Do you have the best mortgage deal?

Interest rates on mortgages are almost as low as they could possibly be right now and there are mixed messages in the financial market about whether those rates will increase in the next 12 months. Many borrowers are taking advantage of the situation and renegotiating a new fixed rate agreement or moving lenders for a better rate. There are stricter rules in place though and more directors are subsequently having their mortgage applications rejected. Make sure you are on the best deal and maximise your chance of application success.

The mortgage rate war – the opportunity

The fierce competition in the market is forcing lenders to continue offering lower and lower rates of interest to win business. Some Fixed Rate mortgages are on offer lower than 1.5% compared to the average Standard Variable Rate of a lender being circa 4%. Lack of action is costing borrowers thousands of pounds in interest that could be reduced by doing some simple research and working with a specialist mortgage broker who will know the best lenders to approach on your behalf. Figurit work with specialist financial advisers to ensure our clients get the best service when it comes to mortgage advice.

Stricter mortgage lending

Despite the mortgage market seeking new business and the high opportunity for borrowers to “get a deal”, new rules that were enforced in 2014 are making it more difficult for some people to transfer their mortgage and make use of these lower rates. The Financial Conduct Authority (FCA) took action to avoid irresponsible lending again by tightening up the application process for mortgages. Now, as part of the application, it needs to be demonstrated that the repayments are affordable amongst other outgoings. Annual income is still assessed however, there is much more focus now on monthly spending habits of the borrower and if these don’t meet regulations then the mortgage is likely to be declined. This alone is causing borrowers stress with having to detail all living costs and personal expenditure, on some occasions even having to prove each item on the credit card statement.

Further problems for directors

Directors of limited companies are facing further problems with their applications. Typically lenders will want to see 3 years of financial accounts as well as forms SA302’s, however on occasion 5 years is their requirement. It appears to be a particular issue for lenders where directors own 50% or more of the shareholding as they are considered, by lenders, to be self employed, rather than employed. Subsequently, directors are seen as a higher risk.

What action can you take to improve your application?

These points may help with strengthening your application:

• Ensure you and all applicants are registered on the electoral register as this affects your credit rating if you can not be found or if details are incorrect
• Consider paying off personal loans and credit cards in advance of applying for your mortgage – as balances will be taken into account
• Consider cancelling credit cards that are not being used – most lenders now deduct the credit limit for all facilities, even those not being used.
• Consider tightening the belt on your personal spending in the months prior to application. As this will be scrutinized if you can demonstrate responsible spending then the lender is likely to be more generous.
• Use a specialist financial adviser for dental and medical professionals as they have access to lenders who are familiar with your business structure and it gives you more chance of success with your application.

Figurit are keen to be able to offer peripheral services to our clients so they have an integrated approach to their finances. Please get in touch and we can connect you with professionals who can help. T: 020 7376 9333 E: info@figurit.com

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