Your thoughts on the lending criteria debate

Nia Williams

November 17, 2008

I work with Estate agents in the Bournemouth area and I have seen 12, yes 12 first time buyers in the last 3 weeks. All with small deposits all wanting to buy. In desperation I referred 2 back to their own banks (C&G) who say they do 90% LTV. Both were declined after messing them about for a week (A1 credit no loans etc) I am proceeding with 3 that have 15% deposits with the Abbey and I am pleased to say are going well at present. The rest have no hope at all. All 12, 2 years ago would have got a mortgage without trouble with the deposits they have plus due to the house price crash would be buying easily under 4 x their salaries at levels they can afford happily. It appears to me we will never get out of this mess if lenders won’t lend to the people that we need in the market to make the market work again. Out of interest if Northern Rock is now owed by the Government why have they not dropped their rates to help their existing clients and get the market moving again? Rob AR

I wholeheartedly agree with the comments of Simon Charles – the rates are not the important thing at the moment. It is the lender’s criteria that is stopping us from helping the public. I have a client who only wants to borrow 34% LTV, has sufficient income in one form or another, but for one registered ‘late payment’ which has been dealt with, I have nowhere to place them. As he says – good PR for these companies but very little help to us. Malcolm Waldie

At long last the voice of reason. Rates are important but totally agree that mortgages have been affordable and personally not had a shortage of clients to take them up. The problem has been criteria and notably loan to value as valuers have been increasingly vicious! If we are looking for the first time buyer to kick start the market, they will be entering the market with at best 10% deposit. Lets face it the majority come up with 5%. With that 10% deposit they will be buying from the first time buyer of 3 years ago who entered with a small deposit, built some equity but now have had that wiped out. If they did sell then where do they get their deposit from as they have no equity left. Lenders have got to return to 95% and 100% lending, because without it the paralysis will remain. With lenders expecting another 10% fall next year, the likelihood of lenders introducing high ltv products are slim. Maybe a government guarantee of the loss of that equity on an individual basis is what we need as opposed [to] bail outs and funding for christmas jollys. Ends

Whilst I agree in principle with what Simon is saying i still the real point is this.lenders may have passed the rate reduction to their lofty SVRs, but there is no sign of them reducing their trackers, in fact some lenders have put the trackers up by 1.5% to negate the drop. The only common factor has been a rush to withdraw their existing rates and I must have had at least 30 emails telling me this on the day the bank rate dropped . So what they are saying is that they want to inrease their margins and surely this is not TCF. Ends

I couldn”t agree more Simon Charles. All talk about rates but so far this week speaking as a mortgage broker I am still waiting for anything to change for the better. I had high hopes that the reduction in LIBOR may get things going as continuous cuts in the base rate, as you point out, just gets a lot of press coverage and some P.R for the lenders. James

Simon Charles – take a bow sir! You have hit the nail right on the head, all we need now is for lenders to take stock and act upon it, and for the media to start reporting “not so sexy” news in the same way they always trumpet negative and headline grabbing news. K Miller

I agree with Simon that the rate change will be very little help in getting the market moving. It will put more money into the economy via the pockets of those on trackers and some variable rate mortgages but I don’t see this getting first and second time buyers moving again. Ends

I haven’t found the problem Simon has in getting cases agreed though they have been harder work. From the broker point of view, the problem has been remortgage deals not competing with SVRs or reversionary trackers in the last six months. It is also clear that the existing trackers must hamper the ability of lenders to offer competitive new deals when they will probably need to be more generous to savers to keep funds coming in. I am not an apologist for lenders; very few of them have proved to be ethical but it is just a fact of life that some margin is needed. Ends

There have been voices urging the Government to guarantee the part of loans above 85%. This would help the first time buyers and also help prospective movers who have bought at 90% in the last two to three years and are now prevented from moving by the loss of equity. However, it would probably return us to the prime market before and prices being out of the range of many and the further development of a property underclass with no chance of ever affording a property . There is an argument for saying that prices need to come down further to be realistic in a country whose economy has little value now it has been stripped off what was laughably called ” City Expertise”. We don’t manufacture enough . Since the early days of Thatcher when manufacturing industry was destroyed, the country has been asset stripped by the rich and the other side of the balance sheet is the billions of unsecured credit represented by no assets.The asset stripping has continued under Labour as the rich got richer. You cannot run an economy on coffee shops , tanning salons or financial advisers for that matter as the IMF told us last week. Ends

For much of this year I have been optimistic, but since the bailout, I really see no reason for lenders to need us for several years. By then , there will be too few of us left to have any clout. The FSA, at least, will be pleased by the demise of the small broker.For my part I am very sad that I see little future in something I have loved . I have a clear conscience at least about the lending I have arranged. Des Platt Lancashire DA

I read this response by Simon Charles and whole heartily agree with every word. Rate cut are NOT the answer, we need lenders to lend. Rates were not the problem for First Time Buyers or Investors both of whom historically generally underpin house values as they by in at the lower end, the problem is the availability of monies. LTV”s need to come back at 90% or 85% for Buy To Let. Banks must support our industry and realise that of cousre there is risk in lending money but if sensible underwriting procedures and real affordability is taken into account then risks should be minimalised. Steve Easter

I totally agree with Charles, ‘Look to lend’ should be the new headlines not ‘biggest rate cut’ or ‘credit crunch’ Cindy Buckley-Mellor

”do you agree with Simon Charles?” Every word – I”ve been saying the same for some time. Tony

Spot on. I have been an amatuer landlord for about 4 years now. I have an excellent credit rating and a faultless payment record. Yet over the last 6 months when it comes to remortgaging lenders are putting obstacle and obstacle including ridiculous valuation in order to not lend you any monies at any interest yet. Anyone wanting to borrow any money seem to have all been put in one big pot labelled – Do Not Touch. No wonder the banks are in trouble – they are certainly not earning any interest from me that”s for sure. Nash

I agree 100%, headline grabbing rates, hard to find mortgages in x/s of 75% ltv, the svr are a joke, why punish good borrowers, a lot are coming off fixed/tracker rates etc and being forced onto svr at rates above advertised rates for new borrowers, they can”t remortgage so gun to head. I just hope we all have long memories when the lenders become despeate to lend again….. Fraser

Simon makes a lot of sense. Where are the FSA when really needed? The lenders are charging higher & higher arrangement fees and continue dual pricing of products. So much for TCF. Roger Pearce

At last! Please pass on my sincere thanks to Simon Charles – I was beginning to think I was the only one who could see this! I too am and ex-underwriter (late 80”s and into 90”s) and I am astounded at the lack of vision in the market-place today, given that we have much experience from which to draw (especially from the lenders” perspective). A little joined-up thinking would be welcome and, I believe, could revitalise the market – unfortunately the Government and lenders between them have not quite achieved what is needed. Carol

I absolutely agreed with Simon, but can not believe it has taken a broker to state the obvious. I predicated this when the Government solution was announced, and there has been no evidence of an improved willingness to lend. I am also an ex underwriting manager, and I have experienced a lender advertising a LTV and then when you submit the business it is declined unless the LTV is reduced. I challenged the lender concerned and the decision was overturned. However this proves that lenders are promoting rates and criteria, yet declining business that meets that criteria. There is lots of business ready to be done! Jill Robo

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