Mortgage application changes 14-04-14

[kmpowell]

P-Jay said:

Kmpowell ask yourself this - with your current income / expenditure could you really afford to repay a half-million pound mortgage and still have any sort of lifestyle?

To be clear, I'm not accusing anyone here of being stupid - as proven Kmpowell was/is borrowing a sensible amount as proven by MMR Calc

It's an interesting question, and given we are by choice only borrowing 2.8x our basic income, I'm not sure I can give you an answer that typifies the people currently in the mortgage market.

Could we 'afford' it? as Sarnie could testify the answer to that is yes. I like to think we're switched on with our money and our calculations show that after ALL our planned expenditure each month we'd have enough left over to cover another £200k on a mortgage, and still be able to leave an 'ok' lifestyle. The problems would only come if we were to lose our jobs etc and fall into arrears. The difference with us, as you've rightly pointed out, is we're choosing not to spend that on our mortgage. We're instead using that buffer to make over-payments when we can, but primarily build a secure future for our 6mth old son. We are being sensible and borrowing well within our means.

Just so it's clear, I think MMR is a good thing, as it brings people back down to a realistic spending level. However, if house prices keep rising at the rate they are then as the months go by the mortgage companies will have no choice but to relax their rules. As I've already experienced, each lender has interpreted the new rules completely differently(!), so there's no standard approach and given the mortgage market is business/volume driven, if MMR digs too deep into revenue it'll be relaxed by lenders to hit targets.

[jrinns]

I'm in a strange place, sold my house in a good area for more than I thought it would be worth EVER! Struggling to find that next place as we are going up the ladder quite a bit. It looks like rented will be the way forward until we find the next house (constraint is we need a few acres).

Hopefully when I come to apply for the mortgage it won't be a problem but who knows, it gets you thinking. I have SA302 showing good earnings for a number of years and will have 50% deposit but its things like Private schooling bills that could impact my borrowing now.

Oh well with a bit of luck I will complete the sale of mine, go in rented and prices will drop ;-)

Edited by jrinns on Thursday 1st May 15:02

[Sarnie]

graphene said:

There are Accord products with £250 cashback (plus other incentives) and there were such products available before they pulled many of their deals on/around the 16th. If you are looking at their website, then you need to tick the 'incentives' box to see the deals (they incur a £345 or £845 fee). For the 2yr 85%LTV situation stated above, it's something like product code 40729. Roughly-speaking, the deal rates seemed to have gone up by 0.20% since last month.

Edited by graphene on Thursday 1st May 12:52

I realised after I posted I was looking at the remortgage rates and not the purchase products. Have since help the poster secure the 2.79% rate elsewhere now so no drama

[texasjohn]

Sarnie

Have Halifax criteria changed significantly since these new rules came into play? What do you need to provide in terms of evidence and are they assuming kids = childcare costs?

Any changes specifically to contractors/freelancers?

Also, how do lenders view shares and investments in terms of proof of savings/deposit? I ask because the value of these can change from week to week rather than cash savings which of course doesn't (significantly, at least)

Thanks in advance...

Edited by texasjohn on Thursday 1st May 20:29

[bigtime]

Sarnie please can you or any other FA's please provide me some advice? I've lived in my current house for 9 years and changed my mortgage around 5 years ago. I've been meaning to change over for the last 2 years but never got round to it as I am currently on a Libor tracker at 2.5%. Am I best to look at a different mortgage or is there no point as I'll only probably get the same rate as I am currently paying.

[bigtime]

Sarnie please can you or any other FA's please provide me some advice? I've lived in my current house for 9 years and changed my mortgage around 5 years ago. I've been meaning to change over for the last 2 years but never got round to it as I am currently on a Libor tracker at 2.5%. Am I best to look at a different mortgage or is there no point as I'll only probably get the same rate as I am currently paying.

[Sarnie]

bigtime said:

Sarnie please can you or any other FA's please provide me some advice? I've lived in my current house for 9 years and changed my mortgage around 5 years ago. I've been meaning to change over for the last 2 years but never got round to it as I am currently on a Libor tracker at 2.5%. Am I best to look at a different mortgage or is there no point as I'll only probably get the same rate as I am currently paying.

Why do you want to change your mortgage?

