Sebastian Murphy is head of mortgage finance and Rory Joseph is director at JLM Mortgage Services.
As we move out of the COVID restrictions – perhaps by the end of the month, although it would also be nice to hear the science behind this – we should all be able to see and speak to our lender representatives in person much more often.
Whether it’s at an industry event, or a one-to-one with a BDM; a coffee with your relationship manager or, dare we say it, a trip to the races/football/cricket, you name it, we are looking forward to those catch-ups when we can put some questions to those who should hopefully be able to help.
First-time buyers happy to risk savings, study shows
So, what might we be concerned enough about to raise? Well, below are a few examples of what we think a good old-fashioned conversation might cover and we await to see just what answers and progress we might get.
First up, is new-build. More specifically new-build purchasing by landlords, and the way they’re treated compared to owner-occupiers. The disparity between the way some lenders approach new-build landlord purchasers and residential borrowers, particularly first-time buyers, is simply bizarre.
In basic terms, many lenders believe landlords buying new-build to be twice as risky as first-time buyers. Hence, why they insist on a 50% deposit from the former, compared to a 25% one from the latter. You may need to read this sentence again to get the full level of bewilderment many advisers will feel at such an approach.
In other words, lenders believe someone with no previous history of paying a mortgage is less of a risk than an experienced landlord purchasing an investment. It should be pointed out that if a first-time buyer loses their job, they are likely to go into arrears and face possession; if a landlord loses their tenant, they find another one.
Would it be possible for those lenders working in such a way to review their criteria, because it’s a very odd thing to have to explain to landlord clients. Also, while they’re at it, perhaps they would also look at their maximum LTVs for buy-to-let – again if you’re willing to look at 95% LTV for a first-timer, then 80/85% for a landlord should not be out of the question.
Next up, and related to buy-to-let, are ‘Green’ mortgage products. We fully understand the positive PR to be generated but can we have products which make an actual difference, rather than simply reward those who already have a property with EPC level C and above.
This isn’t the issue that needs to be addressed. We need products that provide incentives to those owners who have properties yet to meet that level, not those already there. What is the point of that?
There is a structural issue around the UK housing market here of course. A question about the housing stock we have, and how we improve its energy efficiency. The Government has chosen to start with the PRS, which is fair enough, so can we offer products/cashback and the like which incentivise them to carry out the work, to meet the levels required, and then reward them again when they meet that level. Anything else really is greenwashing.
Finally, a word on lenders’ use of conveyancers and, in particular, ‘free legals’. We understand the cost of ‘free legals’ is far below that of the cashback you might otherwise offer, but let’s also think about the service delivered and the benefits in getting through to completion in a timescale less than six months.
The benefits should be obvious to all. Slowing down the process to a snail’s pace ends up causing more stress and frustration and ensures our pipelines don’t move as fast as they could or should. There has to be a better way. Actually, there is and it’s called cashback but, for some reason, the word ‘free’ tends to do all the heavy-lifting here. Even though ‘free’ of stress is the last thing it delivers.
That’s just a few conversations we’ll be having – there are many more which I’m sure demand the attention of the lender representatives you’ll be seeing with increasing frequency. Let us know how you get on.