Santander makes mortgage lending criteria changes ahead of Brexit
From 6 December, borrowers who are citizens of the European Economic Area (EEA) and applying for a mortgage over 75 per cent loan to value (LTV) will need to prove their permanent right to reside in the UK with the lender.
This rule excludes citizens from the republic of Ireland but will also apply to buy-to-let applications where income is required to meet the minimum £25,000 for eligibility purposes.
All residential and buy-to-let applicants must be a UK resident, although there are a few select scenarios where the lender will consider new lending to non-UK residents.
Pipeline applications made by 9pm on 5 December will not be affected by the changes, unless certain alterations are made to the case.
The lender said that from 6 December, substitute properties and re-submitted cases will not be treated as pipeline applications.
FCA reminds firms to be Brexit-ready
Santander’s changes come as the regulator urges firms to prepare for changes ahead of the end of the Brexit transition.
When the period ends at 11pm on 31 December, EU laws will no longer apply and passporting will end.
The Financial Conduct Authority (FCA) said firms should be aware that:
- The FCA is making use of the Temporary Transitional Power to provide them with more time to comply with a large number of the changes
- However, there are also key requirements that firms need to comply with by 1 January 2021
- Firms that intend to carry on providing services currently covered by a passport will need to ensure they will be able to do so after the end of the transition period
The FCA added that if a firm currently relies on a passport to provide services to or from the UK, and intends to withdraw those services at the end of the transition period, they are expected to ensure the right outcomes for their customers, with communications to enable them to make appropriate decisions.
Nausicaa Delfas, executive director of International at the FCA, said: “With just a month to go until the end of the transition period, firms need to make sure they are prepared for the end of passporting, and for the new financial services landscape after the end of the transition period.
‘To help minimise disruption, we have onshored EU legislation and established temporary regimes to allow non-UK firms and funds to operate in the UK after 31 December 2020.
“We remain committed to open markets, international co-operation and high international standards of regulation.”
Santander adds high LTV mortgages and fee-free range
The first of the high LTV products is a two-year fix at 2.84 per cent with a £999 fee.
The second of these is part of a new fee-free range of deals being introduced at all LTV levels.
The 85 per cent LTV version is also a two-year fix at 3.14 per cent interest rate and available for purchase and remortgage.
Other deals within the range are available at 60 and 75 per cent LTV with two-year and five-year versions for purchase or remortgage.
For example, the 60 per cent two-year fix for remortgage is at 1.64 per cent, while the 75 per cent five-year deal for purchase is at 2.24 per cent.
All the new products go live on 1 December.
Santander head of sales Helen Harrison (pictured) said: “We’re pleased to introduce a range of updated mortgage products, now with a £0 product fee, and hope it will give customers a little bit extra in their budget to help turn their new property into their new home.”
TSB limits self-employed to 75 per cent LTV as Santander tightens income demands
It comes after NatWest earlier this week placed fresh limits on borrowers working for themselves.
Nationwide last month put in place lower LTVs for the self-employed.
TSB reduces LTVs and LTIs
TSB has reduced the maximum loan to income (LTI) and loan to values (LTV) for self-employed borrowers.
Applicants working for themselves will only qualify for a maximum LTV of 75 per, while the LTI has also been cut to 4.25
By comparison, employed applicants can qualify for 85 per cent LTV and an LTI of 4.49, where the total income is more than £40,000.
A TSB spokesperson said: “These are temporary changes to ensure our mortgages are in line with market conditions and so we’re able manage our service levels to support the demand from our customers.”
Santander asks for more information on self-employed
Santander has tightened self-employed income evidence demands and now requires explanations of how businesses have survived Covid-19 lockdowns and made changes to business models.
The move affects all new residential self-employed mortgage applications and the lender told brokers it may also be in touch on cases which have already been submitted but not yet agreed.
In addition to existing evidence requirements, Santander is now asking for three months’ business bank statements where the borrower’s income or business has been affected by Covid-19.
The most recent bank statement must not be more than 30 days before the date of the application.
Where the client’s income or business has been unaffected by Covid-19, advisers must explain why they have not been affected or how the client has changed the way they operate.
They must also provide confirmation the business can continue to trade under any current or future lockdown restrictions in a way that allows the income declared on the application form to be sustainable.
Where income or business has been affected by coronavirus alongside the three months’ business bank statements other questions must also be answered.
- Was the business unable to trade during Covid restrictions and if so for how long?
- What impact the previous Covid restrictions have had on the business turnover and customer income?
- Was any government assistance applied for? If so, details are needed.
- What impact any current or future lockdown restrictions will have on the business and how this will affect the turnover and income.
