Take a mortgage without advice? It’s like buying a car without a warranty.

Posted on April 2, 2012 by Mark Dyason

The FSA is facing a tough choice, whether to give in to lenders who are moaning about increased costs or protect what is proposed regarding all mortgage sales. This was to say that all sales have to be advised. It would mean ending the ability to take a mortgage without advice for most people and this will protect them, especially as a significant number think they get advice but do not.

No more could you call the bank contact centre get given the list of products pick one and the bank bags a few year’s profit and the customer gets what could or could not have be a decent rates (my previous roles have been running these teams and setting the product pricing so I have some ‘form’ in this area)

Unsurprisingly the Building Societies Association and Council of Mortgage Lenders have come down on the side of ‘leave it alone,the clients are happy with this’ and it helps us lenders hold down costs, with the Council of Mortgage Lenders saying that it will add 1hr 42 minutes to the whole process if this was implemented.

Which made me think, if I was a customer would I want the fast track process that has no proven track record of delivering better deals for me, the customer or would I like someone to take a great deal more time, get to know my circumstances then offer me advice and document why?

It is a bit like asking someone to buy a car without a warranty, no doubt this is fine if you know your cars well and are prepared for the risk, but how many of us are in that position? And if you do know then you can make sure you are getting the right price, the upside for the no warranty position.

It is more likely the average customer wants some protection about the choice they have made for both cars and mortgage choices. In the case of mortgages that it suits their needs and was the best deal for them. Call centres offering no advice on either of these are the no warranty version. Talking to a mortgage broker for impartial advice is the best route.

The most dangerous thing about the current process is that most customers appear to think they are getting advice, even though the lender tells them they are not. You can imagine, you go to see ‘your’ bank, sit in the office with the young professional in the bank’s uniform and with his business card. He hands you some documents, one of which is a quote telling you your new payment and another is the document saying protected by FSA, own products and no advice, does it stand out a mile that this is not the service you wanted?

Customers go to their banks because they know them – this implies knowing what is good for them, at the moment this is not what is delivered. Imagine buying a car with a warranty but finding out it didn’t have one at all and the garage insisting they told you all along.

So watch this space to see if the FSA sticks to its guns and makes sure that people who think they are getting advice actually get it. No more mortgage without advice.

Posted in Edinburgh Mortgage Advice, Lenders, Mortgage Industry, Mortgage Know How | Leave a comment

Why the top tax rate of 45p is like half price Pinot Grigio in Tesco

Posted on March 22, 2012 by Mark Dyason

We have all been there, walking past the end of an aisle when the headline grabs us. Why Pinot Grigio down from £9.99 to £4.99, that is an absolute bargain, I must have some.

Of course when you get home the quality suggests a £5 (at best!) wine that they seem to have been asking customers to pay £10 for over the last few weeks.

Well, the analogy is that the tax rate cut yesterday is similar. A previous chancellor told all the Higher Rate Pinot Grigio customers that the price was going up, so they all stocked up while the rate was at 40%, well the price went up to 50% and no-one bought any.

Well the good news is that the price is being cut permanently down to just 45% (£4.99) and like Tesco does, George Osborne now hopes customers will be unable to resist the temptation to take part at similar levels to previous sales.

The only issue is that, like the Pinot Grigio, it still isn’t that appealing at that price and the customers have been burned by the high price, have looked at other places and just might not come back in the same numbers they once did. George like Tesco has a problem.

 

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The Budget – what we picked out of it.

Posted on March 21, 2012 by Mark Dyason

Here is our take on the recent announcements in the budget announced today:

Growth, Unemployment & Inflation
All are said to be better than elsewhere but low, however all are pretty shaky and open to getting worse if anything happens to shake the other assumptions that the ONS has given. Growth is up to 0.8% this year with no ‘technical recession’ could this be a boost to confidence. Unemployment will rise to 8.7% but then fall, meaning not as bad as some have expected and inflation will continue to fall. A warning though the that a further £10bn of cuts are needed in the next spending review on top of the £18bn done in the last spending review -that means more benefits are going in 2016/17.

