Following on from the Financial Services Authority’s (FSA) concerns over interest only mortgage products and the advice given in this area, a broker has admitted lenders need to provide greater detail to borrowers and brokers on 100 per cent mortgage deals.
Phil Perry, director at ARK Financial Services, said: “First-time buyers are increasingly looking at 100 per cent mortgages to get onto the property ladder. However many fail to recognise the extra fees that exist, including legal and solicitor fees.”
Perry added his concern over the move towards affordability, as adopted by many lenders. “Changing criteria to allow for affordability based calculations has led to confusion, and some lenders now offer up to five, or even five and a half times income. I don’t think the criteria on 100 per cent mortgages is as good as it should be.”
Alan Lakey, senior partner at Highclere Financial Services, added: “If clients haven’t shown an ability to save up for a deposit, I think mortgage repayments could become too much for them. In the past, lenders have been less willing with their multiples so affordability is, in theory, a good idea. The problem is clients are often economical with the truth on what their disposable income is spent on. One assumes lenders take this into account and reflects this in credit scores and rates.”
However, Andrew Boddie, head of marketing at Standard Life Bank, said: “The main factor with affordability is where you are spending your disposable income. If you’ve got evidence of at least two month’s bank statements, you can roughly see what someone’s monthly outgoings are. But there has been a lot of debate on the stringency of affordability checks.”
