Big deposit key to cheap mortgage
As we move into the 4th year of the credit crunch Ray Boulger of leading independent mortgage adviser John Charcol highlights some of the ongoing consequences for the mortgage market.
"Before the credit crunch, getting money from some mortgage lenders was nearly as easy as asking a resident of the North Pole to lend you some ice. Certain lenders fell over themselves to meet lending targets by offering loss leading rates - just ask borrowers who, probably after getting advice from a good independent mortgage broker, are still paying a rate that starts with zero. We now find ourselves in completely the opposite place. It's like asking the same people to lend you some sand.
"Borrowers are being rejected at record rates, often for very minor indiscretions like being late with a credit card payment, and one major lender admits privately to rejecting 90% of the applications it receives for 90% LTV mortgages. The computer says no has become the most common utterance from some lenders. For borrowers it is difficult to know where to turn. Those who rely on best buy tables frequently find that they don't qualify and most High Street lenders (Halifax is an honourable exception) try to inhibit shopping around by leaving a hard footprint even when a customer just asks for a Decision in Principle rather than making a full mortgage application. This blatantly contravenes FSA rules, with only a few footprints needed to crucify a credit score.
"This is a time when, more than ever, a knowledge of the entire mortgage market is not only an enviable weapon, but absolutely critical to secure a competitive mortgage, and sometimes to secure any mortgage at all. In this environment a good, independent mortgage broker is worth their weight in gold.
"The starting point in assessing the best buy mortgage for any particular borrower is to consider which lenders are actually likely to be prepared to lend the amount required, given the borrower's specific profile. Despite six lenders dominating the market, niche building societies, alternative lenders and private banks (which are not just a home for the wealthy) are also active and this type of lender offers the added benefit of mostly using manual common sense underwriting by a human being. This allows cases to be judged on their merit, not on a generic computer model that is often unhelpful to borrowers, to say the least.
"The mortgage market has changed radically and is unlikely to ever return to what we knew before the summer of 2007, but it is not as dire as some think. Borrowers just need to know who to talk to for the right advice."