www.iva.co.uk

Hi
Just heard on the news that house repossesions are expected to rise by over 50% in the next twelve months.
Now that sounds a frightening figure and will surely impact on lending criterea for future mortgages.
I would guess that we will see a tightening of loans v income multiples.However if you have zero personal unsecured debt you could comfortably afford a four/five times salary mortgage compared to someone with 50k of personal debt trying to pay a mortgage three times salary.
It's all about affordability,as is any debt....................so let's see more affordability tests in both secured and unsecured lending.
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

Hear Hear! I am personally fed up of seeing people knocked back for mortgages which are clearly affordable, simply because they don't fit an outdated matrix of borrowing.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

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Hand on heart, I do not know of a single case where a regulated mortgage contract was knocked back due to affordability issues that do not exist. Affordability is based on the applicants’ personal circumstances, available historical repayment data and the lenders appetite for risk, all of this is considered at the design stage of any regulated mortgage product.

There are already 125% products available, which will allow 5 or 6 times income multiples, there are unscrupulous unsecured lenders who will lend 9 times income (with hideously loaded rates), whether the applicant can afford them or not…

Recent events in the sub prime lending market in the USA has taught us the UK mortgage industry has to be very wary of secured lending over and above the property value especially when dealing with our own sub prime applicants.

I hate to say this, but, I disagree. I believe we are still supplying products that could, at the drop of a hat, cause a borrower difficulties if their circumstances change in the slightest.

From the regulated point of view, lending matrix are far from outdated, most lenders change them every six months.


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LEYBRIDGE LIMITED
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Specialising in adverse credit.

Firm FSA No:313790
Personal FSA No:MJB01557

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For the next twelve months there are believed to be 110000 people per month coming to the end of two year fixed interest rate mortgages. These mortgages were fixed typically at rates much lower than those available today.

For example a £100000 loan (interest only) fixed at 4.25% two years ago will cost £354 per month. A new mortgage at an example interest rate of 6% will be £500 per month.

Combine this with more restrictive criteria for the underwriting of mortgages and there's the risk of some really serious problems.

No surprise that more people are using unsecured credit to pay secured debts, they have no choice as:
1 - They cannot remortgage due to underwriting changes and get stuck on the lenders standard variable rate or/
2 - They can remortgage but still face much higher monthly payments.

Could have a sizeable effect on volumes of reposessions and all types of unsecured debt solutions over the coming months.


Andrew Graveson
Independent Mortgage Broker & Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

Hi
Mike,if a mortgage lender has a set criterea that states a maximum of 3.5 times salary then someone with no unsecured borrowing could be denied a mortgage that would clearly be affordable if they were after a four times income advance.
regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

As I stated it depends on the lenders risk appetite and also the demographic market that the lenders are aiming their products at.

For those applicants with a clean credit history and minimum current commitments secured or unsecured there are products available with much higher multiples.

True, they would not be able to achieve an adverse product that has matrix criteria of a maximum of 3.5 times salary, but with the rates of these adverse products, they (the applicant) probably wouldn't want one.


FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

Firm FSA No:313790
Personal FSA No:MJB01557

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
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Please read our Initial Disclosure Document(IDD):
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Have just read Mike's post after writing my previous one.

The irony here is that Mike feels some of the products that have been offered have been irresponsible (e.g. 125% loans), but for those that took them in previous years their withdrawal/restriction could cause financial oblivion which is hardly responsible.

A difficult line to tread, and one I'm sure the mortgage market will resolve rather than any personal view on what people should and should not be allowed to do.

I read an interesting article in the mortgage trade press recently that I think sums it up:
- Lenders are responsible for supplying responsible products.
- Internediaries are responsible for supplying advice genuinely in their clients best interests.
- Borrowers are responsible for the debt.

If all parties stick to that then I don't see the need for rigid income multiples or LTV criteria. Of course all of our definitions of 'responsible' will vary and we'll inevitably differ in our opinions as a result of that.



Andrew Graveson
Independent Mortgage Broker & Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

I do not believe all 125% products have been issued irresponsibly. As previously stated in a number of threads, lots of people have these products with no issues at all.

