The first time is awkward. Some say it is painful too, particularly if things just don’t work out as planned.
Stokes and Boon just doesn’t work so I’ll stop somewhat prematurely and get to the point. I refer, of course, to the initial house purchase in one’s life.
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Traditionally, the initial thoughts that run through the would-be purchasers’ minds consisted more of how far is it from the nearest nightclub. But first-time buyers (FTBs) these days are different. For starters they are in their early 30s and probably acclimatised to debt. It is well publicised that housing stock is low as landlords have mouths big enough to rightly swallow the one-beds up. So what are the alternatives?
Well, there is that most generous lender in the world – mum and dad. However there is a potential pitfall here – being in your 30s means that they have probably already thrown money for rent at you and your first ‘waste of space’ partner. To get around this, a chunk of money could be deposited in an offset account to reduce the borrowing, on the understanding that the parents relinquish their generosity should partner two follow the same path as partner one and become more interested in your best friend. This contribution could also be ‘locked’ to protect the parents realising a nasty surprise.
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Purchasing in conjunction with housing associations is another way of getting onto the chain. The repayments are a combination of low rent on the part you do not own, and a mortgage. Similarly, shared appreciation schemes can keep monthly repayments low. Often they have specific target audiences in the public service sectors. However, the rates aren’t great as not many lenders deem the market big enough to embrace, so competition is low. It’s also difficult for a broker to crack as tie-ups are long since established often through unions and trade bodies. There are also developer affiliations to contend with as well as the cost of the undoubted extra time to explain the complexities to your client.
Perhaps salvation comes in the form of the affordability calculator. I know first-hand a would-be FTB who approached me for a second opinion of a mortgage they had been offered to the tune of £220,000. Both her and her partner earnt considerably less than £20,000 each. Needless to say, I said: “Please rethink.” An extreme case I hope, but it’s probably right to assume that five times income is now commonplace. The bad news is a one-bed in London is typically £145,000, so therein lays the problem.
100 per cent mortgages remove the deposit problem. Higher income multiples for graduates are also available and a building society recently opened its doors to parental guarantors. Hybrids of secured and unsecured borrowings are now available from more outlets than ever before.
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It appears everyone in our market is trying their best despite knowing that FTBs often have a poor arrears record and little in the way of deposit.
However external influences such as Stamp Duty thresholds and the increase in student loans before adult life starts don’t help. I’m sure such trivia did not cross Tony Blair’s mind when he secured his £10 million retirement pad this week.
To be fair 0.5 per cent BTL proc fees for guys that know what their doing is that bad either is it!
Mainstream
Woolwich is offering a Barclays current account in conjunction with its open plan and offset as the branches are more accessable.
Advantage has enhanced its decision-in-principle technology to include the electronic verification of customer identity and proof of residency. It now accepts new build property on Flexi-share.
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Leeds BS now accepts guarantors on its 100 per cent mortgages.
Buy-to-let
Alliance & Leicester has been pushing the boundaries of its lending policy all year, so it therefore came as a surprise when it pegged back the loan-to-value (LTV) on its buy-to-let from 90 per cent to 85 per cent. The lender said this was down to low demand broker feedback. Could it be the first signs of nervousness in a booming market?
Investec has moved into Scotland for the first time. The lenders it funds include Unity, UX Mortgages, Freehold and Infinity. The lenders specialise in builder and vendor deposits as well as adverse products.
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Chelsea BS has reduced its rental coverage requirement to 110 per cent of the initial payrate based on an interest only payment.
West Bromwich for Intermediaries now accepts expats to 85 per cent LTV, privately owned flats to 20 storeys, and ‘off plan’ purchase applications that are expected to be completed in 12 months. It also will allow landlords to let to up to four students on a single Assured Tenancy Agreement.
It’s interesting to see Woolwich move away from three-year fixes with large fees towards a lifetime tracker at Base Rate plus 0.49 per cent with a £295 completion fee. The product is restricted to 65 per cent LTV.
Self-cert
Bank of Scotland now accepts up to 90 per cent LTV.
GMAC-RFC now allows you to proceed to the certainty of an online offer without the need of a signed paper application form.
CHL Mortgages no longer makes a retention if the valuer’s recommendation is £1,000 or less.
Adverse
Salt has removed its HLCs.
Igroup’s enhancements on properties valued £100,000 or more will be greeted warmly – ex-local authority houses to 95 per cent LTV, and 80 per cent LTV on flats.
