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Mortgage approvals edge higher


Mortgage approvals edged higher in July, according to the Bank of England with 47,312 loans approved, compared with 44,124 in June. The number of remortgages also rose as homeowners took advantage of some of the excellent rock-bottom five-year fixes now on offer.

Numbers are still down on the six-month average but at least they are moving in the right direction. This should be helped by money market rates falling to all-time lows, which is resulting in some extremely cheap mortgage rates.

Lenders certainly seem to be demonstrating renewed vigour. Accord launched a ten-day mortgage sale on Tuesday, with rates available from 2.99 per cent for a two-year fix and 3.29 per cent for a five-year fix – both available to those with a 30 per cent deposit. Skipton building society has also cut rates and while Nationwide has raised its fixed-rate mortgages, this is more down to wanting to maintain service levels than anything else.

Borrowers should not assume that the mortgage market is dire. There are some excellent deals out there, both from high-street lenders and the private banks. Seek specialist advice to find out what is available to you.

Jonathan Harris
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Jonathan Harris

Santander’s SVR hike means borrowers must be vigilant


Santander has written to customers on its standard variable rate (SVR) this week telling them that the rate will jump from 4.24 per cent to 4.74 per cent from October. This will be unwelcome news for those who are already stretched financially and don’t have enough equity in their homes to enable them to remortgage onto a cheaper fixed or tracker rate.

Santander follows several other lenders, including Halifax, Clydesdale and Yorkshire Banks, who all raised their SVRs in May. The average SVR is now 4.23 per cent, according to the Bank of England, making Santander’s new rate look expensive. Borrowers may be bemused as to why their rate is going up when interest rates haven’t moved but this has always been the problem with SVRs – lenders can raise them as, and when, they want.

While this extended period of low interest rates – three and a half years without an increase from 0.5 per cent – is welcome news for homeowners on variable mortgage rates, it is an expensive headache for lenders. There is little incentive for borrowers to remortgage at the end of a fixed or discounted period if the alternative is a lender’s cheap SVR with no arrangement fee, early repayment charge or loan-to-value stipulation. It’s no wonder lenders want borrowers to move off them. Hiking them is one way of doing this.

But not everyone is able to remortgage. If your lender raises its SVR, the usual advice is to switch to another deal but many borrowers won’t be able to as they have become mortgage prisoners. They don’t have enough equity in their home, have an interest-only mortgage, or their circumstances have changed since they first took out their mortgage, so they no longer meet lenders’ criteria.

If you are in this situation, seek advice. Use savings earning next-to-nothing in terms of interest to pay down your loan and improve your equity position, making it easier to remortgage. Ask your lender whether it will offer you another deal, particularly if you will struggle to pay the higher rate.

And for those borrowers whose SVR has not yet gone up, be vigilant. Unless you have a guarantee that it won’t, such as those borrowers with Nationwide and Lloyds TSB who can be charged no more than 2 per cent above base rate – you are at risk of higher monthly payments.

Adrian Anderson
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Adrian Anderson

When private banks get tough, seek advice


We’ve recently seen a steady flow of borrowers approaching us who have been called in by their private bank to review their loan facility. It is no longer a sure thing that their loan will be renewed at the end of the five-year term. Market conditions have changed since they took out these deals and banks wish to improve their capitalisation by boosting their wealth management business. In the most extreme cases, the bank has implied that it wants the loan repaid over 12 months if the new conditions are not met, so the borrower must find a new lender.

Just as private banks have different criteria and strengths, these new conditions vary. Some clients must transfer assets under management (AUM), while others must pay a higher rate of interest or the renewal will be for a much shorter term of, say, one to two years, during which time they would be expected to provide the wealth management aspect. There may be an issue with loan-to-values (LTVs); while prime property values have increased, banks may require borrowers to pay down some of the loan to reduce the LTV to reflect the lender’s tighter criteria, introduced since the downturn. Those borrowers who can’t meet these new requirements face a search for another private bank.

At the height of the mortgage boom, all banks – not just private ones – were more flexible and willing to lend. In 2007-08, private banks opened their doors to clients who would normally have approached high-street lenders for mortgages. But terms and conditions have changed. Some private banks didn’t get the investment business they needed as they moved too far down the transactional route, so now want the relationship to be about more than just lending. This is understandable, as the investment side of the business has always been central to what private banks do, and relationship building is always key.

Private banks are often still the best option for high-net-worth borrowers with complicated income streams, such as bonuses, performance-related pay, retained profits in a business and offshore income, and who require interest-only. Those buying a short-lease property will often also require funding from a private bank.

It is vital to seek advice from an independent mortgage broker, such as Anderson Harris, with a good understanding of the private banks and their requirements, which differ substantially. Details are not published so unless you know what each bank wants, it can be impossible to work out which is most suitable. Hardly any have ‘best buy’ rates: rather, deals are bespoke, depending upon the borrower and their circumstances. Even if the bank has a published mortgage rate, it may be prepared to improve its terms to secure the right sort of client.

Jonathan Harris
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Jonathan Harris