Caps mean different things to different people. Tiger Woods is as synonymous with a cap on his head as he is with a golf club in his hand. It could be the little red circle that breathes life into a toy gun to break parents’ respite. Or it could be the little device that stops life breathing at all.
When applied to our industry, caps take on many guises. The usage perhaps most dear to the lender salesman’s life is the cap on earned commissions – presumably due to internal egos – and with global associations, wage benchmarking is now standard practice. Why, for instance, shouldn’t a productive business development manager earn more than a lousy regional sales manager? They do, after all, perform different roles and probably have the hierarchy reflected in their base level.
My phone rang constantly in the second week in April, with an unprecedented number of lenders trying to make appointments to see me. Why? Because the financial year had ended and they were ‘ready to go again’. The previous year had seen record business levels, and targets seemingly achieved too early – visiting Mortgage Times headquarters having already made the maximum buck was not as appealing.
A good salesman’s favourite food is seconds. They are born hungry, and to stifle productivity by wage capping is nonsensical. Those further up the food chain should look to test themselves, rather than implement a measure to avoid being embarrassed.
Procuration fee caps are a complex and emotive subject. After being lobbied for years, lenders succumbed to the wishes of most brokers to be remunerated on a basis points method rather than a flat fee, therefore, reflecting more closely the increased value to the lender for large loan deals – complete logistical sense.
Despite relenting on the basis points, many lenders impose a cap on the maximum they will pay. Why? Is it really a PR disaster if the media learned that someone earned £15,000 for arranging a mortgage? When estate agents and the government will earn a higher percentage, and off the purchase price rather than the loan amount, this isn’t true. What about the hypocrisy of lenders themselves? I recently read that Mortgage Brain’s built-in completion fee maximum of £32,000 – presumably to avoid keying errors – had legitimately been busted by a lender’s completion fee.
Some might argue that the amount of work for an adviser to put together an application is the same if the loan is £100,000 or £5,000,000. But the lender only has to underwrite one deal rather than multiple cases totalling that amount, so shouldn’t the saving be passed on? The fact is, a lender is there to profit on money lent – administration aside, it is focused on lending money and concentrating sums on this, knowing every pound lend nets its several percentage when repaid – and it protects itself by imposing minimum loans. The value is there for them – the caps are arbitrary, some choose £5,000, others £20,000 – if this is because of PR, why such a wide range of views? It is simple – caps are there for the lender’s bottom line. The good news is this week Northern Rock, The Derbyshire and Salt have all removed their caps. Let’s hope it’s a sign for things to come – I tip my cap to them.
Mainstream
Alliance & Leicester has an online only two-year fixed rate at 5.39 per cent with a £999 fee. Britannia has a 5.99 per cent three-year fix with a £399 fee and Cheshire a 5.84 per cent deal fixed for 10 years with a £899 fee. All of these rates are available to 95 per cent loan-to-value (LTV).
Woolwich believes its service headaches are about to clear, and is to launch its Mortgage Application Xpress (MAX) online system. MAX automates the lending decision and has electronic identity and address verification.
Buy-to-let
Hometrack now provides expected rental figures on its automated valuation models (AVMs).
Skipton has amended its rental calculation to 110 per cent at Base Rate plus 0.75 per cent. There is no minimum salaried income. The loan sizes have also improved and include £3 million on a single dwelling to 75 per cent LTV. HMOS, trusts and corporate lets are considered. AVMs are available to 80 per cent LTV on remortgages for quick decisions.
Cheltenham & Gloucester has lowered its rental calculation to Base Rate plus 0.5 per cent.
West Bromwich now accepts new build flats and apartments – those that have been converted/renovated in the last 12 months will be accepted up to a maximum of 75 per cent LTV.
Advantage has temporarily withdrawn from the market.
Wave is poised to enter the market with a rental and earned income option up to five properties.
Self cert
Bristol & West now accepts ex-local authority flats on self certification.
Adverse
The market is poised to see the new areas Kensington Mortgages will cover when the Investec takeover is finalised in early August.
Preferred Mortgages is tightening its criteria in a number of areas, including reducing the debt-to-income ratio to 50 per cent and building in telephone call security checks on self-cert. Preferred has traditionally been positioned in the toxic end of the market. This may be the first signs of the rocky times ahead for the ‘real’ non-conforming sector, as the light market is poised to expand next year – lenders may be able to get their business here – which in turn may be an easier trade, given what has gone on recently Stateside.
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