How has the mortgage market changed in the last 3 months?

In April 2014 the FCA implemented a new set of rules within the mortgage market place known as the Mortgage Market Review (MMR).  One of the principle aims of this is for banks to have much stricter control only lending money to those that can afford it.  The issue? Every banks interpretation of this is different and no two mortgage clients are identical.

The industry has seen a significant fall in mortgage approvals since April. Is this due to less people being eligible for a mortgage or is it down to the length of time to process a mortgage to approval stage?

From a brokerage perspective it is not due to less people being eligible. We have noticed that it has taken much longer to progress mortgage applications through to an offer stage in comparison to pre MMR times. One key contributor to this is the new documentation requirements.

Those who are self-employed looking to purchase or remortgage a property, would be advised to request your HMRC confirmation of earnings (SA302’s) as soon as possible. They can take up to two weeks to obtain. ‘Self employed’ also includes any shareholder of a limited company with more than a 20% share in the business.  If you don’t have these this will delay the process for yourself and any vendor of a property you are buying.

Due to the housing market moving upwardly the number of applications has naturally increased. As the volume of applications has risen, valuations are taking longer to complete. 

What do you need to know?

It is important for those looking to purchase a house that you take into account the time it will take to receive an offer. We are seeing a lot of pressure, especially by estate agents, to get valuations done and the mortgage approved by the lender in order to fully secure a property with the vendor.

The most complicated aspect of the introduction of MMR is affordability. Most lenders had moved away from an income multiples systems already, however MMR has meant the introduction of yet more complex models assessing affordability.

In addition to this, no two lenders are using the same method of calculating affordability, so we are seeing a real variance in the amount people are able to borrow from lender to lender.

We recommend consulting someone who has experience and knowledge of the different requirements for each bank.  It is too complex for individuals to calculate what they can afford, especially through comparison websites as they are not complex enough themselves to calculate if you can genuinely borrow money off their best buy listings.

By contacting a mortgage consultant to discuss your current circumstances, you will get an idea of what you could borrow and understand the budget for a new home. 

What documents will I need when applying for a mortgage?

Due to the recent introduction of the new rules in the mortgage market review, many people are unclear as to what documents they will require throughout the mortgage process. In order to prepare you we have created a list below for all residential and buy-to-let mortgage applications.

In addition to the documents below it may be a good idea to get a copy of your credit report to ensure that there are no issues you are unaware of before applying for a mortgage. Some useful websites are:

·         http://www.checkmyfile.com/

·         https://www.creditexpert.co.uk/

·         http://www.equifax.co.uk/

Here is the list of required documents:

1.      Proof of identity (passport/driving licence)

2.      Proof of address (utility bill/mortgage statement)

3.      Evidence of income (payslips/accounts and SA302’s)

4.      P60 (latest if available) 

5.      Bank Statements for the last 3 months

6.      Proof of any additional income

7.      Proof of deposit 

If I remortgage can I borrow the same money and pay less than I am paying now?

For those of you settled into a home, don’t feel like you’re missing out on a great opportunity. With an interest rate hike seemingly inevitable, now is a great time to secure a fixed rate on your mortgage.  Interest rates for remortgaging are very low at the minute and with house prices improving there is a greater opportunity for all to take advantage of these.

Due to the rise in house prices, many people are also looking to re-mortgage in order to release the equity to use as a deposit for an investment property or perhaps a deposit for their children to buy their first home.

The number of people looking to use property as an investment is still growing. Although housing prices have risen over the last 18 months, property still remains an attractive opportunity for people to invest in whether that be to increase current income or provide a supplemental income for retirement years.  Many lenders are recognising this and are introducing some extremely competitive rates and even the opportunity for 80% LTV mortgages.

However, if you are inexperienced it is important to seek out the correct financial advice as there are many different strategies which can be chosen depending on your requirements. Make sure you have discussed all possible avenues with an experienced advisor who has a good track record in dealing with BTL investors.

If I want to buy a new home what can the industry do for me now?

What a great time to move house. The winter is over, the weather is picking up and so is the property market. The government is assisting first time buyers in getting onto the property ladder which in turn is also helping people sell and move upwards.  The Bank of England are keeping interest rates low which is helping a lot of people get back onto a better financial footing.

The summer holidays are fast approaching and so why not get settled into your dream house in time for the summer?  If you delay decisions until the summer moving costs can increase.  Removal companies tend to be busier during the school holiday period and use this as an opportunity to hike their rates.

There is an increased likelihood, given the recent statements by the governor of the Bank of England, now the economy is starting to grow again that an increase in the base rate will happen within the near future.  The good news is that fixed rate pricing at the minute is incredibly low.

If you need help finding out what you can afford or indeed if you have alternative funding options available to you via the government speak to a good independent mortgage advisor. They can save you a lot of time and hassle of trawling the high street to find a bank or building society that can only give you advice on what they can lend you and the products they have on offer!

