DEMYSTIFYING THE SPECIALIST LENDING MARKETS – DRAW ON THEIR EXPERTISE
If you haven’t thought about using Kensington for your more complex deals then it may be time to take a look at this Lender. They will accept cases where other Lenders decline due to adverse, low credit score or complex income structures. Kensington are also one of only two mainstream lenders who accept clients who are currently in a Debt Management Plans. Have a read of the article below and click on the link to see actual scenarios that have been agreed, it may well help you with a case today.
Kensington has launched a major new campaign designed to help brokers write more specialist mortgage business. As part of its ongoing commitment to intermediaries, the lender has invested in a three-stage campaign, with original content to help brokers place cases for clients who can fall outside of the mainstream.
The first stage features never-before-seen animated case studies based on mortgages that Kensington has been able to approve in recent months. This was followed by a brand new Marketing Toolkit website, with top tips and information for brokers on how to promote their business.
In May, Kensington will point brokers in the right direction when it comes to placing a case, with a video that highlights the key stages in the application process and useful guides on how to read bank statements and credit reports.
Brokers wishing to access this free information should visit www.kmc.co.uk/expertise and check back each week for new guides and tips.
Steve Griffiths, Head of Sales and Distribution at Kensington, says: “Finding a home for your complex cases doesn't have to be complicated.
“At Kensington we have been a home for hard to place cases for 20 years now and we are always keen share our experience of specialist lending to help demystify the process.
“So we are calling on brokers to draw on our expertise. We think we can help you to identify and place more specialist business, which can only be good for your business.”
Criteria changes for Kensington:-
- Increased maximum age from 65yrs to 75yrs
- Increased maximum borrowing term from 30yrs to 40yrs
- Minimum valuation reduced to £75,000
- Minimum income requirements removed for experienced landlords
AFFORDABILITY STRESS TESTING
Please find below my updated tables on affordability. I have been comparing these Lenders quarterly since MMR day in April 2014. We have seen quite a bit of movement positively and negatively from Lenders in that time. I don’t tend to include Woolwich on these comparisons due to the fact that their affordability calculator is set up differently to others and does not give a value for maximum borrowing. However this article cannot be published without mentioning the fact that Woolwich recently moved to a more positive position and increased their loan-to-income (LTI) cap from 4.5 x income to 5.for aggregate lending in excess of £300,000. For standard lending up to £300,000 a cap of 4.49 x applies where previously this was 4.5 x.
Scenario 1 – Joint First time buyer at 90% LTV – no dependents. Student loan and credit card debts. Incomes £28,000 and £25000 + car allowance £500 pcm respectively (wishing to borrow £225,000)
Platform - £295,000
Skipton - £295,000 (will be lowering LTI cap to 4.75 x income from 11th May)
Nationwide - £280,300
Halifax - £265,500
Scottish Widows - £265,500
Santander - £265,494
Leeds - £251,378
NatWest - £250,700
Accord - £244,218
Virgin - £237,500
Coventry - £232,295
Scenario 2 Joint Next time buyer 70%LTV – 2 dependent children, car loan and nursery fees. Incomes £55,000 + £6000 car allowance and £45000 respectively (wishing to borrow £300,000)
NatWest - £500,000
Scottish Widows - £454,500
Halifax - £454,215
Platform - £427,820
Santander - £424,602
Skipton - £382,250 (will be lowering LTI cap to 4.75 x income from 11th May)
Nationwide - £356,200
Accord - £349,587
Coventry - £328,101
Virgin - £318,750
Leeds - £307,349
WHAT DO LENDERS CONSIDER WHEN ASSESSING AFFORDABILITY
Most Lenders consider 3 types of categories for expenditure within their affordability models. These were expressed within the changes to MCOB rules in the MMR:-
- Committed Expenditure e.g. existing credit, loans, child care costs
- Basic Essential Expenditure – council tax, utilities, food, housekeeping
- Quality of Living – Gym membership, holidays, Sky TV or media,
Some lenders also take into consideration such things that are deductible from Gross or Net Salary, for example Pension contributions, additional pension contributions and child care vouchers or salary sacrifice schemes/benefits. I am attaching an acceptable income table which details some of the elements that Lenders take into consideration when looking at salary and other benefits for affordability purposes. I have also included deductible items.
