I was interested to read last week about the 100% LTV mortgage Aldermore brought out.
It is a three-year fixed rate at 6.48% and parents, step-parents or grandparents will be asked to provide a guarantee secured against their residential property for the amount of loan above 75% LTV.
But as the 25% is secured against the parents’ property I cannot see why Aldermore has to charge such an extortionate interest rate.
Surely, as it amounts to the same risk as any other 75% deal it should price it accordingly.
There is no additional risk to Aldermore the fact the risk is spread across two properties means it is reduced and could easily be priced a lot cheaper.
First-time buyers need a helping hand but are not being given one when they are being asked to pay interest rates that could be seen to be financially crippling.
If Aldermore’s underwriting is going to be strict enough to weed out the bad risks then it should be able to reduce the rate being offered.
It is either unsure of the risks it is going to be taking on and so shouldn’t be taking them or is aware of the risks and pricing the mortgages accordingly so, again, shouldn’t be taking them.
Or maybe it feels there are no risks and wants to cash in on foolish and desperate first-time buyers.
If parents have the equity in their properties to secure 25% of the property value they should raise the deposit themselves, get a contract drawn up to secure their deposit and allow their children to get a sub-3% rate with any other lender.
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Nice try, but Lloyds TSB did a guarantor deal two years ago
With Aldermore’s 100% LTV mortgage, 25% is secured by way of a charge on the guarantor’s property.
But what happens if the guarantor wants to move house, remortgage or dies? A second charge will prevent the first two scenarios or complicate them.
There is no difference with this scheme and what Lloyds TSB did two years ago where the guarantor had to deposit the difference in a savings bond. Nice try though Aldermore.
Woolwich would be out if it adhered to its three strikes rule
I’m sure your readers are aware of Woolwich’s three strikes and you’re out system, whereby three errors of varying importance lead to a ban on business being submitted by the broker concerned.
A colleague had an application recently that had around six schoolboy errors all by Woolwich.
I do a fair amount of business with the Woolwich and on the whole it helps me, which is what I’m looking for from a lender. But if it wants to play baseball it is on around strike 376 with me, and that’s only this year.
As someone once said to me if you live in a greenhouse, don’t start throwing bricks around.
Before Barclays starts criticising brokers it should feel confident about its own service.
HMRC should focus on skeletons in big banks’ cupboards
I was intrigued to read about the anti-fraud verification scheme set up by HM Revenue & Customs, the Council of Mortgage Lenders and the Building Societies Association.
HMRC should stick to collecting tax rather than breaching the Data Protection Act to make easy money at £14 a pop. Will clients be given the chance to authorise the HMRC being approached as is currently the case?
I choose to deal with honest clients via a tried and tested referral system so I find this type of snooping offensive.
It should take a look at the tax affairs of the major banks. I’m sure HMRC will find lots of skeletons hidden in offshore structures avoiding much-needed revenue. The problem is it doesn’t have the guts.
Anti-fraud scheme could replace income proof requirements
I write regarding the anti-fraud verification scheme launched last week. Why do borrowers need to show income or accounts anymore? Surely for £14 every case can be checked with the exact figures.
Mortgage fraud cannot be condoned but those wanting checks will be the same lenders that encouraged borrowers a few years ago by saying they should not worry what was put on forms as it would never be seen by the tax office. How times have changed.
Age limits on lending penalise pensioners with secure incomes
Leeds Building Society last week revealed that it has reduced its maximum lending age from 85 to 80.
It has also made a number of changes to its interest-only criteria.
This reduces the options for the retired and tightens the noose around the marketplace for those with good pension incomes but mortgages still in place.
We meet countless clients who have lived in their family home for decades, have a small but affordable mortgage but are being forced to downsize because they don’t want to take out an equity release scheme and are unable to secure finance because of their age.
The sole option available where you only pay the interest is an equity release product from Stonehaven. But as these schemes are based on age and not income they are not always suitable and at higher rates than on the open market.
It seems ludicrous that those with the most secure income a pension are being penalised due to age and are effectively being forced out of their homes.
We sell a lot of equity release products and it is a fantastic product where it fits clients’ circumstances.
But it doesn’t suit all retired people especially those who can afford to pay a mortgage, have substantial equity and want to continue to live in the home they have lived in for most of their lives.
With the elderly living and working longer this is a growing issue. The regulator needs to support lenders that lend into retirement responsibly, not limit their ability to offer a much needed and quality service.
Alarm bells ring on mortgage securities lawsuit filed in US
It was announced last week that a dozen big banks in the US including our own Royal Bank of Scotland are to be sued by Fannie Mae and Freddie Mac for allegedly misrepresenting the quality of mortgage securities sold at the height of the housing boom.
I have read the summons filed against the firms by the Federal Housing Finance Agency.
Lending processes in the US are different to the UK but we had mass packaging at the time of the crunch and an active non-conforming market. Reading the detail makes me wonder how long it will be before we see similar steps here.
What is sounding alarms for me is the report’s reliance on automated valuation models to question valuations completed five or more years ago, on the basis that they are more accurate than a surveyor.
Also, the credit agencies determined a rating based on data from the lender. What happened to independent verification?
How is it that, considering the widespread nature of the alleged fraud and all the parties pressured at the time, the US regulator did nothing? Sound familiar?
There could be significant ramifications if this ends up in court, not least because the US is now effectively suing the UK as we are the majority owners of RBS.
Government needs to take bold action on insurance issues
I was interested to read Defaqto’s article on Mortgage Strategy Online on critical illness cover.
Issues facing protection take-up are significant with a £1.3trillion protection gap. The cost to taxpayers is also significant.
While advisers have a valuable role in helping to address the issue, the solution requires a bigger vision involving government, industry and consumer groups as stakeholders.
The Retail Distribution Review will adversely affect access to quality advice for those of limited means and one has to question the sustainability of businesses operating in this market.
You only have to look at the withdrawal of the larger corporates in this space to be concerned.
These issues are likely to become more acute. The old saying that insurance is sold not bought rings as true today as it did in the past and people certainly need an incentive to purchase.
With cross-party support suggesting we could have pension auto enrolment, maybe the time is right to consider doing something bold.
Consumers pay the real price of FSA’s regulatory failures
Last week’s Star Letter from Stuart Duncan was interesting but the headline ’FSA’s lack of regulation has failed the industry’ should have read ’FSA’s lack of regulation has failed the public’.
I agree it is a statutory objective of the FSA to enhance consumer protection, yet its failure to regulate this aspect of the market is contrary to that objective.
I won an official complaint against the FSA for its lack of integrity, though it is not really a win for the public when the financial regulators lack integrity.
The FSA was evasive about why endowment mis-selling was not corporate fraud and still has not told us. Neither will the Serious Fraud Office.
Anything from the FSA is PR, merely pretending the financial industries are being regulated.
Even the fines of corrupt firms are ultimately paid by customers and investors instead of just penalising the directors, perhaps with prison depending upon the crime.