In the last few weeks I have noticed a stirring in the mortgage market from a most unlikely source. After a couple of years of, in the main, government backed banks dominating lending, the small Building Society seems to be making a comeback. They are not only competing on rates but are also prepared to lend high percentage loan to values. By doing this they are helping the first time buyer to get their foot on the mortgage ladder and crucially, one building society is prepared to consider lending for consolidation of debts or for buying a second home up to 90% of the value of the property. A few years ago this was no big deal, but since the credit crunch started lenders have increasingly shied away from lending for consolidation purposes at high loan to values. Also, most large lenders rely heavily on credit scoring systems to establish whether they can lend or not, whereas the traditional Building Societies underwrite cases on an individual basis. I believe this helps them to understand the client better during the underwriting process and this understanding sometimes leads them to lend when, as mentioned earlier, the larger credit scoring lenders would decline the application immediately.
The downside of going to a Building Society is that, if you fall into the category of a borrower who may fail credit scoring, you may find your case may take longer to process. This is due to the individual underwriting and possibly extra documentation being needed for them to make a final decision. Also, you have to accept you are not guaranteed acceptance at the end of the process.
Due to the Building Societies more personalised approach, in my experience, I have found that clients dealings with them after the mortgage has completed have generally remarked that it has been a positive experience. This is because they have been able to make contact with them quickly, and had quick response times contrasting with some of the response rates from the banks. In addition, I feel that they are often offering keen interest rates when a borrower’s deal has ended as they look to retain clients for the long term.
Current examples of deals available are the Mansfield Building Society prepared to lend 90% loan to value for consolidation purposes at a competitively priced 4.99% variable. The Hinckley and Rugby Building Society are market leaders at this level with rates of 4.59% variable with no tie in.
Although I believe the Building Societies are fighting back and finding their niche in the market, they are not for everyone. As mentioned earlier, their underwriting process in some cases can take longer and they are not prepared to stretch income multiples as far as the large lenders. However, their common sense approach and their ethos of fair dealing, in my opinion, contrasts sharply with some of the banks practices.
If you are unsure of the options you have, it is worth contacting an Independent Financial Adviser who specialises in mortgages to provide you with impartial advice on what is right for you. Kieron Bassett Financial Services has two Independent Financial Advisers. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Kieron Bassett CertPFS
30th May 2011
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