The Case of the Missing Thousands
Posted on 8 July 2014
We knew that life would never be the same after the implementation of the new Mortgage Market Review (MMR) on the 26th April, but that was an understatement for what has been bestowed upon us.
My first week of broking entirely under the MMR rules has been interesting. I’ve had lenders wanting to verify previous addresses from many years ago, and then one lender who insisted that if the term of the mortgage exceeds the age of 65, they must confirm that the borrower is making pension contributions, although I have not yet come across any lenders asking how often you eat steak, as some press coverage has stated! I have been impressed by lenders’ new websites, and their dedication and commitment to MMR. Surprisingly some of them still don’t have affordability calculators to help brokers, thus adding to the overall confusion.
But how do you compare deals in the new era? Brokers have traditionally used online sourcing systems, and the new rules render these systems useless, unless they take into account each and every lender’s specific requirements.
Forget about using electronic research now, it’s all about fine tuning. Here at John Charcol we moved away from automatic to manual broking years ago, so in this respect it’s almost a case of business as usual for us in terms of the process.
I decided to test the waters with a re-mortgage on a residential property with a small amount of capital raising for the purchase of an investment property. Basic income was around £27,000, plus some consistent overtime of about £10,000. The loan to value was just under 70%, and there was a small balance on a credit card and a personal loan being paid off. Let’s assume this client is living with their partner who is not on the mortgage. They have two children, but no nursery costs, as the other partner stays at home and looks after the children.
I studiously and meticulously started to scale down the list of lenders and deals, went through lending criteria and affordability calculators as if this was the first ever mortgage I was broking.
I aimed for a loan of about £170,000. which was admittedly a bit ambitious but the results were surprising. I started to make my way through the market, starting with the most competitive rates. The maximum amount that some of the most competitive lenders could offer started from only £68,000. The results improved slightly as I continued further - £109,000; £136,000; £154,000 until I received the highest possible result £169,600.... So, I managed to broke my hypothetical case. My question is, how is an individual borrower expected to navigate this new world? Even in the first few weeks of MMR we have learnt a lot about which lenders have similar lending criteria, and which lenders may be able to offer a higher loan (with a higher rate to go with it!) but without a broker it would be extremely difficult for a new borrower to get the best deal for them. If you’re thinking of applying for a mortgage but are not sure how MMR has affected you, it’s important to note a general trend of slightly lower loan offers across the board. Talking to a broker can rally improve your chances of finding the right mortgage for your circumstances.
Categories: Mortgages London
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