Mortgages – beginnings of a trend?

I have just blogged about an e-mail I recieved from the Abbey, regarding a mortgage that is only open to existing current account holders only.

Yesterday, I spoke to a customer and the league table had a product from the Coventry Building Society at the top of the list. One of the criteria – Coventry Savings Customers of 3 years standing, only.

Things that make you go hmmmm.

New 90% mortgage available…

Step by step the mortgage market is slowly becoming a little more relaxed about lending.

I have just had an e-mail from one of the mortgage clubs with a reasonably decent deal it has come up with from the Abbey for a mortgage requiring just a 10% deposit.

Now, in my world, we all know Abbey’s usual lending rules. However, this is a brave move for them and this product doesn’t follow the usual rules, there are a few restrictions.

So, although this e-mail was only sent to mortgage brokers, it still said:

“To help you identify a typical customer who is more likely to be accepted for this product, please make sure they meet the following criteria.”…and it goes on to list a few points – people with low debts, no missed payments etc, but very unusually, the must be Abbey Current Account holders.

So,  they are limiting the lending to only the very best existing customers  with A grade credit scores only. Normally, on a scale of A – E they lend to C, with D’s being considered and E’s being declined.

I welcome the Abbey’s foray into the 90% market, but I suspect the entry criteria will limit the number of takers to…well, possibly not even 100’s of people across the country.

But, it is a step towards what we regard as normality, and if nobody makes these steps we’ll never get there. Hopefully Abbey’s experience will be good and they’ll make more mortgages available, with slightly looser restrictions and encourage other lenders to reduce their deposit requirements.

Self Cert – The devil’s work, or a saviour for the self employed…

Self certification mortgages. Surely if you want to obtain a mortgage and say you earn £30,000 pa, you should be able to prove it?

Well, self certification mortgages are where you don’t, and that seems to be an encouragement to commit fraud, so why bother having them?

Well traditional lenders are a bit, …well, traditional,  about what is income. So, basic salary is income, or if you are self employed, your net profit is income. If you are employed, some (usually half) of your overtime and bonus can be income. And that is all fine for most of us.

But, what if you rent a room out to a lodger – Revenue and Customs allows this income up to about £4500 pa without paying tax, and people use this as an income. Lenders don’t count it though. What if you recieve £1000pm maintenance from your rich ex husband? Some lenders will consider it, but under certain circumstances only.  I have a client who plays on line poker and makes £5000 pa a year. Not counted.  What about someone who has a job paying £15000, but makes £4000 from ‘rent a room’, £5000 from poker, £5000 from car boots and £1000 from training the local kids football team? How much does he earn? You’re right, £15000, even if he declares the car boot and football money most lenders won’t be interested.

Or lets take a less ‘wheeler dealer’ scenario and take a regular salesman. Most salesman are on low basic salaries and a decent amount of commission – lets take a successful salesman who has been making £50,000 pa for the last 2 years. His basic salary is £15,000. Well most lenders will take half his commission – and say he earns £32,500.  Still good money, but four times £50k is alot different to 4 x £32.5k when you are buying a house. He may need a self cert mortgage.

And take the self employed – you buy a car for £24,000. This year ‘allowed depreciation’ will be £6000. That is wiped off your income. You work from home, so a portion of all your home bills are wiped off your income.  So, the self employed can and do earn more than their accounts suggest, perfectly legitimately.

So, there are people, who genuinely need self cert, and that’s why it needs to exist.

The trouble is, it is abused and people think it’s one of those ‘OK’ crimes,  and somehow that needs stopping.

Currently the FSA wants to ban self cert. It may happen, to stop the abuse.

That’s going to be bad news for some people especially those who have self cert mortgages now, as they won’t be able to switch lenders so will become trapped in the house they have, with the lender they have.

But, that may be the lesser of two evils.

 

 

 

 

 

 

Delighted to read on facebook this morning

…one of my old school friends, Mike, lives in Munich.

In Munich, they’ve been building a spanking new bus station (Check out the architecture here) with the aim to improve their fully integrated transport system.

During the building process Munich changed their emmissions rules.  Sadly most of the buses that arrive (from ‘ex communist’ places to the east of Germany) no longer pass the strict emmissions rules.

The bus station stands almost empty.

I thought it was only the UK that did that kind of thing!

Your last ever pay negotiation. How to get it right.

Think about this for a second, because it will help explain what I am on about.

You know with life insurance, if you smoke, or you suffer ill health, or like me you have eaten too many cakes and people say ‘You’re looking well’, the insurance companies make your insurance more expensive – well that’s because they reckon you will die earlier than the health freaks (ie, you may be “looking well”, but you may not last long), and so they stand a greater risk of paying out a claim.

Pensions are the opposite of Life Insurance. With Life Insurance they collect money while you are alive and pay out when you die.

With pensions they are paying out cash while you are alive, so will reward you if you are likely to die early.

So, if you smoke, or you are a bit portly, or you have health issues – any health issue, there is a decent that an “Enhanced Pension” may be available to you.

Now most people, when they get to retirement take the 1st pension they are offered, thinking they have no choice. The  pensions companies know this, so rarely offer a good pension, let alone an enhanced pension. Why should they?

Now, bearing in mind, the pension decision is your last ever pay negotiation, you can see how important it is to get it right – especially if you can qualify for an enhanced pension.

