View more on these topics

Letters to the editor

Letters to editor MS 480

Mortgage Strategy’s cover feature on payday loans last week was a good article but a couple of points were overlooked:

1. Any lender that is automatically turning down a borrower if they have had a payday loan is going to, or should be getting into trouble with the FSA. There is a requirement to judge credit and affordability in a fair and reasonable manner.

2. Linking into this is the point made by John Charcol’s senior technical manager Ray Boulger in the cover feature that it’s unlikely that anyone resorting to a payday loan could fund the cost of buying a property – incomes are substantially lower for payday at an average of £16,500 per annum. But there are still going to be a few borrowers who earn enough and have a decent enough record to be looked at properly

The biggest issue though, and one that tends to get over-looked, is why payday lending has taken off over the last few years. It’s because traditional forms of credit, to anyone other than clean prime, have all but disappeared.

What should be happening is that borrowers who take out a payday type loan, produce decent performance and get rehabilitated into the mainstream credit arena via their bank.

However the reality is that banks do not want to know

The focus on Government lending targets via banks is on total amount lent.

These customers are small scale borrowers, so while lending to these consumers will help numerous people on the ground it doesn’t change lenders’ headline figures much.

I have had conversations with banks about using payday data to bring in the better customers into prime arena.

They are not interested in anything which complicates their lives or using data which they are unfamiliar with.

All this leaves us with is the payday lenders now taking customers upstream via instalment loans and secured loans into what was prime bank territory.

Name and address supplied

Mortgage Strategy last week tackled the payday loans sector, reporting on the launch of an enhanced Code of Practice and the Financial Conduct Authority able to cap the cost of and duration of credit for short-term loans.

In my opinion the payday loan market is worse than backstreet moneylenders, with burly collectors enforcing payments.

The rates are beyond those offered by other moneylenders and yet we allow it. It beggars the question why as I see rates on TV of well over 2000% APR.

We, as a country forced the credit cards to stop charging extortionate 35 per cent APR rates some years ago. This is surely the place that all the rip-off management have gone from other now closed down or regulated industries.

Robin

With regards the recent story that decision-in-principle to application ratios will not form part of any changes Lloyds Banking Group makes to its procuration fee structure, surely the truest measure of quality is how the mortgage performs post completion which brings us back to trail commission for performing loans.

Lloyds director of strategic partnerships Peter Curran says a final decision on whether to pay proc-fees based on quality has yet to be made.

He has ruled out using DIP levels as a metric whilst suggesting that an application to conversion ratio could be used in calculations.

But if lenders had used quality as measure for proc fees pre credit crunch they would have paid more for good quality prime business and far less for sub prime – the inverse of what they actually did. Hindsight is a wonderful thing!

Keith

Thank you Gordon Morris for bringing the Age UK drawdown plan to the readers’ attention, which was printed in last week’s issue of Mortgage Strategy.

However, just so that the same readers don’t get all excited unnecessarily, by thinking that they have access to such a plan offering £500 cash withdrawals, my understanding is that when Morris claims it to be “available to the market”, he unfortunately does not mean available to independent, professional, specialist equity release advisers. I think he means that it is only available through Age UK directly, as part of its offering of products from nine providers in the sector today.

I absolutely agree with Gordon’s comments that “flexibility and simplicity are absolutely key to making these products more accessible…”, so no doubt Age UK will be including the totally unique Hodge Lifetime Mortgage with its flexible repayment and downsizing protection options in its product range in due course. After all, there is whole of market Gordon, and there is the whole market.

Simon Chalk

Equity Release Planner

I was interested to read the story last week that Santander had removed Highclere Financial Services partner Alan Lakey from the Abbey for Intermediaries broker panel with immediate effect, following accusations of him using abusive language towards its employees.

The lender had written to Lakey, who is also a council member on the Association of Professional Financial Advisers, to inform him of the decision on the basis that, as a responsible employer, Santander must support its employees and ensure they are not subject to written or verbal abuse.

The ban follows two emails sent by Lakey to staff at Santander.

