The other day, I stood behind a lady in the queue at a well-known bank and could hardly contain my laughter as she tried to explain that she wanted to place a sum of money in her ‘reserve account’ to offset the interest charges on her mortgage. The bank representative’s reply: “Oh, you want to make an overpayment?” was met with a slightly indignant: “No, I want to place the money in my reserve account.” “Oh – I’ll get the manager,” came the retort from the bemused member of staff. On arrival, the manager promptly asked: “So, you want to make an overpayment?” Slightly agitated, the customer enquired: “Why would I want to do that when I would just incur a redemption penalty?” Baffled, the manager replied: “I’ll call head office.”
Fortunately, this customer was astute, but admittedly it wasn’t entirely the manager’s fault, because on all matters ‘mortgage’, branches rely completely on their ‘Batman’- the roving branch mortgage adviser, who, if not passing by, is no good to man or bat. This has become an increasing concern since high-street lenders are being given more and more power to write the full spectrum of mortgage business.
Take this typical scenario. Two first-time buyers, fresh from university with a couple of rent arrears and CCJs for non-payment of utility bills, make their appointment with Batman. He offers them the bank’s sole near-prime product. Question: is this product competitive? Answer: I doubt whether even Batman knows this, let alone the first-time buyers themselves.
Why do I come to this conclusion? Well, every broker I know recommends choosing from an array of products and lenders rather than just one, and often seeks further reassurance from a sourcing system or a packager help desk. On request, they have to justify their selection to the Financial Services Authority (FSA), whereas the single product provider does not. And critically, in adverse lending, the disparity of rate can be as much as 3 per cent per year.
Surely our guardians and protectors at the FSA must realise that a first-time buyer is as vulnerable as a naked Bat- Girl? They must also appreciate that first-timers need more than just a borrowing option – they need tuition on how to conduct finances, particularly if they have a track-record.
By offering a full service of financial advice, brokers become ‘friends for life’, always on-call to answer queries on weekdays, evenings and even weekends. Although contactable by the ‘Bat-sign’, you are unlikely to actually meet your Batman face-to-face until an unscheduled Tuesday in the distant future, and even then, only for 20 minutes. In fact, when the couple returns in a few years time to apply for a new mortgage, Batman will probably be off elsewhere saving the world on the foreign currency counter. And even if they should require a remortgage, why would the lender want to help them out and risk losing Wayne Foundation’s valuable SVR premium?
The reality is that, as fewer customers reach the brokers, more and more of them could end up paying through the nose. The FSA should act now and, at the very least, insist high-street banks and building societies provide straightforward market analysis on their rival’s products at the point-of-sale. They should explain the benefits of remortgaging at the appropriate time, otherwise, as more and more lenders broaden their product range, the greatest scandal to hit the industry – ‘non-advice in a captured environment’ – will continue to evolve.
Mainstream
Halifax is still piling in the business on its 4.39 per cent two-year fix to 90 per cent LTV. Principality Building Society can match this to 75 per cent LTV with a slightly larger completion fee.
Bank of Scotland has launched a 3.99 per cent, BBR less 0.51 per cent two-year tracker, with free vals and legals for remortgages to 75 per cent LTV.
Against market trends, Furness has halved its maximum loan to £250k.
Bath Building Society has legitimised the student let market by recognising that fellow tenants will be contributing rent towards the guarantor-backed 100 per cent mortgage.
Buy-to-let
Derbyshire’s five-year SWISS Franc LIBOR tracker is 4.24 per cent (pick the bones out of that one Batman).
Unlike most lenders, Woolwich now allows companies who undertake other business activities to purchase buy-to-lets. Incredibly, they also allow a single property purchase of £2.5m.
West Bromwich has reduced its rental cover from 125 per cent to 120 per cent and now accepts portfolios to £10m – high for a building society.
The Mortgage Business (TMB) and Bank of Scotland follow stable-mate BM Solutions – its rental calculation now based on BBR+0.75 per cent rather than reversionary rate.
Self-cert
GMAC-RFC are expected to tread where no man has been before with a 95 per cent LTV second-time buyer self-cert. Its computerised decisioning system has meant light referencing on mainstream for some time, so they probably have a fair idea of what they are letting themselves in for.
First National requires accountant’s confirmation for applicants declaring income in excess of £30k per annum (previously £40k pa).
Platform now allows FTBs at 90 per cent LTV on high LTV adverse products.
Adverse
GMAC-RFC is looking to split its product range by the way it calculates CCJ levels – the direct-to-broker proposition will remain as amount in £s, whereas for packagers it will be based on ‘number’.
First National’s new plans, which lighten adverse tolerance, are aimed at capturing applicants on their affordability calculator (50 per cent debt-to-income ratio on salaries more than £20k per annum).
Richard Stokes is head of product development at The Mortgage Times Group