Deficit
The deficit will fall faster than in the November statement, public sector debt will be falling as a percent of GDP by the end of the parliament, this is better news, but still hardly what anyone would claim as good.

Interest Rates & Property
Re-told about business source funding announced over weekend, also extra funding to finance construction. Also there is talk about extra support for transport infrastructure especially in Northern England and an airport for SE England.

Business
A tax break for Shetland’s oil program.

Stamp Duty
Well it turns out this is the goose that lays the golden egg, well it will be if we can get yet more Oligarchs to move here or hyperinflation strikes finally moving house prices up again and we end up with all First Time Buyers again paying this tax.

The new levels are as follows:
£2,000,000 – 7%, 15% if done through a corporate envelope

Also consultation on existing corporate envelopes about an annual charge. ‘Subsales’ route to be closed off. Also a basic statement  – you will pay

Council Tax
Nothing done, missed opportunity it could work as a progressive mansion tax, the nearer you are to owning a mansion the higher rate you pay. At the moment the cap is far too low.

Income Tax thresholds
Ok the 50% tax rate – it is temporary, so have the last 2 Chancellors, but not going while wage freeze for public sector. £16bn income was moved to save £1bn, self assessment are down £3.6bn. It has raised £1bn not £3bn.

The difference between a rate of 45p & 50p the loss is only £100M, so he has cut it from April next year.

Figures OBR backed.

Tax Allowance

This has been raised to £9205 (on the way to £10k aim) from next April 2013. £220 per year for people. People on minimum wage will be paying half the tax they once were.

With this you  might ask, what has this to do with mortgages? Well the significant move done by the coalition government over recent years means you can now earn a significant amount more each year before paying tax. A £9205 allowance removes nearly a further 600k people from tax entirely. This affects peoples affordability and lenders should look at this because at the moment they are lending very low multiples (I know it isn’t multiples anymore – but you need to use some form of comparison) to lower income people and these tax moves might help those people.

Tax and NI consultation is published next month

VAT loopholes to get closed with the basic exemptions e.g. Kids Clothes and Food remain.

Annual breakdown of government spending of people tax.

Company Tax
Small firms to get simpler tax returns

Corporation tax down 1% and will be only 22% at the end of this process (2 years)

The banks levy is again increased to counter this leaving them paying the same

Pensions & Benefits
The single level basic state pension is coming and estimated at £140pw
Current tax allowance for pensioners are frozen till allowances catch up with them.

Child benefit reduction for higher paid is being withdrawn, only when someone is more than £50k and gradual so all gone once £60k or more is earned by 1 person.

Duty etc
No change to alcohol
Tobacco inflation plus 5% = 37p on a pack of cigarettes
Fuel Duty – big claims on savings – no changes to current plans
Vehicle excise – no changes to current plans

Posted in Mortgage Industry, Press Comment | Leave a comment

Interest Only – more changes, time to call the tailor

Posted on March 20, 2012 by Mark Dyason

If you have an interest only mortgage you must be wondering what is next for you. If have one and are not then perhaps now is the time to start.

A repayment vehicle seemed like a quaint idea to some in the days before the credit crunch, but this has swiftly changed to such an extent that to some lenders the vehicle must now have enough funds in it, this means no further growth is being allowed for. I suspect most people dont have the cash just yet.

The changes mean that those with Interest Only right now need to think ahead. The Co-op has started to write to customers with 10 years or less on their remaining terms to say, do you need help? – This is a warning sign of problems they see up the road. Don’t wait, get something in place now.

But What? Well let’s look at the various options, first what do you have already, what will it give you and can you spare it to pay off the mortgage?

Secondly how about repayment, or even overpayment to starting eroding the balance and if it at the term of your mortgage there will still be a balance payable, what about down-sizing or relocating to a cheaper area?

