Private Finance's Mortgage Memo - 15th June 2022
is our take on what is currently happening in the mortgage market. Our views
are often cited in several national publications, including; BBC News, The
Times, Telegraph, City AM, FT Adviser and Daily Mail, as well as a number of
key trade publications, so this should keep you ahead of the curve. If you have
any questions on any of these stories, or would like further information,
please do not hesitate to get in touch.
- Could we see lenders reduce their LTI?
- Timing key to mortgage recommendations of late
- Can I get a mortgage if moving jobs or recently started a job?
Could we see lenders reduce their LTI?
With the latest housing data from Halifax reporting the eleventh consecutive rise in house prices in May and the average house price reaching another record of £289,099, all while regular pay fell by 2.2% from February to April (adjusted for inflation) (ONS, 2022) many of our clients, in particular first-time buyers and home movers, have been needing to stretch their loan-to-income (LTI) to the maximum, in order to afford the type of property they would like to live in. Buying power has reduced especially over the last two years and buyers cannot afford the same sized property or number of bedrooms they once could.
- It’s a regulatory requirement that lenders only offer a certain quantity of loans over 4.5 times income, for example, a maximum of 10% of the loan book over 4.5 times income. With this in mind we wonder, could we see a proportion of lenders starting to reach these regulatory limits and thus need to reduce their LTI in the near future or set further limits on who can receive higher LTIs for certain people depending on their individual circumstances.
- We have seen more flexibility from lenders in terms of greater LTI over the last few years during periods of large house price growth to help borrowers, however, we are starting to question how much longer this can be sustained considering these regulations, unless these regulations are flexed to reflect the current climate.
- With house prices soaring and affordability concerns, maybe there needs to be more flexibility regarding this regulation and for the percentage of loans above the 4.5 times income to increase in order for more people to get onto the housing ladder.
Timing key to mortgage recommendations of late
Previously, lender waiting times to review a mortgage case wouldn’t vary considerably between lenders at 2-3 days for a review, however lately we are finding this factor is one of the key variables impacting our recommendations to clients. Currently, Nationwide and NatWest state there is a waiting time of 14 and 15 days respectively to review a case for an initial assessment.
- More and more we are having to consider waiting times by lenders as a factor in our recommendations to clients. This is especially the case for purchases where the market is still rather hot, and clients need mortgage finance relatively quickly or face the sale falling through, losing the property in a market of short supply.
- It is important each client ensures before using a lender that they consider the timescales they have compared to their own timescales as an applicant.
- There is relatively little difference between some lender's rates, perhaps a difference of 0.01%, whereas the mortgage could be completed much faster from one lender compared to another.
- On top of these long waiting times, valuations are also taking a while in many cases. If it’s a competitive property, the sellers are not willing to wait 3-4 weeks for the valuation to be instructed or for the appointment itself
Can I get a mortgage if moving jobs or recently started a job?
It’s a common misconception many of our new enquiries hold that you cannot get a mortgage if you are in the process of changing jobs or have recently started a new job or job role, and that you would have to be in a job for six months to a year before getting a mortgage.
- It depends on the lender, however a full-time employee usually can get a mortgage purely on the basis of having a signed contract even if they haven’t started the job. Some lenders may require 1 to 3 month payslips, while others purely require a signed permanent contract.
- After attitudes towards working life changed since the pandemic and the cost-of-living crisis leading to some employees changing jobs in order to achieve higher wages, one in five employees are expected to change jobs this year. Thus the topic of mortgages when changing jobs may be on many people’s minds and could delay a person’s decision to buy unnecessarily. For more information on the number of employees considering a job change this year: https://www.bbc.co.uk/news/business-61552546