‘Lenders should remove maximum lending age for landlords’ – Star Letter 26/02/2021
This week’s comment was in response to the article: Buy-to-let market opens up to first-time landlords – Moneyfacts
Trying to be a Retired IFA said: “It’s good to see the market opening back up to first–time buy-to-let landlords.
“The often-overlooked issue is there is a housing shortage due to under–investment by the government, so the private sector has stepped up with its own money, at its own risk, to provide a roof over people’s heads for a return.”
“The UK economy needs a healthy housing market. Many people need a place to rent as they can’t afford to buy, or don’t want the costs involved meanwhile the population continues to outgrow supply,” they added.
No maximum lending age
They continued: “What mortgagees should do is remove the outdated maximum age to lend to. Why is that relevant anymore especially when a management company looks after the day-to-day affairs of the property?
“With rising unemployment and stagnate wages the last thing people need is a mortgage liability. Surely, it’s better to rent and have local housing allowance so the place lived in can be made a home.”
Trying to be a Retired IFA added: “Owning it doesn’t a home make per se and if all landlords stopped being landlords overnight it wouldn’t solve the housing issue. It would however make it worse for millions who rely on it to provide them a home.”
‘Beggars belief’ borrowers are tested on stress rates but not loss of income – Star Letter 19/02/2021
The first comment came in response to the article: It’s disingenuous for a broker with no personal cover to sell insurance – poll results.
Andrew Ducksbury added to the discussion, saying: “As life insurance is not compulsory, it is easy to see why customers don’t take it out.
“All you can do as an adviser is document the fact that you’ve mentioned, discussed and highlighted it and that the customer has rejected those recommendations. If you’re an adviser that does not mention it then you have left the door wide open for complaints.”
A sensible adage
Responding to the same article, Trying to be a Retired IFA, said: “Believe in it yourself, then advise others is a very sensible adage. It’s not a difficult issue if positioned correctly.
“When a client asks about a mortgage, the good adviser asks for their total budget, including everything from mortgage to insurances. However, a customer may not see the benefits once a mortgage has been discussed if it’s simply seen as added costs.
“If that means the client has to cut back on the mortgage size a bit, then that is the sensible way to go,” they added.
Trying to be a Retired IFA, continued: “It’s a different outcome if the adviser skis uphill, so once the mortgage is sold the adviser then talks about more expense, such as insurances for things the client thinks won’t happen, but the seasoned adviser knows will.
“It’s beggars belief that the regulator requires stress testing for a mortgagor’s ability to pay a higher rate of interest but not if their income stops due to health or death or a partner.”
Ros Edwards reacted to the article: Lenders miss out by not selling interest-only mortgages to low-income borrowers – Star Letter 12/02/2021.
Edwards said: “Interest–only mortgages are great at the start and a nightmare at the end. A huge number of interest–only borrowers have the ‘I’ll worry how I’m going to pay it back nearer the time’ attitude.
“When nearer the time approaches and the nightmare begins, such as falling houses prices or poor performing investments, they then blame the adviser.”
Lenders miss out by not selling interest-only mortgages to low-income borrowers – Star Letter 12/02/2021
The first comment was from Mrsval in response to the article: Banks loosen interest-only mortgage terms but borrowers in the dark
They said: “Why are only high-income earners considered? There are millions of older homeowners with homes that are only worth £100,000 so these poor folk are being ignored.
“Yet these will be the older folks who will be in the majority wanting and needing a retirement interest-only (RIO) mortgage.”
Mrsval added: “What will the banks do for them? The banks, by ignoring these customers stand to lose billions of pounds if these potential customers downsize rather than giving them more business.”
Derek responded to the article: Self-employed borrowers need intelligence and empathy from lenders – JLM
Derek said: “The Financial Conduct Authority say ‘treat customers fairly’, that is all we ask for self-employed clients. Not one rule for employed and another for self-employed.