Most people could do better by shopping around anyway.

40% of people could qualify for an enhanced pension.

An enhanced pension could produce a pension income a third higher for the rest of your life. That’s a 33% payrise.

So please, when the time comes to take your pension, see an IFA. Preferably me, but if not me, any IFA will do.

 

 

Interesting Blog on “Thinking Traps”

Here

These really highlight how we can all have habits in our thoughts that can be non productive or illogical.

Does your image lose you business?

I’ve just had an e-mail from a  freelance paraplanner who is looking for business. Now his speciality is report writing – explaining to my customer why I have advised him to do the thing I advised.

He spoke about the FSA and their rules in a very professional clear way, from what he said I expect he’s competant.

But, he won’t get my business. Here’s why.

OK, one of the reasons is that I have them done at HO, but apart from that…

He only provided a mobile phone number.

He had no signature on his e-mail, no address etc.

His e-mail address was a yahoo webmail address.

He had no website.

I was surprised that someone would commit all 4 sins that we are told to watch out for in spam e-mails when he is touting for business in such a cautious world.

It seems I am immune from the law.

In most professions the professional takes responsibility for his advice and takes out insurance to protect himself in the event he makes a mistake.

That’s the same in my profession.

In most professions, after you leave the industry, you take out a form of the insurance to proect yourself in case a mistake you made while you were working is discovered later on.

That’s the same in my profession.

In most professions the Statute of Limitations says that the period of your liability is for a set time – usually 6 years.

In my profession it’s different. There is no limit – so I could advise someone today, retire tomorrow, they could complain about me in 50 years and I still have to defend myself.

Now, from a consumer point of view, that’s fine, indeed, it could be pretty lucrative if I didn’t keep the file.

From my point of view – I can never retire and I will have to pay for Professional Indemnity Insurance for the rest of my life. I have to keep all my files for the rest of my life. In a world where history shows that complaints can be ‘for fun’ because they know the file will be destroyed and so there will be no defence’, or the rules backdated (“Yes Adrian, when you said it, it was right, but it’s 2040 now and we’ve changed the rules so you are liable”) this will be quite a burden.

Our industry is lobbying against this situation where we are uniquely excluded from the Statute of Limitations.

The industry feels 15 years is fine for a customer to discover that he has a complaint against me.

So, it seems that as it stands, I am subject to all the bits of law that protect consumers against me, but I’m not subject to the bits of law that protect me from consumers.

That seems a bit one sided to me.

I know when you will die!

OK, that may be a little on the confident side, but I am armed with the official statistics from…the Office for National Statistics. Oh yes, the nights fly by in the Garside household.

If you want to join in the excitement, here they are.  My blog stats will show how many people click on this link – my bet is very few!  I’ll tell you what, I will give you a bit of detail now and you could come back to the link afterwards.

So, there is a list of life expectancies for kids born now and 18 year olds now. Further down the page is the life expectancy for people aged 65 now, and this is the interesting bit for me.

So, if you are a chap turning 65 now, you have  decent chance of living another 18 – 20 years… Girls, will last about 3 years longer than chaps.

If  I had been writing this blog in 1950, I’d have been saying 65 year old boys will last another 12 years, girls 14.4 years.

So, on average we’re living longer and that’s nice.

And, it’s the reason planning for an income in retirement is so important.

There are lots of ways of planning for an income in retirement – notice please that I don’t say ‘paying into a pension’.

Retirement for people of my age will have to be planned differently, just paying into a pension won’t cut the mustard any more, the advice needs to be much more holistic and will include 2 things – paying for life as you live it, and a plan for if you end up requiring long term care.

The income side of things may include:

Old age pension,Second state pension, pension tax credits, heating allowance, free TV licences and bus travel, but also making a bit of cash from your hobbies, taking in a lodger, being a helpful man at B & Q, ebay/Carboot trading, self sufficiency ideas like keeping chickens or bees, shrewd use of your savings, actively reducing your bills etc.

And, it will include pension planning, but planning your whole retirement based on a pension now will be too big an ask, it has to be a more imaginative approach these days.

It will be different for people retiring in the future than it is now, but different doesn’t necessarily mean bad.

The long term care thing may be trickier, but since only 1 in 5 go into long term care, it needs a less ‘urgent’ plan, paying a monthly payment is often not worth the struggle, but it’s worth knowing the costs and knowing the various mechanisms for paying for those costs.

What you need is an imaginative Financial Adviser who knows all this stuff…

Oh, and if you want, now go back and click on that link

Cycling to school – rules gone mad.

I encourage my 6 year old boy to ride his bike and his school have just built some bike racks.

He wants to ride his bike to school – supervised, you understand – his mum will ride with him.

But, the school, or maybe more correctly, Hampshire County Council have told us they won’t let him ride his bike to school because he hasn’t passed his Cycling Proficiency.   They won’t let him take Cycling Proficiency until he is 10, which is fair enough, that is why his mum has to supervise.

I’m amazed. A boy wants exercise and the school says no. Since the school is 3 miles from our house, the only realistic option is a couple of car journey’s a day. And, before you say – we can get from door to door on cycle paths and bridleways.

So, we will ignore them and I guess we’ll lock his bike to a fence so that he can still ride and get a bit of exercise.

Am I the only one to think the world is going mad?