[bigtime]

Thanks for quick response. Friends and work colleagues seem to be banging on about fixing their mortgages and I just don't want to be ripped of when rates increase. I am also thinking of buying a car on HP but may put it on hold if I change my mortgage in next few years.

I am happy to stick with my 2.5% lib or tracker if the costs of setting up a new mortage would negate any saving.

[eliot]

Would be interested in Sarnie's view but I don't really get the point of fixed rates - as banks are never going to loose money in the shape of lower interest rates - the rate given always seems to hedge their bets.

Quick example:


I'm on a 2% lifetime tracker that has an APR of 2% - because there is no silly "brand new customers only" rate.
Why would you go for a mortgage with a seemingly low interest rate for it only to revert to a higher rate 2 years later - especially when you are having to pay £1000-2000 product fees every time.

Edited by eliot on Sunday 4th May 08:16

[Sarnie]

eliot said:

Why would you go for a mortgage with a seemingly low interest rate for it only to revert to a higher rate 2 years later - especially when you are having to pay £1000-2000 product fees every time.

Edited by eliot on Sunday 4th May 08:16

For a number of reasons.

- "Lifetime" products are not available at all LTV's, typically reserved for lower LTV's therefore not everyone can get access to Lifetime products.
- Budget. Most people are on a tight budget and want to ensure that no matter what for the specific period of time they can guarantee their outgoings.
- Interest rate rises. It's been on the cards for a few years now granted, but when rates do start to increase people will jump ship from all the Lifetime products on to fixed rates. Lenders know this.

If you are financially comfortable, have low LTV and could absorb the rates going up by 2-3% then Lifetime products probably make sense. Unfortunately not everyone is in the above position.

For what it's worth, with regards to fees, I agree that it doesn't make sense to be paying the larger fees, we tend to recommend products with fees of £1k or less. However, saying that, if the balance is particularly large (£500k+) then paying a few hundred more to secure a product with a lower rate can make sense.

[kmpowell]

eliot said:

I don't really get the point of fixed rates

The cheapest 85% LTV trackers/discounted on the market are c2.49% (followed by c5%) with a fee of c£1000. The forward rates for UK Libor (which more or less tracks BOE base rates) are... 2 years: 1%, 3 years: 1.5%, 4 years: 1.8% and 5 years: 2%. So if we see that come true tracker rates will be up at at least the 3% mark in less than 2yrs time.

The 85% LTV fixed rate I've just obtained was 2.79% for 2 years (followed by 3.99%) with a £499 fee.

A complete no brainer in my book. Is that good enough a point for you?

[skahigh]

I've only read the first 3 pages of this thread but as we are planning to remortgage in July when our fixed rate ends I thought I'd do the nationwide calculator and see what we got....

Joint annual income after tax around £60k
Mortgage of £160k required on house worth £250k
I have a personal loan of £6k, no other debts whatsoever for either of us and no unusual extra expenditures
Substantial sum of money in the bank (which they don't ask about)

Over 25 years Nationwide offered to lend us £34k!!!! WTF???

I am a limited company IT contractor so perhaps this is why but, surely they would lend my wife alone more that that????

[Sarnie]

skahigh said:

I've only read the first 3 pages of this thread but as we are planning to remortgage in July when our fixed rate ends I thought I'd do the nationwide calculator and see what we got....

Joint annual income after tax around £60k
Mortgage of £160k required on house worth £250k
I have a personal loan of £6k, no other debts whatsoever for either of us and no unusual extra expenditures
Substantial sum of money in the bank (which they don't ask about)

Over 25 years Nationwide offered to lend us £34k!!!! WTF???

I am a limited company IT contractor so perhaps this is why but, surely they would lend my wife alone more that that????

It's pretty hard to know why the £34k figure was returned without knowing exactly what you have inputted, for example, the balance of the loan has no bearing on affordability, only the monthly payment. A £6k loan may not sound a lot if the payment is £100 a month, but if it's £500 then it's going to have huge impact.

Do you have children?

You mention £60k of net income, but what did figures did you input for your incomes?

[skahigh]

Having played with it a bit it appears the figure I got is the result of the trading time of my business, make it three years instead of two and suddenly they will lend us £250k.

[vescaegg]

Blimey thay certainly makes a difference!