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Our Latest News

 

 

 

 

03Feb

Consultation on Stamp Duty for Additional Properties Launched


The Chancellor announced in the Autumn Statement that the purchase of additional properties would attract an additional surcharge of 3% on the applicable Stamp Duty rates from April 2016.  The reason given was to give first time buyers a greater chance of competing against those buying an additional property such as a second home or a property to let. 

The Treasury has now published its consultation document which gives more detail on the proposed implementation.  Below we outline some of the key elements, although it must be stressed that the full rules will only be confirmed following the consultation.

When will the higher charges apply?

The new surcharge will apply to the purchase of any additional properties that complete on or after 1st April 2016.  It proposes that if contracts were exchanged on or before 25th November 2015 but the purchase completes on or after 1st April, the higher rates will not be applied.  That could apply to a situation such as the purchase of a new build property where contracts were exchanged long before completion. 

What if I am buying a new main residence?

The use of the property is not generally the determining factor but if a homebuyer is purchasing a replacement for their main residence they may not be liable to the higher rates, even when they will own more than one property following the purchase.  

For example, let’s say a buyer owns a couple of Buy to Let properties and their own home but is planning to buy a new main residence.  If they sell their current main residence when they purchase the new home, it’s proposed that higher rates will not apply as they are replacing their main residence.  

If they don’t sell their current home, for example a let to buy situation, then the main residence is not replaced and the new purchase would be subject to the higher charges.

What if I can’t sell my home at the same time as I buy?

The consultation proposes that where a purchase and sale are not simultaneous the higher rate will be charged.  However, if the original property is subsequently sold within 18 months then the stamp duty surcharge may be reclaimed.

Treatment of Couples

The consultation suggests that married couples and those in civil partnership will treated as one unit.  As a result, if the main home is owned in one name only and an additional property is purchased by the other, the higher rate will still apply as together they will own more than one property. 

Buying for a Child

If a parent helps their child to buy a property and is a joint owner then the higher rates would apply.  That would be avoided if the parent acted as a guarantor and was therefore not a joint owner.

Bulk Purchase

The consultation seeks opinions on how large scale investors, who can have a positive impact on housing supply, should be treated.  For example the consultation asks whether those making a bulk purchase of 15 properties or more should avoid the higher rates.

Purchase by a company 

It’s proposed that even the first purchase by a company or collective investment vehicle will pay the higher rates.  This is designed to prevent the use of companies to avoid tax that would otherwise be payable.

It’s clear that while the new stamp duty regime will hit landlords first and foremost there could also be consequences for others.  However, it’s important to underline that all of this is still under consultation so there could be further changes to come yet.  


Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The FCA does not regulate most Buy to let mortgages.

03Feb

Base rate to stay low longer. Again.


Over recent months expectations of a rise in Bank of England Base Rate had started to grow, with many commentators forecasting a rise this summer, and some suggesting it could come rather earlier.

This would be the first move in Base Rate since it fell to 0.50% in March 2009, and the first increase in 9 years.  As many noted, that could be a disturbing prospect for many thousands of new homeowners who’ve never experienced an interest rate rise.

The good news for those people is that in a recent speech, the Bank’s Governor Mark Carney has again suggested that first rate rise is still some way off.

He was at pains to stress that the Monetary Policy Committee’s (which sets interest rates) primary concern is to control inflation.

With Base Rate at just 0.50% the expectation is that, as inflation starts to grow, interest rates can be increased gently to stop it running too high (if we have to pay more for our mortgages, we’ll have less to spend on other things and retailers can’t hike prices as they otherwise would!).

The problem, as far as returning rates to a more “normal” level is concerned, is that inflation has remained stubbornly low and largely for reasons well outside the Bank of England’s control.

In recent years it’s been Europe, and specifically Greece, causing uncertainty. With the European crisis apparently over, or at least dormant, a recovery under way at home and America finally confident enough to increase rates to 0.50%, it felt like the time was approaching when we could contemplate a similar move.

That has all turned on its head in a remarkably short time. The combination of drastically falling oil prices and the slowdown in China (with its knock-on effects in commodities, industrial goods, and our own steel industry) has returned us to an uncertain world with a weaker outlook. 

As Governor Carney said, with a nice turn of phrase, “Last summer I said that the decision as to when to start raising Bank Rate would likely come into sharper relief around the turn of this year. Well the year has turned, and, in my view, the decision proved straightforward: now is not yet the time to raise interest rates.”

