Estate agency trainer Richard Rawlings has released another letter, again attempting to deal with low transaction and instruction levels in the housing market.
This time, Rawlings has written to housing minister Brandon Lewis.
His latest proposals – to give portability to mortgages – are likely to be less controversial than his open letter to OnTheMarket, when Rawlings said its ‘one other portal’ ruling was hitting listings and sales.
Portability of mortgages has seemingly become a serious issue, with cases highlighted in the media where people have been unable to move because they cannot get mortgages, even where they wish to downsize and need smaller loans.
Rawlings’ letter to Lewis was written after the pair shared a platform at last week’s Negotiator conference.
The letter says:
Dear Brandon,
I very much enjoyed your presentation at The Negotiator conference at the Park Lane Hilton on Tuesday, and thank you for warming up the audience (as I was the next speaker after you!) and for taking my question at the end.
You asked me to email you regarding the idea of lubricating the property market by freeing up mortgage portability, summarised as follows:
Many people who would very much like to move house, especially downsizers and those in debt, are unable to do so because they are trapped by their mortgage.
In essence, since they took out their existing mortgage a few years ago, lending criteria have tightened under the MMR regulations introduced in April 2014.
This means that most home owners who wish to move house are obliged to requalify for a new mortgage from scratch, even if they wish to reduce their existing mortgage by moving to a cheaper property.
My proposal is that, subject to certain criteria, any existing mortgage should be fully transferable to another property. After all, a mortgage is essentially security for a personal loan. Why not be able to switch the security without losing the loan?
Imagine the following scenario:
Mr and Mrs Jones took out a 25-year mortgage of £200,000 in 2010 for their £300,000 purchase.
Since then their income has remained the same but in planning for a possible redundancy, ill health or retirement, downsizing, to pay off some debts, or simply to move closer to family, they now wish to reduce the burden of their mortgage payments or property maintenance costs by moving to a cheaper property and reduce their mortgage from £200,000 to £110,000.
However, by having to requalify as if they were new borrowers, not only would Mr and Mrs Jones be subject to a possible higher interest rate than they enjoy with their current mortgage, but having perhaps missed a credit card payment, or failed the stress test that did not apply when they applied for their current mortgage, they no longer qualify for a new mortgage.
Their options are then either to rent (which as passionate home owners they would prefer to avoid) or stay put, with the burden of a larger mortgage than they want or need, in a property they would prefer to move out of.
By allowing Mr and Mrs Jones to “port” their remaining 20 years of their current mortgage on its existing terms, their lender would be no worse off (and may actually be better off if Mr and Mrs Jones are wisely, planning to reduce their debts thereby avoiding possible mortgage difficulties in the future).
Given that a mortgage is simply a form of security, I would argue that these people should be allowed to simply keep their existing or smaller mortgage but have the legal right to transfer the security onto a different property easily and without penalty.
Having discussed this with a number of estate agents, there is clearly a need for this and it should be enshrined in law as it could possibly free up a substantial number of transactions, benefitting the public, increasing housing availability, reducing debt, and generating the economic benefits associated with a healthy property market – with no apparent down-side!
Suggested conditions:
- The home owner may not apply for an amount greater than that of their current mortgage.
- Repossession proceedings must not have already commenced in respect of their current property (they may want to move in order to pay off mortgage arrears and reduce future payments)
- The home owner must cover all reasonable costs associated with the transfer of their mortgage, plus SDLT etc.
I would therefore ask you to consider introducing legislation immediately relaxing MMR requirements in certain circumstances and requiring lenders to allow all existing and future mortgages to be fully portable without obstruction.
I look forward to hearing your thoughts on the above.
Many thanks,
Kind regards
Comments (40)
OK so mortgages are harder to qualify for than ever before but surely a defaulted loan becomes a repossession no matter how hard the lenders make it for the home buyer. Therefore it cannot be a question of the loan but the political hot potato of taking the heat out of the housing market in London. And it is just a London /south east issue.
So the rest of us suffer because of one city and a few over priced suburbs?
Perhaps the mortgage lenders should go the same way as the NHS with it’s health postcode lottery !!!!!!
