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Mortgage Lender Tightens Criteria

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This doesn't augur well for those wanting a mortgage or for house prices.

What excuse will they use next?

Mortgage lender refuses remortgage application because the road's busy and there's a restaurant next door

Abbey wouldn't give another loan on one London home, even though it had previously approved the same property and the same owner

Andrew Dick outside the door to his east London home. Photograph: Suki Dhanda for the Observer

Mortgage lenders are becoming so strict with their criteria that they are denying loans to customers despite having previously agreed loans on their properties. In one case, a couple were denied a mortgage on their London home even though they had been granted a loan on it from the same lender four years earlier.

Technical editor Andrew Dick and his partner Uli Schade bought their two-bedroom house in east London in 2004, with a mortgage from Bank of Scotland. Over the next six years they remortgaged twice to take advantage of deals from Abbey and Cheltenham & Gloucester. Last month, with the C&G deal ending, they instructed their broker, Stuart Inman from Hearnden Associates, to look for the best rate available. Inman recommended another Abbey mortgage.

Abbey, owned by Santander, appointed a third-party surveyor to value the property – the same company it had used when providing a mortgage to Dick and Schade in 2006, before the credit crunch. This time, the surveyor concluded: "It is not possible to recommend the property as a suitable security for a mortgage because it does not meet the Lenders mortgage criteria due to being located on a very busy road, adjacent to a Chinese restaurant and very close to a large public house." Abbey refused Dick and Schade a mortgage based on the surveyor's appraisal, even though none of the circumstances mentioned in the surveyor's report had changed since the last time Abbey granted them a loan.

When questioned, Abbey said it had declined the application "based on the findings of an independent valuation of the property conducted by a third-party firm, rather than any specific change in lending criteria". Yet it is clear from documentation that the third-party surveyor said the property did not meet Abbey's lending criteria.

Dick, Schade and their broker were shocked. "We knew that living next to a Chinese takeaway or on a main road could affect the sale value, but we've never had a problem getting a mortgage before," said Dick. "Does that mean no property on a busy road is suitable for investment? Does the surveyor understand that in London there is always a busy road, pubs, shops and takeaways in close proximity? We've had three mortgages, including one from Abbey, so there is nothing wrong with the property or location. Our broker said he had to check the calendar to make sure it wasn't April Fools' Day."

Abbey said: "If the valuer deems that one or more factors about the property at the present time (and obviously factors may have changed over time) could adversely affect a property's marketability and value in the future (for example, the combination of factors cited in this case), as a responsible lender we may choose to decline an application on the basis of these findings."

Broker Stuart Inman sees it differently: "When I first heard Abbey had turned down the loan because the house is next door to a restaurant, I thought it was a joke. In 15 years of arranging mortgages I've never experienced this. The surveyor told me Abbey had made a change to its criteria so that properties adjacent to restaurants or anything that could have a detrimental effect on the value will no longer qualify for a loan. Abbey need to put something on their website. They've wasted their own money on the survey, not to mention the time and hassle for the rest of us."

Melanie Bien of Savills said that in this case, even if Abbey is not admitting to a change in its lending criteria, it might be becoming more sensitive to any deviation from the norm in a survey. "It does suggest that Abbey are being more strict now," she added. "When it comes to the valuations and credit-scoring, you find lenders are being a bit pickier. Lenders prefer vanilla cases, such as three-bedroom semi-detached houses."

The couple instructed Inman to check the next best rate, from Northern Rock, and he contacted the bank in advance to check the same thing wouldn't happen. Northern Rock's surveyors wouldn't give a definite decision. "They admitted it is a grey area, so we chose our third-best offer instead," said Inman. This was from Woolwich, which uses an office-based valuation system and approved a loan.

If loans are repeatedly turned down, it can lead to people's credit history being damaged and further applications being denied. A spokesman for credit rating agency Experian said: "If you applied for one or two loans and were turned down, it might be all right; but if you apply for several mortgages in a short space of time and are turned down by them all, it will create problems for your credit rating."

LowerMyBills.co.uk allows you to check in advance what lending you will get accepted for, although this will be based on finances rather than whether you have a takeaway next door.

The message for mortgage applicants seems to be that they are by no means certain to obtain the loan they require, even if they have a healthy repayment record and sound credit rating.

"We were very concerned," Dick said. "We enjoy our home and love the area, and to be told our property was effectively unmortgageable was shocking."

http://www.guardian.co.uk/money/2010/aug/01/abbey-mortgage-application-lending-criteria

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It's only common sense looking properly at what makes a house worth X amount.

Just banks seemed to forget about this for a few years.

indeed, with more choice on the market, those houses that previously would have been snapped up will be bottom of the checklist for the buyer, and banker, looking for value.

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indeed, with more choice on the market, those houses that previously would have been snapped up will be bottom of the checklist for the buyer, and banker, looking for value.