The first rate rise seems deferred again, but it will come sooner or later. Homeowners have a little longer to prepare and hopefully put the petrol-pump savings to good use.


Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The FCA does not regulate most Buy to let mortgages.

14Dec

Remortgage – time to review

As we enter Autumn, lender focus turns to the end of year and building pipeline business for the New Year.  Those that have perhaps not managed as large a volume of business as they would like will be eyeing their year end target nervously.

Not all lenders’ financial year will be the calendar year but those that are eager to get more business on the books before Christmas need to act now.  As a result it’s not unusual to see lenders make a final push to attract customers. 

There is often particular attention on remortgage business as that can typically be quicker to reach completion than new purchases.  This year is showing no signs of bucking that trend and many lenders have been repricing their mortgage rates recently.

The market remains very competitive and cutting rates is a good way to grab the attention of borrower’s.  That has also been helped by a calming in funding costs as the threat of an imminent rate hike has eased.  As a result rates have dropped back after having nudged up a little in recent months.

It’s therefore a very good time for borrowers to review their mortgage and see if there could be an opportunity to cut their monthly cost.  The headline interest rate is only part of the picture though and borrowers need to be sure to consider overall value.

Some of the lowest rates can carry big set up fees which can quickly erode the savings.  However, most lenders will offer a variety of options with different rate/fee combinations. 

In addition, many deals will come with incentives such as free valuation and legal work or a cashback to help deal with switching costs.  It can therefore pay to opt for a product with a slightly higher interest rate but low set up fees.

What certainly doesn’t pay is apathy and failing to review your deal could be costly.

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

14Dec

The Buy to Let Punchbowl

Buy to Let lending seems to be back at the top of everyone’s agenda again. Recent figures from the Council of Mortgage Lenders suggest buy to let has been one of the key drivers of the market recovery since the credit crunch, and claim it accounts for an astonishing “more than 70% of the overall growth in mortgage balances outstanding” in the last five years 

Certainly lenders seem keen to get in on the action, be it new entrants such as specialist Fleet Mortgages or Indian giants Axis Bank and State Bank of India, challengers like TSB and Metro Bank coming into the sector or established names like Santander, Natwest, Virgin Money and Leeds BS substantially improving their offering.

More new lenders are said to be on the horizon and competition is increasing all the time. Even the big specialists Birmingham Midshires (part of Lloyds group) and The Mortgage Works (Nationwide) have upped their respective games and most recently Paragon subsidiary Mortgage Trust slashed rates by as much as 0.60%.

Why is buy to let booming so much? Ever since the credit crunch lenders recognised there was low risk business to be had in this sector, with better returns than they could get from homeowners.

At the same time, restrictions first on availability of loans for first time buyers, and more recently in affordability assessments, along with continued undersupply of new homes, have made for a thriving rental market – giving confidence to landlords and lenders alike.

With that backdrop, it’s little surprise that the Bank of England and Treasury have been watching the buy to let sector closely. The Bank’s Financial Policy Committee – charged with monitoring the stability of the economy and  where possible heading off potential threats – has been raising the topic for quite some time.

At a recent session of the Treasury Select Committee, Chancellor George Osborne signalled the Bank of England would likely be given powers to intervene in the buy to let market. While there’s no guarantee any intervention would immediately follow, the direction of travel seems clear.

So it looks like buy to let is at something of a crossroads and it could be we’re seeing the last hoorah for a while, before the brakes are gently applied. Or, to borrow the former BoE Governor Mervyn King’s metaphor, the punchbowl can’t be topped up that much further before it gets taken away.

 

Guild Mortgage Service, Provided by London & Country Mortgages

 

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

 

Most Buy-to-let mortgages are not regulated by the FCA

14Dec

Securing a deposit

Despite a climate of record low interest rates and ever improved deals for borrowers over the last 12 months, First Time Buyers still face a range of challenges when it comes to getting onto the property ladder, the biggest of which is building up a large enough deposit.

 

Figures from the Office of National Statistics, published in The Times this month, showed that the average price of a First Time home is now around £215,000, so even those aiming for the minimum 5% deposit will need a significant level of savings.

 

The launch of the new Help to Buy ISA on 1st December should provide a useful option for those looking to save. It allows for an initial deposit of £1,000 plus £200 per month thereafter. The Government then provides a 25% uplift on the money saved, to a maximum of £3,000.  While hitting the required amount for a deposit may still seem out of reach, this type of account provides a welcome boost for potential buyers.

