MORTGAGE SPECIAL
As funds free up, the ‘For Sale’ signs will follow.
The Self Build MorTgage Self build mortgages are another clear niche where there’s good news for borrowers. Michelle Slade says “Not everyone wants to offer it, but the LTVs are lower than they used to be.” This is one area, though, where new entrants haven’t made much impact, a handful of lenders such as Norwich & Peterborough dominate the market. Ray Boulger says, “It’s a sector where the building societies rather than the banks predominate.” Furness, Ecology, Scottish, and Progressive Building Societies all have targeted self-build products, while other societies such as Newbury encourage self build applicants through the intermediary route where, their website claims, “We don’t credit score and don’t have boxes to tick”, and each case is individually assessed. One of the biggest players in the sector, though, is not a building society, but Buildstore, a self build specialist which offers both mortgages and self build project management. However, it remains a specialised market. Whether the recent push by Housing Minister Grant Shapps to open it up and make it more mainstream will bear fruit remains to be seen.
The diSappearing MorTgage Three kinds of mortgage seem to have disappeared. One is self cert. Michelle Slade says “Self cert has completely gone now, and I don’t think anyone will come back into that market any time soon.” Another is subprime (poor credit rating). Catherine Hearnden says, “Getting a
mortgage is tricky if you’re not squeaky clean. If you’ve got a good credit rating and deposit it’s as easy as it ever has been, higher LTV is where you start struggling and lenders set their credit scores much higher.” And Ray Boulger says, “If you’ve got heavy subprime you have no chance of getting a mortgage.” But, he says, those with slightly spoiled
credit records may find they can access funds. Lenders such as Precise and Melton Mowbray are looking for a clean record for the last 12-18 months, but will overlook previous problems, and Precise will overlook CCJs more than two years old. The third mortgage type to have
disappeared is interest only. True, interest only mortgages haven’t disappeared, but Michelle Slade says “Lenders are very strict on who they’ll give it to now, and the LTV on such deals has gone down significantly.” That makes it the only area of the market where recent loosening of LTVs hasn’t
The mortgage market is beginning to thrive, despite the disappearance of a few difficult types of credit.’
applied. “The number of providers offering interest-only has also reduced,” she says. The FSA has also raised concerns about
the widespread offering of interest-only terms, stating that it should only be used where there is evidence of a genuine repayment method. Meanwhile there is some evidence that banks are offering homeowners in difficulties the chance to switch to interest-only rather than face arrears, which suggests new borrowers, denied these terms, are in a sense subsidising those with existing loans.
lTV (loan To Value) Across the whole market, with the exception of interest-only, LTVs have been rising again. Michelle Slade points out that with the base rate remaining unchanged for so long, lenders are having to compete on something other than rates alone. “While base rates stay on hold,” she says, “we’ll see more people offering their best deals at a higher LTV.” The benchmark has now become 75 per cent, a year ago it was nearer 60 per cent. In fact, Moneyfacts figures show that the number of deals at 60 per cent LTV has fallen, while the number of products at other levels has risen. Michelle Slade says higher LTV loans are
also rising. “There are some 95 per cent deals, but they’re mostly with guarantors; 90 per cent is back, too, and getting competitive.” At 90 per cent, the average
interest rate has fallen below 6 per cent for the first time since March 2008, it’s this tier which has seen the biggest fall in rates. Overall, the mortgage market is
beginning to thrive again, despite the disappearance of a few of the more difficult types of credit. But with time-limited offers, often exacting loan criteria, and new products coming on the market every week, it’s more than ever a market where expert guidance is required to get the best mortgage for clients, and in some cases, to get a mortgage at all.
ConCluSion So where is the mortgage market going to end up? Whatever happens, we’re not going to see boom conditions in the near future. The CML’s 2011 forecast states that, “We do not envisage a return to the lending levels that characterised the middle of the last decade for many years to come,” though the CML still expects moderate growth. Paragon also believes the market will
stabilise below peak levels. BTL advances fell from £44.6 billion in 2007 to £8.5 billion in 2009; Paragon believes that long term sustainable lending is £25-30 billion a year in ‘normal’ conditions. That’s a third lower than the peak. We may also find that the market has
become much more tactical permanently, and that the ‘productised’ market may have
PROPERTYdrum AUGUST 2011 25
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