Digital Mortgages target Buy-To-Let market

Atom

AtomDigital Mortgages by Atom Bank, which has been offering residential deals for nearly two years, has now expanded in to the buy-to-let (BTL) mortgage market through an exclusive, pilot scheme.

Atom bank is regarded as the first in the UK to have been built exclusively for smartphones and tablets.

It began offering its two-year, fixed-rate residential mortgages through independent advisers in December 2016, shortly after the bank launched with two Fixed Saver accounts and an SME business lending product.

Residential mortgage customers are able to track changes in the progress of their mortgage when they have received a decision in principle (DIP) through the Atom app.

In the latest move, the initial product offering consists of two- and five-year BTL remortgages for landlords who have anything from four to 25 properties in their portfolios.

The two-year product is available at up to 75% Loan-To-Value (LTV) at 3.70% (2.95% above the base rate), while the five-year product is also available at 75% LTV, at 3.80% (3.05% above the base rate).

Both products command a 1% product fee and feature a maximum loan period of 25 years. Maria Harris, Atom’s intermediary lending director explains that as the bank’s mortgage proposition expands, the aim is to make mortgages both easy and transparent to buy while offering landlords a “great all-round deal”.

Harris believes this will transform the market, adding that this initial pilot with selected intermediaries will enable the bank to make improvements before rolling out the product to a bigger audience. Atom is also already working on increasing its range to include fixed-rate products.

Selected brokers will not be able to access early repayment charges and Atom says automated valuations may be used in certain cases to speed the process and keep the costs low.

In a separate development Atom and Newcastle University have announced they are conducting research into both how trust works in financial services and to look into developing ways for businesses to design better digital banking services.

The two institutions have set aside three years for the million-pound project, which has been dubbed “FinTrust”. It will involve experts in the fields of computer science, banking and psychology in order to understand why customers are reluctant to trust technology.

Atom and Newcastle are also trying to find parallels between digital design and behavioural science to bring the scope of Open Banking into focus. Atom’s officer in charge of innovation, Edward Twiddy, says that the research will inform Atom and help the bank enhance the design of future innovative products and services. An early application will be in developing the bank’s blockchain to build better mortgages.

Buy-to-let mortgages are specific types of mortgage for people who need financial assistance when they wish to buy and rent out properties. You can find out more with our Buy to Let Mortgage Guide

New lifetime mortgage to pay monthly income

lifetime mortgage

lifetime mortgageLegal & General’s new Income Lifetime Mortgage aims to give customers more flexibility when accessing the value of their property in later life

By paying customers a fixed monthly income the mortgage is aimed at people who want to supplement their income.

The new product aims to offer a mortgage solution for those people who would rather have a monthly income instead of a lump sum, or who have not been able to save the amount into their pension as they had hoped.

The lender believes this makes it compelling for those people who want to bridge a gap in their retirement income in order to be able to benefit from a standard of living in later life that is more comfortable.

The mortgage is designed so that the interest will roll up through the life of the loan. Then both the loan and the interest will be recouped by the lender when the property is sold after the last surviving borrower’s death or move into long-term care.

With Income Lifetime Mortgages compound interest’s effect is reduced because funds are released on a monthly basis, rather than as lump sums.

People aged 55 and over who own a property with a minimum value of £100,000 are eligible for Legal & General’s new Income Lifetime Mortgage. Those that take it up will be offered an interest rate that is fixed for life at the outset. Then the monthly income generated by the mortgage will run for a term of 10, 15, 20 or 25 years that is agreed and then cannot be extended.

When the fixed term ends so will the monthly income but interest will continue to roll up until when the mortgage has been repaid. Mortgagees can choose to end the income at any point, but when it is stopped it can’t be restarted.

Steve Ellis, L & G’s Home Finance CEO says that the mortgage will provide that little bit of extra income to pay for things like a day out with the grandchildren or weekends away in the country. Ellis adds that he and his colleagues know how useful this could be for keeping people “doing the things they love”.

He believes it’s a new option giving consumers a chance to enjoy the benefit of their housing wealth with a fixed interest rate for life, along with the security of a regular monthly income for as many as 25 years.

Ellis says that retirement lending  has “a bright future ahead for” and L&G is intent on seeing more people enjoying the positive role the value of their homes can play when they get older.

Finder UK offers a comparison of the UK’s mortgage providers so you can find the mortgage that would suit you. We have a simple guide to remortgaging and to help you de-code the jargon we have put together a handy A-Z glossary.

 

‘Green mortgages’ aimed at enhancing property energy efficiency

Green mortgages

Green mortgagesEnergy provider E.ON teams up with banking giant BNP Paribas to pilot ‘green mortgages’ that could save homeowners £380 a year.

The aim is to offer homeowners finance via their mortgage of their property. This innovative approach to financing property purchase will mean people who are moving, buying for the first time, or remortgaging their homes will be able borrow more through an ‘energy efficiency home improvement loan’ linked to their mortgage.

It is one of the many arrangements that are on offer for home buyers.  To navigate the maze finder UK has a guide to help you better understand how mortgages work and how you should compare the different deals that are out there.

Under the E.ON and BNP Paribas green scheme, the improvement loan financing would come from BNP Paribas Personal Finance and the managed services that install the appropriate energy efficiency solutions would come from E.ON.

According to the innovators, any improvements paid for by the loan could lead to a discounted mortgage rate when the property’s Energy Performance Certificate (EPC) is updated and the energy efficiency measures verified.

The new move comes after Bank of England researchers discovered that people who live in more energy efficient homes pose a lower credit risk.

Their data indicates that about 1.14% of people living in homes that are energy inefficient are in mortgage payment arrears, whereas only 0.93% of people in energy-efficient properties were behind on their payments.

