There has been a 0.5 per cent rate increase among purchase and remortgage fixed and tracker loans with borrowing amounts of up to £3m and £5m at the 60 per cent and 75 per cent LTV tiers. 

These changes include a 60 per cent LTV two-year fixed with borrowing up to £3m. This now has a rate of 1.49 per cent and a £2,499 fee. The five-year equivalent has seen its rate increased to 1.74 per cent. 

The 75 per cent LTV two-year fixed, also with a maximum borrowing amount of £3m and a £2,499 fee, has seen a rate increase to 1.84 per cent while the five-year fixed offering has a rate of 2.14 per cent. 

Rates reduction for small deposit borrowers 

Meanwhile, the lender has reduced rates by 0.15 per cent at the upper tier, with its two-year fixed purchase product now at 2.99 per cent and the five-year fixed equivalent at 3.34 per cent. Both products are fee-free. 

Santander has also reduced the loan size on its standard residential mortgage range from £2m to £1.5m. 

Sard (pictured) will take up the role of managing director of home buying and ownership in the summer and will be responsible for leading the team. He will report to Les Matheson, chief executive of personal banking.

He replaces Ian McLaughlin, who left the role in May last year to join Bank of Ireland as chief executive.

Sard’s previous roles at Santander include, managing director of Santander for Intermediaries, and chief executive of Santander’s insurance services in the UK. He became the managing director of Abbey for Intermediaries in May 2011.

He also chaired the UK Finance mortgages product and service board from February 2018 to December 2018.

Brad Fordham will take up the role as interim head of mortgages from today.

A NatWest spokesperson said: “We are looking forward to Miguel Sard joining the home buying and ownership team in due course and welcome his expertise and experience in the sector.”

Santander head of retail and business banking Susan Allen said: “I would like to thank Miguel for all his efforts over the last sixteen years with the group, and the last nine years in mortgages.

“He has helped us to deliver a consistently strong performance in mortgage lending and he leaves with our very best wishes.”

Mortgage lending up

Sard’s departure follows the bank’s financial results revealing its highest net mortgage growth in a decade.

Gross mortgage lending came in at £31.3bn in 2018, up from £28.8bn in the previous year – £7bn of which came from first-time buyers, up from £4.8bn in 2018, Santander’s most recent full-year results showed.

Its home loan book jumped by £7.4bn in 2019, to £165.4bn from £158bn in 2018, and around 60 per cent of mortgages retained were refinanced online.

However, competitive mortgage pricing took a toll on its bottom line and overall profit before tax fell by 37 per cent year-on-year to £981m.

Home loans jumped by £7.4bn in 2019, to £165.4bn from £158bn in 2018, full-year results showed.

Gross mortgage lending came in at £31.3bn, up from £28.8bn in the previous year – £7bn of which came from first-time buyers, up from £4.8bn in 2018.

Around 60 per cent of mortgages retained were refinanced online, the lender reported.

Santander’s online banking customers with an existing mortgage can now request a switch to a new deal online in under 10 minutes.

And through Mortgage Engine, the bank launched a pilot to provide multi decision in principle technology for intermediaries.

Mortgage pricing hurts margins

However, Santander’s focus on competitive mortgage pricing took a toll on its bottom line in 2019.

The bank’s net interest margin (NIM), the difference between interest income and interest paid, dropped 16bps, down to 1.64 per cent.

At the same time, the lender also lost £3.9bn of typically lucrative Standard Variable Rate business.

Overall profit before tax came in at £981m, down 37 per cent year on year.

The lender said it is delivering on a £400m transformation programme, including restructuring its branch network, to improve future returns.

Focus on retention and first-time buyers in 2020

This year, Santander expects mortgage lending growth of around three per cent, as borrower demand and house price growth is lower than long-term levels.

The bank said its focus will remain on quality customer service, retention and a proposition for first-time buyers.

Nathan Bostock, Santander chief executive, said: “Our 2019 results were impacted by the ongoing competitive income pressure on mortgages and PPI charges, but they also include the investment we are making as part of our plan to transform the bank for the future.

“We have continued to support our customers and I am pleased that we delivered our strongest net mortgage growth in a decade, reinforcing our position as the UK’s third largest mortgage lender.”

He also warned “the environment for the banking sector remains challenging, with ongoing competitive pressures and a demanding regulatory agenda”.

People moves also held readers’ attention with Martin Schultheiss joining Mortgage Advice Bureau and Damian Thompson’s promotion to director of mortgages at Aldermore.

And of course a potential, or not, base rate cut also drew significant interest along with stress test changes at Nationwide.

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Santander increasing rates

Santander has increased rates on a host of two- and five-year fixed rate products by up to 0.05 per cent.

Affected deals include the two-year fixed rate at 1.89 per cent for borrowers with a 25 per cent deposit and the five-year fixed rate at 2.34 per cent at 85 per cent loan-to-value (LTV).

It has also withdrawn two ‘remortgage special’ deals.

