An innovative product for the UK mortgage market
An interesting piece of news has reached me which, although from last week, is worth reporting here nonetheless.
A new mortgage product has been launched whereby applicants do not need to be credit scored. This is the only such mortgage available in the UK (that I’m aware of).
The mortgage is offered by the Legal & General Mortgage Club, is a two-year fixed-rate mortgage and has a rate of 3.35%.
The company says that the mortgage is a response to many borrowers who are perfectly creditworthy generating a low score on the rating mechanisms.
The press release uses some hyperbolic and contradictory language which describes the new mortgage as both ‘innovative’ and ‘back to basics’ but it is clear that the product will be competitive in the current market.
Of course, after the recent economic events there are some caveats to the provision of the product. These include a £100 booking fee, a £1,399 administration fee and a maximum loan-to-value (LTV) of 75%.
There are thought to be other caveats as well. Since the Legal & General are not using formulaic credit ratings but rather judging on a case by case basis they are likely to be tougher on such matters as other debts and loan multiples.
This underlines that the new product is not simply a catch-all for people who have failed to get a mortgage elsewhere.
The new product is interesting in that, with a background of increasing mortgage approvals and rising house prices, it is further evidence that the
UK housing market is returning to health.
The nuanced emphasis on examining applicants’ financial suitability for a mortgage is also refreshing, considering the unbridled ‘sub-prime’ lending that got us all into the mess in the first place.
It remains to be seen how successful the new Legal & General mortgage will be, but its introduction marks a continued note of optimism for lender and borrowers alike.
