Mortgage News

[loanarranger]

is this going to be a trend going forward over the next few months??

Barclays is the second lender in 48 hours to announce of steps to manage what has become a nightmare in processing an increase in the number of mortgage applications for both purchases and Buy to Let. Below is an extract of the notice given to brokers;-

“Barclays is withdrawing its core residential products at 75 per cent loan-to-value in a bid to manage demand,

On Monday the lender announced it was withdrawing one of its 85 per cent LTV deals for the same reason.

Brokers will have nine days until Friday October 9 to complete applications for the 75 per cent LTV products that are being withdrawn, so long as they have a successful case booking.”
After this deadline applications will be restricted to Remortgage applications.

Previously the State Bank of India who specialises in the Buy To Let sector announced on Monday that to deal effectively with new applications, only Remortgage cases would be the only category they would for the present accept, this coming on the back of increased rates.

Underwriters are invariably working remotely and are experiencing great difficulties in handling the volume of applications both new and those being processed much to the frustration of brokers and in turn clients. Callcentres are taking a long time to answer calls which is wasting more time from brokers, I spent over 90 minutes waiting to be connected to Barclays for an update which arose because of a system fault, not unusual as unless you hit the phones at 9:00 the delays of getting a response lengthens. No point in berating the operator they are only able to deal with one call at a time.

One hopes that the two lender examples are not emulated by other lenders because this would have a marked effect on sales and capital raising applications coming to a shuddering holt.

i will keep the forum updated as I get other important lender notifications.

[loanarranger]

Boris Johnson has plans to help First Time Buyers who have minimum deposits

First-time buyers have been finding it particularly hard to buy a property since the pandemic began as lenders have cut maximum loan to values (LTVs).

The stamp duty holiday in England and Northern Ireland was also granted to landlords and second home owners, further squeezing those looking to buy their first home as house prices have been pushed up and demand has increased.

In an interview with the Telegraph before the start of the Conservative Party conference, Johnson (pictured) said a “huge” number of people were excluded from the owning a home and he wanted to solve the problem with a mortgage scheme that permitted deposits as little as five percent.

Speaking to the newspaper he said: “I think a huge, huge number of people feel totally excluded from capitalism, from the idea of home ownership, which is so vital for our society.

“And we’re going to fix that – Generation Buy is what we’re going for.”

According to the report, Johnson has asked his ministers to work on a scheme to encourage the availability of long term fixed deals with five per cent deposit mortgages.

The government withdrew Help to Buy mortgage guarantee scheme at the end of 2016 which offered lenders the option to obtain a guarantee on a 95 per cent mortgage.

If the borrower defaulted on the loan, the government would share in some of the losses. In the two years it was available, the scheme helped to more than double the amount of 95 per cent LTV deals available on the market.

[jpkeates]

I'm not sure that having 2m additional homebuyers is going to be helpful over the next few years.
There's no chance there will be 2m additional places to buy.

[loanarranger]

It is all well and good making such borrowings easier to get but the overriding issues affecting many First Time Buyers is their credit profiles ,taking a sample of 1st time buyer clients over the last 12 months ,there have been serious issues over misuse of credit cards, student loans where the individuals are earning at a level requiring the loan to be repaid, PCP contracts and unauthorised overdrafts; in the current and potential next twelve/ eighteen months lenders would be exercising considerable prudence when assessing affordability for this category of applicant.
I remember the Nigel Lawson scheme which gave couples dual tax concessions following the Demise of the Harold Wilson introduced “ Option Mortgage Scheme” and when interest rates went high the result was a significant number of 1st time buyers pushed the house keys through the building society branch letter boxes and the result was a crash in the value of properties and a high level of repossessions, not a nice thing to have been involved in. If the government want to help reintroduced Mortgage Guarantee Insurance but limit borrowings to 90% . I welcome any structured help for home owning aspirants but not on giveaway terms.