The pulled products are the five-year fixed rate at 1.39 per cent at 60 per cent LTV, and the five-year fixed rate at 1.49 per cent for borrowers with a 25 per cent deposit.

Rate reductions at Barclays

Barclays has confirmed a host of rate cuts, alongside the launch of a new five-year fixed rate buy-to-let deal.

On its residential range, it is cutting the rate on its seven-year fixed rate for borrowers with a 40 per cent deposit from 1.89 per cent to 1.84 per cent.

It is also reducing the rate from 2.85 per cent to 2.80 per cent on its two-year fee-free fixed rate for borrowers at 95 per cent loan-to-value.

On buy-to-let deals, the five-year fixed rate for borrowers with a 25 per cent deposit drops from 2.77 per cent to 2.67 per cent, while the five-year fixed rate purchase only deal at 2.22 per cent falls to 2.13 per cent.

Its new product is a five-year fixed rate at 1.75 per cent with a £1,295 fee at 60 per cent LTV.

Fixed rate cuts at TSB

TSB has cut the rates on a host of residential products.

The largest is a 0.2 per cent reduction on its 85 per cent LTV ten-year fixed rate deal to 2.64 per cent.

It has also trimmed the rate on its five-year fix at 85 per cent LTV from 1.94 per cent to 1.84 per cent, with smaller cuts on other fixed rate deals.

Alongside the rate cuts, TSB has withdrawn its five-year fixed rate deals at 75 per cent to 85 per cent LTV with a £1,495 fee.

Nick Smith, head of mortgages at the lender, said: “There are many homeowners in the UK whose fixed rate deals are about to come to an end, so I’m sure that these rate reductions will be a welcome addition to our product range.”

Chris Sykes, mortgage consultant at Private Finance, said the firm received notices from lenders including Barclays and Santander saying several mortgage applications were having to be cancelled because inspection requests made to management and maintenance companies of high rise properties were delayed. 

He said he had seen some requests held for as long as nine months due to a lack of qualified inspectors, meaning mortgage applications were often exceeding the typical three-month timescale. 

Sykes added that although testing may have been done on the buildings at some point, it was not always sufficient as many mainstream lenders require inspectors with certain qualifications and from particular trade bodies to carry out checks. 

He also said clients were not receiving updates on the status of the inspections resulting in applications “grinding to a complete standstill”. 

Sykes said: “We’re only given a certain amount of information and we can only chase so much. It seems those reports never come through, so we have to look at alternate routes.”

This has resulted in Sykes going to another lender to get another valuation, as he found some valuers were less concerned about particular cladding materials being used and did not consider them to be a risk to lend on. 

He added:“Other times it’ll be somebody looking to remortgage, and they’ll just have to stick them with their current lender and find them the best rate there or they end up on the current lender’s standard variable rate.

“If someone is trying to sell a property and nobody can buy it because of cladding reports, then it’s throwing a spanner in the works.” 

EWS1 certificate

A spokesperson for Barclays said the matter related to “those qualified to issue the EWS1 certificate, the number of buildings that need to be inspected and the time needed to complete this review”.

It added: “For existing Barclays Mortgages customers that have not yet been able to obtain the EWS1 certificate, we will allow them to complete a swap rate to any of our highly competitive loyalty products – or complete a product transfer. For those seeking to remortgage in order to borrow additional funds, until EWS1 certificate is available we will not provide further borrowing.” 

Barclays has been instrumental in developing a document with The Royal Institution of Chartered Surveyors (RICS), The Building Societies Association (BSA), and UK Finance to address those who are unable to remortgage due to cladding issues.

The initiative was introduced in December and will be a single assessment for each building which will be valid for five years.

Santander has been approached for comment by Mortgage Solutions.

The Intermediary Mortgage Lenders Association (IMLA), whose membership includes 16 of the 20 largest mortgage lenders, has sent a clear message to developers; onerous terms and conditions in freehold sales contracts could scupper mortgage deals.

IMLA’s executive director Kate Davies (pictured) said: “It’s important to ensure that developers make absolutely clear up-front what services are to be provided in return for payment of the fees, and how these will be initially be set and subsequently increased.

“Where the arrangements are unclear, look to be unfair or are otherwise onerous, lenders may impose restrictions or decline to lend on such properties, as the existence of fees which can be increased without challenge or control could ultimately render a property both unsaleable and unmortgageable.”

Estate management fees are costs paid by homeowners on a private housing estate to maintain, renew and repair the shared amenities and spaces that their local council has not adopted.

Some developers, however, are applying uncapped, escalating fees to freehold contracts, which are often sold on to a management company once the estate is finished.

Last month, Mortgage Solutions reported how Santander was refusing to lend on new-build homes if the developer had included uncapped management charges in the freehold contract.

Santander said it could not carry out an affordability assessment if the developer had included uncapped fees in the sales contract as it could not establish whether the borrower could afford the house over the long-term. In such cases it could not offer a mortgage.

