THE INS AND OUTS OF MORTGAGE BROKERAGE.

By Lee Langley, Principal at OnPoint Mortgages.

How are first time buyers being treated by lenders?

The low cost of mortgage funding and flexible affordability calculations mean this is a good time for first time buyers with sufficient deposit. Recently, we have noticed an increase in applicants looking to get on onto the property ladder due to a potential reduction in house prices over the coming months. This especially appears to be true amongst those with the ability to work from home, who may now be in a position to expand the location of their search for a property outside of the more expensive areas within cities and towns.

The prevalence towards working from home will certainly be something that developers will want to consider in future projects. Moving forward, the mortgage industry will need to ensure those reliant on higher LTV products, often those whose families are unable to contribute towards a deposit, are not locked out of buying and are still able to purchase their own home.

Banks and building societies are also asking questions around the impact of Covid-19 on a customer’s income. If an employed buyer has been furloughed, they will typically only use 80% of the normal basic salary while, for the self-employed, they will look at the sustainability of their business earnings, seeking an understanding of the company’s ability to trade through the pandemic.

What about the mortgage market appetite for second buyers and downsizers?

As they typically require lower LTV’s, second buyers and downsizers remain an attractive proposition for lenders if they meet the same criteria around affordability and the likely sustainability of their income through the pandemic.

In respect to potential downsizers, the market has been working on providing improved solutions for older applicants, such as retirement interest only mortgages and flexible maximum age criteria. With a low rate environment and improved lending options, downsizers as well as second buyers will remain an important demographic for developers.

In the investment market, how are new builds viewed as an investment by buyers and buy-to-let lenders?

During the height of the pandemic, some BTL funders halted or paused new build applications, as they were not acceptable for remote or desktop valuations. Once physical inspections could take place, borrowing for new builds resumed. New build houses are typically accepted at the same LTV as existing properties, while for flats they can be restricted to 65%, but options at 75% remain readily available. BTL lenders are often tougher on certain types of new build flats however, for example high rise blocks, smaller studios and those over commercial premises, so you want to check the ability to mortgage units upfront prior to embarking on a project.

Your home may be repossessed if you do not keep up repayments on your mortgage. Some forms of Buy to Let and Commercial Lending advice are not regulated by the Financial Conduct Authority.