Don’t like those ideas? Well we better get something sorted otherwise that could be your choice.

Other overpayment ideas are start now and increase your overpayment every year till the term by a few per cent, it might not clear the loan, but the more equity equals more choice.

Are you willing to work longer? Will your employer let you?

None of these questions are very pleasant, however Interest Only may have let you live in a house with a lifestyle that would have been out of reach on full repayment, there is no criticism intended, in fact what I want to provoke is thought early about the financial changes needed to maintain this.

The reason for this is lenders are now restricting the ability of folk in this situation to get new loans, even if your payments are up to date, your credit file  the very definition of gold standard, that is no longer enough. You have to fit in to a new world that does not like Interest Only lending.

Santander & Nationwide in the last few weeks and most recently the Coventry have now restricted Interest Only to 50% loan to value, so got a house worth £400k and a mortgage of £240k? Well, you can do the maths. From now on only repayment from these lenders and could you afford the jump on your remaining term? And other lenders will follow, perhaps yours?

You will have noticed in this article that most of it is about questions not answers, well that is because everyone needs their own answer tailoring and if you fancy getting measured up for a solution that suits then get in touch.

PS notice the webchat on the right hand side, open that up and I am happy to answer any questions you may have about interest only remortgages or any other mortgage subject.

Posted in Interest Only, Interest Rates, Lenders | Leave a comment

What goes down must come up – Standard Variable Rates head north

Posted on March 7, 2012 by Mark Dyason

Halifax, RBS One Account customers and now Bank of Ireland customers have all been told in recent days that their Standard Variable Rates are going up. Why?

It is the cost of funding we are told. Well, given that the interbank lending rate is a little higher but stable at just over 1% and the European Central Bank just emptied nearly a trillion Euros into the bank pockets at 0.5% there must be more to than that.

We are also in ISA season and what that means is great offers to hoover up all the spare cash this tax year and make an early attempt to catch some of next years. That means higher rates for proof just watch the TV ads. Last same week Santander raised new loan rates on mortgages and at the same time it topped the Isa best buy tables. You decide if it was happenstance.

So savers are at last getting a better deal, a relief because now several million pensioners will again be able to afford jam for their scones. But seriously what this means is a reality check for interest rates, rates have been artificially low for 3 years and now the old fashioned 2-3-4 bank manager’s route for business is back in full flow (borrow from savers at 2 – lend to homeowners at 3 – be on the golf course at 4).

What to do? Well review of course, but this is where I hope all that EU money comes in because at the back end of last year all lenders said for them borrowing would be harder this year (which in turn means lending) and a sure sign of that is the ISA/Mortgage tie up being seen, but the extra EU money could loosen the purse strings.

I sincerely hope so because after a very busy Jan and decent Feb we are seeing lenders again not want to be top of the sourcing tree, pulling products pronto and generally wanting to look like they are at the mortgage prom, but not actually dancing.

So all in all rates have gone up, which we knew would happen but has not been driven by the base rate, further indication that the base rate is now just one of several levers rather than the stand out driver of borrowing costs.

If you are tied to a tracker or with a lender that has tied itself to a tracker standard rate, then you have choosen/fallen into it very well but need to watch your lender closely in case they can cancel this – see Skipton BS in early 2010. Otherwise check NOW what rate you are on and what you can get. Also check what your Lenders Standard Variable Rates will be, if you are with Yorkshire, Leeds or Chelsea Building Societies you could be in for a shock

And that applies to everyone, even those on a tie in – forewarned is forearmed.

Posted in Base Rate, Edinburgh Mortgage Advice, Housing Market, Interest Rates, Lenders, Mortgage Industry, Standard Variable Rates | Leave a comment

The search Google is not interested in anymore. Mortgages.

Posted on February 8, 2012 by Mark Dyason

The search giant exits Mortgage comparison. When it launched and its capture of beatthatquote for £37M had commentators reaching for hyperbole and back in 2007 this seemed yet another nail in the coffin of the local mortgage broker looking sit down and chat over customer’s needs.

