Who said politics doesn’t change anything?
David Jones is director of Click2Check
I’ve often been intrigued by people who say they ‘don’t follow politics’ or ‘have no interest in politics’ or ‘politicians are all the same’.
To me, this seems utter lunacy given the real impact politics and government, has on all our lives; as we’ve seen time and time again, government intervention matters and can make huge differences to our lives, and our futures.
Take the recent Budget. There will not be a person in the country who isn’t in some way impacted and affected by the decisions made, and measures announced, and because of that, livelihoods are shaped and reshaped, life decisions are taken or put off, and the way we exist is changed.
The housing market has seen more government intervention than most recently and that clearly will continue given the impact politicians and treasury officials can have on the sector, and the ability it has to either pump up the tyres or deflate them.
Judging by the adviser forums and social media, no sooner had the Chancellor announced details of the government guarantee scheme that would support the greater provision of 95% LTV mortgages, the pumping up began.
Advisers were quickly talking about potential purchasers contacting them about their own ability to secure a 5% deposit/equity mortgage, even if the details are not yet known and the first products are not due to hit the market until April.
The Budget delivered an immediate reaction in that regard. Rightmove quickly said that its website traffic increased by 16% within half hour of the Budget announcement being made, with use of its mortgage calculator increasing by 85%, with potential borrowers wondering what this would mean for them in terms of accessibility.
And that really highlights the big issue with any return to 95% LTV lending – how many borrowers who might have the necessary 5%, or could get their hands on it quickly, will actually be eligible for such a mortgage given the criteria and affordability hoops that they will need to jump through?
Because as advisers will no doubt be telling those clients, having that deposit money is one thing, but even with a government guarantee, lenders are not going to be loosening the tight grip they have on ensuring borrowers can afford to pay their monthly commitment.
Indeed, this is written into the guarantee schemes rules, plus you might even suggest lenders will be even more strict in this area because of the heightened risk they might perceive.
Which of course, leaves advisers in a somewhat tricky position. The market undoubtedly needs lower deposit/equity mortgages, they are coming next month, but the fundamental point is not the 5% but the individual’s credit record, their outgoings and incomings, and everything else required to get them past the lenders’ thresholds for lending.
Advisers do have a slight advantage in that, as mentioned, we’re not anticipating the products to arrive until next month.
In the time available, this provides the opportunity to pre-check those potential borrowers who do come knocking, and to gather the information required to ensure they are not given false hope, if it looks like their financial position means they won’t be eligible.
By utilising a product such as Credit Assess, you can acquire – with the client’s consent – both their credit report and open banking data, so you can begin the affordability and suitability journey on their behalf.
Of course, that journey won’t be able to be completed until we see the products and criteria, but it will undoubtedly be obvious to professional advisers those cases which have only the slimmest chance of sticking.
A good risk profile is going to be a pre-requisite for those seeking 95% loans – you’ll be able to assess upfront exactly those clients who it’s worth pursuing and spending resource on, and ensure you get the most out of a demand which is likely to be increased significantly because of this latest government foray into our market.