“I would like to see lenders that are developing this type of dual lending policy to be investigated to identify if clients with equal income and risk levels are being treated the same.”
Payment deferment not needed for all
Arron Bardoe reacted to the article: Two-fifths of mortgage holiday borrowers would have struggled without payment breaks – FCA
He said: “On the flip, is the survey saying six in 10 did not need the payment deferment?
“It was not a ‘holiday’ and I suspect both the government and press calling it such led many people to take it without realising the implications. Lenders were deluged so did not have time to check every case.”
‘Mortgages should automatically convert to RIOs’ – Star Letter 05/02/2021
Paul Barrett responded to the article: Retirement interest-only mortgage market flourishes
He said: “I’m surprised lenders aren’t clamouring for retirement interest-only (RIO) business. It is far superior to normal lending.
“Usually, the properties to be mortgaged have massive equity in them. The ability to have excellent security and a possible 30-year additional mortgage term gives lenders a 60-year mortgage profit line.
Barrett added: “I would suggest that lenders automatically offer conversion of any type of mortgage to a RIO one and allow continual 75 per cent loan to value (LTV).”
‘Start treating mortgage advisers fairly’ – Star Letter 22/01/2021
This week’s comment was in response to the article: Broker FSCS levy soars as pensions sector ‘blind’ to fraud and bad advice .
Derek said: “There is a guideline in our industry that relates to treating customers fairly. How about that applying to advisers?
“Start treating mortgage advisers fairly.”
He added: “We seem to be monitored, regulated and compliance checked to the hilt while dealing with clients who often are reluctant to pay for the service.
“We now find that we are having to pay for the failings of the pensions and investment advisers, every one of which I know have fee levels and incomes far exceeding those of any mortgage adviser I know.”
Base rate should ‘immediately be cut to -3 per cent’ – Star Letter 15/01/2021
This week’s comment came from Paul Barrett, who was responding to the article: There are ‘lots of issues’ with negative interest rates – Bailey
He said: “The Bank of England should immediately reduce rates to -3 per cent. If things start to get better, then increases can occur.
“The UK economy is in the toilet being kept afloat by massive taxpayer subsidy of quantitative easing and furlough. These rates should be kept for decades just like they were in Japan.
“The government should do all it can to persuade people to get into debt and spend. Negative interest rates are needed to reduce costs for the consumer.”
‘If whole of market needs explaining maybe we should change the term’ – Star Letter 08/01/2021
The first comment was from Stuart Phillips, in response to the article: Regulator rejects complaint about advice firm’s ‘whole of market’ claim
He said: “I agree that brokers should be able to advertise whole of market if they access all lenders available to them, but it doesn’t change the fact that the term ‘whole of market’ doesn’t mean what a customer would expect it to.
“If you have to explain that something doesn’t mean, what it sounds like it means, then maybe the term needs to be changed?”
He added: “Simply change the text in the initial disclosure document to ‘single provider’, ‘limited providers’ and ‘all available providers’ and list the lenders you can or can’t access.”
Phillips also commented on the article: Application to completion failures should not be so high – Clifford
He said: “It simply comes down to communication.
“Brokers need to be able to better communicate with lenders over what’s acceptable, how they perceive something, what their appetite is.”
“It’s more complex than criteria, affordability and rate, tools that address these three points are not sufficient for a vast majority of cases.
“However, as things stand talking to just one business development manager might be 30 minutes of work, maybe longer,” he added.
Phillips said: “How many lenders can a broker speak to before that case simply stops being profitable, I bet it’s not all 50+ of them.
“Fix this issue of communication and you will see more cases going to the right lender first time.”
Property management concerns
Arron Bardoe added to the discussion of the article: Ground rent scrapped for extended leaseholds in property law reform
He said: “How will freeholders be reimbursed for their work if ground rent is removed?
“For example, freeholders will normally co-ordinate the insurance of the block of flats but will no longer receive any payment for this service.”