Yet here we sit on 2012 and the information behemoth has just announced the exit from this venture, perhaps this is yet again proof person to person advice and service is not scalable – see here for comment from an IFA perspective on the same subject.

Search tables are great. I use them to have a look at prices, and have them on my website to help people get a mind’s eye of costs – window shopping if you like. There is also no doubt my recommendations are much stronger because of the use of these, however they are the start not the end of the recommendation piece. I have next to delve into criteria, match overall fees payable against initial rate, penalties, overpayment flexibility, revert to rates and portability to name just half a dozen common needs that customers ask about – then to balance adn prioritise these and make a recommendation that fits with the customers overall needs. Try putting that in a table.

Google also makes a fair bit of money from all the financial businesses that are online and if Google started getting in the way how would these people and their ad budgets feel about that? I reckon we should applaud Google for giving it a go, after all if there is anything Financial Services needs right now it is innovation

So over to us, what can we try next to look at communicating better and looking to explain what we do in a better, clearer way? Answers on the back of a table….

Posted in Lenders, Mortgage Industry, Press Comment | Leave a comment

A really busy January – is this the storm before the calm?

Posted on February 7, 2012 by Mark Dyason

Like a good few brokers I had a strong start to the year. January was my 2nd best month ever. All this positive start heartily encouraged both me and my colleagues, this is all the sweeter when you take account of the naysayers predicting a market that was at the very best going to be half of the lower end of next to nothing.

But recent times have taught me to be cautious, so I thought it is working out what all this means. I know for instance that there are several lenders led by the big boys with significant fixed rates volumes finishing in the first few months of this year; this can only buoy volume, but only in the shorter term so here is the hurry up to myself – make the most of it.

On top of that we have the first rates finishing where the revert to rates are the post credit crunch SVRs – no more reverting to BBR+0.5%, that means these customers are more likely to want a new deal rather than stick with a fabulous variable rate that means 2 years ago admittedly meagre volumes will add to this years .

The base rate seems stuck for a decent while longer, however these rates will move and cause a stir when they do and that market is an unknown, but should be a decent fillip when it comes.

All in all it seems very much that you know the market, it is like  last year and you seemed to survive that, so get on with it and the above will give you a little more to chew on.

So what of the storm clouds predicted? Well the gross lending figure is as stuck as the base rate, so if you are going to get more customers they need to come from somewhere or put more succinctly someone else. These can be from either direct lenders (who in my experience don’t have much experience behind the desk – try mystery shopping them honestly after some calls I don’t know if I should laugh or cry) or other broker’s be they ex-broker or not looking after their existing customers, any growth achieved is not driven by the market it is driven by me/you.

There is talk in the market about an appetite or lack of it to lend and this will hold down volume, but if this is true why are more and more lenders looking for niches? 80% BtL & 90%+ (even 100%) lending are all areas that have hit the trade press news in recent times. Lenders chase niches looking for profitable lending which means the other areas are too competitive – not the sign of a market with a lack of lending even if some are not really pulling their weight.

All that said nothing is going to pull up stumps and create business that simply runs through the door and throws itself at you, however it feels like it is easier to find right now than previous years and I don’t see why it should change……pardon, oh Greece default you say…..hmm not that could cause a storm but I don’t have time to talk about that, far too many apps to write. TTFN.

Posted in Edinburgh Mortgage Advice, Housing Market, Lenders, Mortgage Industry, Press Comment | Leave a comment

Aldermore’s new Buy to Let range vs TMW’s products at 80% LTV, are they any good?

Posted on January 10, 2012 by Mark Dyason

Buy to Let, high LTV lending anyone?

Aldermore has set the cat among the sole 80% lending pigeon by increasing its max LTV, so let’s look at the rates to see what changes this could mean.

