Market Watch: Does ‘independent’ still mean what it used to?

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Independence is on people’s lips, with the UK pondering Brexit and brokers’ cherished status affected by the MCD

The decision by Mayor of London Boris Johnson to oppose prime minister David Cameron on Europe has added fuel to the fire of the Brexit debate.

While Johnson’s decision can be seen as a deeply political move, there is no doubt it has provided a boost to the ‘Out’ campaign and delivered more of the market’s least favourite thing: uncertainty.

We will no doubt all be suffering from Brexit overload during the next few months but the referendum in June is a fundamental decision for the future of the UK. We can only hope scare tactics are left on the sidelines and a sensible, informed debate ensues.

Meanwhile, Bank of England governor Mark Carney has admitted interest rates could be cut further.

Indeed, it seems there is now a preference to reduce rates rather than resort to more quantitative easing because, with banks now in a much better place, margins can be squeezed to help convince them to lend more.

The prospect of seeing negative rates here is unlikely, however, as the last thing anyone wants is consumers withdrawing their life savings and hiding them under the mattress.

In the mortgage market, one of the biggest discussions at the moment is around the topic of independence.

Post-Mortgage Credit Directive, brokers will no longer be able to call themselves ‘independent’ unless they include second charges and advise on whether or not they are an option in all cases.

There is much debate over whether this is actually an issue or not. Does ‘independent’ still mean what it used to?

In the markets this week, three-month Libor is still at 0.59 per cent while swap rates have fallen once more.

2-year money is down 0.06% at 0.72%
3-year money is down 0.10% at 0.76%
5-year money is down 0.13% at 0.89%
10-year money is down 0.14% at 1.31%

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The latest income multiple tweaks have come from NatWest, which has lowered the loan-to-income maximum on mortgages between 75.01 per cent and 85 per cent loan-to-value to 4.45 times, from the previous 4.75.

While this is unpopular, it is important to understand the difficulties lenders face in trying to accurately assess their 15 per cent limit on loans over 4.5 times income, which is calculated quarterly.

Meanwhile, it is worth reiterating Santander’s recent change on interest-only, which on part-and-part mortgages now requires a buffer of £150,000 at the end of the term rather than at the beginning.

That means this type of loan now works on properties priced at £300,000 and above, which should open the door further to borrowers looking for this type of method.

Elsewhere, Investec is back with some great policies and decent rates in the £1m-plus market. Its ‘dry lending’ proposition is worth taking a look at.

Precise continues to push the boundaries to help borrowers on the fringes by introducing new tiers that take into account a greater number of adverse issues.

Rates on Tiers 7 and 8 start at a very reasonable 4.59 per cent with a flat fee of £1,495.

Precise will also be increasing the number of bedrooms accepted under its HMO policy to eight, from six.

Kent Reliance has removed its requirement to have separate legal representation on limited company loans up to £2m, while Market Harborough has a natty line in ex-pat mortgages starting at 3.25 per cent.

It also has a complex buy-to-let product available at 4.49 per cent with no maximum age limit.

Heroes

Andrew Montlake is director at Coreco