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Letters to the editor

Letters to editor MS 480

Star letter

I was interested to hear in the Budget last week the announcement of the Government’s Help to Buy scheme.

This will come in two forms – a 20 per cent shared equity option and a mortgage guarantee option whereby the Government will offer a government guarantee to lenders who offer mortgages to people with a deposit of between 5 per cent and 20 per cent.

But while this is an excellent initiative to aid property movers, I believe that the borrower should be required to pay a single premium based on the difference between the base loan and the amount required excluding their own deposit – it shouldn’t be a freebie.

The revenue from this could then go in some small way to justify the guarantee being provided by the Government.

The original mortgage indemnity guarantee arrangements worked reasonably well with the indemnity being provided by leading insurers and only became unstuck when lenders started to compete for an ever increasing share of the mortgage cake.

Lenders then dropped their prudential stances in assessing an applicants suitability which then caused issues when loans defaulted amidst falling house prices which had become inflated by the liberal lending to almost anyone who wanted to get on the housing ladder.

While this will hopefully not be repeated in the current regulatory climate I feel that there does need to be a payment by the borrower for having the benefit of this lending concession.

Name and address supplied

With regards the government Help to Buy guarantee the issue in the past on MIG schemes is that the insurance provider has often been BBB rated or below, meaning that the insurance carries little weight with either the regulator or the rating agencies as the insurer invariably has a lower rating than the issuer.

If the same logic is applied, the UK Government is still AAA rated by two of the three main agencies and therefore much more highly rated than any of the banks whose loans they will be insuring.

In short, if you don’t trust the guarantee given by the state, no MIG scheme will ever work!

Name and address supplied

Home Funding, chief executive Tony Ward wrote an interesting blog last week in the wake of the Budget and the launch of the two Help to Buy option.

As Ward pointed out the indemnity guarantee option applies to new loans, remortgages, second hand properties as well as new build.

He said: “This is potential a game changing scheme providing the banks can get capital relief from the regulator.

“Is it a coincidence that this looks almost Canadian in its structure I wonder?”

The UK is one of the only developed property markets in the world where the government hasn’t underpinned lending in some form so not surprised at this move.

On one hand its good because it will hopefully grease the wheels of lending.

On the other hand the short term products of one and three year trackers and fixed rates may be replaced by longer term five, 10 even 20 year products so less quick remortgage business. Personally I don’t see the Government’s obsession with trying to drive continually higher LTVs.

Having to put a decent bit of skin into the deal of upwards of 15 per cent seems like a fair trade if you’re buying a house.

Hugh Wade-Jones

The chancellor George Osborne has delivered his Budget for the aspiration nation but it seems that he has introduced another tsunami of small initiatives, most of which will probably be lost through red tape and small print, like most of the previous initiatives.

While in isolation the proposed ideas are positive and welcome, what is missing are bold and positive concepts which will motivate SMEs to grow and expand.

Just look at the scrap yard of failed initiatives like the funding for Lending Scheme, which actually motivated the banks to lend less because of the unsustainable conditions and lack of demand.

What surprised me most is that the proposed home loans plan which is in effect reverting back to the days of 95 per cent mortgages which got us into this financial mess in the first instance.

Our banks received a firm slap on the wrists for being lax with their lending – and quite rightly so, because all of us are now paying the price.

So why would anyone want to go back to those days?

So hopefully, the small print will make sure this scheme does not take off!

There are many other ways to help first time buyers, without creating artificial demand which will only fuel more price increases and without risking the taxpayer’s money.

Henry Ejdelbaum

AIMS Accountants for Business

I recently submitted an application to NatWest for a widow whose husband died a couple of years ago. The case failed on adverse credit. I got a copy of her credit file which was excellent but had her deceased husband as a financial associate. My BDM suggested that it might be that a financial associate had adverse and that might be the reason being declined.

He may be the first dead person to fail a credit score. My question is this – who gave NatWest permission to credit search him as he certainly didn’t?

Name and address supplied

We all know that when a bank gets their teeth into your client, we risk losing products or the client completely. 

But a safe bet to ensure this doesn’t happen is to ring fence that client in the first place. 

Let’s face it, they do business with you because they trust your advice, recommendations and service. 

So why do some brokers fail to review their clients entire financial requirements? 

A simple way for a bank to entice your client is by offering them a cheap buildings and contents product. 

If this is something that you have not discussed, what’s to stop your client being lured?

Will the policy be as good as you could offer? 

Will they thank you for failing to offer it?    

A client will only see you as their adviser if you let them know you can in fact advise on all of their needs.  

Ring fencing the client in this way, and adopting a regular contact strategy will ensure that when the lender comes knocking six months before the fixed rate is up, the first call the client will make will be to their adviser for a chat. 

A good enough reason to sell B&C, without even mentioning the income it generates.

Max Thompson

Select & Protect

E.surv business development director Richard Sexton last week made an interesting point in defence of valuers.

He said: “Valuers will always respond to requests for reviews but the reality is that amendments are rare – they are paid to get it right first time after all.” 

He also argued that lenders are also now becoming more cautious about encouraging such reviews – there is some difficulty in requesting independent advice and then being seen to encourage it to be reviewed. 

I appreciate that valuers are paid to get it right first time but do they?

When there is a genuine disagreement about a property value brokers are asked by the lender to get comparable data.

Additional work is carried out getting information about the most recent comparable sales in the area only for the valuer to disregard these.

When asked for the comparable sales data the valuer has used this is greeted with the answer that these cannot be disclosed.

Why, if they are confident in their own abilities?

Steve Lupton

In response to Steve Lupton’s comment about problems with valuations, our experience is that this is not a remortgage issue.

We are seeing this in the purchase market. Valuers are behind the curve on values in London and when a lender asks for comparable evidence, it has to be three properties that have completed in the last three months. Not an easy task because of lower transaction levels of late.

The valuer rarely changes his mind because to do so is a clear indication that he did not get it right at the first time of asking, rather than he was correct in the first place.

Name and address supplied

Enterprise chief executive Danny Waters’ made an interesting critique in his blog on Mortgage Strategy Online about the advent of 90 per cent LTV bridging loans.

He argued: “That kind of bridge is a bridge too far. In prime and super-prime central London, 80 per cent LTV bridges are neither unreasonable nor uncommon. But 90 per cent LTV? Even in the most prestigious areas of the capital I would consider that kind of loan-to-value reckless. A 90 per cent LTV bridge on a buy-to-let in, say, Barnstaple is a recipe for disaster.”

I couldn’t agree more but once again we have a typical ‘London is the centre of the universe’ approach. As a broker in the North West I am frustrated by the blinkered approach of lenders. Believe it or not, percentages are the same in other resions of the country so there are minimal risk buildings in many cities and towns. Similarly there are properties worth £70,000 producing fantastic rental yields yet because they are valued at less than £75,000, which wouldn’t buy a shed in some parts lenders don’t want to know.

Look north of Watford, it actually exists!

Name and address supplied

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