What is happening in the mortgage market?

Lenders have acted strongly in the wake of the FSA’s recommendations for the mortgage market, particularly as regards interest only mortgages, where changes in policy have been severe, with one lender banning it completely.

As with criteria changes post credit crunch, it does feel that the ‘emergency brakes’ have been applied, and it remains to be seen whether a slight easing will take place.  There is no doubt however that it has stifled lending somewhat, something we do not want to see in the current climate.

Jonathan Clark

Mortgage Partner

New Buy mortgages now available

Lenders are responding to the Government’s ‘New Buy’ scheme. An attractive rate is available for up to 95% of purchase price at 4.99% fixed for 2 years.  An application fee of £499 is payable up front.

Jonathan Clark

Mortgage Partner

Protection – Limited to the Mortgage?

It worries me every time I see a mortgage accompanied by life cover only, and then usually only for the mortgage amount.  Consider a situation where a young family, buying perhaps their first or even second house, covers the mortgage for life only.  They probably have other debts, perhaps a car loan, or most common these days, a “family loan” to assist with at the very least the deposit for the property, and probably a lot more besides.

The main breadwinner tragically dies.  The mortgage is paid off – good news you think – but how will the family get by?  No doubt there will be some State benefits available, but this won’t be very much, but what more could they have done??  Two solutions spring to mind; an amount of life cover greater than the mortgage, or perhaps “Family Income Benefit” (FIB).  FIB is life cover payable annually for the remaining term of the policy and is significantly cheaper as a result, (for example, someone dying half way through the term would be paid half of the sum assured payable for the remaining term).

These days protection can be complex, rather than buying a base product from the internet, proper advice is needed to ensure the policy is designed specifically for the circumstances identified.

David Thomas

Joint Managing Partner

Mortgage Market Review Update

The Mortgage Market Review paper was finally published by the FSA on the 19^th December and gave us an idea of their plans to reform this important part of the UK Financial Services sector.  The FSA believe that mortgage lending in the run up to the credit crunch was poorly regulated, with loans being granted too readily to people who could neither afford to service the payments nor repay the amount borrowed before retirement.

They are particularly concerned about ‘fast track’ lending where income is not always verified, interest only lending where no repayment vehicle is in place and loans that exceed normal retirement dates.  They feel that many of these customers would have been repossessed by now if interest rates had not been so low for the last 3 years.  At the moment, the MMR is just at the proposal stage, but it will be interesting to see how the lenders react to it.

Jonathan Clark

Mortgage Partner

Improving retirement income

Many people are still missing out on a better income when they exchange their pension fund for an annuity at retirement. The ABI is introducing a compulsory code for its members to encourage people to shop around when they retire. Since 2009 the number of people buying an annuity from a different provider has increased from 36 per cent to 44 per cent.

The need to shop around is even more important if you could qualify from an enhanced annuity for medical or lifestyle reasons.

Steve Fleming

Partner - Chartered Financial Planner

Slight Optimism in Loan to Values (LTVs)

Higher loan to value mortgages were one of the first casualties of the credit crunch, with banks shying away from 90, 95 and 100% loans overnight.  Northern Rock’s much maligned 125% mortgage (it was actually a 95% mortgage with an additional unsecured loan element) was also a much publicised victim.  Most people would agree that needing a 5% deposit in order to purchase a property is not a bad thing, but hardly any 95% products exist at present.

Encouragingly though, there are signs that this may be gradually easing, with more competitive 85 and 90% deals becoming available as well as some more competitive 95% deals (although many require parental assistance in the form of a cash deposit to the lender) gradually coming to the market and aimed primarily at helping first time buyers.

Jonathan Clark

Mortgage Partner

Incentive to move your mortgage?

An increasing number of mortgage borrowers are being contacted by their mortgage provider who are providing financial incentives for them to repay their mortgage early. Many of the more ‘creative’ mortgage companies are keen to recoup what is now seen as a rather risky loan, particularly as the spectre of another credit crunch looms. Typically, mortgage companies are looking to waive any penalties applicable to early repayment of the loan within an agreed timescale and the really keen ones are even offering to reduce the loan amount by 5%, or in some cases 10%.

This is a great opportunity for many, but the only problem for some of these borrowers will be their ability to re-mortgage to another lender, particularly if the original mortgage was granted on a ‘non-status’ or ‘adverse credit’ basis. Conditions normally attach the timescale for repayment and may add a further level of complication to a potential remortgage.

Jonathan Clark

Mortgage Partner

Chadney Bulgin tees up for growth

Just click here to see a profile of Chadney Bulgin that has appeared in the trade publication New Model Adviser

Rise in State Pension Age delayed

The government has delayed rises to the state pension age (SPA) for women set to be worst hit by the measure.

Welfare secretary Iain Duncan Smith has revealed long-awaited relief measures for women who were facing two years longer than expected before they could claim the state pension.

The delay came as result of reforms that would see the SPA for women reach 65 by November 2018 and rise to 66 for both men and women by April 2020. The amendments, tabled today, will propose that the SPA for men and women reaches 66 by October 2020.

Steve Fleming

Partner - Chartered Financial Planner

The changing world of advice

Just when we thought the public had come to grips with independent versus tied advisers, the Financial Services Authority (FSA) has decided to move the goalposts once again.  Only this time, a much more complex definition has been created, known as “Restricted Advice”.  Restricted has many facets which include not covering all providers (the old tied and multi tied), but importantly now includes not offering all types/styles of product.  In the mortgage market, this could include a decision for example not to offer a particular type of mortgage.

Our view is that as the line becomes more blurred between independent and restricted, that a completely different, public aware term be adopted, that of the Chartered Firm.  Chartered reflects a marque of quality across all professions, and should give the public the confidence they seek in an adviser.

David Thomas

Joint Managing Partner