 

For many First Time Buyers however, using their own savings will not be enough, and it is for this reason that cash gifts are still the most common way that the ‘Bank of Mum and Dad’ can help. Most lenders are happy with this as a source of deposit, as long as it can be confirmed in writing by the parent. Bumping up the deposit from 5% to 10% also opens up a much wider range of mortgage deals with lower interest rates.

 

Further options exist for parents who want to help without physically parting with their savings. Some lenders allow money to be held in a separate savings account, allowing parents to keep their savings in their name, while still providing the additional security needed and often securing a better rate.

 

While getting a deposit together can feel like an uphill struggle at times there are options available, and with some financial discipline and planning, stepping on to the property ladder for the first time could become a reality.

 

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

14Dec

More support for Help to Buy Announced

The Autumn Statement brought a number of important announcements for homebuyers, not least a doubling of the housing budget to boost the supply of new homes.  Much of the focus is on affordable housing and builds on the 200,000 discounted Starter Homes that have already been pledged.

In addition to the Starter Home Initiative the Chancellor announced Help to Buy: Shared Ownership.  This is expected to number 135,000 homes which will be available to those that want to purchase an initial share of the property, with the option to increase to full ownership as their circumstances change.

Shared Ownership is not a new concept and many housing associations offer it as an affordable way for aspiring buyers to take a first step onto the property ladder.  Different housing associations can apply varying eligibility criteria depending on the target buyer.  The new Help to Buy Shared Ownership properties will not carry any such restrictions, other than qualifying households will earn less than £80,000 outside London and £90,000 in London.

The Help to Buy equity loan scheme has been highly successful in offering an alternative for homebuyers struggling with deposit and affordability requirements.  The scheme has been extended until 2021 and a new variant is to be launched in early 2016.

London Help to Buy will offer a 40% equity loan, double that of the standard 20%, recognising that house prices in London are substantially higher than elsewhere.  Although more detail is due in the New Year it sounds like it will follow the approach of the existing scheme. 

Available on new build property the equity loan is interest free for the first 5 years and available for those with just a 5% deposit.  Assuming it works in the same way, the repayable amount will be the equivalent percentage of the sale price. 

All in all, the Autumn Statement included a number of measures to boost the supply of new properties and hopefully increase the availability of affordable homes.

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

14Dec

Long Term Fixed Rates


Expectations for an interest rate rise may have eased over the last couple of months, but even so borrowers are beginning to plan for the future, and think about what it will mean for them when rates do start to edge up.

 

Our clients approached the mortgage service for the Guild of Professional Estate Agents looking for advice when purchasing a new family home. A move up the property ladder meant taking on a bigger mortgage, and with two young children, their main objective was to secure a competitive long term rate and stabilise their mortgage payments for the foreseeable future.

 

After discussions with their mortgage adviser regarding the difference in cost between 2-3 year deals and those over a longer term, the couple decided that a 10 year fixed rate mortgage would fit their requirements.

 

Their intention was to stay in the property for at least that length of time, and they felt that securing a mortgage now while interest rates remain extremely competitive could give them an advantage in the long term, if rates do start to rise. Their mortgage adviser was able to secure a 10 year fixed rate with a high street bank and the family are hoping to move in to their new home before the end of the year.

 

Borrowers must of course be made aware that the majority of long term deals carry Early Repayment Charges for the length of the fixed period. It is therefore important for homeowners to think about any changes in circumstances that are likely to occur over the next decade, and decide whether more flexibility may be required.

 

Most deals are portable, but there is no guarantee that a borrower will meet the lender’s criteria when they come to move.  As a result, being locked into a deal for this length of time will not be suitable for everyone but for the right borrower it could be a good chance to secure peace of mind for the future at today’s rates.

 

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

14Dec

House Prices Rise but Regional Gap Widens

Recent figures indicate that UK house prices are continuing to rise.  Nationwide’s house price index showed that UK prices rose by 0.5% in September.  That meant that the annual rate of price growth increased to 3.8%.

The Building Society’s chief economist was encouraged by the modest pick up in house price growth, noting that prices rises were stabilising and somewhat nearer to the pace of earnings growth.