Why should banks be legally required to accept amendments to a loan? This is a mental suggestion!
The only way any housing crisis will be avoided is by building new properties. Supply and Demand is forcing prices up, not because some old granny in Margate cant downsize her 3 bed semi to a retirement flat.
Why is it mental? They actually used to have it in the UK. and they are very popular in Australia. http://www.mortgagechoice.com.au/home-loans/home-buying-advice/home-loan-features/loan-portability.aspx
Let’s not dismiss ideas out of hand!
Is that an ‘Open Letter’?
Where’s Dr Who?’s input mentioned?
How can this possibly work when their last ‘Open Letter’ reckoned OTM has proper bu99ered the property market already?
Answers, on a postcard, please…
OK we’re now listening to you peebee and awaiting your recommendations (not sarky comments). Let’s put all this wasted talent you have to good use. Next time we hear from you then it’ll be constructive ideas that could actually serve the industry some good. And I’m talking buyers, sellers and agents, not just yourself !
“OK we’re now listening to you peebee and awaiting your recommendations…”
Didn’t say I had any.
“Let’s put all this wasted talent you have to good use.”
I save it all for my clients.
But here’s the thing, Mr Redway. LAST WEEK, Mr Rawlings was claiming that the market was basically bu99ered because of OTM. THIS WEEK, it’s mortgage portability.
How will freeing up lending improve things when according to him, people believe there’s nothing to buy so don’t even bother trying?
To you…
Maybe the the things are connected ! Ah, Didn’t think of that !
If lending is improved then the impact of those movers listing their properties will provide more stock for those looking to buy – hence starts oiling the wheels of the system and the end result is more transactions.
So it is about ‘all’ these factors not just one in isolation (like building more homes) that will increase the volume of completions. So let’s not dismiss any idea until we have explored more thoroughly. Maybe peebee you’d like to join me on an industry thinktank for this – and put your energy to good use. Lets get ‘wilko’ and ‘smile please’ on board too as they have strong opinions!
Mr Redway
ALL things are connected when it comes to the housing market – you didn’t think of that either!
Mr Rawlings’ ‘plan’ will create small closed chains of activity. Those selling at the top become those buying at the bottom. No new blood; no new money being spent.
Where is the benefit of that to the ‘whole market’?
Where do all the aspirational FTBs fit in with this plan?
Predicted result (for future clarity and avoidance of doubt that is a guess, NOT a bet…) – a bu99ered market. No change there, then according to Mr Rawlings, as it is apparently bu99ered already.
Those that try to meddle with the market need to learn that effluent doesn’t naturally flow uphill.
Nor can you wrap it in Christmas paper and make it more of a gift.
I’m not your man, as I’m sure you will glean from the above.
Nearing retirement and don’t want to meddle in the market for the better?
I don’t blame you – but the industry does need a bit of meddling to unblock the antiquated ways – and you’re not the man.
How are you qualified to meddle Ben? it seems to me there are too many people attempting to social engineer folks out of their homes to suit aspirational families.
And Robert, how are you qualified?
I’m not trying meddle but for the record 29 years experience, FNAEA (via examinations sat) service supplier with apparently about £26 billion rent going through two of my systems from nearly 7 in 10 of all UK tenancies.
and you?
Wow – maybe you should meddle. Did you do all those £26b yourself?
I don’t need to meddle with things that aren’t broken in order to resolve issues with things that are but which people in BoE, Treasury, HMRC, CLG and DWP have little inclination or motivation to sort out.
The market has become dysfunctional and over extended there is nothing you nor I can do about that.
Forcibly oiking old folk out of their homes as Wilson at legal and General has proposed or easing downsizers out of their homes with portable mortgages simply shifts demand from one bit of the market to another rather than alleviate demand.
Back to the question, and you?
Spoken like a true onlinie/hybrid/’disruptor’.
Nearing retirement? I’m closer to hanging up my tools than entering apprenticeship, I’ll give you that.
As far as the rest goes – whatever.
I’m simply happy to make my ‘difference’, my way, every day.
I look forward to seeing your proposals. There’s always someone wanting to reinvent the wheel.
