Although it should be easier for borrowers to change their provider, mortgages are more complex than bank accounts
There was a flurry of discussion last week over mooted government plans to give homeowners the legal right to switch mortgage provider within seven days.
A consultation is set to be launched on whether mortgage companies should be forced to allow customers to switch if they are not getting a good deal. This will be an interesting one for lenders to get their heads around.
My first reaction is that, while this is a well-intentioned move and it should be easier and quicker for borrowers to change provider, mortgages are a lot more complex than simple bank accounts.
The question here is: where are they starting from? If it is from the date of a new offer, well, we have a cooling-off period now and the main issue lies on the legal side.
To be fair, some lenders are already able to get offers out on remortgages within seven days, but the conveyancing process needs to be drastically simplified. Searches are slow and free legal providers can be hopelessly inefficient.
If the Government really wants to support people who feel they have a bad deal, simply adopting proper transitional rules will help those who want to switch product but are unable to.
Meanwhile, it was interesting to see the warnings over declining broker numbers, with concerns that not enough new intermediaries are coming through to help deal with the additional business being sent our way. Ami chief executive Robert Sinclair highlighted that things were “getting tight”, with just an estimated 12,000 brokers now in the market.
We all need to help get new blood into the industry because, let’s face it, we are not getting any younger. What is refreshing is that we have seen some excellent new prospects and, for those willing to use apprenticeships, graduate programmes and academy schemes, the rewards are there.
That said, we may not need as many brokers in the future. We just need technology to help them do their job more quickly and efficiently, so instead of doing five or six cases a month they can do 20 or 25.
In the markets this week, three-month Libor has given up the ghost at 0.59 per cent while swap rates have continued up the hill.
2-year money is up 0.04% at 0.86%
3-year money is up 0.07% at 0.96%
5-year money is up 0.08% at 1.13%
10-year money is up 0.07% at 1.53%
Virgin Money has launched new products for Help to Buy equity loan schemes, with two-year fixes from 1.78 per cent at 55 per cent LTV and 1.79 per cent at 75 per cent LTV, plus stamp duty buster products with £2,500 cashback from 2.84 per cent with a £995 fee at 75 per cent LTV.
TSB has reduced rates and extended all its end dates, while Skipton Building Society has lowered rates on two- and five-year products by up to 0.17 per cent. It has a 90 per cent LTV two-year fix at 2.88 per cent without fees, among others.
In the buy-to-let world, yet another lender has followed the recent changes, with Newcastle Building Society upping its rental coverage ratio from 125 per cent at 5 per cent to 145 per cent at 5.5 per cent, which is a big jump. It has also reduced the maximum number of investment properties from five to three.
Let me be straight about where I stand on this: while I question where the 145 per cent figure comes from, I do not blame lenders at all for upping their main calculations on buy-to-let loans in a personal name. In fact, it is eminently sensible. Once the new tax changes have bedded in, landlords will be making less profit and, for some, this could be the difference between making or losing money. Lenders need to address this with a rise in stress tests accordingly.
That said, this should not apply to limited company loans or where there are five-year fixed or longer-term products.
Meanwhile, Fleet Mortgages now accepts individuals who move properties into a limited company and will classify this as a purchase.
Finally, I recently attended the launch of Brightstar’s funky new specialist sourcing system, Easysource. Talking of technology helping brokers, this looks like a market changer delivered with a passion to do what is right for the consumer.
Andrew Montlake is director at Coreco