Lakey was informed by the lender’s operations team that his fast-track functionality was being removed following an audit of the cases he was submitting on 29 November.

He then sent two emails to the lender about the decision on 29 and 30 November. As a result of the language used in both emails under Santander’s mortgage and insurance terms of business, the decision was made terminate Highclere’s involvement with immediate effect.

Section 11.2.2 of Santander’s terms of business states: “Any misconduct by the Intermediary or any person or body for which it is responsible (including and appointed representative) which is or could be reasonably viewed as prejudicial to our business or reputation.”

I am a mortgage broker and although there is no excuse for being abusive, I can understand Lakey’s frustration.

Many lenders appear to work these days with the mindset: what obstacle can we use to avoid giving this customer a mortgage.

There are times when such ridiculous and unyielding criteria makes you want to pull your hair out. For example: I have a client earning £250,000 per year through rental income. His property portfolio is in excess of £5m.

One of the major high street lenders will not give him a buy-to-let mortgage because he cannot show a minimum of £20,000 earned income. It beggars belief.

Phil Reading

With regards the story in last week’s Mortgage Strategy on my removal from the Abbey for Intermediaries panel, of course, the headline always tends to obscure the reality.

Last week I advised Abbey that I had removed it from my panel due to their corporate imbecility.

To dress this up as it removing me is to rewrite history.

Abbey chose to release the correspondence aiming to discommode or embarrass me. Didn’t work.

The “abuse” was directed to Abbey, not its staff who, in the main, I find to be pleasant and who I feel sorry for labouring under the rigid nonsense that purports to be their lending policy.

Alan Lakey

With regards the story last week about the broker that was removed from Abbey’s panel, this is why brokers have such a bad name in the minds of lenders employees. There were so many ridiculous comments on Mortgage Strategy Online underneath the article from brokers that it was embarrassing.

If you don’t like the lenders criteria or service stands, go elsewhere. Otherwise accept the situation and work with it. If you have an urgent case don’t place it with a lender that has a two week service delay – it’s not that hard.

Name and address supplied

Think I’d want to see the emails in question before passing judgement on the broker moved from Abbey for Intermediaries’ panel. Think all the other comments about quality of underwriting etc are irrelevant really.

Surely we all owe it to each other to be courteous and professional? I don’t really want to live in a world where it is acceptable to behave hideously to one another as implied by some of the posts that were left. If your job is making you that angry, it’s time to hang your boots up.

Charlotte Dean

The announcement in the Autumn Statement last week that the Support for Mortgage Interest scheme, due to expire next month, has been extended until March 2015, made me ask a simple question – why does the Government persist in propping up house prices?

Under SMI borrowers that have been unemployed for 13 weeks are currently eligible for the support, which replaced the 39-week qualifying period in 2009, and the qualifying loan size increased to £200,000 from £100,000. Both were due to revert back in January 2013.The extension of the SMI scheme will cost an extra £10m in 2013/14, followed by £95m in 2014/15 and £90m in 2015/16.The autumn statement report states: “Temporary changes to SMI are extended until 2015/16 for working age SMI claims. The waiting period will remain at 13 weeks and the working-age capital limit will remain at £200,000 until 31 March 2015.”

But there’s no equivalent support for renters. I rent and if I become unemployed there’s no support given to me over and above Job Seekers allowance to pay my rent.

When someone buys a property they should take into account the fact that they might become unemployed and provision or be cautious accordingly. Perhaps this would have helped constrain the excessive risks that home owners have taken with the presumption that property values can only ever go up!

A state of affairs that the politicians seem keen to preserve though it can’t be done forever and the sooner affordable property prices are established the better for everyone and the economy.

Name and address supplied

Recommended

Life after the CML

By Roy Armitage, head of credit at LendInvest Last month saw three-quarters of the membership of the Council of Mortgage Lenders (CML) vote in favour of plans to create a super-trade body, which would see the CML merge with the likes of the British Bankers’ Association and Payments UK. There is little room for misty-eyed […]

Newsletter

News and expert analysis straight to your inbox

Sign up