Some claim we live in an unfair world. For example, you can pay the same amount for a train ticket whether you sit or stand or, even worse, eight times more if you buy the ticket on the day rather than in advance. Why is this? Cash-flow? Does this mean NetWork Rail can outperform all fund managers and realise 800 per cent growth in just three weeks? Well, I want some of that.
Similarly, in football, what if your team hasn’t reached the FA Cup final for 20 years and, despite your consistent dedication through ‘thick and thin’, the allocation of seats for the prawn sandwich brigade prevents you – ‘the genuine supporter’ – from attending the match of your life?
Okay, so neither of these are life threatening, but are we kidding ourselves that heightening the profile of ‘Treating Customers Fairly’ (TCF) in the market will put to bed the ills of the mortgage industry?
A product guide I recently received dedicated a whole section to the latest industry buzz-words, with all those important bits of advice you’ve actually been applying for years. I quote: “[Customers]… should be made aware of the ‘payment shock’ that could occur at the end of the initial fixed rate or discounted period.” Thank you, Mr Lender, for pointing out this little gem.
I can’t disagree with this profound revelation – there will be surprise as this product jumps 2 per cent, however what about the lender’s initial rate of 6.88 per cent (or even greater 10.96 per cent on smaller loan sizes) – an epicentre that will issue a sharp shock on ‘day one’ let alone when the reversionary ripple hits. With rates like this, the lender should look a little closer to home before preaching to others. Ironically though, without alternatives, the 6.88 per cent could actually save some of UK customers’ money if they remortgaged – and that would surely constitute TCF?
I’m a great believer that these things self-regulate. If you conceal the truth about the reversionary rate, believe it or not, your clients will eventually find out when their payments increase. You could lose them and possibly the referrals they gave you – an introducer’s life-blood – so why take this risk? Anyway, surely key facts illustrations (KFIs) reinforce the rate detail, so you wouldn’t need the lender mothering you in the first place.
So, returning to my point, re-advising introducers about TCF is unlikely to make any difference, particularly if the lenders themselves are simultaneously presenting questionable products. TCF will be built into the sales process as a matter of course and lender articles or disclaimer wording will have very little influence. Regrettably, people are either ethical or they aren’t and, should the Financial Services Authority (FSA) spot that TCF is not being applied, the individuals will probably drift to another industry and cause problems for someone else there.
Mainstream
Britannia’s 4.34 per cent two-year fix still dominates and, for the first time in ages, it is reinforcing this message by a concerted radio campaign, which will annoy introducers because procuration fees are not payable.
Halifax has extended its ‘no income verification’ to all loan-to-values (LTVs), subject to an ‘A’ credit score.
Leeds Building Society has withdrawn the unusual, yet popular, 4.75 per cent two-year fix without early repayment charges (ERC).
Bristol & West has launched a 2.4 per cent discount mortgage for two years with a tiny 2 per cent ERC – it must be praying that nobody redeems in this period.
Self-certification
The Mortgage Business (TMB) has launched an aggressive 4.79 per cent fixed product for two or three years to 85 per cent LTV.
Money Partners has removed its self-certification loadings on all lighter adverse plans.
Amber Homeloans is the first mortgage lender to offer prime remortgage self-certs to 95 per cent LTV, which allows straight-swaps and home improvements.
Buy-to-let
db Mortgages enters the market through selected distribution, with buy-to-let lending dominating its range. It offers income-based or rental coverage options – the former set at 6 per cent deduction of the existing mortgage balance, 1 per cent below TMB and Freedom Lending.
Amber Homeloans now does not require proof of £20k earned income.
Capital Home Loans is withdrawing its popular 4.89 per cent three-year fix with free valuation.
Adverse
According to Trigold, none of db Mortgages’ products are ‘portable’ – presumably a temporary arrangement until its system can accommodate this important facility for residential mortgages. Now the good news: it allows up to 95 per cent LTV higher lending charge (HLC)-free, with £1,500 CCJs (generous for new entrants) and a 5.70 per cent payrate (three basis points away from the market leader).
London Scottish has finally reduced its ERCs to three years, in-line with the market. The slight sting in the tail is that the formula now works on the amount redeemed rather than month’s interest, which is invariably higher.
Amber Homeloans has launched some very aggressive rates, including its status 90 per cent LTV £3k CCJs rate at 5.22 per cent discounted for two years, without extended ERC – 10s of basis points lower than everyone else.
Rooftop Mortgages has extended its acceptance of 5 per cent builder deposits to all plans and added in two-year fixes to its light, medium and heavy ranges.
Richard Stokes is head of product development at The Mortgage Times Group