- Explain how the business bank statements support the income declared for affordability on the application form.
Santander head of sales Helen Harrison said: “Santander remains committed, as a responsible lender, to supporting self-employed customers applying for a mortgage up to 85 per cent LTV.
“The recent changes to our evidence requirements will help us to continue to work with customers to fully understand any recent impacts on their business and ensure that any borrowing remains affordable.”
Lenders warn brokers about completing legal work for stamp duty deadline
Santander and Nationwide have both posted the prominent messages on their intermediary pages telling brokers to allow enough time for legal work to avoid any issues in completing cases.
The Santander warning includes a countdown to the 31 March deadline, currently 128 days, and says: “Make sure you allow enough time for legal work to be completed.”
It also provides a link to the latest data on how quickly local authorities are completing searches.
The lender told Mortgage Solutions: “We are providing early warnings to our brokers to ensure that they, and their customers, understand the implications on stamp duty if all parties do not complete before 31 March 2021.
“Each property purchase is different and the more complex transactions may take longer than others.”
Mortgage Solutions also understands the lender has recruited more people to help it process applications to meet the deadline.
The Nationwide Building Society message says: “Please make sure you allow enough time for the mortgage application and legal work to complete to meet eligibility criteria.”
The lender told Mortgage Solutions it was taking a prudent approach and ensuring everyone including members and brokers was aware of the most up-to-date timings and information approaching the end of the stamp duty holiday.
It added that it was being a responsible lender highlighting this in the current climate.
Platform adds more 90 per cent LTV deals and Clydesdale cuts LTI cap – round-up
All deals will have fees of £1,499 and will be available as two or five-year fixes up to 75 per cent loan to value (LTV). These mortgages will be offered to borrowers with balances of £150,000 and above and rates are personalised to each customer.
The bank will also make changes to the fees of its buy-to-let and consent to let products, but rates will stay the same.
Existing residential fixed and tracker rates will also remain unchanged.
Platform relaunches high LTV deals
Platform has reintroduced a selection of mainstream new business mortgages up to 90 per cent LTV.
This includes the relaunch of the two-year fixes at 90 per cent LTV, with a £999 option and a fee-free alternative. Rates are at 3.49 per cent for the fee paying product and 3.89 per cent for the fee-free mortgage.
A pair of two-year fixes at 85 per cent LTV with £0 and £999 fee options have been re-introduced.
There are also the two-year fixes at 60-80 per cent LTV with a fee of £999. Rates range from 1.66 per cent to 2.44 per cent.
And the relaunch of the two-year fixed at 60 per cent LTV with a fee of £1,499 at 1.58 per cent.
These products are available from today.
Clydesdale reduces LTI for low income borrowers
Clydesdale has reduced its loan to income (LTI) cap to 4.49 times income for customers with a joint allowable income of £50,000 or less.
As well as basic pay, the full pension, rental and allowable benefit income will be included in the LTI calculation.
The changes will come in on 25 November and will apply to applications submitted on the day or afterwards.
Pipeline and remortgage applications with no additional borrowing will not be affected.
A spokesperson said: “For customers with income of less than £50,000, we have amended our mortgage lending terms to 4.49x income, subject to other affordability criteria. For incomes above this our policy of up to 5x is unchanged.”
Top 10 biggest mortgage broker stories this week – 20/11/2020
IMLA revealed to Mortgage Solutions it had sought the regulator’s help over competition rules.
Meanwhile, lenders’ criteria and LTV changes continue to dominate the top spots. Elsewhere, the revised Help to Buy scheme will soon be open for applications and new temporary regulations to protect renters means they can accrue close to 18 months’ arrears without sanctions.
Here’s what made the top ten stories this week.
Lenders seek FCA permission to re-enter high LTV mortgages at same time
Accord brings back 90 per cent LTV mortgages with permanent range
Tenants can accrue 18 months’ arrears with no eviction under temporary rules
Revised Help to Buy scheme open to applicants from December
Lenders offering smaller loans but first-time buyer affordability improves – MBT
Nationwide expands interest-only mortgages to purchase via brokers
Halifax and Platform relaunch 85 per cent LTV mortgages
Santander cuts low LTV residential and BTL rates
Cladding and building safety guidance ‘not designed for valuations’ – housing minister
New blood needed or high LTV lending might dry up – Bamford
Santander cuts low LTV residential and BTL rates
The rate reductions of up to 31 basis points will be made on standard residential, Help to Buy and buy-to-let mortgages at 60 per cent or 75 per cent LTV.
The largest decrease is on the 60 per cent LTV two-year fix with £999 fee for residential purchases which has been cut by 31 basis points to 1.28 per cent.