Loan to Income ratios (LTI) as a reminder the Bank of England set a ruling that no more than 15% of a Lenders mortgage book can be above 4.5 x income. Skipton have managed to hold their LTI cap for as long as possible but on the 11th May they will be reducing down to 4.75 x income.
BUY TO LET MARKETS
The Buy to Let markets are set to increase this year and we have already seen a number of new entrants challenging for market share, such as Fleet Mortgages, Foundation Home loans and Metro Bank. This is all good news for experience landlords. However, for those clients who are considering getting into these areas with no experience it is not necessarily the Utopia you might be thinking it is. In March 2016 when the Mortgage Credit Directive imposes their new rules on the UK, BTL transactions will ceased to be regulated by the FCA and will also move out of Consumer Credit. This means that Lenders will be the gatekeepers of who they wish to deal with. As a group guided by their union the Council of Mortgage Lenders, they have come up with a charter on how they should deal with BTL business moving forward so as to mitigate risk and attract quality clients and business. Within this document they state that they would expect an Intermediary to be explaining to a potential new client their responsibilities as a Landlord to their tenants and what is involved in the whole process of buying property for investment purposes. You can view the statement of practice by going to the Council of Mortgages website, however Coventry have set out their statement below.
Dedicated to the intermediary market, Coventry Intermediaries are here to support you and your clients. You’re an integral part of their business and one they value highly. So with the CML introducing their Buy to Let Statement of Practice, they’ve created a BTL factsheet to ensure you have everything you need during the sales process - to help your BTL clients understand their landlord responsibilities.
What your clients need to know
Together you have a responsibility to communicate the key commercial obligations associated with taking out a Buy to Let mortgage including:
- Shortfall in rental income and/or increased costs
- Tenancy agreements
- Deposit protection schemes
- Protecting an investment
Consumer Credit: If you haven’t already done so you need to consider applying to vary your permissions and add consumer credit to your existing FCA permissions via the FCA’s connect system.
Why?- If you want to continue to offer BTLs, 2nd charge loans or consolidate any debt using these two transactions as vehicles to do so then you will need to apply for these permissions. From March 2016 both of these transactions will come out of Consumer Credit and 2nd charge loans will move into regulation. Buy to Lets will no longer be regulated apart from a new category called Consumer Buy to Lets which picks up accidental landlords and those clients who have acquired an investment property through circumstance rather than actively sought to purchase a BTL for business purposes.
What do I need to do? – Have a look at the below checklist
- Check your interim permissions click here for the register
- Check you are holding the correct interim permissions – Generally you will need Credit Brokerage to carry out BTL and 2nd charge lending even if you only refer to a 3rd parry broker for both. You may also need Debt Counselling on a commercial basis limited to BTL, 2nd charge and investments. The latter permission is needed if you want to consolidate debt using a BTL or 2nd charge loan
- Log in to the FCA Connect system – You may have received a reminder email from the FCA giving you the link to click on to vary your permission.
- Once logged in you click on start a new application and follow the form through
- You are only adding consumer credit permissions so do not change anything else in the permissions section. Click on the Consumer credit permission tab and it should have pre-populated your interim permissions. You can now add or delete required permissions.
- If you are adding or deleting any permissions then you may be asked to supply some more information around your business model and how this may have changed. You could also be asked for further supporting documentation.
- If you are in any doubt about any of the questions then you can ring me to discuss or you can contact the FCA on their helpline number 0300 500 0597.
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Their Loyalty Mortgage product range:
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To be eligible for these Loyalty products, your clients must EITHER:
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Their Loyalty range also offers Homebuyer or Remortgage Solutions, providing a free standard valuation on a property valued up to £2.5 million plus £250 cashback for purchase or standard legal fees paid for remortgage. The cashback/paid standard legal fees are repayable if the mortgage is redeemed before the end date on the benefit package. Click here for the full eligibility criteria for our Loyalty mortgage range.
PLACE YOUR VOTE!
Election fever is nearly over and it looks like the Conservative Party will make it to the 325 seats needed to form a majority government. The moral of this story for anyone who wants to force a change or make a difference is to always vote.
We need you to Vote again now in our Provider Awards, it takes 5 minutes to do and it certainly makes a difference to the Lender and Providers who win. If you don’t want to see the same old suspects collecting awards then click on the button below now.