Court case ruling helps bury PPI mis-selling claims

Samantha Cordon, 17 October, 2012

On 4 October 2012, Recorder Yip QC ruled over the Manchester County Court case in what was one of the first judgments in PPI litigation since the Harrison v Black Horse appeal was withdrawn from the Supreme Court earlier this year. In Plevin v Paragon Personal Finance Limited & LL Processing (UK) Limited (in Liquidation), the Court was faced with a claim which had already been subject to four amendments with another proposed at the start of the trial. In 2006, Mrs Plevin took out a £34,000 secured loan to be paid back over ten years, to fund some home improvements and consolidate her existing debt. Via the broker LL Processing (UK) Limited, she took the loan, plus a five year PPI policy for £5,780, out with Paragon Personal Finance. After moving house in 2007, Mrs Plevin took out a further, smaller loan with Paragon without PPI.Two years later Mrs Plevin took legal action against both the broker and the lender over a number of grounds including the claim that the broker had said or implied that the PPI was compulsory when in fact it wasn’t and that the broker and insurer would receive commission which also created an ‘unwholesome incentive’ for the broker to sell PPI.Fiona Hayles, senior associate at SGH Martineau, who represented Paragon, said: “The problem faced by Mrs Plevin in maintaining these arguments was that following the withdrawal of the appeal to the Supreme Court in Harrison v Black Horse, the robust decision of the Court of Appeal remains good and binding law. “Recorder Yip QC noted that whilst Mrs Plevin had suffered ‘buyer’s remorse’ in relation to her decision to take out PPI following the Harrison decision, a seller is not obliged to warn a buyer of whether his product is expensive or why he charges the prices he does.

“The Court found that there could be no unfair relationship between Mrs Plevin and Paragon and also decided against Mrs Plevin’s claim under section .18 of the Consumer Credit Act that the PPI agreement was incorrectly executed and therefore unenforceable.”
Mrs Plevin’s legal representatives, Miller Gardner, ran up costs amounting to £320,000 by the time of trial, against a maximum claim value of some £5,000, yet failed to get to the bottom of the factual case. Paragon had made a without prejudice offer to Mrs Plevin back in 2010 on a commercial basis simply to see an end of the litigation, which was rejected by Miller Gardner.  Hayles added: “Recorder Yip QC held that as a result, and given her ‘real concerns’ over Miller Gardner’s conduct, it would be appropriate to order that Mrs Plevin pay Paragon’s costs on the indemnity basis in relation to the entirety of the action. “This is the strongest order that a Court can make and is illustrative of the displeasure with which Miller Gardner’s conduct was regarded. It was clear from the amount in question that the litigation had been run only to benefit Mrs Plevin’s solicitors and not to achieve the best result for her. “Given the findings by the Court of Appeal in Harrison and Recorder Yip QC in Plevin, claimant solicitors now have little chance of successfully continuing with claims in relation to PPI mis-selling. “Further, the Courts are now very much alive to the fact that such claims cannot be regarded as being in borrowers’ best interests. The industry that has grown up around PPI should beware.”

As a brokerage that has never sold single premium PPI you can rest assured their will be no claims made against us.  We deliberately decided not sell these policies as we saw them as morally wrong due to the excessive interest charges incurred and the fact that the ability to claim on them was, in most cases, diffcicult at best!

Mortgages Leeds: Govt plans for pension pots to fund mortgage depos...

Mortgages Leeds: Govt plans for pension pots to fund mortgage depos...: Govt plans for pension pots to fund mortgage deposits 24 September 2012 8:16 am | By Samuel Dale Deputy prime minister Nick Clegg has u...

Govt plans for pension pots to fund mortgage deposits

24 September 2012 8:16 am | By Samuel Dale

Deputy prime minister Nick Clegg has unveiled plans to allow individuals to use sizable pension pots as a guarantee to help their children raise a deposit to buy their first home.
The plans are currently being investigated by the Department for Work and Pensions and the Treasury and would allow parents to use up to 25 per of their pension pots to guarantee first-time buyer mortgage deposits by setting aside part or all of their future tax-free cash lump sum entitlement.

The policy was initially considered for inclusion in the Government housing strategy in December 2011 but was dropped when it was published.
Yesterday, Clegg told the BBC’s Andrew Marr Show: “This is part and parcel of something which I think most people agree with, which is that as we fill in the black hole in the public finances we have also got to make sure that we do not put Humpty Dumpty back together again and make the same mistakes, that we rewire the British economy and make it fairer and give people more opportunities.”
Treasury chief secretary Danny Alexander told the BBC: “There are an awful lot of parents who don’t have enough cash to help their children get on the housing ladder. In many cases, they might well have built up a substantial pension pot - that’s their only asset - which they will be able, when they reach retirement age, to release a tax-free lump sum.”