What's in this edition?
Accord Mortgages - Improved affordability and one hour AIP referrals
Christine Newell’s Compliance and Technical Update
NatWest for Intermediaries- Concierge service and increased maximum loans
Skipton for Intermediaries- Mortgage lending with a human face
Santander for Intermediaries- Launch of new BTL special products
Paradigm Hints and Tips
Accord are more accepting now
Responsible lending is in Accord’s DNA, but they’d got out of line on affordability. Now they’re back in line with the market. They’re still a safe pair of hands, but if you’ve not used them for a while, you’ll find they’ll approve some applications from your clients that they previously wouldn’t have. And in most cases they’ll be happy to lend more than before. Good news for you and your clients. Better still, since July last year they’ve changed their AIP so that more cases are accepted automatically, meaning your clients get an answer quicker. They still care about responsible lending – but you’ll definitely find they’re able to offer your client a loan much closer to the bigger lenders than before.
One hour AIP referrals
When your AIP refers, it’s a sinking feeling. Accord knows you want to get back to your clients quickly because they’re waiting to hear from you. So not only have they reduced the number of AIPs that refer from 55% to 32% over a year, they’ve made the entire process more client friendly. They’ve taken out hand-offs and delay and put in automation, ownership and common sense. Since 16 June 2016, nearly all Accord’s AIP referrals have taken an hour or less, rather than four. So they have gone from dealing with only 41% of AIP referrals the same day to a whopping 94%! So they’ve improved their affordability model, increased AIP accepts and they are faster on AIP referrals. Use Accord’s affordability calculator and see how much your clients could borrow.
Christine Newell’s Compliance and Technical Update
PS28/16– Standardising Buy to Let underwriting – A brief guide
Following the FPC’s concerns around the growth of the buy to let market in the UK and the visits made to 32 Lenders by the Prudential Regulator, the PRA launched a consultation paper CP11/16 looking into standardising how Lenders underwrite their buy to let mortgage business. This consultation finished in June 2016 and week commencing 26th September a Policy and supervisory Statement PS28/16 has been issued confirming these new rules driven from the consultation.
What are the main issues
The main issues for discussion were around standardising the Interest cover ratios (ICR) used by Lenders, along with the other affordability tests applied to buy to lets including costs and new personal taxation. Also the way portfolio and experienced landlords are underwritten and the treatment of the SME factor for capital requirements.
When are the rules being implemented
The feedback from the consultation paper has bought about a phased approach on implementing these new rules. The New ICR and Affordability tests including considering a client’s personal taxation status will need to be implemented by 1st January 2017. All remaining expectations and rule changes will need to be implemented by 30th September 2017.
What are the ICR and Affordability new standard rules
- All lenders will need to implement an Income coverage ratio test using a rate of 5.5% and/or an affordability test if personal income is considered to support such a loan.
- All firms will need to consider the likelihood of further interest rate rises over a minimum period of 5yrs from the start of the buy to let
- In considering future interest rate rises, all firms to have regard to market expectations, a minimum increase of 2% in BTL interest rates and any prevailing FPC recommendations. A firm will need to be able to justify the basis of what is used in these considerations.
- If the considerations above would indicate the borrowers interest rate would be less than 5.5% during the first 5yrs of a borrowers buy to let mortgage, the lender should assume a minimum of 5.5%
What are the main other changes happening
- Portfolio Landlords will be classed as anyone owning 4 or more properties
- A specialist underwriting approach will be needed for these clients which should take a proportionate approach based on their knowledge of the borrower, their portfolio and alternative sources of income they have.
- Lenders will need to assess the borrowers experience, collect asset and liabilities of the borrower including any tax liabilities due to the new tax changes, consider the merits of any new lending in the context of the borrowers existing buy to let portfolio, their business plans and historical and future cash flows associated with their properties.
- Lenders need to put in place and operate with a full written policy detailing the differences between underwriting buy to let landlords and underwriting portfolio buy to let landlords
- The SME factor used by lenders to discount the amount of reserved capital required for certain types of loans cannot be applied to buy to let business. This could mean that the cost of borrowing in the buy to let residential sector might increase.
