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Falling rates and easing criteria: it’s getting easier to obtain a mortgage

Mortgage rates continue to fall on the back of the Government’s Funding for Lending scheme, while lenders are crucially now also loosening criteria. It has never been easier – certainly not in the past five years – to get a mortgage.

This is great news for those who have been holding back from moving, concerned that it’s not worth applying for a mortgage because they wouldn’t get one anyway. It is also good news for those who haven’t bothered looking into remortgaging for much the same reason. Now is the time to act, and while rates may fall further still, they are already at historic lows. What have you got to lose?

On the rate front, two-year fixes are available at less than 2 per cent, five-year fixes at less than 3 per cent and now even ten-year fixes at less than 4 per cent. Of course, you will need a sizeable deposit of around 40 per cent of the purchase price to qualify for the best rates but further up the loan-to-value curve, pricing has also fallen.

What is really encouraging is that criteria are easing too. For every lender tightening its interest-only criteria or making it tougher for older borrowers to get a mortgage, there are others who are realising that the way to bring in more business and grow their loan book is to be more flexible, not less.

The private banks have continued to lend throughout the financial crisis and are still often the best option for the right sort of client. They have an understanding of borrowers with complex income streams – taking retained profits in a business or bonuses into account – that is simply not the case on the high street.

We’ve also seen some improvements for contractors and on buy-to-let, with several lenders loosening previously tight criteria in the past few weeks. It all adds to a more positive market that is well worth exploring if you have been holding off applying for funding.

However, as usual, caveats apply. While lenders are demonstrating more of an appetite to lend, it is still worth seeking independent mortgage advice. There may be more options available at better rates but sourcing them all yourself is a tricky business. Why not speak to an expert who spends their working day sifting through what’s available and who can advise you accordingly?

Advice increasingly crucial as mortgage fees reach 25-year high

The average mortgage arrangement fee has risen to £1,522, according to research out this week from Moneyfacts – the highest figure recorded since the company started monitoring such data.

Record low mortgage rates

While mortgage rates have fallen to record lows, particularly on fixed-rate deals, arrangement fees have continued to rise. A typical five-year fixed-rate mortgage for those with a 25 per cent deposit now has an average fee of £1,258 compared with £964 at the start of the year.

However, borrowers shouldn’t necessarily let hefty fees put them off: those with large mortgages may find that it is worth paying the bigger fee in order to access a rock-bottom rate.

Do the sums – or better still, get someone else to do them for you

What is important is to look at the bigger picture when it comes to choosing a mortgage, and look at all the fees associated with the deal as well as the rate in order to compare like with like. But it’s not just what you pay that is important: will the lender consider complex income streams, such as retained profits in a business and share dividends, when deciding how much you can borrow? Is interest-only available or what about a loan greater than £5m – can the lender accommodate that?

Anderson Harris can do the sums and point you in the right direction when it comes to choosing the lender most suited to your situation. It may be that a private bank proves to be a much better fit than a high-street lender – we have access to many private banks and specialist lenders as well as the mainstream high-street lenders.  If you are asset rich but have limited income and are purchasing or remortgaging a high-value property, and require discreet advice, we can help.

Funding threat to the ‘improve not move’ brigade

The Government hopes that its proposal to relax the planning laws, making it easier to add a conservatory or extension, or do a loft conversion, will boost the economy. Rules on shops and offices expanding will also be relaxed as part of the scheme. But it’s not so much planning that’s the issue – for most people it’s lack of finance to pay for the building work.

It’s all well and good suggesting that the answer to the housing crisis is to extend existing homes but unless you have got the £20,000 upwards to pay for it sitting in your bank account, there could be funding issues.

Lending is tougher than before the downturn so getting your mortgage lender to advance the required funds will not be as easy as in the past. Lenders will look at the overall loan-to-value (LTV) once the extra funding is factored in: higher than 75 per cent, and the lender may well refuse the extra borrowing. So those borrowers with plenty of equity in their homes may be ok, but those who have a high LTV already may struggle.

Those borrowers who are enjoying the cheapest mortgage rates may also find that not only will their lender not lend the extra money at the same preferential rate, but that it insists that all the borrowing is remortgaged onto less attractive terms.

On the commercial side, the potential to develop more easily will be attractive to those who can access the necessary funding. More lenders have moved into this space in the past couple of years, including a number of bridging lenders, so there are increased funding options. We may see more investors taking a punt on a commercial purchase with the idea of developing and extending the building but specialist advice will be crucial to access funding options.

We welcome any move that might boost the economy and bolster the housing market at the same time. But borrowers should seek advice to ensure they are financing any project – whether it’s a residential or commercial deal – in the most cost-effective way.

Rising mortgage rates and service issues: why you need a broker

The Bank of England has voted to keep interest rates at 0.5 per cent for another month. This is not surprising; indeed, it is widely expected that Base Rate – which has been static for more than three years – won’t rise for another couple of years at least.

Yet while interest rates haven’t moved, mortgage rates are on the rise. A handful of lenders, including Halifax, have raised their mortgage rates in the past week, following lenders such as Clydesdale and Yorkshire Banks increasing their standard variable rates earlier this month. Interest-only criteria continues to tighten, making it increasingly difficult for those with bonus-driven incomes to secure funding.

Service issues at certain banks are also causing problems for borrowers. We have seen a significant increase in buyers coming to us in desperation because their mortgage offer is taking so long to process that they are in danger of losing the property they are trying to purchase. When there is a dearth of desirable properties on the market, this is a disastrous situation for a buyer to find themselves in. Some lenders are taking several weeks just to get an offer out because they have been inundated with demand for their ‘best buy’ deals or have restricted their conveyancing panel. But this is too slow for many.

However, Anderson Harris can help steer clients in the direction of lenders who aren’t experiencing service issues. We can assist with getting funding arranged at relatively short notice and we know the private banks to approach for the right sort of client who needs interest-only.

These are difficult times when it comes to borrowing but there are often solutions if you know where to look. Advice is more crucial than ever.

Interest rates held at 0.5 per cent

For the 37th month in a row, interest rates have been held at 0.5 per cent. This comes as no surprise; indeed, it is unlikely that there will be any move in interest rates for the next couple of years at least.

Yet while interest rates haven’t moved, mortgage rates are on the rise. The higher cost of funding on the wholesale markets and general reluctance of many lenders to stick their heads above the parapet when others are tightening their interest-only criteria or raising their standard variable rates (SVRs), means there is a general trend towards less favourable terms.

But all is not lost. Advice is more crucial than ever. Interest only is still possible, particularly if you meet the private banks’ criteria. Remortgaging may be worth considering if you are on your lender’s SVR. The important thing is to take a look at your circumstances rather than ignore the problem and hope it goes away.