Can’t say I’ve seen a better model in production than the original antiquated design, though…
The online agents won’t ‘imho’ even cause a dent in traditional agency – that’s where you and I agree. The me-too onlinies have zero usp, price cutting is not the answer.
That said, agents need to keep abreast of the changes in consumer habit and be open to a bit of meddling or even finessing of the original model. As the original can still be the best.
You’re starting to interest me, Mr Redway.
Keep going…
Seems he doesn’t finish conversations.
Robert, thats a bit unfair. Been offline for an hour and a half. 🙂
Let’s assume our interests are aligned and that is to support the model that we all know works and has done for years. The online agent and the hybrid are just dilutions and serve no purpose other than to disrupt for the sake of it. ‘Crowdfunding = just dumb money after dumb money.’
Google Boo.com from the late nineties and you’ll see that no amount of funds (they blew £60m before going bust) can make a model work if the business premise is wrong. The onlinies will run out of money, and fail. You cannot compete on price alone (unless you are poundland) and most sellers don’t want to cheapen their property in the eyes of the buyer.
Its fun watching this all play out and the me-toos all vying for position – in the meantime I do believe we should give some credit to the thinkers like Richard whos heart is with the industry.
As I said earlier I’ll support anyone on this forum who is open-minded and trying to improve the industry, transaction volumes and even fee rates !
It was based o the fact you didn’t reply to the 4 pm post when you were around at 5.
It was a straight question about your qualifications to meddle with the market.
You don’t have a Social media profile and have only until today posted a couple of times on Richards stories, that hardly justifies your tone on here today.
Hi Robert, sorry I missed your comment earlier. Anyway have a good evening. Yes I’m new on here – but have posted on other news items and will continue to do so. Check out the one about emoov.
Have you moved on since the portal? Where are you now? This is not a dig, I’m genuinely interested.
I have built a fast and focused web search system that’s like an index of the internet; it puts individual agents at the centre of search. Although in beta testing I can produce #1 Google search results against Rightmove, Zoopla, On the market, Nestoria etc for property related search without expensive or ongoing SEO.
Robert, very compelling. I’ll contact you via linkedin in a few days. Interested in a demo.
Please get in touch Ben but I really do want to know your experience and qualification. I am not building a system for every agent in the land, I only want agents who can value properties and win instructions without having access to someone else’s comparables and dead file data.
Has he finally lost it?
He is now looking to revolutionize the mortgage market?
I think somebody has a “God complex” we can all come up with ideas that will stimulate the housing market but does not mean they are right or should be done!
I do not think it is people currently in homes looking to move that is the problem.
We have a shortage of property in the UK and it is much more pressing for FTB’s to get on the ladder.
Freeing up the minority who cant move but currently have a mortgage at this time is only going to add further competition to properties for sale and raise prices further!
It benefits the agents as more stock could change hands but does nothing to address the shortage of property!
These poor people that cannot afford to move but can find £500 for survey, £1,800 for solicitors, £1,440 for stamp duty £2,400 for estate agents (conservative figures, will probably be higher) = £6,140!!!
I was at the conference when he raised this and everyone in the room including the housing minister thought it was a good constructive idea. I’m afraid you’re in the minority here and you are patently wrong, as this move would actually put more homes ‘on the market’ as these buyers would be selling their property hence enable FTBs to buy!
Think about your comments before you make a fool of yourself !
What a surprise somebody standing on stage getting a round of applause, who would have thought it!
So where do these poor people find over 6k to move?
I have thought about my thoughts and stand by them. FTB’s will be further priced out of the market.
It really is simple, build more houses!
Only person making a fool of themselves is Richard and now you Ben.
If more FTS properties are put on the market they will be snapped up by over 55’s who understand that property, despite Mr Osborne’s best efforts to deter them, is a far better investment than anything to do with the banks or investment market.
Mark Carney said that once un-employment rates fell below 7% he was going to hike up interest rates, do you understand why he hasn’t done that? Why he hasn’t doubled the interest portion of over extended mortgages on property that in some areas is transacting about 25% above realistic trend line?