[loanarranger]

Given all of the negative news of late in the mortgage market , there is a whisper that Paragon Bank may be returning at some point in the near future to accepting applications for HMO & properties being occupied by Students, this feature of their criteria was removed in recent months because of the concerns over Students and Private Renting in the era of Covid19. Soundings have been taken from their Regional Valuers and in the main the responses have been positive , one area which apparently was less positively reported was Brighton where rentals fell in real terms and whilst not significant has resulted in Landlords experiencing marked reductions over their portfolios. This same was reported three months ago by TMW but the negative research extended across other university locations on the South Coast.

Once I get further news I will report to Forum Readers but at least one of the leading lenders in Portfolio borrowings is taking prudent steps before deciding to return to a sector of the Buy to Let sector which is popular with investors particularly as the number of other lenders who will base their lending on commercial investment valuations rather than Open Market Value is very thin on the ground.

[loanarranger]

New Buy to Let lender to enter the sector in early 2021

Whilst it might seem premature but the following announcement demonstrates lender confidence in the Professional Buy to Let sector.

”New digital property lender, Monument Bank, has received an ‘authorisation with restriction’ (AWR) banking licence from the PRA and the FCA.

Monument is aimed at professionals, property investors and entrepreneurs who have a net worth of between £250,000 and £5m. The bank will offer an entirely digital journey for buy-to-let and property investment lending of up to £2million, as well as a range of savings products.

Monument now plans to finish the build of its technology and operational capabilities to enable an initial launch in early 2021.”

[loanarranger]

The Nationwide have announced this afternoon that for Residential Homeowner applications by applicants who are self employed are being capped at 85% , furthermore several lenders have announced increases in both Residential and Buy to Let mortgages increases in product interest rates.

It seems that from comment in the intermediary press that once one lender makes such an announcement be it rates or criteria there is considered to be a fair chance that many others are choosing to follow suit.

[loanarranger]

Lets start the week on a positive note.
Paragon has today announced that it is now open again to properties for occupation by Students with no differential on rates to the standard HMO's etc and funding up to 75% of LtV.

[loanarranger]

The following article has appeared today in a leading Mortgage Broker trade publication and needs reading by anyone about to embark on buying either for owner occupation or investment since the ramifications are potentially too horrendous for all concerned.

I have heard of clients having mortgage offers withdrawn following institutional investors stopping funding “ Centralised Lenders” at the beginning of Covid 19 but the following cannot be ignored particularly as the threat to employment in various sector of commerce makes job security somewhat precarious and isa potential red flag for lenders who for whatever reason decide to review mortgage applicants before agreeing to release funds. Some might rightly say that there cannot be smoke without fire and Santander might have had good cause to take the action it did but buyers and sellers alike need to ensure that before exchange of contracts take place the broker , if indeed there is one, establishes with the lender that there are no current identified issues which might result in funding being withdrawn. I leave it to readers to read and comment.

”

"If lenders can withdraw an offer after contracts have been signed, then every buyer in the chain is at risk. The only person to benefit would be the seller at the top of the chain."

Mortgage brokers across the UK should be on their guard against an alarming new pitfall in the house buying process, which has arisen seemingly due to the Covid pandemic.

A Reading couple with a young baby are faced with a bill of at least £33,000 plus ‘damages’ following the collapse of their housing chain after exchange of contracts – despite having a secure mortgage themselves. Abdus Saboor and his wife were left devastated when, in the period between exchange and completion, their buyer was told by lender Santander that their mortgage offer was being withdrawn.

The fact that contracts had already been exchanged meant that all buyers were still obliged to pay their 10% deposit to their respective sellers. The Saboors were in the process of buying a £660,000 house, but were selling their own for £330,000 – so their deposit was of course double. They therefore faced the prospect of losing £33,000.

Abdus appealed to Unbiased.co.uk, which helps people find independent financial and mortgage advisers, after reading one of their articles on this issue. He explains, ‘The problems started due to the Covid situation, when my buyer’s lender Santander withdrew their mortgage offer on completion day – while we were loading the removal van! We were willing not to ask our buyer to pay their deposit, but our seller insisted on us still paying our deposit. This money is all our savings from the past seven years. Our account’s empty. We are devastated by this – we have an eight-month old baby.’

