Mortgages  

Most borrowers can't get record-low rate mortgages

Most borrowers can't get record-low rate mortgages

Borrowers are being denied access to record-low mortgage rates due to lenders’ affordability requirements, a broker has claimed.

While a range of sub-1 per cent products is now available to consumers, London-based Enness Mortgages has pointed out that most borrowers fail to qualify for the deals – even though they would probably have no difficulty making the repayments.

The problems are said to be particularly acute for people who are self-employed or in professions that lack a steady income stream.

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Skipton Building Society recently became the latest lender to join the mortgage price war with a 0.99 per cent two-year fix at 60 per cent loan to value, which comes with a sizeable £1,995 fee.

It followed earlier moves by Yorkshire Building Society and HSBC, which have both launched deals with rates below 1 per cent.

But with the average fixed rate mortgage fee recently reaching a four-year high, concerns have been raised that consumers opting for headline-grabbing rates may not be getting the best deal available – particularly as some of the products are not available via intermediaries.

Steven Boyde, associate director at Enness Mortgages, said borrowers who can more than afford to service a mortgage often have to pay a higher rate because they have more complex circumstances.

“Once you have sifted through the very best rates at the top of the pricing charts, it is then a case of finding the cheapest product/lender specific to the actual client’s situation,” he added.

“The checks inflicted upon borrowers now mean that even the wealthiest clients are limited in their property financing options, and all this hyperbole about the cheapest ever rates is alienating them from the mainstream market even further.”

Daren O’Brien, IFA at London-based Aurora Financial Solutions, said the sub-1 per cent rates are typically only available to 5 to 10 per cent of clients.

“They are advertising these rates and clients are having unrealistic expectations of what they can achieve,” he explained. “They then get agitated with us, saying ‘they are offering a great rate – why can’t I have it?’

“It is just headline grabbing, really, and unfortunately in today’s quick turnover of headlines it seems to be working.”

He said clients sometimes see low rates and ask why they have not been advised to take out the product, adding “it brings into question our whole-of-market research”.

simon.allin@ft.com