The world of mortgages, post-lockdown, is a rather frenetic one. No sooner has a lender launched a deal or a tempting rate, than its pulled from the shelves. In our latest article Greg Cunnington, our Director of Lender Relationships and New Homes, explains why it’s happening and how, with some help, we can help you to steer your way through the chaos.
As mortgage lenders have looked to adapt to challenges during the coronavirus period, we are seeing multiple daily changes to rates and criteria.
This can mean you may be eligible for a certain loan amount with a lender one day. Then, following a criteria change the next, they would no longer offer this to you – just when you had found your dream property!
Data by mortgage criteria search system Knowledge Bank shows that in the month of June there were 746 changes to residential lending criteria, compared with 390 in the same month last year.
The number of criteria changes for buy-to-let mortgages also increased, from 146 in June last year to 393 in June 2020.
What is changing?
Lenders are adapting to a continuously changing landscape in the current economic climate and as that shifts, lenders need to adjust and refine their criteria.
A prime example of those adjustments have been in relation to how lenders assess affordability for different types of self-employed clients, some of whom have had to temporarily cease their business, whereas others have seen business booming.
Due to this, where most lenders were able to conduct some automatic assessments, many now manually assess each self-employed applicant to ensure the income can be verified as ongoing.
With our access to decision makers at the lenders, we can often speak to a lender in advance of an application to sense check your scenario will be OK, so it is vital for self-employed clients to be using a mortgage intermediary right now.
For employed clients, there are also frequent changes. We see shifts as to which lenders will still use additional income (such as commission, bonus or overtime) to support a mortgage application.
Some lenders have reduced the amount of this income they will now accept. For example, one major lender used to use 100% of bonus income but will now only use 25%.
However, on a positive note, some lenders who temporarily stopped taking this income into account during the lock down period will now use this once more, as long as it is paid monthly (as they can see a recent track record). As such, if you receive additional monthly income we have lenders who will take this into account again for your mortgage borrowing calculation.
Lenders are also adapting their criteria in relation to clients on furlough, or set to return from furlough, and how this income is taken into account. We covered this topic in detail in our recent article.
We have seen many shifts among lenders begin to again take applications from clients with a 10% deposit (i.e. 90% loan-to-value or LTV) but then withdraw these a few days later due to demand.
It is important to highlight that some criteria changes are very positive. The more specialist and buy-to-let lenders are actively enhancing their criteria weekly.
Last week saw Foundation Home Loans return to 80% LTV lending for landlords on buy-to-let mortgages for example and Mansfield Building Society has recently started accepting applications from clients looking to purchase a holiday let property.
We expect positive criteria moves to continue as lenders are able to lend more as their processing capability continues to improve.
We are seeing mortgage lenders change rates regularly, sometimes more than once a week from one lender.
These changes are often slight rate increases, made by lenders in order to acutely control the number of applications when they become too busy.
The increase in post-lockdown activity along with stamp duty changes have caused the property market to become very busy again. What’s more some lenders are still not back to pre-lockdown staffing and processing levels.
These factors combined have meant lenders can become too busy very quickly and rate adjustments are a typical method of controlling the large numbers of applications.
As such, the lender with the best rate for a particular client’s circumstances changes regularly, so it is important that you are speaking to an intermediary with access to as many lenders on the market as possible to ensure you will get the best mortgage product for your circumstances.You can check out the best deals available right now via our website.
How can an intermediary help?
An intermediary such as ourselves will be actively monitoring these criteria and rate changes. So, we can advise you if any criteria or rate changes have taken place that may affect you as soon as they occur.
Thanks to our excellent lender relationships we will often be made aware of these changes with advance notice.
This means that as long as your documentation is in order we can then get your application submitted before any change that would negatively impact your options. If you were dealing with a lender directly, the first time you would be aware would be when you contacted them to look to apply!
Similarly, we will typically get advance notice of any rate changes. This enables us to contact our clients that may be impacted so that we can look to get your application submitted on the lower rate before it is pulled.
Lender service limitations
One of the consequences of lenders being too busy, and having to control the volumes of applications received, has been a change in the service levels and timeframes compared to the pre-lockdown period.
Particularly for applications that need a manual assessment, such as for clients who are self-employed, a client who is on furlough or who is using additional income, will require a longer application process. Current timeframes of up to 13 working days for an initial assessment are common with some of the larger lenders.
This is of course not ideal if you are looking to purchase and need to move quickly, or looking to remortgage and your current fixed rate shortly ends.
The good news is that an intermediary can help to circumnavigate these issues for you. We are aware of each lenders current timeframes, so we can look to submit the application with a lender operating quicker if needed.
Also, we have exclusive access to the decision makers and escalated service teams with many lenders. This means that by using an intermediary such as ourselves your application will be reviewed quicker than if you use a lender directly, and also that if any issues arise we are on hand to help smooth these through with the lender to avoid long delays.You can see for yourself using this link how our lender access and relationships has assisted our clients.
Can I still obtain a mortgage with a 10% deposit?
We are seeing lots of enquires from clients with a 5% or 10% deposit looking to purchase right now, especially since the stamp duty change announcement last month. These changes may well mean you can now put down another 5% deposit using the money you had set aside for stamp duty costs.
There is still less availability of mortgages for clients with a 5% or 10% deposit compared to earlier this year.
As lenders are still struggling to manage the number of mortgage applications they are receiving, they worry returning to this market would add fuel to the fire.
As such, some of the larger lenders want to ensure they have their service time frames in order before they will look to offer these mortgages once more.
What we have found is that the lenders are returning with mortgage products for clients with a 10% deposit on a temporary basis, or only offering a limited number of applications to be accepted per day, whilst they look to ensure they do not take on too many applications to impact service levels.
An intermediary can ensure you are kept updated on the options available at any specific date.
Some lenders are also only offering mortgages with a 10% deposit via selected intermediaries to ensure they can manage the number of applications received.
We have access to some mortgage products on a semi-exclusive basic with a 10% deposit, so if you are thinking of purchasing in the near future please do not hesitate to contact us to speak to one of our mortgage advisers.
Please get in touch with us if you need any further advice. You can email us at AskAlexanderHall@alexanderhall.co.uk or use the contact us page on our website – click here.
This article was originally posted in What Mortgage online. You can see the original article here. Please note this will launch a new web page.