Tag Archives: Mortgage lending

The mortgage process – what’s involved

Mortgage process

Sarah Logeswaran, a first-time buyer from London, recently sent Springtide Capital some positive feedback as follows:

“Springtide Capital’s extensive knowledge and experience, coupled with their approachable and friendly nature, really eased me through the process of purchasing my first home.”

We thrive on feedback at Springtide Capital, as it helps us to continually improve the service we offer.  We’re thrilled that Sarah was happy with the high level of service she received and it’s something we strive for with all our clients, as we know that getting a mortgage is one of the most stressful things you can go through. We’re proud of the service we give and that’s why we’d like to help new clients to understand what they can expect from us when purchasing their first property.

Henry Knight, Director of Springtide Capital has also provided his tips on key broker qualities.

  1. The initial meeting

A client’s perspective: The client initially approaches Springtide Capital to obtain a mortgage for a property they have set their sights on. Although the majority of clients are savvy with their finances, the mortgage market is baffling and clients often require guidance on what they can afford and the types of mortgages available. Non-advised sales of mortgages are now not available so a client must seek financial advice.

Moreover, clients usually prefer face-to-face meetings with a broker, rather than a call centre adviser, due to the private nature of the questions, which must be answered. It also provides the client with more options, as the broker isn’t tied to a specific lender, and gives them a point of contact to guide them through the mortgage process.

A face-to-face meeting is then arranged and our Mortgage Consultant will go through their client’s requirements, financial situation and explains the application process and the types of mortgages available.

Springtide Capital’s perspective: The mortgage industry is heavily regulated, and it’s vital that the Mortgage Consultant can demonstrate (document) that any recommended mortgage fits his/her client’s personal circumstances and is affordable in the event of rate rises – protecting the client.

Henry’s tip: “A mortgage consultant should take the time to understand a client’s circumstances on the first meeting. They must then clearly explain the process and then make sure the client understands the financial commitment they’re undertaking.”

  1. The key facts documents

A client’s perspective: The client will then receive a Key Facts Illustration (KFI) document, explaining, in detail, the type of mortgage recommended (including interest rate, the overall Annual Percentage Rate of Charge (APRC), the monthly payment and any fees), the total amount payable over the term of the mortgage and next steps they’ll go through if they wish to proceed.

Springtide Capital’s perspective: This is where our Mortgage Consultant’s experience really comes into play. Using all of their knowledge of the market, regulation and lender relationships they will have researched the deals available that best fits the client’s needs before issuing a KFI. They will also take into account any additional challenges that the client may face when applying for the mortgage e.g. any restrictions they might have that could make getting a mortgage difficult and place the business with lenders who specialise in such cases.

Henry’s tip:“A mortgage consultant should have an in-depth understanding of the mortgage market in order to find a mortgage which best fits the client’s circumstances. They also need to know how to structure a proposal to a mortgage lender especially where the client’s circumstances are outside of the standard criteria.“

  1. The Agreement In Principle (AIP)

A client’s perspective: The client is given an AIP by the lender and details are sent out to read and discuss with the Mortgage Consultant. The client can then place an offer on the property. Once the offer on the property is agreed, our Mortgage Consultant will then submit a formal application with full information to the lender.

Springtide Capital’s perspective: This is a crucial part of the process as an AIP is only based on information provided by the client. To obtain a mortgage the Mortgage Consultant must then evidence the facts provided by his/her client e.g. proof of income, bank statements etc. It’s then vital that everyone in the process is kept up to date with progress until exchange of contracts and money is transferred from the lender. This is often the most stressful part of the mortgage process and that’s where our Mortgage Consultants really come into their own. They will liaise with their client, the lender, solicitor and estate agent to ensure that all the documentation is received and will often be the first point of contact if things don’t go as smoothly as planned. They will work hard with all parties to make sure their client gets the resolution they need, with as little hassle as possible.

Henry’s tip:“A mortgage consultant should keep all parties updated with progress, whether they are the client, lender, estate agent or solicitor. They should be available throughout the process and proactively resolve any problems that crop up.”

 

If you would like to speak to a Springtide Capital mortgage broker please call

020 3040 4400.