The only other lender at this level is the Mortgage Works and below are the 2 ranges to compare at 80% LTV. (Both lenders are only offering fixed rates at this point)

TMW ALDERMORE
Rate Term Fee Rate Term Fee
6.19% 2 years 2.50% 5.88% 2 years £1,999
6.39% 3 years 2.50% 5.88% 3 years 2.50%
6.28% 3 years £999
6.49% 5 years 3.50% 6.48% 5 years £1,999

 

Ok, so better rates from Aldermore but what of the fees?

Well for the 3 year fix £999 fee to be less than 2.5% then the loan needs to be more than £39960 and if it was more than £40k then they have the same fee with a lower rate.

For the £1999 on the 2 year it needs to be more than £79960 and for the 5 year rate the loan needs to be larger than £57114.

So, on all but the smaller loans it makes sense to look more closely at Aldermore’s offering and for a 3 year Buy to Let fix TMW’s offering is not as competitive . Well done Aldermore, hope it brings you all the business you want it to!

But what will TMW do?

They have 3 options,

*  Let the business head to Aldermore – not quite as daft as it sounds, high LTV lending is riskier, depends on the Risk appetite and capital held. Also it means they will still lend based on criteria, such as no minimum income requirement or a maximum age of 90 at the term, both of which Aldermore will not do

*  Cut the rates and look to head off the Aldermore challenge at the pass, Aldermore’s funding is likely to cost more than TMW’s as TMW can access the savers from Nationwide’s money, but if you cut at 80% you might have to cut over the range, do they want this, in a word –No.

*  Introduce a new Buy to Let products that are more attractive to higher loan amounts.

Conclusion

Not masses of business at this level anyway, Aldermore will take some and it is likely to be more profitable for them, overall it won’t hurt the monolith that is TMW’s lending volume.

But it might encourage others to have a look at the fringes of the Buy to Let market and elsewhere, looking for higher profits and that is where we start to see criteria relaxed, less risk averse lending and an opening up of the market.

This isn’t me declaring all is well, but without first moves like this we can’t get the market moving back up towards £200bn where the market should naturally sit.

 

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Our Comment on Mortgage Rate Changes

Posted on January 6, 2012 by Mark Dyason

The  Mortgage Rate Update

Thursday 12th Jan BoE Base Rate Decision

The Bank of England said that Mortgage availability will get harder in the first quarter and nearly every broker on Twitter was telling the world how busy they are (including some not a million miles from here….ahem), so that will be interesting to see where it takes us. America’s economy is getting better faster than expected and where America leads we follow, so let’s hope that will knock on over here, expecially if there is any chance of fixing the Euro.

Here is what I have picked from this week’s Mortgage Rate changes to have a look at, it isn’t all of them but ones I wanted to highlight. There were a few changes with some Lenders positioning themselves for 2012 early doors.

Aldermore – Reduced the Buy to Let range’s rates including a range at 80% LTV to give more completion for The Mortgage Works. These offer 2,3 & 5 year fixes with steps at 65%,75% & 80% LTV and fees from £999 to 2.5% – A good range that extends Aldermore’s reach in to the market and gives another choice at the top of the LTV range for customers in England and Wales.

Mortgage Trust – A smaller range (Buy to Let), high (3%) arrangement fees without the rates to back that up, not likely to catch anything but criteria driven business. MT also reset their LIBOR rate at 1.1% relevant as they use this variable more other lenders.

Coventry Building Society – A really strong range of Residential rates from the Coventry, they are showing an appetite to lend and have a wide range with everything from a 5 year fix from 3.58% and low fee deals. Coventry also offer a free valuation (up to £670) on purchase deals and their buy to lets have fixed fees and a remortgage package available which can outweigh lower rate/higher fee deals elsewhere, the whole range will be in the mix.

Paragon Mortgages – (Sister company to Mortgage Trust and also Buy to Let) in similar fashion changed its range and is not going to win any low rate prizes with this range. A portfolio customer can have any number up to £5M which could be useful if really stuck.

If you want to have a look at more click on the Mortgage tab for best buys or to start your own search.

