Client focus

Case study:

8 March 2008

Clive Kornitzer is

chief operating officer

at Abbey for Intermediaries

Walt is facing the same concerns as many people who are looking to take out a mortgage at the moment. According to our research, almost two-thirds of first-time buyers are delaying their first step onto the property ladder due to economic uncertainty. Indeed, 82 per cent of first-time buyers aged between 25 and 34, like Walt, have said that this has affected their decision to delay home purchase.

In the second half of last year, Abbey saw an upsurge in mortgage lending as people moved away from what they perceived as riskier borrowing to brands they felt they could trust in the long term.

Walt should seek advice from a broker who is willing to talk not just about rates and terms, but also the benefits of being with a bank that has strong financial security. There are measures such as financial strength ratings from credit agencies and tier one capital measures that can be used by mortgage brokers to highlight the top lenders and reassure their customers.

Alan Lakey, is

senior partner at Highclere Financial Services

It is generally agreed that building societies are more reliant on investor funds and therefore have a lower exposure to the wholesale markets than banks and the specialist lenders. While this does not guarantee that building societies are a safer option, the statistics indicate this is the case. In truth, it is investors and not borrowers who suffer the potential losses.

One sector best avoided is those lenders relying on securitisation to fund their future mortgage lending. Not only does this place their future funding in doubt, but also implies that their loan book will be parcelled up and sold on to other institutions. Experience shows that this alienates borrowers as it provides scope for confusion and lack of confidence in the new lender.

In short, Walt should restrict his selection to leading building societies as this will allay the bulk of his concerns.

Ashley Clark is managing director at NeedAnAdviser.com

Property is a long-term investment and should only be seen as such. There is some risk of falls in house prices later this year but interest rates are expected to also fall. Long-term demand for property will continue to outstrip supply. Buy property and buy it now; it is certainly a buyer’s market at the moment. Walt must conquer his short-term fears.

My view on lender stability is simple: ‘who cares?’ It is better to owe money rather than have money invested with a lender that is in difficulty. Many high street lenders have a good underwriting policy and therefore have not experienced the same difficulties with wholesale market borrowing. The regulator has also been tasked with tightening its grip on the financial solvency of regulated firms, so expect lenders to have much ‘cleaner’ lending books anyway. This will deliver future stability. The reality is that if a lender fails, there will always be others that will be prepared to take on the loan book, so a loan is unlikely to be recalled.