MORTGAGES


an already stagnant housing market. John Heron says, “The retrenchment of


these lenders in the owner-occupied market is driving some of that business out to the periphery of the market.” That’s not always been good news for buy-to-let. Some of those peripheral or smaller lenders have struggled to cope operationally with the influx of business, and “that’s led to them cutting back the level of their buy-to- let business,” he complains. At the same time, we’ve seen the price of


mortgages increase. Eurozone troubles have raised the cost of funding in the wholesale markets, and many banks – having bitten the bullet for a while and seen their mortgage margins squeezed – are now hiking their SVRs. (Halifax, RBS and the Co-operative Bank all did so in May.) Hiking rates will improve profit margins – but it is also likely to depress demand. Lenders are also tightening their credit


requirements and in some cases trimming back the product range. Many banks have restricted access to interest-only mortgages, and the Co-Op has pulled out of the interest-only market completely. More lenders are using scorecards, and while many had stopped lending to the bottom quartile of customers, more and more now seem to focusing only on the top of the market. That means even customers with a perfectly adequate, but not sparkling, credit record are finding it difficult to source finance. Brian Murphy says lenders have got


market share from 40 per cent in 2008 to 27 per cent now, within which even the Halifax has seen a decline from 25 per cent to 20 per cent. RBS, too, is thought by City analysts to want to reduce its gross asset base, and that probably means reducing its mortgage book. Who is picking up the slack? Building


societies have started to grab back some market share; their gross lending grew 36 per cent in the first quarter of this year. Brian Murphy says he’s seen an increasing appetite among some of the smaller building societies. “They want to lend,” he says, “they are less credit score driven, and they don’t take a one-size-fits-all approach.” But they are simply too small to make up


the shortfall from the bigger lenders. Ray Boulger says, “They don’t have the collective capacity to soak up all the business Santander is no longer taking.” So overall capacity in the market has shrunk, and that could have a negative impact on


tough. “We are seeing policy being absolutely rigorously applied.” Sometimes, for instance, three bank statements aren’t enough – the lender wants another three; when a client banks over the internet, and has to order paper statements, that can take time, and sometimes deals fall through as a result. More loans are falling through at a later stage, too, and there are often processing delays. “It’s another result of the tightening credit environment,” he says.


Other major lenders are


also trimming their commitments, Lloyds’ market share is down


from 40% to 27%.’ JOHN HERON PARAGON


Banks stopped lending to the bottom quartile


of customers, and more are focusing only on the top of the market.’


However, lenders are not being


unreasonable. While transactions are taking longer to complete, and John Heron says that “lenders are asking more questions”, they don’t seem to be making unreasonable demands, and he hasn’t seen deals falling through that he would have expected to proceed – lenders haven’t become skittish or unpredictable. “They’re not trying to avoid lending,” he says, “they are just being justifiably cautious.” It does look as if the mortgage market


will get tougher in future. There doesn’t seem to be any end to the eurozone crisis in sight, and improving a bank’s balance sheet – which is what a lot of the recent moves amount to – is a multi-year project.


WHAT CAN YOU DO? So what can agents do to ensure applicants


get funding for their purchases, and sales don’t fall through? Brian Murphy suggests they should maintain good relationships with mortgage brokers who can help qualify prospective purchases. “You need to ensure that applicants are as financially qualified as they can be,” he says. “In the current market, the more checks you can put in place to ensure that your sales progress, the better.” In particular he warns agents to be wary


of purchasers who claim they are cash buyers. “Cash sometimes isn’t cash – it depends on a sale. Is it money that is easily obtainable?” He also points out that many purchasers who do have ready cash might still prefer to borrow rather than use their own capital, to maintain their financial flexibility.


PROPERTYdrum JULY 2012 43


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