-year fixes.
Elsewhere, Platform has reduced rates on residential, professional and mainstream mortgages by up to 0.12 per cent. Product switches for residential and buy-to-let mortgages have seen rate hikes of up to 0.19 per cent.
Halifax and BM Solutions
Halifax has reduced rates on remortgages.
Meanwhile Lloyds Banking Group’s buy-to-let brand BM Solutions has increased the rate of a five-year fixed at 75 per cent LTV with a £999 fee. The product transfer now has a rate of 2.21 per cent.
The top 10 biggest mortgage broker stories this week – 19/02/2021
Meanwhile, a tightening of the rules around the new Help to Buy scheme got brokers talking.
But stamp duty is still at the top of the housing market’s agenda, with news and views about the tax holiday making four appearances in this week’s top 10 mortgage broker stories.
Stamp duty holiday extension ‘does little to help’, conveyancer says
Buyers could save £1bn with six-week stamp duty holiday extension – Rightmove
HSBC accepts overtime as mortgage rates are cut
NatWest re-introduces high LTV options
First-time buyers have greater mortgage choice as lenders step back into market – Moneyfacts
Help to Buy rules get tougher as couples forced to jointly apply, say brokers
Lenders cut maximum loans as affordability used to regulate mortgage volumes
Sunak considering stamp duty holiday extension – reports
The risks ahead from unwinding the stamp duty holiday – Pike
Santander cuts mortgage rates and adds cashback
NatWest re-introduces high LTV options
The bank will also introduce four remortgage products at 90 per cent LTV for borrowers remortgaging on a like-for-like basis.
These include a two-year fixed at 3.39 per cent with a £995 and the fee-free alternative with a rate of 3.59 per cent. The five-year fixed £995 fee-paying alternative has a rate of 3.54 per cent, while the fee-free option is set at 3.74 per cent.
For those requiring extra borrowing, remortgages are still limited to up to 80 per cent LTV.
NatWest has also increased LTVs on new-build houses from 80 per cent to 85 per cent, with borrowing on flats remaining at 75 per cent LTV.
New business rate cuts
The bank has cut rates on its new business mortgages with two and five-year fixed purchase products seeing reductions up to 13 basis points (bps) and 23bps respectively.
The bank’s two-year fixed purchase products at 70 per cent and 75 per cent LTV have both seen rate cuts from 1.57 per cent to 1.44 per cent.
For five-year fixes, the 60 per cent LTV purchase product has been reduced from 1.34 per cent to 1.33 per cent.
At 70 and 75 per cent LTV, the five-year fixed purchase mortgages have both seen cuts from 1.86 per cent to 1.63 per cent.
The two-year fixed green mortgage at 75 per cent LTV has been reduced by 12bps and the five-year fixed option has decreased by 5bps. The mortgages have fees of £995 and £250 cashback.
These changes will apply from tomorrow.
Banks loosen interest-only mortgage terms but borrowers in the dark
Mortgage brokers Trinity Financial and Private Finance say a common misconception among borrowers is that interest-only is a pre-credit crisis mortgage option.
However, since Coventry Building Society re-entered the interest-only market in September and Nationwide widened its range to purchases in November a flurry of lenders have made criteria tweaks to open up their interest-only options to more borrowers.
NatWest changed its interest-only income criteria in November to match its capital repayment policy which means bonuses can be taken into account. But single applicants must earn at least £75,000 a year and joint applicants must earn £100,000 between them.
In January, Barclays enhanced its part repayment and part interest-only criteria by increasing its loan to value (LTV) from 80 to 85 per cent for those classed as Barclays Wealth Management or Premier Banking borrowers.
In the same month, Metro Bank said a homeowner choosing interest-only could now state debt consolidation as their reason for borrowing. The bank also increased its part and part LTV to 75 per cent when the sale of the property is the repayment strategy and the property is worth at least £600,000.
Meanwhile, Dudley Building Society launched a part and part discounted interest rate of 3.94 per cent up to 85 per cent LTV. The interest only portion of the loan can be up to 75 per cent of the debt and capital repayment accounts for the remaining 10 per cent.
