In the last few years we have tended to be critical of Banks & Building Societies and their sometimes irrational behaviour when lending money. Although this continues it is refreshing to be able to report that some lenders have started to become more flexible and innovate again.
The latest example of flexibility is the return of the interest only mortgage with the Leeds Building Society having joined a select band of lenders offering these mortgages. In fairness the other lenders have very strict criteria with regard to income with the Woolwich demanding a minimum income of £75,000 and a very high level of equity required. But the Leeds deal is a breakthrough as it appears to be targeting mainstream borrowers, and if the borrowing is less than 50% loan to value they do not require a payment vehicle. They are prepared to accept that the loan is paid off by the sale of the property. If the borrowing is more than 50% then that amount over 50% has to be conducted on a repayment basis and they will lend up to 75%.
Other recent examples of change involve the Dudley Building Society entering a niche market by launching a range of discounted rates that are aimed at the listed building market with the discount lasting for the term of the loan. Other examples involve the Bath Building Society who will take into account rent a room income when assessing how much you can borrow.
Some lenders also seem to have grasped the nettle with regard to mortgages in retirement, as this type of mortgage, like the interest only plans disappeared after the financial crisis. They are now making a comeback with lenders such as the Mansfield, Staffordshire Railway, National Counties and The Furness lending to people until their eighties.
We are also seeing now that the Mortgage Market Review changes are over a year old that criteria differs quite a bit from lender to lender. This means that some lenders are prepared to lend sometimes up to 40% more than the next most competitive lender due to differences in what they would count as income. Also we are finding that with regards to minor credit problems lenders can be a little more understanding involving such things as small mobile phone defaults with ‘challenger’ lenders prepared to be more flexible than before.
Overall I believe that the mortgage market is now really competitive and lenders are trying very hard to gain market share and this is showing within the first instance through lower rates. But some lenders I believe have recognised that by being flexible, and they can still offer competitive rates but don’t need to be market leading to gain the business. These lenders are typically small lenders and I think it is a shame that in general larger lenders have not yet shown the same levels of flexibility in the market. Also due to lenders differences I believe it is more important than ever to consult with an independent mortgage broker to ensure that you get the mortgage that is right for you.
Kieron Bassett DipPFS, CertSMP
6th July 2015
“