Bardoe added: “It may move more leaseholders to see their right to manage, but these schemes only work if some of the leaseholders are prepared to do all the work on behalf of their neighbours. A freeholder who is separate from the leaseholders can sometimes be a good thing.
“If the freeholder is not receiving a fee, which incentive have they to do anything at all?”
‘Expect a government U-turn on stamp duty’ – Star Letter 18/12/2020
This week’s comment came under the article: AMI and IMLA warn of property chains collapsing without phased stamp duty deadline.
User Sox wrote that it will be “horrendous” for those buyers who narrowly miss the deadline.
And added: “Whilst it might be very easy to tell our clients they will need to have the additional funds in place, someone having to pay an extra £6-£11k for the ‘sake of a few days’ is not just simply going to accept that, smile serenely and ‘lump it’.
“Especially if that person was in a complete chain with a mortgage offer a full three months before the deadline, when 12 weeks ‘should’ have been more than adequate.
“These otherwise quite lovely and passive clients will be screaming at their solicitors, brokers and everyone who will listen because no one has that money to lose in this environment and, frankly a government incentive that was handed out on a whim without any understanding of the impact on the market was irresponsible.
“Expect a U-turn in true 2020 government style, but it won’t come until the deadline is almost upon us because otherwise there will be the flip side of the coin and those people that try and push it, which would be simply not fair.
“So yes please to an extension, but please don’t announce it until much nearer the time for goodness sake.”
The only argument for stamp duty extension is second lockdown – Star Letter 11/12/2020
Both of this week’s comments came under the article: ASTL and FIBA warn government over stamp duty cliff-edge.
Sox kicked off the discussion, saying: “I think going with the ‘valid offer in place’ option is a fair and reasonable one.
“Only those already in the pipeline really deserve to be assured of receiving the benefit of the relief. Those starting the process in January should not expect to make it anyway and brokers should be advising of the same and ensuring they have the funds available for the additional cost.”
They added: “But those who have received an offer now and in some cases have had one for a long time should be assured.
“This would have to apply to complete chains though, for example, you can’t just have one person in the chain with an offer dated before December.
“You could possibly extend that to the middle of January at the latest, just to account for the Christmas shut down.”
“But really, this genius government incentive was not thought through, as problems caused by lockdown and even social distancing in work spaces has meant that increased demand was met with a compromised workforce that was always going to struggle, so this should be accounted for in some way,” Sox said.
Arron Bardoe added: “The government did make it clear the deadline of the 31 March 2021 when the stamp duty land tax holiday was announced in July, so everyone has had almost nine months’ notice.
“The only argument for an extension is the second lockdown, which was not suggested when the tax holiday was announced. This disruption has caused some councils and lenders to incur further delays as they fail to get their staff back to work.”
‘Some remortgage applicants are savvy enough to do it themselves, others are not’ – Star Letter 04/12/2020
This week’s Star Letter comes from Andy Wilson, who commented on the article: Compare the Market launches online execution-only remortgages.
Wilson said: “Some remortgage applicants are savvy enough to be able to decide whether a particular offering is right for them. Some are definitely not, and should be taking advice.
“I arranged for clients a two-year fixed rate deal on a Help to Buy (Mortgage Guarantee) product with the Woolwich (now Barclays Bank) in 2015.
“After the two years was up, the clients went direct to the lender and reserved a five-year fixed rate product transfer, without taking advice. They did not need to carry on using the Help to Buy products as their loan to value (LTV) had reduced markedly after two years of paying the mortgage and with house price increases in the meantime.
“They now find the new product was still a Help to Buy Mortgage Guarantee product and carried a further five-year exclusion from borrowing more money on a further advance.
“Three years later and now their only way of releasing more money for the home improvements they plan to do would be by remortgaging, with the associated early repayment charge kicking in for repaying the five-year deal.
“To make matters worse, the lender no longer needs the security of the Help to Buy guarantee as the LTV is even more improved after five years. Even with the further advance monies, the LTV is below 80 per cent.”