According to analysis from Sesame Bankhall Group (SBG), there are now 61 lenders on its panel that offer residential interest-only deals.
Data from Moneyfacts shows that there are 89 pure interest-only mortgages available. However, more than 60 per cent of the 2,893 mortgage deals available on 1 January offered borrowers the option of having part of their mortgage on interest only and part on capital repayment.
Aaron Strutt, product and communications director, Trinity Financial, said: “Interest-only mortgages are popular with our clients and they are much more widely available than they were a couple of years ago. Yet a lot of borrowers still do not realise that lenders are offering these mortgages again.
“Interest-only isn’t suitable for everyone but they useful at the moment. The vast majority of borrowers take full capital repayment mortgages, while part interest and part capital repayment deals are more suitable for many homeowners who want to lower their monthly repayments.”
Lenders do not charge a premium for their interest-only deals so borrowers have the opportunity to lock in to sub 2 per cent rates.
Santander, for example, is offering a rate of 1.24 per cent with a fee of £999 up to 60 per cent loan to value, available to interest-only borrowers.
This means a homeowner with a £300,000 mortgage would pay £311 a month.
Chris Sykes, associate director, Private Finance, said: “We do a fair amount of residential interest-only mortgages. It does seem like they are the lesser-known mortgage product, assumed extinct, as some clients will even feedback other brokers have said that residential interest-only mortgages no longer exist post 2007.
“Granted they took a little while to come back but they have been gradually returning over the years and now offer a competitive alternative to normal capital and interest mortgages in the right situation.”
Strutt added: “Most of the bigger lenders want a larger slice of the interest-only market and many of them are looking at ways to ease their acceptance policy, especially if their main competitors offer a more lenient policy.
“Brokers have waited a long time for the lenders to really push to attract interest-only business, but the market is more positive.”
According to criteria analysis of interest-only mortgages by SBG, borrowers who want to use sale of property as their repayment vehicle are generally restricted to a maximum LTV of 50 per cent. Most lenders are happy to offer part repayment and part interest-only up to 75 per cent LTV.
Leeds Building Society will offer up to 60 per cent LTV and Virgin Money up to 65 per cent LTV on interest only. Building Societies such as the Harpenden and Leek United will go up to 75 per cent LTV.
Banks generally stipulate the borrower must have between £150,000 to £300,000 equity in the home.
Sesame’s analysis found Santander to be the most flexible on this criteria point, accepting £150,000 equity and allow this to be at end of term if there some element of capital and repayment on the mortgage. Otherwise lenders request the minimum equity to be available on application.
Dudley Building Society, Family Building Society, and Furness Building Society have no strict restrictions on level of equity in the property and instead look for comparison properties within a five-mile radius that the homeowner would be able to downsize to.
The minimum income levels of £75,000 for a single borrower and £100,000 for joint stipulated by NatWest are the norm.
Jane Benjamin, director of mortgages, SBG, said: “A factor to remember for interest only is that lenders are stricter on income requirements compared to capital and repayment. This is important when placing a case with the mainstream lenders. Accord, Coventry, Leeds Building Society and Santander have no minimum income requirements, however, other mainstream lenders only accept applications for high income earners.”
With banks willing to offer more flexible terms on interest only than they have done in recent years, it can offer borrowers a way to free up cash but with such tight criteria controls in place, an interest-only arrangement is not for the cash strapped.
Sykes added: “The mortgage needs to be affordable in a lender’s eyes. Often lenders will stress the mortgage is affordable on a capital and interest loan rather than interest-only just to be sure the borrower can afford it. So suggestions that interest only is a useful tool in times of distress will often fail.
“If you are in a vulnerable position with no work or are self-employed with reduced income it may well be the mortgage isn’t available to you at all, or on an interest-only basis at the moment.”
NatWest cuts rates on mortgages up to 90 per cent LTV
A two-year fixed mortgage at 80 per cent LTV with no fee has been cut by five bps to 2.48 per cent, while at 85 per cent LTV the free-fee option has a rate of 2.93 per cent down from 3.09 per cent.
Mortgages for those with smaller deposits have seen the largest reduction, including a fee-free two-year fixed deal at 90 per cent LTV with a rate of 3.48 per cent, cut from 3.69 per cent.