We can see from some analysis already carried out by Hometrack that potentially it will be harder for certain geographical areas and rental hot spots to achieve such affordability calculations in terms of rental yields using the new standardised 5.5% ICR tests. This in turn could force loan to value levels downwards and potentially increase rents for tenants. Landlords are going to have to look at finding larger deposits or increase rents to cover the new requirements. Lenders are going to spend more time processing portfolio landlords with extra checks on background properties needed, we may start to see niche Lenders championing these areas where more prime residential lenders ‘stick to their knitting’. Lenders could see that 5yr fixed rate products may be a way of avoiding these more stringent affordability checks and enable them to gain market share. If you would like to read the consultation paper and the made rules in full then please click below:
CP11/16 – Consultation Paper PS28/16 – Policy statement paper
NatWest Intermediary Solutions has introduced a new ‘Concierge Service’ for brokers for all applications over £500,000. It has also increased the maximum loan value for purchases to £10m and for remortgages to £2m.This new service will improve the overall customer experience and the application-to-offer timescales. All cases submitted by brokers for over £500,000 will now be assigned a dedicated Concierge Manager who will oversee the progress of each case from submission of the initial application to the point when the first direct debit payment is taken, providing regular updates to brokers.
The initial contact commences with a welcome phone call to cover any additional information required and outline the next steps. They will also receive an email from the Concierge Manager informing them of the Mortgage Reference Number and their contact details. They will then make sure that each application is packaged correctly, that underwriting is completed and will instruct the valuation. They will facilitate the resolution of any issues and keep the broker updated throughout.
Luke Christodoulides, Senior Corporate Account Manager said, “We are constantly looking for ways to improve the broker and customer experience that we deliver and believe that this new Concierge Service will be welcomed. With larger loans, because there are often more intricate and complex issues to address, we felt it would be better to have a single point of contact for the broker who would oversee the mortgage application’s progress from start to finish.
“We believe this service, coupled with our residential interest only offer, £10m maximum loan size, specialist underwriting team and no additional large loan fees, makes NatWest an attractive proposition to intermediaries and their customers.”
Mortgage lending with a human face
If you work in the property market, you’ve probably lost track of how many houses you’ve sold, the number of mortgages you’ve secured and the lives you’ve helped change. For BDMs and brokers, it’s all too easy to lose sight of the human side of what we do. But for the buyer, a house purchase is the biggest single decision and purchase they may ever make. It can take months to buy a house, so we owe it to the buyer to do what we can to help make their dreams come true.
The human touch is an important part in securing a mortgage. How many times has a case come across your desk where there might be something that’s just a bit outside the norm? On paper, the case might not automatically qualify for securing a mortgage, but a phone call or chat will often clear up any questions and help speed it through.
At Skipton Intermediaries, we realise there’s no ‘one size fits all’ approach. That’s why we have our Real Life Lending charter and a nationwide team of IRMs who understand your business and your clients. As local experts, they’ll listen to what you have to say and make things happen. Thanks to feedback from our broker partners, we’ve made a range of improvements to how we work with you. This year we’ve made 64 improvements to our online eMortgage system, introduced day one mortgage valuations, and widened the range of mortgage products available.
Skipton Intermediaries strive to offer five star service in every interaction with you. If you feel we aren’t providing the level of service you’d expect from us or have suggestions to help make our service better, we’d love to know – share your feedback today.
Great service on Santander's Buy to Let mortgages
We recently launched new competitive Buy to Let special products* which will only be available for a limited time:
- 60% LTV, 2 year fixed Buy to Let, 1.94%, 1% product fee – purchase and remortgage
- 75% LTV, 2 year fixed Buy to Let, 2.29%, 1% product fee – purchase and remortgage
Why use Santander for your BTL cases?
1. Minimum 125% rental coverage at 5% up to and including 60% LTV and then at 5.50% over 60% LTV and up to 75% LTV
2. Our simple BTL calculator tells you how much your clients can borrow checking it fits our minimum rental coverage and that the property is self-financing
3. Our current average BTL offer time is 9.9 days, that’s great service!
4. We offer a free standard valuation for mortgage purposes on all purchases and remortgages as well as £250 cashback for remortgages. Overall, a very competitive range
5. We consider BTL remortgages with capital raising for personal use up to 75% LTV - including debt consolidation
Remember, when sourcing our BTL remortgage products please don’t select the ‘free legals’ option on the sourcing system as our products will not appear. We offer a cash back instead of free legals. Please call your dedicated contact to discuss any BTL clients you’re looking to help.
OUR HINTS AND TIPS
Paradigm regularly issue our helpful hints and tips emails which focus on Lenders that will accept unusual cases or our monthly affordability calculations that show which Lenders are best for FTBs and next time buyers. We also produce fact sheets around current, changing topics in the market, the most recent covered the recent BTL tax changes and the governments Help to Buy schemes. For more information on these, click here.
GET IN TOUCH
If you would like more information on any of the items detailed in this bulletin then please get in touch on the numbers below or visit our website: www.paradigmmortgages.com.
Mike Allison (Head of Protection) – 0775690340
Christine Newell (Mortgage Technical Director) – 07824708956
Catherine Kennedy (Mortgage Technical Assistant) - 07741314769
Birmingham Office: Riona Mulherin – 0121 781 7338/7337