I do believe, however, that where the products have been supplied without a true investigation into the likelihood of the borrower falling into difficulties with repayments later is irresponsible. As none of us are able to see into the future the only way is to look at what has gone before or what is happening in similar markets in other countries.

The current restrictions being placed on the majority of products are those products that are aimed at the sub prime or medium to heavy adverse markets.

Too much has happened for lenders not to take action. House prices are falling, rates have risen and to offset future problems lenders are starting to restrict what is available. A damn good move in my opinion.

There are, as Andrew quite rightly states, a lot of people who are going to feel the pinch, but remember they were all provided products that were available at the time, based on the information available at the time. No one knew the market was going to turn the way it did, no one knew rates would go up or that house prices would start to stall, and people caught with the end of their fixed rates are going to suffer. But for responsible lenders to do nothing, would be irresponsible.


FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

Firm FSA No:313790
Personal FSA No:MJB01557

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
http://mikebdomain.blogs.iva.co.uk/
Please read our Initial Disclosure Document(IDD):
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Mike,
Are lenders changing their criteria for the purposes of responsible lending, or are they changing their criteria due to a lack of funds available on the wholesale markets and a lack of understanding as to the sell-on value of their potential mortgage book?

Andrew Graveson
Independent Mortgage Broker & Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

That’s very cynical Andrew, LOL - a bit of both, I hope, although, we both know the difficulties some lenders are facing; you must be getting the same calls we are.

FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

Firm FSA No:313790
Personal FSA No:MJB01557

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
http://mikebdomain.blogs.iva.co.uk/
Please read our Initial Disclosure Document(IDD):
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Not trying to be cynical. It makes a big difference. In scenario one we can expect permanent changes in the market, in scenario two we can expect a return to the previous market as money markets see a return of confidence (which for many reasons might not be quick).

I think I may have had the same calls as you though!

Andrew Graveson
Independent Mortgage Broker & Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

I am hoping for and anticipate a slow return to something that resembles what we previously had. Although, other factors are now having an influence, that will make it even slower, including, but not limited to the recent stall in house prices.

I’m not sure about the clean market, we are new player, having specialised in the adverse credit market for so long. But, I’m fairly confident there are a lot of smaller niche lenders sitting on the sidelines of sub prime, waiting to see what happens, as the big boys start to shift, they will jump in with new products, hoping for a bite of the cherry. There is just too much money to be made in the adverse market for them to stay out for too long. And there isn’t enough clean business for everyone to stay in the game.

When we have lenders phoning up to see if we have any cases for them, we know they are starting to feel the pinch themselves.


FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

Firm FSA No:313790
Personal FSA No:MJB01557

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
http://mikebdomain.blogs.iva.co.uk/
Please read our Initial Disclosure Document(IDD):
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Hi Mike
Do you get that happening ?
I used to work in car finance many years ago and we would take a "flyer" on another companies rejection just to get a foot in the door of the dealer............interesting to think that it may happen in the mortgage industry
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

It's what the sub prime industry is built on. Who is prepared to take the bigger risk..

FREE ADVICE IS THE BEST ADVICE

LEYBRIDGE LIMITED
Mortgage Broker
Specialising in adverse credit.

Firm FSA No:313790
Personal FSA No:MJB01557

see feedback and testimonials at:
http://www.leybridge.com/testimonial.php
Check out my blog at:
http://mikebdomain.blogs.iva.co.uk/
Please read our Initial Disclosure Document(IDD):
http://www.leybridge.com/Leybridge-IDD.pdf

Grrrr ...
I'm going to chuck in my personal tuppence worth.

The housing market is grossly overpriced, mostly hyped up by estate agents trying to make a fast buck, who use in house 'advisors' who are more interested in their commission than being sensible - proabably 'cos the estate agents pay them badly and tey have to rely on commission.
The govt should impose a max of 2.5 times earnings limits , with a minimum enforceable 25% deposit -- that should apply to all motgages and loans .

It was far to easy to get an insane mortgage, and to hope that you would make money on your property .. Grrrrr

Mish