The £995 paying option at the same tier has decreased 3.44 per cent to 3.24 per cent.
Two-year fixed remortgages have been reduced by up to 14 bps and five-year fixes have seen cuts of up to 15 bps.
Two-year fixed remortgages now vary from 1.17 per cent at 60 per cent LTV to 2.84 per cent at 85 per cent LTV. Meanwhile, rates for five-year fixed remortgage deals range from 1.31 per cent at 60 per cent LTV to 2.7 per cent at 85 per cent LTV.
For first-time buyers, the two-year fixed at 80 per cent LTV has been reduced by 0.05 per cent to 2.48 per cent and the five-year equivalent has decreased by 15 bps to 2.58 per cent. Both products have no fee and offer £250 cashback.
Elsewhere, the bank’s green mortgage range has seen reductions up to 0.16 per cent for two-year fixes and product switches have been cut by up to 0.09 per cent.
Changes are effective from tomorrow.
Winners of second NatWest Local Hero Mortgage Awards revealed
NatWest is using the awards to recognise broker firms that have gone beyond everyday expectations to put the customer and their local community at the heart of their business. These achievements have only been magnified by the impact of the pandemic.
Across the 12 regional categories, firms were asked to demonstrate their position as a local mortgage and protection expert, their commitment to quality advice, excellent customer outcomes, and their positive contributions to the local community.
The judging process also urged firms to show a clear focus on a more sustainable approach to reducing the social and environmental impact of their business practices and how they encourage others to take a more sustainable approach to environmental issues.
NatWest head of intermediary mortgages Graham Felstead said the lender was delighted to recognise its Local Heroes again.
He added that while it was disappointing this acknowledgement could not be done in person, it did not detract from the hard work, commitment and community focus of all the firms who participated.
“The awards are specifically aimed at recognising the hard work and commitment of mortgage adviser firms that have gone above and beyond normal expectations,” he said.
“These firms have exemplified putting the customer and their local community at the heart of everything they do, in addition to providing sound financial advice for those consumers within their locality.
“We can see again that there are many firms doing exceptional things in their communities.”
Best Firm, East of England
Winner: CLS Money
Highly Commended: Premier Financial Group
Best Firm, Greater London
Winner: Alexander Hall Associates
Highly Commended: BTJ Mortgages
Best Firm, South East England
Winner: Crystal Clear Financial Services
Highly Commended: Forces Family Finance
Best Firm, North East England
Winner: First Mortgage NE
Highly Commended: Mapps Mortgage & Insurance
Best Firm, Yorkshire & East Midlands
Winner: Fulcrum Financial
Highly Commended: Believe Finance
Best Firm, Scotland
Winner: ESPC Mortgages
Highly Commended: Argyll Financial Services
Best Firm, South West England
Winner: TFA Trusted Financial Advice
Highly Commended: Ecclesiastical Financial Advisory Services
Best Firm, South Central England
Winner: The Money Guardian
Highly Commended: Threshold Financial Services
Best Firm, Wales
Winner: Westmore Insure
Highly Commended: Clearwater Financial Solutions
Best Firm, North West England
Winner: Bluetree Financial Services
Highly Commended: Rapport Financial Strategists
Best Firm, West Midlands
Winner: S J Financial Solutions
Highly Commended: JAM Advisors
Best Firm, Central England
Winner: RTA Mortgage & Financial Services
Highly Commended: JLM Mortgage Services
Top 10 most read mortgage broker stories this week – 22/01/2021
Also among the most read stories was news of industry optimism towards the stamp duty holiday deadline and an upcoming Parliamentary discussion on its extension.
And there was an estate agent getting tripped up by its claims to sell properties for just £1.
