Consumer rage or criteria rage?

Tighter mortgage criteria has led to an increased number of consumer complaints about mortgage products, according to a report by the Council of Mortgage Lenders (CML).

The trade body, using data from the Financial Ombudsman Service's (FOS) annual review, said that a 'significant proportion' of complaints were caused by providers changing their lending criteria due to difficult market conditions.

FOS reported that 9537 complaints were received about mortgage lenders, up 4% on last year's figures.

There was an increase in complaints from customers who were unhappy with their lender's range of mortgages, with consumers also disappointed with the explanations provided by lenders when applications were turned down.

The FOS received an increased number of complaints about the reduction of upper age limits on some products, with older borrowers also frustrated by an increased requirement to provide details of their income in retirement.

Complaints from buy-to-let investors also grew, with customers unhappy with higher product rates and administrative charges.

 The number of issues raised to the ombudsman regarding new loans also increased, with more borrowers complaining about being unable to get a mortgage with the loan-to-value ratio requested.

Elsewhere, complaints received from people trying to switch mortgages between properties fell but the ombudsman highlighted the need for lenders to provide more information to customers having their homes repossessed.

A Jubilee tale

Buckingham Palace is estimated to be worth £1bn, up 9000% since the Queen took the throne when it was estimated to have been worth £11m.

Were it ever to be sold, that would equate to c.£70m in stamp duty.

Windsor Castle’s estimated value was £2m when the Queen began her reign in 1952 and it is now estimated to be worth 9350% more at £189m – so that would be a mere £13.2m in stamp duty.

Don’t think they would be fans of the ‘mansion tax’ somehow.

Compared to non-royal residences, the average UK house price in 1952 was valued at £1,891 and is now up 8605% to £162,722.

During the Queen’s reign the average UK house price has increased from £1,891 to £162,722.

Bye bye New Buy?

There is rising concern that the Government’s flagship NewBuy scheme has hit trouble, just two months after its launch.

The scheme, which launched on March 12, allows first-time buyers and home movers to purchase a new-build house worth up to £500,000 with a 95% mortgage, with taxpayers and developers underwriting the loan.

But the scheme has been dogged by controversy, with mortgage lenders offering NewBuy mortgages at high rates that have come under increasing fire from house builders.

The three lenders in the scheme when it launched have all hiked their rates: NatWest, which offered the best initial rates, at 4.29% for a two-year fix and 4.99% for a five-year fix, has hiked them up to a current 4.79% and 5.49% respectively.

Barclays and Woolwich have also raised their initial rates, with the latter now offering a three-year fix at 6.09%. Lloyds Banking Group, which entered the scheme after launch to become the fourth NewBuy lender, offers rates of around 6%.

Mike Farley, chief executive of Persimmon Homes, says the scheme will not work unless the lenders drop their rates. He said: “There’s nothing wrong with the concept, but to make it work we need a lower rate or people will drop out.

“The rates are so high, people won’t be able to afford the repayments, and that will put the brakes on.”

Pete Redfern, chief executive of Taylor Wimpey, said it is ‘very difficult’ to know if the scheme will work or not, and he said lenders would have to find the right rates. He said: “Individual lenders are nervous that if their rates are too low, they will take market share and that will distort their mortgage book.

“It is not the end of the story, but it is unfortunate and I hope it doesn’t knock the train off its rails.”

Santander has yet to launch into NewBuy but says it will do so, and smaller lenders may enter the arena, with hopes among developers that more competition will encourage better pricing.

Aldermore, the new bank launched two years ago, says it intends to launch a NewBuy deal but wants to see how the larger lenders are doing first.

Estate agents have been among the most vocal critics of the scheme, pointing out that buyers of new homes pay a high premium, and that while NewBuy is designed to offer some protection to lenders should they need to repossess a property, the indemnity will not stop purchasers falling into negative equity.

History in the making..

Next week will see history made in the mortgage market.

From next Tuesday the Co-operative Bank and Britannia Building Society will no longer offer mortgages on an interest-only basis.

Customers will now only be able to take out mortgages on a capital and repayment basis.

The lender says it expects the changes being proposed in the Mortgage Market Review will result in all customers who apply for a mortgage being assessed on the basis that they can afford a capital and repayment loan, which is why it has made the decision to only lend to customers on a capital and repayment basis moving forwards.

Existing interest-only mortgage customers are able to switch to any open product for the same amount of borrowing on an interest-only basis when they come to the end of their deal.

In addition they will also be able to take their interest-only mortgage with them should they move home.

The above changes will also apply for mortgages offered through Platform, the dedicated intermediary lender for The Co-operative Bank.

In the case of Platform, the majority of its lending is focused on buy-to-let and volumes of mainstream and almost prime interest-only applications are low. It also believes demand for interest-only loans will continue to fall.

As a result, the lender says the cost of changes that it would want to make in order to comply with future regulations and meet its high standards as a responsible lender cannot be justified. It has therefore also taken the decision to withdraw interest-only lending for new residential lending and additional borrowing on residential interest only loans.

Platform will continue to offer interest-only as a payment option for buy-to-let, as the rent on the property is typically used to make monthly repayments and the value of the property is used as the repayment vehicle for the mortgage.

Well it had to happen eventually – the question is of course , whether others will follow suit this time as well....only time will tell.

As always thanks for your attention.

Mark (mark@themortgagemonkey.co.uk)