The Saboors have tried to raise the issue with Santander, but so far have been offered no explanation as to why the bank took the decision to withdraw their buyer’s mortgage offer. Particularly baffling is the decision to do this following the exchange of contracts.

Traumatic as this ordeal has been for both the Saboors and their own buyer, it has huge implications for every homebuyer and mortgage broker in the UK. If lenders can withdraw an offer after contracts have been signed, then every buyer in the chain is at risk. The only person to benefit would be the seller at the top of the chain.

Nor does this predicament appear to be a one-off. Research earlier this year by Butterfield Mortgages suggested that as many as three in 10 buyers whose chains had collapsed, had ended up losing their deposits as mortgage offers were withdrawn post-contract. The Saboors’ case indicates that this is still happening, leaving families’ finances in ruins along with their dreams of home ownership.

It has been widely assumed by mortgage brokers and homebuyers alike that a mortgage deal in place at exchange cannot be withdrawn before completion. It appears in practice that this is not the case. This means that, for a period of between one and two weeks, all buyers in the chain are entirely at the mercy of every lender involved – any one of whom might theoretically pull out.

The Saboors’ only hope currently is that the government may eventually offer compensation for people in this predicament, just as they have provided money for furlough and other Covid-related costs. Until then, brokers should advise their clients to take extra care, and perhaps try to get contracts worded so that they are not liable if they lose their buyer post-exchange.

‘We need help to bring this out and share it with the public,’ said Abdus. ‘I don’t want anyone else to go through what we are going through

[Glover1862]

I thought the practise was to sue down the line, I'm assuming their buyer is buying a £330k house so must have some funds behind him, should they not be asking their buyer for the £33k?

Exchange and complete on the same day I suppose and avoid chains, obviously not always possible, the solicitors should have something to say as they work for both parties.

[loanarranger]

It is important to note that lenders require up to 7 working days from receipt of the Certificate of Title in order to make its final checks and to ensure the funds are remitted by CHaps to the solicitors which using the example I gave provides adequate time to make a last minute pull of the application.
This is indeed an unsavoury story which leaves all parties including brokers and legal sources under pressure to manage expectations of their respective clients.
Although Covid19 makes face to face meetings with lenders impossible but I intend to investigate how their respective masters deal with such matters.

[loanarranger]

Santander make changes before Brexit Deadline

Santander has laid out changes to its mortgage lending criteria ahead of the Brexit transition period ending on 31 December.

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.

[loanarranger]

I am detailing below an article which has appeared today in a leading Trade Publication , clearly many Estate Agents are up to such antics in a desperate move to capture the client even though the Regulators marked this as an unlawful practice a few years ago.
As a broker when asked if I know a good solicitor I following the guidelines of the Law Society and offer three independent firms for the client to contact and obtain quotes, it is then down to the client as to which of these firms they wish to use or indeed one of their own choosing, unfortunately there are referrals which result in a commission to the Estate Agent or Broker and guess who pays.
No one has to buckle under the pressures of Estate Agents , their job is to act in the best interests of the vendor who will pay them the success fee but still allowing the client to resource the mortgage independently

Third of buyers under pressure to use mortgage broker linked to estate agent

by: Shekina Tuahene

• 10/12/2020
• •
• 7

A third of buyers believe they have been put under pressure to use a mortgage broker recommended by an estate agent while some are under the impression this will give them a better chance of purchasing their desired property.

Research conducted by Boon Brokers surveying 1,958 UK mortgage holders found nearly a tenth of buyers felt using the suggested broker would give them preferential treatment while four per cent revealed they were explicitly told that would be the case.

Younger and inexperienced buyers were more likely to be targeted by estate agents wanting them to use their preferred broker firm, as the proportion of buyers being told they would be at an advantage if they did this rose to a tenth for those aged 18-25.

As a result, three-quarters of buyers aged between 18 and 25 ended up using the mortgage broker linked to an estate agency when purchasing their home.

Overall, 44 per cent of homebuyers use the adviser suggested by an estate agency when looking for a mortgage.

However, the widespread sharing of personal data was a concern for those who were encouraged to use recommended brokers as on average, respondents said they dealt with three different estate agents when buying their property.

