Marketwatch
Share
Complex prime seems to be the in thing. It’s great that some lenders are trying to help borrowers who don’t pass automated credit scoring systems, even though they aren’t high risk
JONATHAN CORNELL, HEAD OF COMMUNICATIONS, FIRST ACTION FINANCE
Swaps fell slightly, reversing some of the previous week’s increase. Three-month LIBOR is unchanged at 0.64%.
1-year money is unchanged at 0.93%
2-year money is down 0.02% at 1.62%
3-year money is down 0.03% at 2.17%
5-year money is down 0.06% at 2.93%
It was fascinating to see The Mortgage Works launch its guarantor proposition just a couple of weeks after Halifax announced it was withdrawing its guarantor facility due to lack of demand.
With some TMW products the guarantor can limit their liability, which is innovative. Guarantors have traditionally been liable for the entire loan, which some were not too keen on.
I have to say the new products don’t look that cheap but at least borrowers now have some options. Well done, TMW.
Aldermore’s plan to enter the mortgage market is welcome as we badly need more lenders. The firm says it won’t look at sub-prime, which is hardly surprising, but it will consider prime clients with the occasional wrinkle.
Two words we hear a lot at the moment are complex prime. A large number of borrowers don’t fit big lenders’ criteria for whatever reason. High street players are able to pick and choose who they lend to and if someone doesn’t fit, it’s tough luck.
Lenders such as Aldermore will get underwriters to look at cases in their entirety rather than simply whether the client fits the credit score box. With Kensington announcing that it is also looking at complex prime lending it is clear there is a gap in the market for this type of product.
Meanwhile, Northern Rock’s non-flexible everyday range looks great value at the moment, with a two-year fixed rate at 3.45% with a £595 fee for purchases up to 70% LTV and a five-year fixed deal at 5.15% with a £595 fee up to 70% LTV. The remortgage versions come with fees of £995.
It has also launched an appeals process for cases above £500,000 which are declined if the client does not does not get a high credit score. You’d expect Northern Rock to be careful with large loans but at least it’s good to be able to challenge its score if you think it is wrong.
And well done to Platform Home Loans which is going to give 48 hours’ notice before pulling deals. Few things are worse than quoting a rate to a client and returning to the office next day to find it was pulled at midnight.
I’m not surprised the Financial Services Authority is reporting that arrears on high LTV buy-to-let deals are three times higher than on residential loans. You expect owner-occupiers to try hard to pay the mortgage but landlords don’t have the same incentive.
And with the Bank of England base rate so low many mortgages will be on low reversionary rates so when rates go up, so will arrears.
HERO OF THE WEEK is Aldermore for its plan to lend entirely through brokers. Any new entrant with money is great news for the sector. It will not look at sub-prime but will consider prime borrowers who have the occasional credit wrinkle.
VILLAIN OF THE WEEK is the government for making available just £83m to kick-start the housing market. This won’t make much difference and seems to be yet another bit of window-dressing by a lame duck administration.
