Credit to lenders’ risk departments for starting to adjust criteria, and to lenders themselves for engaging more with brokers
Brokers have been banging on to lenders for a long time about criteria being king, urging them to focus their attention there rather than solely on blindly cutting rates. The good news is we are starting to see that filter through and we have to give credit to risk departments for moving forward with this.
To be fair, we understand the battles lenders face: the worry that the regulator will say one thing publicly but something different behind closed doors during a visit. Not-too-distant experience weighs on some and such memories are hard to argue against.
Add to this the pressure from the PRA, the Government itself, European legislation and the press and PR that go with certain moves, and it is a tough old time.
What has pleased me is that more lenders seem to be really engaging with brokers, bringing senior people out to talk to us, especially those working in risk. These discussions are always welcome and often fruitful, enabling a better level of understanding on both sides but ultimately a better understanding of what our clients really need.
Lenders are also realising that brokers are less shifty than they may have supposed. We sometimes moan and shout but it is because we care, we want to do things the right way and we are passionate about doing what is best for our clients.
Meanwhile, we must stand together when facing accusations that we are returning to the days of lax lending. We are not. The extra work – affordability checks, stress testing and so on – makes it a very different place from the bad old days.
Our market has always been a partnership: neither lender nor broker thrives without the other, and the more we talk and work together, the better.
In the markets, three-month Libor is at 0.59 per cent while swap rates have fallen like the Labour party in Scotland.
- 2-year money is down 0.06% at 0.81%
- 3-year money is down 0.07% at 0.89%
- 5-year money is down 0.10% at 1.04%
- 10-year money is down 0.09% at 1.46%
In the product world, Halifax has continued its age-related changes and raised its maximum age to 80. I know others have done this and it could have gone further but it is a positive move from a big lender with such a conservative initial stance and should be recognised.
Meanwhile, Barclays’ new and improved Family Springboard mortgage no longer requires the borrower to put in a 5 per cent deposit, leading many to regard it as a 100 per cent mortgage.
The reality is parents still need to put 10 per cent on deposit but will get interest on it and can get the funds back in three years’ time. The rate available is fixed for three years at 2.99 per cent. Barclays has also increased the income multiples to 5.5 times for those with joint incomes in excess of £50,000.
Elsewhere, Kent Reliance has a swathe of good changes coming (more next week) and now accepts clients who want to borrow through a limited liability partnership. This includes borrowers who wish to switch a buy-to-let asset from an individual name into an LLP.
Precise has raised its maximum term to 35 years and its buy-to-let maximum loan size at 75 per cent LTV to £750,000. It also has fixed-fee products at pay rate returning, with a 4.39 per cent five-year fix to 75 per cent LTV with a £2,495 fee.
Accord has made positive changes to its affordability calculator for loans up to £500,000 and improved its service offering, with residential processing done by an underwriter with an appropriate mandate. It has also cut rates.
Some negative news has seen NatWest stop offering mortgages to ex-pats, which unfortunately includes existing customers who may want additional borrowing.
In buy-to-let, the big news is TMW changing its rental calculation stress test to 145 per cent from 125 per cent, as well as cutting its maximum LTV to 75 per cent. This will have a big effect in areas such as London but TMW’s reasons make sense. Landlords must be aware that the coming tax changes mean that, in five years’ time, their profit could evaporate.
No doubt other lenders will follow suit but hopefully with concessions on five-year fixes where, in my opinion, they do not need to move, or when it is in a limited company name.
Andrew Montlake is director of Coreco Group