It wouldn't be because more take_away/restaurant owners are nuking their places just as they fall toward bankruptcy?

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The Sunday Times carried this story today about Lloyds/Halifax/C&G tightening up their lending criteria by forcing all their interest only mortgage holders to prove each year that they could repay the load at the end of its term. If they can't, then they will be 'asked to consider moving some or all of the loan to a repayment basis'.

This could be the final straw for tens of thousands of I/O mortgage holders who are struggling to make the payments right now; e.g. some of the ones who stretched themselves to buy at the peak between 2005-2007.

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What re the Lender's Criteria?

Could it be: "Knock 50% off for when the Tories have sacked everyone and the country goes into a crime meltdown like with Old Margaret in the 80's. Then consider another 15% off that as it will have to be shifted at auction. If the residual amount from this calculation is greater than the sum requested then do not proceed?"

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The Sunday Times carried this story today about Lloyds/Halifax/C&G tightening up their lending criteria by forcing all their interest only mortgage holders to prove each year that they could repay the load at the end of its term. If they can't, then they will be 'asked to consider moving some or all of the loan to a repayment basis'.

This could be the final straw for tens of thousands of I/O mortgage holders who are struggling to make the payments right now; e.g. some of the ones who stretched themselves to buy at the peak between 2005-2007.

Got a link?

I hadn't heard about that. Fascinating and it will be carnage. I know of several people who got IO mortgages with absolutely no intent of saving to pay them off, just cash in the profit in a few years time and move up the housing ladder or some sort of weird logic. One of them woked in Audit! Should know better you would have thought, apparently fools hang from every branch in the tree and not just the low hanging ones.

Bring on the fun and games.

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They probably don't want to lend on properties that are going to lose a lot of value due to their location.

Amazing when properties where going up in value then no one cared.

You do wonder how much longer UK property prices can avoid the inevitable correction.

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They probably don't want to lend on properties that are going to lose a lot of value due to their location.

Amazing when properties where going up in value then no one cared.

You do wonder how much longer UK property prices can avoid the inevitable correction.

People rushed in, felt desperate and bought something that was less than ideal just because they felt they needed to. Housing stock that should not have easily sold did. Now the market is turning people are being more choosey and going for what they want, rather than panicking. Pretty sweet to be a buyer now and for the next few years at least.

With this story, I wouldn't buy near a large pub and takeaway. Noise,mess, damage to cars, drunken violence etc. And offering a discount wouldn't tempt me, just wouldn't buy at all. All of this is taken into account in a serious valuation. Seems they weren't being serious before and whinging that the banks have now wisened up is just pathetic and dumb. It's a business and your house presents an unacceptable risk, simple. I wonder if their pride is hurt the most though, knowing that others look down upon their investment and no longer see it as a profitable enitity. That would probably panic them and maybe that's the bit that annoys them most.

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Got a link?

I hadn't heard about that. Fascinating and it will be carnage. I know of several people who got IO mortgages with absolutely no intent of saving to pay them off, just cash in the profit in a few years time and move up the housing ladder or some sort of weird logic. One of them woked in Audit! Should know better you would have thought, apparently fools hang from every branch in the tree and not just the low hanging ones.

Bring on the fun and games.

Unfortunately I can't link to the story in the STs Money supplement - it's behind a paywall now :(. We get the paper delivered.

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People rushed in, felt desperate and bought something that was less than ideal just because they felt they needed to. Housing stock that should not have easily sold did. Now the market is turning people are being more choosey and going for what they want, rather than panicking. Pretty sweet to be a buyer now and for the next few years at least.

With this story, I wouldn't buy near a large pub and takeaway. Noise,mess, damage to cars, drunken violence etc. And offering a discount wouldn't tempt me, just wouldn't buy at all. All of this is taken into account in a serious valuation. Seems they weren't being serious before and whinging that the banks have now wisened up is just pathetic and dumb. It's a business and your house presents an unacceptable risk, simple. I wonder if their pride is hurt the most though, knowing that others look down upon their investment and no longer see it as a profitable enitity. That would probably panic them and maybe that's the bit that annoys them most.

I dunno, the place is still worth something, even if you or I wouldn't buy it. All it says to me is that they are happy to go too far the other way, as if it will balance out or something. There's no reason why they couldn't factor in a lower offer rather than a refusal. Their choice, obviously, but it seems a bit extreme. We're not talking a trailer home on an eroding cliffside here, plenty of people live close to takeaways and pubs. Obviously this sort of behaviour will make the drops bigger, but it seems they're not helping themselves here(which in itself is unusual..)! I guess they no longer need to go looking for business, and can pick and choose the absolute cream.

Edited by cheeznbreed

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  • 259 Brexit, House prices and Summer 2020

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      • down 5% +
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      • up 5%



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