Marginal drop in post-referendum house purchase activity

According to the Council of Mortgage Lenders’ (CML) latest market summary, there has been a marginal decrease in house purchase activity following the EU referendum in June this year.

CML has estimated that gross mortgage lending was £21.4 billion in July, only a small decrease on June’s figures, but the first year-on-year drop for more than a year.

A year-on-year drop hasn’t gone unnoticed, as the Bank of England (BOE) has announced a “significant monetary stimulus, aimed at supporting the domestic economy during a protracted period of uncertainty and structural change.”

Economic snapshot

CML’s market summary reported that “the post-referendum economic landscape is not much clearer than a month ago. Some indicators are more backwards-looking or inherently volatile than others, and this makes it harder to gauge where things currently stand.”

On the other hand, the UK has a record proportion of working age people in work, the unemployment rate is down to 4.9% and retail sales rebounded strongly in July.

Henry Knight, Managing Director, Springtide Capital commented: “Although a decrease may sound negative, the UK economy actually seems to be fairing well following the referendum. We still have a long and unknown road ahead, however, we can take some reassurance in the fact that the Monetary Policy Committee (MPC) has a package to support financial pressures.”

The MPC package

According to CML, “the MPC unveiled a significant package of monetary measures in early August. Reflecting the transmission delays before the monetary policy takes effect, the Bank’s timing is designed to provide meaningful stimulus to our domestic economy as growth sags going into next year.

“As well as the widely anticipated 25 basis point reduction in Bank Rate to 0.25%, the Bank of England also announced a fresh round of quantitative easing – with £60 billion of gilt purchases and up to £10 billion of UK corporate bond purchases – and a new £100 billion Term Funding Scheme (TFS).”

How will this help?

Firstly, the base rate will no doubt help borrowing rates to remain low, which helps affordability for households and firms.

Secondly, lenders will have access to £100 billion over the next year at beneficial rates for four years – supporting the financial pressures that they will face. As a bonus, new lending may also be eligible for a matched amount of additional funding under the new package, encouraging new business.

House price growth changes down a gear

According to the latest Halifax house price index, it’s too early to determine whether last month’s slowdown in house price growth is a result of June’s Brexit decision.

House price growth slows down

The Halifax house price index reported a fall of 1 per cent in July’s house price growth, although year-on-year house prices are still increasing, growth is slowing down.

Despite the fall, the bigger picture shows that the UK still has healthy growth; house prices in the three months to July were 8.4 per cent higher than the same three months of 2015. This is also reflected by the fact that house prices in the last three months (May-July) were 1.6 per cent higher than in the preceding three months, with an average house price of £214,678 according to Halifax.

The rate in which house price growth was increasing was seen by many as unsustainable because it makes properties unaffordable, slowing the market down. Interestingly, the number of first-time buyers rose by around 10 per cent in the first half of the year, compared with H1 2015, which reflects measures to help first-time buyers on to the property ladder. Any further slowdown in house price growth would be welcomed by first-time buyers.

Home sales figures still remain distorted by the introduction of the buy-to-let stamp duty change but are continuing to improve with a 5 per cent increase compared with May. Overall, sales for H1 were 11 per cent higher than the same period last year.

Economist view

Martin Ellis, Housing Economist, Halifax says: “House prices in the three months to July were 1.6 per cent higher than in the previous quarter; up from 1.1 per cent in June but comfortably lower than earlier in the year. The annual rate of growth was unchanged at 8.4 per cent; the lowest since July 2015.

“There are signs that house price growth is slowing with a deceleration in both the annual and quarterly rates of increase in the past few months. Nonetheless, the current rates remain robust.

“July’s monthly decline largely offsets June’s increase. The month-on-month changes, however, can be erratic and falls often occur within an upward trend. Overall, it remains too early to determine if there has been any impact on the housing market as a result of June’s EU referendum result.”

Financial adviser view

Henry Knight, Managing Director, Springtide Capital says: “Although economists will not commit to last month’s slowdown in house price increases being due to Brexit, it does support my thoughts on house price inflation levelling out, against what was, an unsustainable level of growth.

“A decrease in the interest rate is also a sign that the UK is looking to stimulate the market, but the fundamental issues in our property market are no different now than they were before. We still have a shortfall in housing stock.”