However, there are many that continue to point to the imbalance between the supply of property and the strong demand from buyers.  With fewer properties on the market and plenty of interest from buyers it would not come as a surprise for there to be a continued pick up in house price growth.

The UK wide price increase masks a wide range of regional growth rates.  London in particular continues to see price increases far and away higher than elsewhere in the country.  In fact, Nationwide figures show that the price of a typical home in the capital is now more than twice the UK average.

Far from the rocketing prices of London some areas have shown a slowdown in the annual rate of growth.  To underline how different the growth rate can be depending on location a couple of areas saw a small decline in prices.

The regional variation in prices has led to the divide between prices in the North and South of England reaching a record high.  The third quarter of this year saw prices in the South of England up 8% year on year whilst those in Northern England increased by just 1%.  Putting that into cash terms means that the gap between average prices in the South and North of England has exceeded £150,000 for the first time. 

However, most areas continued to see gains in the third quarter and with the risk that construction activity could lag behind strengthening demand there could continue to be upward pressure on house prices.

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

14Dec

ECONOMIC NEWS FOR NOVEMBER 2015

At the beginning of November, the Bank of England’s Monetary Policy Committee voted by eight to one to maintain interest rates at 0.5 per cent. The Bank also signalled that a hike in interest rates has now slipped back until at least the latter months of 2016. At the same time, the Bank produced its quarterly inflation report in which its inflation and growth forecasts were cut.

In the wake of that, The Office for National Statistics (ONS) reported that the UK’s inflation, as measured by the Consumer Prices Index, remained at minus 0.1 per cent in October, which marks the first time that it has fallen on an annual basis for two months in a row since it was created in 1997. The Retail Prices Index, which includes housing costs, fell to 0.7 per cent from 0.8 per cent in September and is the lowest RPI rate since November 2009.

At the end of the month, the ONS confirmed that the UK economy grew by 0.5 per cent between July and September. Although this was a drop from the 0.7 per cent increase experienced in the preceding quarter, it still marked the eleventh consecutive quarter of growth. The slowdown is largely blamed on a widening trade gap and a contraction in construction output of 2.2 per cent.

November closed with The Chancellor’s Autumn Statement, which announced that buy-to-let landlords and people buying second homes will have to pay a 3 per cent surcharge on each stamp duty band from April 2016. The Statement also included an extended Help to Buy scheme in London, which will see buyers who can find a five per cent deposit given a loan worth up to 40 per cent of the property; elsewhere the existing maximum loan is for 20 per cent of the property’s value.

The Statement also reported that the Government is putting £6.9 billion into housing, which includes an extra £2.3 billion in loans for the Government Starter Homes programme and £4 billion lent to housing associations and local authorities to build more homes for shared ownership. The Government also announced a pilot scheme to trial the Government’s Right-to-Buy programme for housing association tenants.

14Dec

Stamp Duty Increase for Landlords and Multiple Homeowners

In the Autumn Statement, Chancellor George Osborne announced a substantial increase in Stamp Duty on the purchase of additional residential properties.  That will therefore apply to situations such as purchase of a property to let out or of a second home.

From April 2016 any such properties will face an additional 3% charge, on top of the existing levy.

This means the new stamp duty structure in England and Wales will look like this:

 

Property Value

Standard Rate

Additional Properties

£0-£125,000

0%

3%

£125,001-£250,000

2%

5%

£250,001-£925,000

5%

8%

£925,001-£1.5m

10%

13%

Above £1.5m

12%

15%

 

Stamp duty is applied only to the portion of the property value falling in that band, similar to income tax.

So while a sole home valued at £300,000 would incur £5,000 stamp duty, if that same £300,000 were an additional Buy to Let property for example, the stamp duty charge would increase to £14,000 from April.

 

Property Value

Standard Rate

Additional Properties

 

Rate

Applied to

Cost

Rate

Applies to

Cost

£0-£125,000

0%

£0

£0

3%

£125,000

£3,750

£125,001-£250,000

2%

£125,000

£2,500

5%

£125,000

£6,250

£250,001-£925,000

5%

£50,000

£2,500

8%

£50,000

£4,000

Total charge

£5,000

 

£14,000

 

Clearly that’s a massive increase in costs so we can expect a flurry of activity as potential “additional property buyers” seek to beat the April deadline.  Anyone thinking about becoming a new landlord or adding to an existing portfolio is bound to be keen to complete the purchase before the new higher charges come into effect.

