So this week, Mortgage Solutions is asking: If you had the chance to develop a product with a lender, what would it be?
This might sound controversial – I don’t think everyone needs consumer protection, yet everyone is bound by it. Few discuss the negatives of this, and I’m beginning to question whether we crossed a line a while back and didn’t notice.
Otherwise, our industry is obsessed with ‘best rates’ which creates deep layers of complexity that takes considerable expertise to navigate. While this is mostly amazing and serves 99.9 per cent of people, not everyone cares.
We get thousands of customers every month, stressed, distressed, and scared to death of missing out on their dream home. Most just want the comfort of an affordable deal approved, not hunt around for the cheapest rate going.
Borrowers also lost something when the Financial Services Authority and Financial Conduct Authority stepped in – the option to be responsible for themselves.
I’d design an unregulated, self-responsibility, mega mortgage, addressing certainty and affordability.
A rate-for-risk ‘one mortgage’ approach, where all clients are approved and just given a deal that matches their situation. It might be an eight per cent rate, but if you don’t like it, try to get a better one elsewhere.
And let some people self-certify where credit indicators and loan to value tiers deem that more viable.
I’m not advocating 2007 and everyone having the power to ruin the country, but I do think there are savvy, experienced and sensible borrowers who are fully capable of making choices about the borrowing that suits them.
Then if they default, it’s completely their own doing. The lender takes no responsibility whatsoever and they have no rights to compensation.
As holidays abroad remain a distant dream for the time being, the holiday let market has simply exploded.
The opportunity for savvy investors is huge but holiday home interest has grown so rapidly that products have been playing catch up – especially at the top end of the market.
An issue with current holiday let products for high net worth (HNW) clients is the restrictions around how the property is going to be used.
These typically fall into two strict categories to satisfy lender affordability concerns; those using the property as their personal holiday home and renting sporadically, or those primarily operating it as a commercial venture who’d like to stay there occasionally.
But for HNW clients looking to purchase high value holiday homes, these restrictions don’t make much sense.
The pandemic has refocused the fact that HNW individuals are after flexibility.
They don’t want constrictive mortgage criteria that demands they let out the property for no more than a certain number of days a year.
As such, we’d love to see a residential product whereby HNW clients have carte blanche as to how they use the property – their income and wealth structure being more than large enough to sate any affordability worries the lender may have.
It would be aimed at those with a vast wealth profile who want the flexibility to buy a second home and use it as they see fit.
Loans would be for mortgages over £1m and ideally on an exclusively interest-only basis as the property is not their primary residence.
Our core business is in the buy–to-let sector and our clients range from first–time buyers and first–time landlords, through to the experienced portfolio property investors with hundreds of properties.
If we could develop one product, it would be a combination of all of the best features of varying existing products but wrapped up in to one proposition.
With such a focus on tax planning and how much landlord tax has been hit over the last six years, flexible and variable features would be useful for our proactive and entrepreneurial property investor clients.
I would love to see a feature which would enable family members to be added to a flexible, offset, portfolio buy-to-let product. This would also enable succession planning and management or mitigation of the inheritance tax issue.
For the portfolio landlords who can deposit rents straight into the offset savings account, this would reduce the mortgage interest charged as the portfolio balances would offset against each other.
In one stroke we have a product that has helped with tax, cashflow and future estate protection.
The flexibility would also be there to enable quick drawdowns to buy other properties without the need for further fees and time constraints.
Ultimately the product would be a ‘self-lending’ one. A low cost, low tax planning vehicle, enabling some kind of retaliation to the George Osborne devastation that was imposed some years ago.
With a growing rental population and a desire in the property investor industry to support that, we still need the holy grail of all mortgage arrangements.