As More Licenses Are Approved, And Challenger Banks Reduce Credit Requirements, North East Adviser Calls For Caution
There is a influx of challenger banks and foreign banks with UK bases offering great rates at the moment for mortgages. The reduction of lending criteria means more people can access a mortgage. Great news yes? But are the lenders what they really seem?
Martin Graham of MG Financial Solutions has been working closely with many borrowers who seem to have lots of questions in such an uncertain pre-Brexit market, so here he explains what care we should take with our mortgages and which lender we chose to apply to.
“We face so much uncertainty about Brexit, and now with no leader for the country, it leaves us in a strange place. Without doubt, the housing market is keeping buoyant and moving though. Mortgages are being sought and lent, and banks are strengthening their stronghold in the UK to be ready for whatever change is coming.
“That includes many banks with their European HQ’s here in the UK. Twenty five such banks have concluded or close to concluding their applications for EU subsidiaries allowing them a license to trade here, when and if Brexit happens. Many of these banks have also opened other hubs in Paris, Frankfurt and Amsterdam. Some have already moved HQ’s and focus.
“This has opened the market somewhat for challenger banks – independent banks who have opened up and challenge the big high street four. They are based on a retail platform, usually are all digital (with no branches) and work very much through advancements in FinTech.
“Names such as Monzo, Atom Bank and N26 are being heard about more and more. Many of the challenger banks have reduced their requirements for credit scores for successful application, which in particular makes it easier for first-time buyers to secure a mortgage.
“Virgin has adjusted its lending criteria, TSB has increased its multiple of salary to lend more, those with CCJ’s can now borrow more easily from many lenders.
“But should we be jumping in and grabbing this opportunity, or is there a reason to exercise caution?
“Two positive reasons for this happening and for us embracing it, is that the mortgage rates remain low, and this encourages competition, which is fierce in the mortgage market.
“However with lenders such as Magellan Homeloans, Amicus, Fleet Mortgages and Secure Trust Bank closing their books completely just a matter of weeks ago, I do feel we should err on the side of caution.
“The best advice I can give to anyone, is to speak with a qualified adviser, who can guide, run proper checks and make sure your decision is the one that is best for you in the long run. You may only save a surprisingly small amount each moth by taking what is actually a large unforeseen risk. I would always advocate long term security on your largest purchase is much more important. And once where you might not have been able to borrow from a reputable lender, its highly likely you may be able to.”