Posted in Base Rate, Buy to Let, Lenders, Mortgage Industry | Leave a comment

The Stupid Deals that Saved Our Bacon

Posted on January 3, 2012 by Mark Dyason

How stupid deals saved us from oblivion

The 2 worst finance deals in decades* that saved our bacon

Deal 1

Bank of America steps into save Merrill Lynch for just $45Bn

OK, firstly hindsight is always 20/20 and BoA’s Ken Lewis had no idea just how bad the punt he was going to take on Merrill Lynch. He had got hold of the best renowned sales force in the whole world at an absolute bargain price. It was happened next that must have made him regret his deal making prowess.

Warren Buffett, a man who has had his own fingers burned by credit crunch events has termed Lewis as the “Ironic Hero” as he talked over the fact that any buyer should have sat on his hands as Lewis dipped into his own in to shareholders funds. So gold medal to Lewis because the next day Lehman Brothers went belly up, and that made $45Bn for a firm in the very same market, with the similar problems and that was heading very much the same way seem $45Bn too much. So imagine if you could what would have happened if both Merrill and Lehman had gone west? What size of bailout is now needed?  At the time there was much bandiment of terms such as a ’30s depression, perhaps it was only a company or 2 closer than we thought.

 

Deal 2

Lloyds steps in, at the governments prompting to buy HBOS

OK, firstly hindsight is…..ok with this one hindsight wasn’t needed. The fact that the government was willing to set aside any competition ‘details’ means that we all know how much it was needed, but when was the last time a politician kept any of the really large promises so why did Lloyds believe Gordon Brown? But let’s come back to that after we take a look at the numbers behind the deal.

First, I want to declare an interest, I was an HBOS shareholder and had watched the equity drain away as the market kept telling me that the way HBOS was set up didn’t match the new world situation. For me the Lloyds deal was painful, but not half as painful as what Northern Rock or Bradford and Bingley’s shareholders have been through. And more to the point it wasn’t as painful as the experience for the Lloyds shareholders.

Here was a well capitalised, conservatively run bank that should have been in absolutely pole position once the crunch finished. To give you an example, look for a buyer of Northern Rock, a bank whose mortgage book had to be run down and needed capital, but nothing like the losses and capital need that was HBOS and whose mortgage book whilst much derided has problems with 10%, or put another way 90% is currently good, how much would that cost, not £23bn in the first 6 months I reckon? No, a couple of years later Virgin pays just over £1bn ofr the good bit of the Northen Rock bank.

Also the EU as part of its pound of flesh for letting the Government pile cash in is making Lloyds sell brnaches (Project Verde) and Lloyds has a preferred bidder of Co-op, which is having a very hard time showing the FSA it is is in a place to do that. At this point a float of the branches seems more likely right now.

But Lloyds bought HBOS. And it only cost £12Bn and then lost a further £11Bn in the first 6 months so to flush quite that much shareholder value down the toilet so quickly is amazing, it took RBS and Fred Goodwin to do it better and keep Eric Daniels from general villification.

But what if HBOS had hit the wall. The largest mortgage provider and a bank that was pushing Barclay’s for 3rd place in the FTSE banking valuations before this began. Look at it this way, when you look down a street 1 in 4 of the people who bought their house with a mortgage had it with HBOS and that is every street in every town.

So let’s get back to the politics of the deal, if allowed to ‘mature’ over 10 years then Lloyds can look to deliver great savings and capital returns, however we are now 3 years and I dont see it happening yet.  All pain no gain, so second place but only just to Lloyds.

To sum up.

These deals stink and those that made them have paid a price reputationally, but my point is without them our banking industry would be struggling with far more than it is just beginning to set behind it, and as we know when the banking industry sneezes our governments rush in with buckets of cash to wipe its nose.

* – the Time Warner/AOL deal is up there, but a quick comment on that, it was a bum deal because of the hubbris  at the height of a bubble, whereas these deals we despite a bubble burst, even 20/20 isnt good enough some times!

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