The research concluded that a home’s energy efficiency is “a relevant predictor of mortgage risk”.

According to E.ON and BNP Paribas about 19 million households in Britain fall below the EPC Band C rating and by putting basic measures in place could save up to £380 a year.

E.ON UK CEO Michael Lewis says green mortgages could a “game changer in the delivery of affordable finance”. He is keen for home-owners to step into “energy efficient living”.

Claire Perry, the Minister at the Department for Business, Energy and Industrial Strategy who looks after the clean growth brief, says she is delighted to see businesses like E.ON and BNP Paribas Personal Finance seizing the multi-billion pound opportunity that exists to energise communities into tackling “the very serious threat of climate change”.

The finder UK mortgage pages can put you in touch with a mortgage adviser, give you access to online mortgage comparison, and allow you to browse the various rates available.

Better credit scores to benefit renters who pay on time, thanks to a new initiative.

Credit scoring

Experian, the credit reference agency, says it is now taking account of 1.2 million tenants’ payment habits.

Most of these people, around 79%, can expect to improve their access to bank accounts, loans, and mortgages by enhancing their credit scores. The analysis also indicates that adding rental data to credit reports will increase the proportion of tenants able to prove their identity online from 39% to 84%, which will additionally broaden the range of financial services available to fastidious payers.

Credit scores make all the difference when taking out any financial arrangements like loans. They determine the terms people are offered or whether they will be approved at all.

Bad or limited credit histories have the power to reduce a person’s chances of obtaining often vital finance, like mortgages, car finance, and credit cards. At finder UK we help people find out about all the ways they can build up their credit history and enhance their credit scores.

Prior to the latest Experian move, the majority of people renting their homes had been unable to prove the likelihood of them meeting monthly mortgage payments. But last year, just under 150,000 people signed a petition to demand increased recognition of tenants who regularly pay their rent on time.

The petition’s organiser, Jamie Pogson, claimed to have paid more than £70,000 in rent when it was due but had still found it a struggle to successfully apply for a mortgage.

As a result of the petition, a debate was held in Parliament and afterward, Treasury minister Stephen Barclay argued that lenders should act more favourably to those renters who kept their payments up to date.

Now, tenants’ rental payments appear on both Experian’s CreditExpert and in statutory credit reports as part of a Rental Exchange initiative that has been developed in partnership with the Big Issue Group’s social investment arm.

Data is being reported into the Rental Exchange by over 150 social housing providers, along with local authorities and letting agents. Experian is also working with property technology companies (PropTechs) to help tenants better report their data themselves.

The downside of this initiative is that those with poor records of paying rent on time could discover their credit scores are adversely affected, which would make it harder and possibly more expensive, to gain access to other financial services.

Social housing or council tenants need to ask their landlord to report their rental payment data to the Rental Exchange. Private tenants who pay large landlords or letting agents should request the same, but private tenants can also self-report their payment data via an Experian partner like CreditLadder or Canopy.

Experian Consumer Services Managing Director Clive Lawson recognises that tenants each month pay a large amount of money for their homes and says it’s right these regular payments are recognised “in a similar way as mortgages”.

Big Issue Group MD John Montague says the aim has been to create a fairer playing field for people to access credit because it was recognised that “people in poverty were routinely penalised”.
Picture: Shutterstock

Home buyers warned to beware inflated mortgage fees when offered deals

Lenders are upping mortgage fees to levels that are the highest they have been in more than five years, according to new data.

With the latest figures indicating that the average mortgage fee has risen by £15 in the last three months and now stands at £1,005, home buyers are warned to be wary of how fees can bite.

At Finder UK we’ve teamed up with the UK’s leading fee-free mortgage broker, L&C, to provide advice on the mortgage deal that is right for you. Our expertise can help whether you’re buying a home, remortgaging or purchasing an investment property.

It’s wise to be careful because, according to financial information company Moneyfacts, which collated the latest data, while mortgage lenders appear to be concentrating on competing with each other for the lowest rates on the market to attract borrowers, many of them are offsetting their reductions by raising fees instead.

Moneyfacts commentator Charlotte Nelson points out that not only are average mortgage fees rising, but they are now surpassing the £1,000 threshold for the first time since the August of 2013 when the average was £1,001. Nelson describes this as “disappointing” and advises that borrowers need to think twice before making an application for any mortgage, and they should always check the terms and conditions.

The Bank of England has increased the base rate from 0.25% to the current rate of 0.75% since November 2017 but many mortgage rates are being offered much lower than providers’ costs. For example, the average two-year fixed rate currently stands just 0.16% higher than in November 2017 when it was 2.33%.

The table below illustrates the impact fees can have on your payment: it demonstrates that even though the fixed rate is set much lower, the fee-free mortgage product still works out as less expensive in the first year.

Lender Rate LTV Fees True cost after 1st year*
Yorkshire Building Society
1.34% fixed to 31/12/2020
60%
£995
£10,414.10
Yorkshire Building Society
1.71% fixed to 31/12/2020
60%
£0
£9,837.08

Source: Moneyfacts.co.uk. *True cost based on borrowing £200,000 over 25 years on the basis of repayment-only.

Nelson emphasises that homebuyers should take note that the impact of fees can vary depending on how much is borrowed. For example, she says, a low rate/high fee offer may be perfect for people looking to buy property at the more expensive end of the market. But she warns that for average borrowers who remortgage every two years, fees soon add up and it may be better spending any additional cash overpaying the mortgage.

Taking out any mortgage is a big commitment and should not be rushed into without exploring the available options. That’s why finder UK has designed a page to help you better understand how mortgages work and how to compare the different deals that are out there.

Picture: Shutterstock