That could therefore intensify competition for suitable property in the next few months.  From April, however, aspiring first time buyers may find life a little easier as investor numbers ease back. 

 

Guild Mortgage Service, Provided by London & Country Mortgages

 

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

 

Most buy-to-let mortgages are not regulated by the FCA

05Nov

In early October, the Bank of England’s Monetary Policy Committee held its monthly meeting and voted by eight to one to keep interest rates unchanged at 0.5 per cent. Ian McCafferty was the dissenting voice who voted for a quarter-point rate rise for a third month in a row.

Shortly after, the Office for National Statistics (ONS) announced that construction output fell by 4.3 per cent in August – its sharpest drop since late 2012 – while house-building fell by 3 per cent from July. An ONS official said that the weak construction figures for August may have been linked to wet weather during the month.

In the middle of October, the ONS reported that inflation, as measured by the Consumer Prices Index (CPI), fell to minus 0.1 per cent in September. The chief contributors to negative inflation were falling motor fuel prices and a smaller than usual rise in clothing prices. The Retail Prices Index (RPI) measure of inflation fell to 0.8 per cent in September from 1.1 per cent in August.

More recently, ONS statistics showed that the UK’s Gross Domestic Product (GDP) grew by only 0.5 per cent in the third quarter of 2015, compared to 0.7 per cent in the preceding quarter, and lower than analysts’ predictions of 0.6 per cent. This slowdown in the UK economy resulted largely from a fall of 0.3 per cent in the output of the manufacturing sector in the three months to September; the manufacturing sector has now experienced a decline for three consecutive quarters. Another contributing factor was the biggest downturn in construction output in three years, a drop of 2.2 per cent; nevertheless, the services sector grew by 0.7 per cent.

The maintenance of inflation well below the Bank of England’s target of 2 per cent, coupled with the slowing down of growth in the economy, may suggest that a hike in UK interest rates in the near future is retreating. According to a recent poll of economists by the news agency Reuters, their average forecast of when the Bank of England will start to raise interest rates has been pushed back to the second quarter of 2016 from the first quarter. Meanwhile, the October monthly meeting of the US Federal Reserve has also voted to keep its interest rates unchanged.

05Nov

LAND REGISTRY DATA: SEPTEMBER 2015 (released 28 October 2015)

The September 2015 Land Registry data showed a monthly increase in average house prices across England and Wales of 1.0 per cent. In London, prices increased by 1.8 per cent, well ahead of all other regions; the North East experienced a fall at minus 0.3 per cent.

The overall annual price change now stands at 5.3 per cent, making the average house price in England & Wales £186,553 and in London £499,997. London saw the highest annual change in prices at 9.6 per cent, followed by the South East at 8.5 per cent and the East at 8.3 per cent; the North East was the only region to see a fall at minus 0.3 per cent. By property type, flats and maisonettes showed the highest annual increase at 5.6 per cent; the lowest was seen in terraced properties at 5.2 per cent.

In greater detail, 12 counties and unitary authorities saw an annual fall in prices, the greatest being Darlington at minus 5.1 per cent; Reading continued to experience the highest annual rise at 15.3 per cent. The strongest monthly growth was seen in Newport with an increase of 2.2 per cent, while Merthyr Tydfil had the most significant monthly drop at minus 3.3 per cent. Only two counties and unitary authorities saw no monthly price change.

Of the metropolitan districts, Sandwell again showed the largest annual price increase at 9.1 per cent; three districts saw a fall, the greatest being South Tyneside at minus 2.7 per cent. Knowsley experienced the highest monthly price increase at 2.5 per cent, while South Tyneside and Sefton both saw the greatest monthly price fall with a movement of minus 1.3 per cent.

Of the London boroughs, Newham once more had the highest annual price rise at 13.6 per cent, while only Hammersmith & Fulham saw a fall at minus 0.5 per cent. On a monthly basis, Hounslow showed the highest increase at 2.1 per cent, while Hackney experienced the only fall at minus 0.3 per cent.

The volume of properties sold in July 2015 was 4 per cent lower than a year earlier in England and Wales and 10 per cent lower in London. Over the same period, properties sold for more than £1 million across England and Wales as a whole fell by 9 per cent and in London by 16 per cent. In England and Wales and in London, volume falls were also seen across all price brackets under £250,000.

