Despite the challenges facing the mortgage industry, there are rays of sunshine in the form of new opportunities
Last week, I spent an excellent day at the Mortgage Strategy Leaders Forum, which boasted a great programme of seminars and discussions.
While there is no doubt there are challenges for the mortgage market to overcome, the overwhelming majority of the room was positive. As Ami’s Robert Sinclair rightly stated, we have gone from an industry that produced around £70bn five years ago to one doing circa £150bn today. And with pretty much the same people. Where else in British industry can you find that?
To be fair, we have always been a ‘glass half full’ industry. But there is much to keep track of alongside the daily travails of demanding clients, over-officious lending policies and beyond shocking legal service levels.
For example, we have the FCA competition review that will no doubt yield further interference and, perhaps more importantly, the Senior Managers Regime to get our head around.
Then there are the changes to the buy-to-let market, especially those to underwriting coming later this year for landlords with four or more properties. That said, make no mistake this is a massive opportunity for brokers. Landlords will struggle to negotiate the new rules without professional advice and guidance, particularly when you get into the detail.
The debate around technology and robo-advice provides another opportunity. Technology should be used to simplify the archaic traditional end-to-end process, doing the heavy lifting that enables a broker to focus more energy on what they do best: advising, nurturing and hand-holding.
We should all be thinking about our customer journey. We are no longer being compared to one another but to the customer’s last great service transaction, whether that is Amazon, AO.com or the like. Do not fear the changes coming; embrace them.
In the markets, three-month Libor is still at 0.32 per cent, while Swap rates have climbed a touch further.
2-year money is up 0.03% at 0.60%
3-year money is up 0.04% at 0.69%
5-year money is up 0.07% at 0.88%
10-year money is up 0.06% at 1.24%
There have been some big news stories from the world of lenders. Nationwide hit the headlines by taking on builders who offer leasehold houses with the potential to yank up ground rent in the future.
The minimum acceptable lease term on new build properties will be 125 years for flats and 250 years for houses. The maximum starting ground rent on leasehold new builds will be limited to 0.1 per cent of the property value. Ground rent and other event fees must be “reasonable at all times” during the term.
This is a real shot across the bows to builders and, agree with it or not, Nationwide should be recognised for having the balls to produce a policy like this. If copied by other lenders, the unfair practice will end overnight.
Elsewhere, Natwest has made some excellent changes, including the fact it will no longer cap the income multiple at 4 x over £500,000, reverting to its standard multiples of up to 4.85 x income.
What is more, the minimum income requirement from at least one applicant for a residential interest-only mortgage is being reduced from £100,000 to £75,000 and the maximum loan-to-value for a residential mortgage on a new build house is increasing from 80 per cent to 85 per cent.
Barclays has also improved its interest-only proposition by reducing the minimum loan size for lending from £300,000 to £200,000. It has also launched new lower rates across the board.
Family Building Society’s new Offset buy-to-let offering is a great addition to the market for landlords. Adding this to its family mortgage, expat buy-to-let and lending into retirement offerings, it is becoming a favourite with brokers.
And finally, while Precise has withdrawn its five-year fix at 2.99 per cent for buy-to-lets, Pepper Home Loans has released one at 2.98 per cent to 75 per cent LTV with a 1.75 per cent fee. The rental calculation is based at 140 per cent at 2.98 per cent. It has other good rates that are worth checking out too.
Andrew Montlake is director at Coreco