UK Mortgaging: What You Need To Know

MMPE is introducing a new quarterly news blog for our clients.

Our aim is to update you with relevant housing and mortgage market news. We will aim to share any significant industry changes, covering market conditions, regulatory updates, and useful product information.

In this article, we cover the following areas:

• The U.K. mortgage charter
• Consumer duty – a new regulatory commitment
• U.K. Mortgage & Housing market, what can we expect?
• Improved mortgage review service

We trust that you will find the blog a useful summary of what is occurring in the U.K. mortgage & housing market. Should you have suggestions for future posts, please email info@mmpe.co.uk

U.K. Mortgage Charter

If you have any concerns about your mortgage or losing your home, then this information could be invaluable.

On 23 June 2023, the Chancellor, Jeremy Hunt, met with the U.K.’s principal mortgage lenders and the financial conduct authority (FCA) to agree on support for households struggling with mortgage repayments.

Most U.K. mortgage lenders have agreed to support a new U.K. mortgage charter; the charter is aimed at providing support to residential mortgage customers through their lender. The support measures include:

1. Anyone worried about their mortgage repayments can call their lender for information and support without any impact on their credit score; we would encourage you to contact your bank, who are there to help.
2. Customers won’t be forced to have their homes repossessed within 12 months from their first missed payment.
3. Customers approaching the end of a fixed-rate deal will be offered the chance to lock in a deal up to six months ahead. They will also be able to apply for a better deal (if available) until their new term starts.
4. A new agreement between lenders, the FCA, and the government permitting customers to switch to an interest-only mortgage for six months or extend their mortgage term to reduce their monthly payments and switch back to their original term within the first six months if they choose to. Both options can be taken without a new affordability check or affecting their credit score.
5. Support for customers who are up to date with payments to switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check.
6. Providing well-timed information to help customers plan should their current rate be due to end.
7. Offer tailored support for anyone struggling and deploy highly trained staff to help customers. This could mean extending their term to reduce their payments, offering a switch to interest-only payments, but also a range of other options like a temporary payment deferral or part interest-part repayment. The right option will depend on the customer’s circumstances.
8. Read our full article, which includes a reminder of the value of independent mortgage advice, plus handy hints and tips which could be extremely valuable. Especially if you have a mortgage product that is ending within the next 6 to 12 months, as your mortgage costs are likely to increase. Click here to read the full article.

Consumer Duty

Consumer Duty is a new regulatory principle that has been introduced as of the 31 July 2023. The aim of consumer duty is to set higher and clearer standards of consumer protection across financial services, and it requires firms to act to deliver good outcomes for customers.

What does the FCA mean by “good outcomes”? Firms are required to provide customers with products and services that meet their needs and offer fair value. As a customer, you should receive communications that can be understood. You should also be offered customer support that you require and when you need it.

The key areas covered by consumer duty are:

• products and services
• price and fair value
• consumer understanding
• consumer support

The regulator has had a firm commitment to delivering improved customer outcomes for many years, which started with TCF “treating customers fairly”. Where consumer duty strengthens this commitment is that Consumer Duty requires firms to provide evidence that the key areas listed above are consistently reviewed in a firm’s planning, process, and make-up, and the steps taken can be evidenced.

MMPE is fully committed to consumer duty and will work to ensure that we deliver the commitments to our clients. As a business, we have already taken steps to review our processes and procedures and implement new developments which will provide greater support to our clients and ensure that we are offering to review your needs and requirements on a more regular basis.

The Mortgage & Housing Market, what can we expect?

So, what are the predictions and expectations for the U.K. housing market?

We have seen, over the latter part of 2022 and the first 6-7 months of 2023, 14 consecutive interest rate hikes, taking the present base rate to 5.25%. This has led to a decrease in the number of property sales transactions and, as expected, an increase in mortgage costs.

So, what will the future bring? Property website Zoopla has predicted a 5% drop in prices in 2023. Nationwide’s house price index for July echoed this sentiment, revealing the most significant annual decrease in house prices for 14 years. Halifax also confirmed that they have seen a four-month run of declining house prices.

The consensus is that house prices are on a downward trajectory. Zoopla has also confirmed an 18% dip in demand for U.K. homes over the past couple of months, which reinforces the trend. The overall thoughts are that we will see up to a 5% dip in prices over the course of the year. However, this cannot be guaranteed, and other parties are reporting potentially larger falls.

