He is employed and earns £23,000 a year and is looking to borrow at least £110,000. Deal or no deal?
Response:
“Although Mr Edmonds is fortunate to have a good amount of equity to enable him to put down a sizeable deposit, his income is relatively low and so will limit the choice of lenders available to him, especially as he also has a small amount of adverse credit.
If Mr Edmonds had come to us a few weeks ago, we would have been unable to consider his application, as our maximum income multiple was 3.5. However, on 12 June, we launched a number of new additional criteria enhancements and part of these included an increase in income multiples. Due to the adverse credit, Mr Edmonds would fit onto our Almost-Prime scheme, which accepts up to £500 of CCJs and any defaults are ignored.
The near-prime sector now accounts for around 50 per cent of all business written in the non-conforming market, as with continuing high levels of consumer debt, more and more people are suffering small forms of adverse credit. For example, the DVLA is now registering around 18,000 CCJs a month against people failing to pay their road tax.
As his application is at 85 per cent loan-to-value, the maximum income multiple we would apply is five times so the maximum we could lend would be £115,000. This is assuming he has no outstanding credit commitments. Platform has a range of interest rate options on Almost-Prime, including two and three year fixed rates and a three-year tracker, all with no early repayment charge (ERC) overhang. With the cost of fixed rates increasing recently, trackers have become much more attractive and our three-year tracker is currently 5.65 per cent (LIBOR plus 0.90 per cent).”
Paul Hunt is Head of Marketing at Platform
Mike Pendergast is an IFA at Zen Financial Services
“Mr Edmonds may need to look to an adverse mortgage lender as the recent CCJ and credit card defaults will mean that many mainstream lenders will be unable to assist. If he were to clear the CCJ this would help, but he still may find many mainstream lenders unable to agree to this mortgage. In addition to this, he is looking to borrow near to five times his salary, which is a little on the high side. There will be mortgage lenders who will assist him – although he may well end up paying a higher rate of interest.”
Adrian Kidd is an IFA at Mint Financial Services
“A number of non-conforming mortgage lenders would look at this case, at fairly competitive rates (5.50 per cent). The good news is that the CCJ is small and anything under £500 is not usually a major problem. I am concerned, though, about the defaulted credit card repayments as it doesn’t say how much for and how recently. This may make the interest rate higher.
I would be interested to know how much his existing mortgage is, as although he seems to be maintaining this, his other commitments are not being taken as seriously. It would seem that he is financially stretched at the moment, as his credit handling over last few months seems to be poor. So, I would recomend a full budget planner to see his income versus expenditure and see where, if possible, we could save him money on such items like life insurance, home insurance and income protection if he has any of these, or his energy or phone bills and credit card bills.
His income will get him the loan he requires, but I would strongly suggest this is the maximum he borrows, and that a full status loan will help keep the rate lower and not over stretch what seems to be a tight household budget already.
I would want to make him fully aware of his monthly payments, maybe suggest a fixed rate, even though trackers are a bit cheaper currently, and be happy with his ability to pay and his willingness to repay his commitments, both of which would be under question.”