Its 75 per cent LTV version has been cut by 25 basis points to 1.59 per cent.
Among the Help to Buy product changes, the 60 per cent LTV two-year fix with £999 fee has been cut by 25 basis points to 1.39 per cent.
And the 75 per cent LTV five-year fee-free versions has been reduced by 15 basis points to 2.24 per cent.
Santander is also launching a range of 60 per cent LTV fixed rates with £1,499 fee for loans up to £1.5m.
The range starts with the two-year fix for remortgage at 1.14 per cent up to the five-year deal for purchase at 1.38 per cent.
Finally, reductions have also been made on buy-to-let deals with zero fees and a £1,499 fee.
These include the 60 per cent LTV two-year fix with a £1,499 fee, which has been cut by 10 basis points to 1.54 per cent, and the 75 per cent LTV five-year fee-free deal reduced by 30 basis points to 2.39 per cent.
Santander tightens self-employed evidence requirements
The lender is the latest to make rules for self-employed borrowers stricter, something which has frustrated brokers advising their clients.
The additional requirements will kick-in from Sunday 8 November and affect self-employed applications over 75 per cent loan to value (LTV) and limited company directors.
Santander told Mortgage Solutions: “These updates to our policy will ensure we continue to act responsibly in our role as a mortgage lender, and that any lending we give to customers is affordable and right for them.”
Self-employed applications over 75 per cent LTV
In addition to existing evidence requirements, Santander will be asking for three months’ business bank statements for all self-employed applications over 75 per cent LTV.
The most recent bank statement must not be more than 30 days before the date of the application and should evidence that the business is healthy, trading at the expected level, and showing no signs of financial pressure.
Limited company directors
Santander will ask for an accountant’s certificate to assess the performance of the business and income for all limited company director applications below 90 per cent LTV.
Santander starts taking mortgage prisoner applications
The Financial Conduct Authority (FCA) published guidance a year ago designed to allow lenders to support mortgage prisoners trapped with inactive or unregulated lenders.
They can use a modified affordability assessment where borrowers are up to date with their mortgage payments, do not want to borrow more, and want to remain at their current property.
Santander said its facility will be open to all registered intermediaries where a client has received a letter from a third-party administrator on behalf of the FCA identifying them as a mortgage prisoner.
It highlighted three scenarios where it would be able to consider cases:
- Failed standard like-for-like remortgage affordability assessment/loan to income policy
- Failed standard LTV policy
- Light adverse credit performance outside of existing policy.
And it also listed the types of cases where it would not be able to accept applications:
- Current or recent (e.g. last 12 months) mortgage arrears
- Failed affordability based on assessment against reversion rate1
- Significant adverse (e.g. defaults and CCJs in last 3 years over £500)
- Capital and interest loans over 90% LTV
- Interest only loans over 70% LTV
- Part and part loans over 85% LTV (max 70% LTV interest only)
- No established interest only repayment vehicle
- Cases with additional borrowing
- Outside of other policy criteria e.g. credit scoring, age-related e.g. IO to maximum age 70, security or leasehold requirements.
The lender said it has set up a dedicated team who can review and manage these cases if a client has received a mortgage prisoner letter.
Once an application in principle (AIP) has been submitted that meets the criteria, advisers must contact the mortgage prisoner exceptions team with the AIP case reference.
The team will then review the case and respond within 72 hours.
A Santander spokeswoman said: “We’re pleased to be supporting mortgage prisoners by working with the industry to open up the market, and help more homeowners secure a lower mortgage rate.”
West Bromwich Building Society was one of the first lenders to adopt the modified affordability measures, NatWest and Halifax have since followed suit.
Santander increases PT rates and Platform tweaks fee assisted remo
The increases will range between 0.05 per cent and 0.2 per cent and affect selected fixed and tracker residential product transfer rates at all loan to values (LTVs) up to 90 per cent.
Santander did not give details on specific products that will be changed.
In a notice to advisers, the lender said all end dates will roll on by one month to 2 February and the completion deadline will be rolled on by one month to 5 March 2021.
It added that product transfer rates are personalised to each customer and can only be obtained by logging on to the lender’s system.
Meanwhile, Platform has widened the availability of its fees assisted remortgages.
The lender has removed the £500,000 maximum loan limit to qualify for fees assisted remortgages.
The only restriction that will remain in place is the exclusion of unencumbered properties as well as standard LTV restrictions.
Platform also emphasised the importance of obtaining an email address for all customers submitting applications to support its conveyancing process.
Doing so allows the conveyancer to use the Land Registry E-Deed service which will speed up remortgage times and also allow for the online completion of conveyancing applications.