Brokers frustrated over remortgage exclusions
That’s the verdict of Dominik Lipnicki, managing director of Your Mortgage Decisions, following the launch of a first-time buyer exclusive at 90% LTV from Abbey for Intermediaries last week.
Although he welcomes AFI’s decision to move into the higher LTV space he is frustrated that the product cannot be used by the wider market.
He said: “The remortgage market really needs a product like this. We need to help customers locked into their mortgages who want to secure a better product or raise finance.”
Lipnicki said it does not make sense that the remortgage market is seen as less attractive than the first-time buyer market which services inexperienced homeowners.
But David Hollingworth, associate director of London & Country, said the reasons for adding restrictions to the higher LTV products could be a volume issue.
He said: “The house purchase market is fairly muted at present so if you remove restrictions from these products then the lender is probably opening itself up to a large amount of remortgage business at a high LTV which it probably doesn’t want.”
The LMS Remortgage report showed that gross remortgage lending in December was £2.7bn; 13% lower than in November and 24.7% lower than the same time in 2011.
December’s figure was not only the lowest recorded in 2012 but also the lowest monthly value since the end of 1999.
The average LTV for remortgages stood at 56% while the average advance was estimated to have fallen by 14.2% to 19,279 in December.
Andrew Montlake, director at Coreco, said getting first-time buyers onto the property ladder has been a major government focus and is seen as the way to get the market moving again.
He said: “So from that perspective it’s an easy win for lenders putting these products out, it’s good PR for them and it gets them a lot of coverage.
“But we need to get the economy moving and they have to start somewhere so first-time buyers appears to be lenders’ main focus at this time.”
Montlake said that although more choice is needed at the 90% LTV level for remortgages, there is not a massive incentive for people to switch their deals because of the way 90% remortgages are priced at the moment.
He added: “If you are on a really low tracker or standard variable rate you more inclined to stay where you are then think about switching and meeting the lenders requirements and passing the credit score for these products is very tricky – probably because they don’t want to do that much lending at this level.”
A lender which has been singled out for good product offerings in the 90% remortgage sphere is Coventry with a 4.35% 3-fixed with a free valuation and free legals but the lack of choice is making it difficult for brokers to find the right deal for their client.
Hollingworth said: “Although we are not seeing a huge demand for remortgages at that level of LTV it is always useful to have that option in your locker than not.”
And restrictions on the type of borrower are not the only obstacles brokers need to overcome if they want to remortgage their client – reasons for capital raising are also under scrutiny.
If the borrower wants to raise capital as part of the remortgage the LTV is often reduced and if the reason is for debt consolidation then it can drop even further.
But Montlake said it is just a matter of time before Funding for Lending has an effect on this area of the market.
He said: “When FLS really kicks in it will drive competition up the risk curve eventually filtering through to the remortgage market.”