Higher mortgage rates have undoubtedly made it more expensive to purchase a home. This has led to the house purchase market taking a knock, and prices throughout the country are being affected.

With the cost-of-living crisis challenge, household budgets are also feeling the squeeze, which is undoubtedly affecting the house price landscape. Household budgets have come under pressure, and therefore, fewer people can afford to consider either buying for the first time or moving.

It is not all doom and gloom, though; let’s remember that the housing market has witnessed huge growth since the start of the century, and the average house price has almost trebled. For many first-time buyers, they will see this market as an opportunity to make their first steps and secure a property.

There is some hope, though, of a “relatively soft landing”. Well-regarded sources are now hinting of hopefully a relatively soft descent. The U.K. and Europe tend to follow in the footsteps of the American economy, and across the pond, there are indications of improvement which could lead to a more positive outcome than originally was thought.

As a reminder, MMPE is here to support our clients; if you have concerns regarding your home or your mortgage, please do not hesitate to get in touch; we will be pleased to assist.

Improved Mortgage review service launched.

MMPE has launched a new and improved mortgage review service, the aim being to provide our clients with securing the most cost-effective mortgage product available as early as possible when reaching a product end date.

Traditionally, remortgage products are only available to apply for within a 6-month window of a product end. Lenders who also offer product transfers will also offer these products at the earliest stage of 6 months.

With 14 consecutive base rate rises and therefore increased mortgage pricing, reviewing your mortgage options as early as possible and securing a new rate has been imperative. However, it is then important to continue to review options up until completion, as on occasions, we have seen better rates products become available.

MMPE have reviewed our processes to ensure that we provide our clients with what we believe is a valuable remortgage review service, “4 Simple Steps”.

“4 Simple Steps” to ensure you get the best mortgage deal when your existing mortgage rate ends.

Get proactive: Speak with MMPE, ideally 12 months prior to your product end date and no later than month 7. Get to know and understand.

• The current market trends.
• What the future predicts for mortgage rates?
• If you are in any financial difficulty or need assistance. Discuss options and understand how the U.K. mortgage charter may help.
• Understand how mortgage products are funded and timescales for withdrawal of products.
• MMPE have a 12-month remortgage product if you want to fix it as early as possible.
• Get prepared: 7 months prior to your product end date, we recommend making sure that your financial profile, objectives and supporting documents are provided to your broker. Benefits to you are.
• Research can be provided to you six months before your product ends. This is generally the earliest lenders will accept a remortgage application.
• If your existing lender has product transfer rates available, we will provide you with research comparing your existing lender versus the open market.
• Get locked in: At month six prior to the product end date. We aim to assist you in locking in your new deal as soon as possible with the most suitable and cost-effective scheme available to suit you.
• This secures a rate prior to any further potential rate increases.
• If an improved rate or scheme becomes available, we are still free to switch the deal.

Ongoing reviews: With MMPE, we provide you with an ongoing review service that monitors rates and your options. If a more cost-effective or more suitable scheme becomes available. We will work with you to switch to the new deal.

Preparation & Planning

Take some time to consider your personal situation, your future needs, and your requirements. What plans have you with regard to your home for the future, such as:

• Future home moves
• Additional borrowing for home improvements or other plans.
• Future objectives.
• Scheme type tracker / fixed / flexibility required?
• Your maximum mortgage budget, with rates having increased, you need to plan for increased monthly mortgage costs.
• Have you reviewed your expenditure and looked at what non-essential costs can be trimmed down (if required)?

Note: Product transfers are not always a suitable option as they may not be the best mortgage product on the market for you. To create real value for clients, MMPE take into consideration each client’s individual circumstances, such as the need for additional borrowing, overall costs etc, which may make remortgaging a better option.

As a broker, we compare and analyse the wider financial position and circumstances. We take into consideration all factors, including equity, your loan to value (LTV), your credit history, and your plans for your home/property. Plus, any additional costs and eligibility for products all play a part.

It might suit you to choose a different lender who may offer a better rate, scheme term or additional borrowing.

If you have already accepted a product transfer or remortgaged and would like to benefit from our review service, you can follow the link below; the process takes about a minute to complete and is limited to a couple of simple steps. You need to provide confirmation of your existing mortgage product and when it ends. MMPE will then be in contact at the relevant time to assist.

To Review the full article click here.