If the buyers were to speak to each suggested broker, that would result in the sharing of personal and financial information with multiple firms, which was a worry for 24 per cent of respondents.

‘Unacceptable’ practices

Gerard Boon, founder and partner at Boon Brokers, said: “We regularly hear from homeowners who say they have felt pressured to use an estate agent’s mortgage broker and some have even been told it would help them get a better deal on the house they wanted, or that it would put them at the top of the list of potential buyers.

“Obviously, these practices are totally unacceptable and we would hope that most estate agents would be as horrified as us to hear these stories.

“Getting independent advice is always a good idea when making financial decisions – particularly one as big as getting a mortgage.

“But we advise that home buyers should ensure that mortgage advice is truly independent from a broker who has whole of market access and who will not charge for advice,” he added.

[loanarranger]

Buy to Let Mortgage for Rent to Rent

I thought I would share the following given the level of hype that seems to be promulgated by various Property Educators judging from research on the web.

In early December I received a call from someone who had been recommended by another client. The gist of his enquiry was to raise a mortgage to buy an HMO as a first investment through a new SPV.

He proceeded to tell me that he intended to let the property to a Limited Company who would take responsibility of creating a separate agreement with another organisation to let the property to a variety of persons seeking accommodation.This concept seems to have come about after having completed an “Online Master Class “ and paying a significant sum to learn about buying and letting HMO’s.
On discussing the proposition further, it transpired that no AST would be created but an agreement to let to the company who in turn would contract out to another Limited Company for three/ five years but the rental was “ guaranteed” to be higher than if the property was let on a Room by room basis!!

At this point I pointed out that such an arrangement would fall outside the criteria of all lenders who operate in the HMO/ Limited Company sector to which he challenged my understanding given that he had been assured that it was perfectly legal to operate such a scheme. I then promised to investigate and respond, this took me several days to complete.

During my research I searched the internet and was intrigued at the number of searches which revealed the “ Rent to Rent” arrangement and the ease under which such arrangements can be put in place but also whether it was indeed a legal facility to undertake. With this information I spoke with all lenders and my concerns were confirmed certainly when it comes to obtaining a Buy to Let Mortgage was concerned.

Clearly if the property is unencumbered there is absolutely nothing to prevent the owner from entering into any such type of letting , the only condition was to ensure that the Insurance Company was fully appraised of the Letting arrangements and the type of persons who would occupy the property, failure to do so could render the policy as void if such material information had not been disclosed.

The same however cannot be said when the property is subject to a mortgage , lenders insist on a minimum AST of six months for a new Tenancy and, depending on which lender , a normal maximum of 2/3 years; the only exceptions to this is where the Landlord enters into a 3/5 year Agreement with a Housing Society or Local Authority on a full repairing basis or to a Limited Company for a similar period but where the occupants are employees of the company. There are no other exceptions.

Clearly the information disappointed my “ New Client” as he had genuinely believed that this was a money winner given the saving on Management fees and no additional demands on him other than accounting for the profits.

Some of the lenders with whom I spoke with were very aware of such arrangements and which seem to arise below the radar after the borrower has let the property in strict accord with the mortgage terms but after say 6 months have elapsed they move into a Rent to Rent arrangement in the belief that the lender won’t find out, equally the property now has the wrong type of Buildings Insurance in place and leaves the tenants unaware that the building will not be covered if a claim were to be made.
Lenders now have special teams who monitor such lending and where it is discovered that breaches of the mortgage have occurred they reserve the right to ask for the loan to be repaid and potentially place the borrower onto the Hunter System

Apologies for the lengthy post but once again such schemes cause me frustration at the promulgation of a scheme which based on lenders criteria is adjudged as being way outside of criteria. There may indeed be niche lenders who will fund on an entirely different basis to the conventional lenders but I know of none.

[jpkeates]

Thanks, Mr Arranger, informative!

I do worry that people can really believe that being a landlord letting to company A who will let to company B who will rent to the public could possibly mean that the landlord could earn "more" than letting individual rooms directly to the same public.