Is the 85% LTV buy to let mortgage on valuation really back? OK I know everyone wants it but, wishing it will return wont bring it back.

There has been rumours abound of mythical hedge fund finance, hotmail addresses promising 100% buy to let finance and all sorts of deals promised but many of these are simply hot air.

And I should know – I follow these developments like a hawk because if these deals were available I know you would want to know straight away, and I would tell you.

Now I do feel strongly about giving you my view on this because I know many of you are considering doing these schemes because we are all desperate for more flexible finance and you’ve been told that this is a solution.

So lets look at whats on offer and I’ll tell you my thoughts: Continued…

Buy To Let Mortgages – do we do ‘em?

Before I start on this week’s news I just wanted to confirm something.

I received an email last week from someone asking if we advise on buy to let mortgages. Now, I know this newsletter is jam-packed with salient information and crucial top-tips, but obviously one of the core messages has somehow fallen on stoney ground, as they say in the good book. Continued…

Interest Rates
I’m not even sure why I bother telling you that base rate was held last week at 0.5% again, but seems this record period of ultra-low interest rates is set to continue. At the moment there doesn’t look like there any movement soon, however as soon as the mood changes you will be the first to know. Continued…

It’s not always apparent what impact the European Commission has on our banking sector – but it certainly is this week.

The commission has demanded a break up of both the Royal Bank of Scotland and the Lloyds Group – RBS is to sell off 318 branches, while Lloyds will dispose of more than 600 branches over the next four years.

Northern Rock was also told by the commission last week that it must not appear in the top three of the mortgage best buy tables until the end of 2011. These requirements don’t come into force until next year, however since the ‘relaunch’ of Northern Rock mortgages, they really have been very competitive in the market (see best buys below) so it really will be a case of snapping up these deals whilst they are still available.
One way round it, of course, is that most best buy mortgage tables don’t include broker exclusive deals. Mind you, as discerning and intelligent readers that you already knew that and more importantly you knew that there’s no substitute for tailored, specialist advice from your resident broker!

Darling (no, not you, I’m talking about our Chancellor) has said that the break up could result in three new high street banks over the next three to four years. For example, Lloyds is understood to be looking to sell off TSB Scotland, Cheltenham & Gloucester and Intelligent Finance. Importantly, the banks assets will only be sold to new entrants in the mortgage market to help boost competition.

Darling tells us, half a dozen big providers was not acceptable. For once, we agree.

The Bank of England released figures today showing an 18 month high in mortgage approvals this further underpins the view that the housing market continues to strengthen.

Still, to mix my metaphors, with every silver lining theres a dose of reality. The latest data from the Bank of England has revealed that major lenders are expecting to increase mortgage fees in the coming months, to compensate for a reduction in spreads. Or, to take another view, because they can.

What does this mean? Well, it will probably effect the residential mortgage market the most, as lenders will be looking to reduce their rates as the market gets more competitive but may well be countering these rates with higher fees.
At the moment though, we are seeing (almost on a weekly basis) a reduction in residential mortgage rates, and if you have a low loan to value with provable income, then there are some very competitive rates about. For lifetime trackers rates, they start from 2.79% (free legals and valuation, £995 fee) to 5 year fixed rates from 4.99%. Worth considering for the Tip of the Week 1 below.

OK, I know the mortgage market isn’t always the most interesting subject, but this week in mortgage terms it really did ‘kick off’.

The FSA published their Mortgage Market Review which contained their proposals for the future of the mortgage market, and reflected their intention of a more obtrusive approach. So, here I offer a quick rundown of the points and my own take on their impact:

Banning ’self-cert’ mortgages.

Up to 1 million of mortgages were arranged on a self cert basis. As I have mentioned before, if self cert is banned, then these people will be at risk of never being able to get a mortgage again, even when the market improves. So, unable to move OR remortgage, they are left to sell up or stick with their current lender.
Now, as most mortgage interest rates are low this may not intially be a problem, but as rates rise it will become more of an issue – some may be able to switch to a fixed rate (if the lender is gracious to offer a product transfer) but if you are with a lender who doesnt offer product transfers, or a lender who has left the mortgage market, then you will be at the mercy of those interest rate rises. In fact, the irony is that for someone stuck in this trap, it could result in mortgage arrears and ultimately being repossessed – and this will be a direct consequence of new regulation to protect the consumer!

Lenders will be required to hold more capital and liquidity.

This has certainly happened already and the effect is simple: fewer and more expensive funds available within the mortgage market.

Regulation to cover buy-to-let mortgages (and all lending secured on a home).

I haven’t quite got my head round the impact this may have. From a brokers point of view (which I have) most of our buy to let advice is treated as regulated anyway (best business practice etc), however it all depends on what impact it has on the lenders. For example, if stricter affordability practices are adopted, it could lead to even more restrictions on the number of buy to let mortgages anyone person can have.

Imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay.

I can only imagine this is going to mean more comprehensive underwriting, which no doubt will lead to longer application time lines and possibly more rejections.

So lets get cliched here – where there’s a change there’s opportunity (and other such motivational ramblings), so if you have solid provable income, keep your credit clean and have access to cash deposits then now’s the time to take advantage of a market in flux.

With The Mortgage Works pulling out of the self certification market last week, it seems to indicate the end of self cert mortgages as we know them.

The remaining lenders, namely Platform and Beacon, will almost certainly follow suit, and then there will be none.

Rumours have been rife that as part of the FSA review they will potentially ban self-cert mortgages, and so it looks like lenders are pre-empting this decision by simply withdrawing these types of products. Not good to be seen to be last man standing, so to speak. Fast-track mortgages (which were never really meant to be self-cert but fast-track as in fast track underwriting) are also being withdrawn by various lenders across the board.
The Council of Mortgage Lenders are saying self-cert shouldnt be banned but that we should all revisit the definition of self-cert and take practical steps to make sure affordability considerations have been taken. Hmm.

What does this all mean? Well, going back to my newsletter in April (What, you cross reference your own newsletters? Sad, isnt it) I spoke about the self-cert trap.

It seems that self-cert trap is well and truly here. How?

Anyone who took out a self-cert mortgage within the last few years and now wants to move will have great trouble, unless they can now prove their income. Apart from the option of porting their existing self-cert mortgage, they could be trapped in their property for quite a while that is until the FSA and the lenders decide that self cert mortgage are valid again. It is not only those who are trapped, but there are thousands of new applicants that, for whatever reason, will find it difficult to prove their income who now will be unable to get a mortgage.

Well, it had to happen at some point this week we’ve seen a number of lenders reducing their rates, which is very good news for those looking to buy or remortgage.

Lenders like The Mortgage Works, Platform, Godiva and Northern Rock have all reduced their buy to let mortgage products in the last week, and some by up to 0.5%.

The residential mortgage market is experiencing an even greater amount of competition which is fantastic news for you, and seems to reflect a greater appetite for lending and increased competition in the market. This should hopefully have a knock-on effect with the other lenders most notably BM Solutions who seem to have cornered the 75% LTV market for months now.

So, the question is have we reached the end of the mortgage ice age? And are we at the beginning of the long thaw (sorry that is an hackneyed analogy but I couldnt think of anything else!)