Mortgage criteria tightening
It is no surprise to see lenders starting to tighten the purse strings a little and so see mortgage criteria tightening in specific aspects. There have been a few articles creeping in over the last week or so which shows lenders are declining more cases, but there is rarely much detail. Issues highlighted are things like being declined as a potential borrower due to being on furlough or taken a payment holiday, or had pay reduced.
Stricter mortgage rules
That isn’t our experience, as we haven’t seen anyone declined for those reasons. It may be that they are self employed and the company is no longer profitable, or they are working in a high risk sector or their job is at direct risk. The media is rarely interested in looking into the detail as it doesn’t make good click-bait.
For some first time buyers, with a 5-10% deposit it is true that some lenders require you to be called Bob, born on a Tuesday and know the password which must be whispered to a magical goblin in order to get approved… OK, that isn’t quite true or my job would be a lot more fun, but there are stricter rules around this area.
As ever, in the interests of efficiency, below are the key areas where lenders have tightened up and more care needs to be taken:
- If you have less than a 25% deposit
- If you run your own company
- please note, most lenders deem you self employed if you own 20% + of the company you work for
- This also includes Contract workers
- If you are buying for the first time
- If you need bonus/commission to get to the loan amount you need
- If you have had any credit blips in the last 2 years
- If you have been, or are on furlough in the last 3 months
- If you are based abroad or need to use non-Sterling income
Finding the right lender to say yes
If you aren’t on the list above, it is business as usual, if you are, it is by no means a show stopper, but please do engage with us early so we can navigate the very choppy waters for you.
The whole role of a broker is to find you the best lender, which is rarely about the rate they offer. Now more than ever, it is a case of finding the right lender that says ‘yes’ to the goal you are looking to achieve.
All lenders are so cheap, rate chasing is rarely fruitful as there is often a nominal difference in cost, but it can be a very painful experience if you start down the wrong path, especially with the purchase market so busy!
Money Markets all down last week which has bucked the recent trend of upward movements. With nearly all lenders now dealing with higher than pre-lockdown levels of business, with severely limited capacity (worth reading here for more detail on that) which is all pushing mortgage rates UP.
In the last week:
3 Month Sterling Libor = down by 0.002% at 0.068%
2 Year SWAP = down by 0.029% to 0.095%
5 Year SWAP = down by 0.044% to 0.188%
2 Year Variable from 1.19%
2 Year Fixed Rates from 1.07%
5 Year Fixed Rates from 1.31%
BTL Rates from 1.14%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec August 2020
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