Nationwide warns of ‘peak period ahead’ and returns 90 per cent LTV max term
Petition to extend stamp duty holiday secures Parliament debate
NatWest slashes rates by more than two per cent
Buy-to-let mortgage rates hit highest level of Covid crisis – Moneyfacts
Estate agent’s ‘£1’ ad receives complaint as sellers face £300 bill to use own solicitor
Home repossessions to leap more than ten-fold by 2022
Perenna raises £7m to bring Danish-style mortgages to UK
Two mutuals reintroduce 90 per cent LTV mortgages
Ex-Lloyds intermediary MD Mike Jones joins MAB
Still possible to meet stamp duty deadline, lenders and brokers say
Lenders relax rules over local authority indemnity insurance as stamp duty deadline looms
NatWest has historically only accepted the insurance for remortgages but said from December it is temporarily excepting it for purchase cases.
Skipton has changed its policy for purchase cases where search information is ‘significantly delayed’.
Around 20 councils in England and Wales are reporting turnaround times of between 40 and 60 working days to deal with local authority search requests, according to Searchflow’s website.
York is not currently processing any requests while Bedford and Hackney Borough Councils are quoting 180 working days. Hackney Borough Council was the victim of a cyber attack in November which has left it unable to provide the information.
To help reduce delays that homebuyers in these areas are experiencing, some lenders have agreed to accept the conveyancer’s indemnity insurance in place of the searches.
Alex Beavis, head of mortgage products at Skipton Building Society, said: “Skipton Building Society now accepts indemnity insurance for local authority searches on purchases, to provide an additional option for conveyancers should local searches be significantly delayed due to the exceptional demand associated with the stamp duty rush, plus the added pressures of working through the Covid-19 pandemic .
“This move is designed to take some pressure off purchase chains, keeping the market moving and hopefully helping more borrowers meet the 31 March deadline.”
NatWest said it would also accept the insurance on a temporary basis for purchase cases.
Not all lenders, however, will proceed to completion without the searches which means brokers are having to give their clients an additional mortgage option of a lender that accepts the insurance.
Andrew Montlake, managing director, Coreco, said: “Borrowers who definitely want to complete before the stamp duty deadline are being offered extra choices. We’re showing them the best deal for their circumstances and if necessary an additional deal from a lender that accepts indemnity insurance.”
Barclays and Halifax will accept the insurance if the conveyancer is comfortable going ahead without reviewing information that could affect the property but Santander and Nationwide will not.
Mortgage Solutions has contacted HSBC.
David Hollingworth, associate director, communications, L&C, said: “Together with the search provider we are able to identify cases that will be affected by the delays at an early stage and then consider whether any of those cases could run into issues with the lender if indemnity insurance was used.
“That helped to flag a small number of cases and allow for appropriate action to be taken in placing with a lender that would be able to progress to completion.”
He added: “Skipton’s move to address this issue is a welcome one.”
Calling all lenders
Brokers are calling for more lenders to follow Skipton and NatWest’s lead.
Lea Karasavvas, managing director, Prolific Mortgage Finance, said: “Most lenders are aware of the issue in Hackney and are starting to accept indemnity insurance, but there are still a lot that will not. One way around this is for the buyer to instruct private searches which is when someone goes into the local council offices and has to manually look through the documents but as you can imagine the delay on this can be considerable with some solicitors saying this will take over six months.
“With most buyers wanting to complete by 31 March, this can mean that most people buying in Hackney where the average purchase price is over £500,001 will be stung with an extra £15,000 on their stamp duty bill as they will miss the deadline.
“If possible we need all lenders to take this into consideration and accept the indemnity insurance but they understandably need to listen to their own legal advice on whether they can or not.”
Risk to buyers
Indemnity insurance can be arranged to protect buyers from any search entries that could damage the property value but were not uncovered because the information was unavailable, for example a planned development that would be disruptive to the house. But proceeding without seeing searches can also put the buyers’ safety at risk.
Beth Rudolf, director of delivery, Conveyancing Associations, said: “For the buyer, insurance in place of the authority information is not always a good thing, albeit often worth it to enable their transaction to proceed.
“For example if there was a loft conversion then the buyer might assume that the loft conversion can be safely used as a bedroom when in fact the building control inspection might have revealed safety issues that mean that it can only safely be used as storage.”
Last year, the Conveyancing Association recommended that sellers should obtain the searches when their property is listed for sale that way by the time a buyer has made an offer the information is likely to have been returned and any issues uncovered can be dealt with by the seller cutting out delays.