Nationwide has declined a small number of similar cases because it was uncomfortable with the estate fees included in the sale contract. The mutual said it would insist the solicitor draws up documents to protect the borrower and the lender.

Davies said lenders would always take a reasonable and practical approach to underwriting mortgage applications and there will be times where charging estate fees was justified. For example, if a local authority has refused to take responsibility for roads then developers have to put in place arrangements for their upkeep and collect the money to pay for that.

Lenders can ask conveyancers to check whether there are onerous clauses in contracts but this should not replace the requirement for the developer to be upfront, said Davies.

She added: “While obtaining clarification via conveyancers may provide reassurance, the emphasis really needs to be on developers providing really transparent information before buyers commit themselves to buying new property and thus avoiding disappointment and disputes later on.”

The news that Lloyds Banking Group was the lender referred to by the Ministry of Justice as being behind the spike in mortgage repossessions also piqued readers’ interest.

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The bank said it would apply a “simpler calculation” to buy-to-let properties that sit in the background of a residential mortgage application to work out if the property is self-financing.

The rent needs to cover the higher of 145 per cent of the declared mortgage payment or 145 per cent of the bank’s stressed mortgage payment at a rate of 5 per cent.

If there is a surplus of rent once the calculation has been applied, it can be used as secondary income as long as property is already let out and the rent isn’t received in a foreign currency.

Angela Blakesley, senior buy-to-let and residential mortgage specialist, The Buy To Let Broker, said: “Given the changes in the rental coverage expectations for buy-to-let mortgages, it’s no surprise lenders would review their expectation of background properties for residential applications too.

“What is surprising is that Santander would increase its coverage expectations on the residential side beyond what they expect for most of their buy-to-let applications.”

Blakesley said that Santander had been market-leading in relaxing its stress testing for like-for-like mortgages and its five-year fixed products prompting other lenders to follow its lead.

But she added: “Clients who have completed a recent buy-to-let mortgage with the bank could now find their own Santander buy-to-let mortgage to be deemed not self-financing when they apply to Santander for residential finance.”

Marcus Robinson, managing director of Mortgage Style, said he was pleased the bank had simplified the way it calculated rental coverage for background properties because previously it was “long winded”.

However, Robinson said there were a number of scenarios where it would appear the bank used a more lenient assessment of rental coverage on buy-to-let applications than it did on residential applications.

He added: “It would have been better for them to be more lenient on the background buy to lets instead.”

Other criteria changes include the treatment of mortgage-free properties that are already let. In this case, Santander will take 15 per cent of the monthly rent to cover the cost of running the property. Surplus income can be used to support the mortgage application.

Dominik Lipnicki, director of Your Mortgage Decisions, said: “On the surface of it the Santander change can be positive as it gives borrowers the ability to use excess rent toward affordability. Taking off just 15 per cent of the rent towards the running of an unencumbered property is also lower than others.”

Santander said the changes it has made to buy-to-let and second property criteria have streamlined the calculation it uses to assess affordability in underwriting. It uses a simple interest rate, which it said makes it easier for brokers to submit the right information and for the bank to process the application. Prior to introducing these interest rates, Santander asked for itemised details of all individual payments made to cover the running costs of the property, for example ground rent.

The changes to both lenders’ product portfolios go live today.

NatWest

NatWest is changing more than 50 products as it overhauls its residential and buy-to-let (BTL) products.

The lender will be introducing rate reductions on residential products, including broker exclusives, of up to 70bps, with BTL rates trimmed by as much as 53 basis points.

NatWest head of sales Mark Bullard (pictured), said: “These changes once again underline our commitment to the intermediary market.

“I’m pleased that we have been able to make further rate reductions to our buy to let and purchase portfolios, across a wide variety of loan to value (LTV) bandings and two- and five-year deals.”

Changes to its broker exclusive range include rate reductions for purchase products of up to 70 basis points on selected two-year deals and up to 15 basis points on selected five-year deals.

For remortgage exclusives rate cuts of up to 47 basis points on selected two-year deals and up to five basis points on selected five-year deals apply.

In its BTL purchase range rate reductions of up to 18 and 23 basis points are available on two-year and five-year deals respectively.

And the remortgage core range has cuts of up to 53 and 26 basis points on two-year and five-year fixes respectively.

Santander

Santander has increased its mortgage interest rates on eight products – seven of which are two-year fixes and one is a five-year fix.

The changes have been made at a range of LTVs and also include one Help to Buy purchase product.

The two-year fix for purchases and remortgages at 60 per cent LTV with £999 product fee has seen its rate increased by 0.1 per cent to 1.31 per cent, with the £250 cashback removed from the purchase version.

The Help to Buy two-year fixed rate at 75 per cent LTV with a £999 product fee has been increased 0.05 per cent to 1.49 per cent.

Meanwhile, the only five-year fix to be affected is at 95 per cent LTV with no fee, which has been increased by 0.15 per cent to 3.49 per cent.