Month on month, the total number of properties sold across England and Wales rose from 70,404 in June to 81,696 in July – an increase of 16 per cent. The number of property transactions from April 2015 to July 2015 averaged 71,766 per month, compared to 78,330 over the same period a year earlier.

05Oct

95% Normal

The launch of the government’s Help To Buy Guarantee scheme in late 2013 gave much-needed help to buyers with small deposits.

The scheme gives an insurance policy to lenders (paid for by the government), to protect them against potential losses in the event of repossessing a high loan-to-value mortgage: with relatively little equity at the outset, the lender risks a much greater loss if things go wrong, and after the credit crunch they were naturally wary.

So before the launch of the Help to Buy scheme, borrowers with only a 5% deposit had very few options indeed. By bringing the guarantee into play, much bigger names were happy to join in with Halifax being both the biggest and the first out of the blocks but most of the high street soon joining in.

Nationwide has been a notable absentee in this, only offering 95% products to existing borrowers moving home. Until now.

In early September Nationwide finally launched a range of 95% products. They’ve always had a very strong reputation for movers and first time buyers, and the new deals are well placed compared to the other big names so this – coming with a £1bn lending commitment – is very welcome news.

And interestingly they’re doing it outside the government’s Help to Buy scheme. That’s due to finish at the end of 2016 anyway, but it’s encouraging that Nationwide feels confident enough to take 5% deposits with no extra security. They’re not the first to do this (Yorkshire BS and TSB, for example, both operate outside the guarantee) but are certainly the biggest.

At the same time, Santander have announced they’re taking their 95% mortgage products out of the guarantee, though this will be phased over time.

But with the end of the scheme still over a year away, it’s a very good sign that lenders are feeling confident enough to return 95% mortgages to a more normal footing.

 

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

05Oct

Buy to Let continues to grow

The popularity of the Buy to Let market shows little sign of slowing.  According to the Council of Mortgage Lenders’ (CML) figures for July, lending to Buy to Let landlords saw an increase of nearly 12% on the previous month and 52% year on year.

Demand for good quality rental property remains high, particularly as first time buyers continue to grapple with the need to pull together substantial deposits.  With low rates available on savings accounts, investors are attracted by the income that a Buy to Let property could generate after taking account of all running costs.  In addition there is potential for capital growth if house prices rise over the longer term.

Any aspiring Buy to Let investors will typically need a deposit of 25% or more and will need to demonstrate that the rental income will be adequate to cover the mortgage interest by an adequate margin, typically 125%.

Bank of England Base Rate is currently at a record low and more lenders have entered the Buy to Let market in recent years, which has heightened the level of competition.  As a consequence mortgage rates are very attractive at the moment.

The CML figures also highlight that it’s not just new landlords that have created the growth in Buy to Let but also existing investors remortgaging their properties.  In fact remortgage lending for Buy to Let rose by 69% year on year.

Many landlords are reviewing their mortgage deal to see if they can cut the cost of their borrowing.  There are plenty of options available but it’s crucial to shop around for the right all round deal, taking account of criteria and the fees involved as well as the initial rate.

Getting the right combination could make it possible to not only reduce the level of interest on the mortgage but also to lock into a rate and protect against any potential increase in Base Rate in the short to medium term.

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The FCA does not regulate most Buy to let mortgages.

05Oct

Economic News 24 September 2015

At its meeting in early September, the Bank of England’s Monetary Policy Committee (MPC) voted to hold interest rates at 0.5 per cent by an eight to one majority; Ian MacCafferty was the dissenter who voted for an increase in the interest rate by 0.25 per cent. Andy Haldane, the Bank of England’s economist and another of the nine MPC members, voted to maintain the interest rate but has recently been expressing concerns about the disinflation and deflation recorded around the globe and has suggested that a cut in interest rates may be needed to combat low inflation. Other members, however, including Martin Weale and Kristin Forbes, have indicated their belief that interest rates will need to rise sooner rather than later.

Just a few days after the MPC meeting, the Office for National Statistics (ONS) announced that the UK’s inflation rate fell to zero per cent in August, down from July’s rate of 0.1 per cent, apparently due to a smaller rise in clothing prices from a year ago and cheaper fuel prices. The Retail Prices Index (RPI) measure of inflation rose to 1.1 per cent from 1.0 per cent in July.

