Advisers should contact potential remortgagors
Paradigm believes many thousands of borrowers who are sitting on their lender’s standard variable rate (SVR) are likely to have difficulty in securing remortgage finance due to changes in their circumstances and significant changes to both lender’s lending appetite, their product criteria and policies for determining credit-worthy applicants.
The warning comes following the latest minutes from the Monetary Policy Committee February meeting which revealed that three members of the MPC had voted for a rate rise. The markets are now anticipating a rise before summer and this is expected to signal the start of a significant increase in the numbers of borrowers looking to remortgage.
Paradigm is therefore urging advisers to contact all clients who may be considering their remortgage options in order to detail the current state of the mortgage market and how they may or may not fit within it.
With house prices having fallen in many regions, Paradigm believes borrowers could have less equity in their properties than they anticipate which will mean a higher LTV product is necessary with potentially higher monthly mortgage payments.
Bob Hunt, chief executive of Paradigm Mortgage Services, commented: “There appears to be a significant movement underway in terms of remortgage activity particularly as we draw closer to an inevitable increase in Bank Base Rate. Unfortunately, many borrowers will be re-entering a mortgage market which is much changed from the one they last encountered two/three years ago.
“Lenders’ appetite to offer mortgage finance has been curtailed and with criteria also having been tightened considerably, coupled with a drop in house price levels, many potential remortgage borrowers may struggle to secure a mortgage in this environment. This situation could also worsen as many borrowers will be waiting for an actual interest rate rise before they make their move. At this point, demand for remortgages may be overwhelming and there is no doubt that many will be left disappointed.
“We are therefore urging all mortgage advisers to make sure their potential remortgage clients are clued up on the current state of the market and fully informed about their ability to secure finance. Providing clients with an early indication of their credit-worthiness and how they look to lenders now will undoubtedly help them make the decision about what to do and when to do it.
“Beating the remortgage rush may well be advisable given what could be coming over the horizon and advisers should ensure they are in prime position to deliver all the necessary help and support, which could make the difference between their clients securing a remortgage loan or being left on the SVR shelf.”