Pension projection stance shows why providers are simply years away from returning to normality
I read with great interest your star letter in the September 17 issue and the letter which followed regarding the service provided by lenders at present.
I can only concur with the comments made by both individuals and recount an experience I have had in the last few weeks, which is becoming more and more commonplace, to demonstrate the sheer lack of common sense that now prevails at most of our mortgage providers.
Alongside that, there is a complete lack of empathy with the introducer and a lack of service that we would never get away with in a million years with our clients.
I have been involved in the mortgage industry for over 35 years, latterly as an independent adviser, but I cannot recall a time when common sense, pragmatic decision-making, and quality service are so hard to come by.
This dreadful case experience for me involves a couple who require a 14 per cent – yes, 14 per cent – LTV remortgage, with an unblemished credit record.
The husband has worked in a senior position for a local authority for many years, and is nearing retirement on an excellent salary, and outstanding pension projection.
His annual salary is more than the amount of the loan being requested.
His wife has recently retired from her job in education, and she has a pension income alone on which a multiple of two would cover the mortgage required, with no other credit commitments for either of them.
A case which many would regard as so straightforward as to be a doddle.
I anticipated that the lender would require pension details, as my clients may decide to continue with their mortgage beyond the initial benefit period, and borrow into retirement, so the term requested reflected that.
So, along with all the usual items, I provided the lender with annual pension details for both my clients.
One was a pension projection dated August 2011 for the husband, and the other an annual statement of pension paid to his wife dated this year.
Not good enough for the lender.
Unbelievably, they required a pension projection for the husband dated this year, even though it hadn’t been issued at the time of the application, and no amount of pleading or arguing would make the slightest difference.
So my client had to wait until a letter could be produced dated 2012, to confirm this year’s pension projection, before the case could proceed to offer. There then followed a completely unnecessary delay of two weeks that beggared belief.
I can understand lenders being cautious. I can understand that there are strict guidelines for case assessors, and underwriters to follow, to ensure risky lending is avoided.
I get that. I just cannot abide the stupidity of the stance taken by this household-name lender in this case, which is for me the worst of numerous examples I and colleagues can recount at the moment, without so much as an apology, or an acknowledgement that the stance taken was ridiculous or unacceptable.
We are in a parlous state when lenders have chosen to take this position, and it serves to confirm to me that we are probably years away from a return to normality.
They say what goes around comes around, and I’m looking forward to explaining to hard-pressed mortgage development managers from certain lenders why they are struggling to meet their monthly targets, and getting absolutely no business from me, when the market has returned to any kind of volume, and real competition between lenders, based on service and common sense, has finally returned.
Name and address supplied
Minimum staus checks make payday loans sell
There have been a string of stories in Mortgage Strategy about payday loans, with the most recent last week based on research from Santander about the number of people using them.
It claimed that one million people in the UK are using payday loans to cover the cost of household bills in a typical month
The figures were based on research commissioned by Santander and conducted by Opinium Research in June this year with 2,011 UK adults.
Respondents were asked to estimate how much they take from a number of sources each month to pay for bills. Out of the 2,011 respondents 557 said they use one of a number of sources to cover monthly bills which equates to 28% of the sample. And out of these 45 said they specifically used a payday loan to cover their monthly bills which equates to 2.2 per cent of the sample size.
There really isn’t a problem with payday loans as such. Its not a new idea but the way it is marketed is where the problems are coming in.
For the average Mr and Mrs Joe Average who earn a decent income and have a few savings taking out a loan like this would not really be a problem if they needed it.
But these loans are primarily aimed at low income earners who most likely have tried and have been refused credit elsewhere for whatever reason.
The fact that it is a minor credit check means it gives them easy access to money they probably cannot afford to borrow and then the problem escalates.
If this type of loan was restricted to good credit earners with good credit history then it is unlikely that it would ever sell in the first place and quite likely it would never have the negative press about it being unaffordable.
The rates on these products and the costs on these products are clearly marked out but what is not advertised so much is the fact that these loans can be handed out with the minimum of status checking and that’s what makes it sell.
The applicant may have the best intentions but reality often gets the better of them and crisis starts.
Regulation is needed to control the way these products are marketed and issued. You are not going to change the applicants but you can take more care with who may or may not get this type of lending.
We don’t need the Govt to provide indemnity scheme
I read with interest last week’s letter from Grey Haired Underwriter suggesting that a “good old fashioned indemnity scheme” be introduced by the Government to boost the housing market.
He is absolutely correct to assert that mortgage insurance “could be a good way to get things moving”.
However, I have to disagree with his proposal that the Government needs to be the provider.
There is a vibrant private mortgage insurance market, of which I run one of the providers, supported by the global reinsurance industry, which is capable of supporting many billions of pounds of new high LTV lending.
What the Government could do to help matters would be to require the FSA to allow lenders utilising MI to receive full regulatory capital relief.
It is illogical they don’t get such relief, devalues the benefit to lenders of buying MI and ultimately impacts particularly on the first and second time buyer market – the vpeople who need to be helped.
Chief executive officer
Genworth Financial Mortgage Insurance Europe
Depositcare could be the magic switch Hunt is hoping for
Paradigm’s chief executive Bob Hunt produced another excellent summary of the current state of the market.
In particular, in particular he pointed out that far from the dip in house prices that resulted from the downturn in 2007 leading to more first-time buyers, “taking that first step on the ladder has become even more difficult due to tight lending conditions, historically low savings rates and negligible salary improvements”.
And in particular he pointed out that it is the chasm between house prices and average wages that is the big problem.
As he added: “While there is no magic switch that can be flicked to alleviate the situation, the Government would do well to acknowledge it as the heart of the problem rather than presuming it is funding issues which are halting proceedings.”
We have been trying to create awareness and activate a Depositcare Scheme.
Many homeowners have benefited from a vast increase in property values and a fair proportion have no , or low LTV, mortgages by the time their children are looking to buy.
Under the Depositcare Scheme parents offer their properties as security for another property so that lenders would have the security of the property being purchased and a charge on another property.
The combined security takes the LTV below 75% and the purchasers should benefit from the same rates as anyone with a 25% deposit.
Obviously legal and valuation fees are slightly higher with two properties involved.
All political party support, as well as industry support would be beneficial to maximise acceptance, by lenders, of the Scheme which has potential benefits not only for people looking to buy, but for all house owners. Increased activity in the house market would have the effect desired by government and the majority of the population.
The scheme does not benefit those whose family are unable to help, but it could be the magic switch for many that Hunt is looking for.
Senior financial cConsultant
Moneycare Financial Planning