Hard on the heels of that news, the ONS further reported that the unemployment rate for the May to July quarter was 5.5 per cent, unchanged from the previous quarter but down from 6.2 per cent last year. It also announced that average earnings grew by 2.9 per cent between May and July compared with the same period last year – some analysts have speculated as to whether this news might bring forward a hike in the interest rate.

Meanwhile, The British Bankers’ Association (BBA) reported a pick-up in mortgage activity in August, believed to be due to expectations that an interest rate rise was in the offing. 80,221 home loans were approved by the major High Street banks of which more than half were for house purchases, while remortgaging accounted for 32 per cent of the loans, the highest level for four years.

Seasonally adjusted figures from HM Revenue and Customs (HMRC) show that 106,480 homes were sold during August, more than in any month since February 2014; it is the third month in a row that sales of more than 100,000 were recorded.

05Oct

Interest Only Borrowers need to plan

Citizens Advice has warned that there could be almost a million mortgage borrowers with an interest only mortgage but no plan as to how they will repay the mortgage.

Interest only mortgages do exactly as the name suggests with the monthly payments only covering the interest charge.  As a result the capital balance is not reduced and the borrower will need to repay the whole of the mortgage amount at the end of the term.

Traditionally, the borrower would have made regular contributions into an alternative repayment vehicle to run alongside the mortgage.

These are typically investment backed vehicles such as endowments or stocks and shares ISAs.  The hope is that the vehicle will grow sufficiently over time so as to reach the target amount required to pay off the mortgage.

However, some have taken no repayment vehicle at all, relying instead on the sale of the property to cover the balance.  The fear is that they could reach the end of the term with no means to pay off the mortgage, which could result in them having to sell the property to pay off the mortgage.

Anyone in that situation would do well to try and put a plan in place sooner rather than later, as the longer they leave it the harder it can become.  Switching the mortgage to repayment will mean that monthly payments increase but shopping around for a keener rate can help minimise the impact as much as possible.

If that looks too much to take on, putting funds aside or overpaying the mortgage as and when it’s possible will at least start the process of reducing the mortgage.  Just be careful to check that any overpayments will be within allowed limits so that no early repayment charges are incurred.

Even those with a repayment vehicle in place should regularly review their plans, in order to ensure that they remain on track to meet their target.  If there is any potential shortfall then, again, it makes sense to try and deal with that sooner rather than later.

 

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

05Oct

LAND REGISTRY DATA: AUGUST 2015 (released 28 September 2015)

The August 2015 Land Registry data showed a monthly increase in average house prices across England and Wales of 0.5 per cent. In London prices increased by 1.7 per cent, exceeding all other regions; the East Midlands, Yorkshire & The Humber, and the North West experienced falls, the greatest being the North West at minus 1.4 per cent.

The East once again showed the highest annual change in prices at 8.4 per cent, followed by the South East at 7.6 per cent, London at 6.6 per cent and the South West at 5.4 per cent. The North West saw the lowest annual change at 0.2 per cent but no region experienced a fall. The overall annual price change now stands at 4.2 per cent, making the average house price in England & Wales £184,682 and in London £493,026. By property type, semi-detached properties showed the highest annual increase at 4.7 per cent; the lowest was seen in terraced properties at 3.7 per cent.

In greater detail, 14 counties and unitary authorities saw an annual fall in prices, the greatest being Darlington at minus 6.2 per cent; Reading again experienced the highest annual rise at 14.6 per cent. Both Reading and Southend-on-Sea saw the strongest monthly growth with an increase of 2.4 per cent, while Merthyr Tydfil had the most significant monthly drop at minus 3.4 per cent. Nine counties and unitary authorities saw no monthly price change.

Of the metropolitan districts, Sandwell showed the largest annual price increase at 9.8 per cent; five saw a fall, the greatest being Bradford again at minus 2.4 per cent. Bolton saw the highest monthly price increase at 1.6 per cent, while ten saw a drop, the largest again being Wolverhampton at minus 2.0 per cent.

Of the London boroughs, Newham saw the highest annual price rise at 15.5 per cent, while Hammersmith & Fulham and Camden experienced falls at minus 0.3 per cent and minus 1.7 per cent respectively. On a monthly basis, Barking & Dagenham showed the highest increase at 2.2 per cent, while Kensington & Chelsea saw the biggest fall with a movement of minus 1.1 per cent.

The volume of properties sold in June 2015 was 13 per cent lower than a year earlier in England and Wales and 19 per cent lower in London; falls were seen across nearly all price brackets. Properties sold for more than £1 million across England and Wales as a whole fell by 17 per cent and in London by 22 per cent over the same period.