Here is the really bad news, build to let has snuffled up the vast majority of new build in the past few years, investors home grown and foreign are competing for every bit of yield in a market saturated by demand. investors large and small have an appetite for property. which will only be cured by significant interest rate rises.
The property ladder is broken and choosing a single rung to repair isn’t going to do much good.
Surely by helping people who want to move, but can’t this will help to address the property shortage. As their homes are then available for FTBs. I’ve not heard of any suggestions from you about how to do this. So stop criticising other people – unless you’re prepared to come forward ‘to the industry’ or housing minister yourself with ideas that can be considered. The more ideas in a changing market the better, I say.
Okay how about this Ben abolish stamp duty – Equally as insane and has as much chance of happening as changing the mortgage market.
Want another …
How about once offers have been put forward they are legally binding. This way all the people worried that chains fall through will move. Oh wait thats another equally mad idea!
Oh and Ben stop liking your own comments, regular posters can see through it.
Why is that such a mad idea?
This is a changing market and things need to be challenged. I don’t like my posts, but I disliked yours (oops).
Ben just a thought but are you in anyway connected with Richard?
Looking at your posts it seems you are most vocal when Richard appears ,,,,,
So you think OTM is to blame for shortage of stock, and now you AND Richard think its down to current owners with mortgages not being able to afford to move (but able to find between 6 -10k to pay associated costs) which is why there is not enough property?
And yes the examples i give above are mad. And i bet if i had a public industry awareness, gave a speech to a room full of industry professionals and pitched them my above mad ideas, i too would get a round of applause, its polite in that situation. But i bet not many came out of there thing “My lord, he has got it! lets make all mortgages portable!”
I know Richard yes, as do I’m sure hundreds of other agents on here who respect him. At least he comes forward and I support that – which is why I did on his other post. I will also support other people on this forum who are constructive with any ideas that help our industry develop. So let’s stop bickering and work together!
I too respected him until the last couple of weeks, has he changed his water provider?
I am all for good ideas, well thought out ideas which are possible and can lead to change.
But this is just headline grabbing. Self promotion. I am sure it will book him a few more gigs and good luck to him its his business after all and i gather he does pretty well out of it.
But if you are going to come out with, lets face it ill thought out, controversial ideas than expect people to react.
Why not look at the conveyancing process and the service they provide?
Everybody within the industry knows its the conveyancing that holds up the process and there is not enough emphasis on time or the clients needs. Why not look at how this can be changed so the fall through rate in England in no longer 1/3 and on average 12 weeks from sale agreed to completion? That is something with some thought and collaboration that can be changed.
Ben Redway……”I know Richard yes, as do I’m sure hundreds of other agents on here who respect him”…..That may have been the case…….until he lost it!
First a ridiculous open letter, then this nonsense. Shows how out of touch Mr Rawlings has become with the real agency world in my, and many other pro agents, opinions. .
RR always reminds me of that lady recently fired on The Apprentice. Has a lot to say about how things should be done but when asked to sell, couldn’t – failed miserably. She was a sale trainer!
If you read the letter you’ll see that it’s not about homeowners not being able to afford to move – its about not being allowed to reduce their outgoings by moving. A review of the mortgage regulations as suggested would free up more homes for sale, benefiting everyone although this does not, I agree, solve the issue of too few new homes being built. That’s another issue.
And as for binding offers (further down this post – absolutely! I’ve been using them for years and encourage my clients to do the same.
So you think there are people looking to move to reduce outgoings that have between 6-10k to spend on associated fees?
Sorry Richard i just cant agree with you this is a sensible suggestion.
I have also left off my figures the no doubt pretty hefty admin fee the bank will apply. They will need to get the property valued and have admin / processing costs. Are they expected to swallow this or is this further fees the mover needs to cover in addition?
And actually i also forgot the probable early redemption charge to drop the mortgage from your example of £200,000 to £110,000.
So i am guessing to be able to port their existing mortgage (because they are looking at reducing outgoings) the fees they need to find between 10-15k in total – I cant see too many wanting to do this.
In summary (given your above scenario) if they are on a current 3.92% repayment mortgage of 20 years left they will have to find up to £15,000 in fees to save £542 per month.