Month on month, the total number of properties sold across England and Wales increased by 7.3 per cent from 65,619 in May to 70,404 in June – chiefly in properties valued above £250,000. The number of property transactions from March 2015 to June 2015 averaged 65,550 per month, compared to 73,985 over the same period a year earlier.

05Oct

Mortgages for older borrowers

With the UK population living longer and working later in life, it comes as no surprise that our mortgage requirements are also beginning to change.  High house prices have made it all the harder for first time buyers to get on the ladder and many will not buy their first home until they are in their thirties. 

In addition many of those entering the market for the first time are choosing longer mortgage terms, possibly as long as 35 or 40 years, in order to make their loans more affordable.

The Council of Mortgage Lenders recently published figures revealing that there are currently 11 million people in the UK aged 65 and over – representing around 17% of our population. By 2034 this is expected to rise to 17 million, or 25% of the population.

That could see more borrowers with a mortgage beyond the current standard retirement age.  Lender criteria has got tougher and lenders have typically capped the maximum age to which they will lend, even when it can be show the mortgage would be affordable. 

After deciding to relocate in order to be closer to their grandchildren, our clients approached the mortgage service for the Guild of Professional Estate Agents looking for advice. Both applicants were already retired and in receipt of a combination of private and state pension income.

The couple were looking for a mortgage term that would take them up the age of 75.  Using the proceeds from the sale of their current property, the couple were able to put down a sizeable deposit.  After discussing costings with their mortgage adviser, they felt comfortable that their pension income would be sufficient to support the mortgage payments.

While some lenders would not allow a mortgage term running past the age of 70, the couple’s mortgage adviser recommended a competitive 5 year fixed from a high-street building society.  It was able to take a more flexible approach enabling them to secure the mortgage term up to the age that they required.

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

11Sep

With the tougher mortgage rules in place since 2014 getting a mortgage perhaps seems to be a more complex process than ever.

Lenders are focused on establishing that a mortgage will be affordable for the borrower, not only now but also in the future.  As a result they will ask questions not only about your level of income but also about your outgoings.

That will include expenditure on other credit commitments like loans and credit cards but will also look at other items like regular travel costs, utilities and childcare.  This helps the lender calculate how much you can borrow so it makes sense to sit down and map out your monthly budget.

This will mean that you have all the figures to hand and help you to gauge the amount you might be able to borrow more accurately. It might also help you see where you might be able to make savings.

You will also need to be able to prove your income to the lender, so be prepared to come up with plenty of paperwork to back up your application.  They might typically require payslips, accounts for the self employed, P60 plus bank statements, proof of address and ID as well.  It’s not possible to predict everything a lender may request but gathering together what you can in preparation could help the process run more smoothly and quickly.

If you have any concerns about your credit history, either because of a possible blip in the past or because you have been previously declined, then you can get a copy of your credit record.  This could help identify any issues and if there are errors then you can get those rectified before you make an application.

It’s important to remember that just because you can’t meet one lender’s criteria that another will not be able to help.  Shopping around can help match your circumstances to the right lender as well as help identify better rates.

11Sep

Lenders have always had differing distribution strategies, from relying entirely on mortgage brokers, to having different pricing for branches and brokers, to not accepting introduced business at all.

For many years HSBC has been in the latter camp, preferring to restrict mortgages to their own branches and website. But that has now started to change and we’re very pleased to be one of the first firms to be able to arrange their mortgages.

It’s a sign of growing support for the intermediary market generally. Since the Mortgage Market Review brought in the need for virtually all mortgages to be formally advised upon, the importance of high quality advice (and the work brokers have always done) is increasingly recognised by lenders.

It’s also the case that giving advice is a rather bigger job than giving “only information”, so lenders have also seen that not only do their own staff need greater training, each mortgage now  takes longer to arrange.

So the fact that there is a readily available, already trained body of mortgage advisers out there is increasingly valuable to lenders seeking to grow their business in a highly competitive market.

At the time of writing HSBCs range looks well suited to movers and first time buyers, with competitive rates for those with deposits between 10% and 20%, giving a welcome additional option for hard-pressed buyers. How the lending policy and service supports that, only time will tell; but you don’t get to be the biggest bank in the land by accident and having extra options can never be a bad thing.