First time buyers are more likely to be rejected for a mortgage than they were a year ago!

 A recent study by Aldermore Bank showed that first time buyers are more likely to be rejected for a mortgage than they were a year ago. Unfortunately, more than two in five said that they had been rejected more than once. This compares with fewer than one in five before the pandemic.

In the survey, the top reason for mortgage applications being rejected was due to having a poor credit history (41%) and over a quarter of prospective first-time buyers said that they were worried about their credit history with over a third currently seeking to improve their credit score. 

In our experience, an often-repeated mistake is for first time buyers with any kind of complexity and/or poor credit to seek to obtain a mortgage via their bank first and this will more often than not result in a rejected application. This can lead to despair, desperation and sometimes shame and embarrassment, but brokers like ourselves are experienced in helping such customers.

Regrettably, the survey also highlighted that more significant credit issues are becoming more prevalent too with nearly a quarter (23%) having an account handled by collection agencies, one in nine (14%) having taken out a payday loan, 12% having a County Court Judgement (CCJs) and 9% having a bankruptcy in their past.  These findings are being echoed in our day-to-day dealings with customers and it’s clear that the pandemic has impacted the finances of many, but that need not mean that they cannot obtain a mortgage.

By enlightening customers to the many options available, no matter what your circumstances, mortgage brokers can remove the supposed stigma and shame of having poor credit and help make your home ownership dreams a reality.

Be prepared at the start of the mortgage process, to save issues later on.

It will not have escaped your attention that lower deposit mortgages are back which is great news, although due to their higher rates and more stringent criteria only a lucky few may be able to successfully apply, at least for now.

For many potential borrowers, especially first-time buyers, these mortgages are out of reach for another reason and that is either because of outstanding credit commitments or minor adverse credit. 

Income and credit-related scrutiny has, quite rightly, been ramped up from a lending perspective in recent times and clients must share all relevant financial commitments.

This sounds obvious but we have experienced instances where missed information has caused major delays further down the line and the need for full transparency upfront is greater than ever.

An area highlighted by one of our top advisers is that clients often overlook student loans as being a credit commitment, as these are automatically deducted from salaries.

However, lenders may include these in their affordability calculations.

As a specialist mortgage broker, we’re also seeing a greater proportion of clients who are not only self-employed but who have a non-traditional income history and a variety of income streams. Lenders may consider such scenarios, and each has different policies in dealing with such cases.

With regards to adverse credit, we’re seeing the next generation of adverse credit coming through and if you delay/miss a payment to a utility or communications company, you could be awarded a default almost immediately. The biggest increase at the moment we’re seeing is car parking fines. People do not want to pay a silly little charge because they went over their time allowance at a superstore, but then they also ignore the private parking charge firms chasing them down.  However, these can escalate into a registered adverse item and ultimately affect their ability to achieve finance.

The more thorough and better prepared we are from the onset with all relevant and transparent details, the less time we will spend firefighting issues further down the line, and less stress will be placed on you, the client, throughout the mortgage process.

New Help to Buy and Shared Ownership schemes for First Time Buyers due in April

 

With changes to both the Help to Buy and Shared Ownership schemes due to come into force at the beginning of April 2021, it’s vital that you remain fully up to speed on how you may be affected by these impending changes.

The latest figures from the Ministry of Housing, Communities & Local Government outlined that a total of 291,903 properties were bought between 1 April 2013 and 30 September 2020 using the Help to Buy equity scheme. The data also showed that 82% of all completions were by first-time buyers. The total value of the equity loans was £17.4bn and the value of the properties sold under the scheme equated to £79.2bn. In addition, between 1 July and 30 September 2020, 13,211 properties were bought with an equity loan.

So, how does the new scheme differ from the old one?

The new Help to Buy scheme, running until 2023, will be restricted to first-time buyers and will operate with regional price caps in place (maximum property price in London £600k and South East £437,600 for example).

You can borrow a minimum of 5% and up to a maximum of 20% (40% in London) of the full purchase price of a new-build home.  You do not pay interest on the equity loan for the first 5 years (interest starts in year 6 on the equity loan amount you borrowed). The equity loan, the deposit you have saved, and your repayment mortgage cover the total cost of buying your newly built home.

Help to Buy is not an all in-compassing solution but it can prove to be a viable option for a variety of first-time buyers, even for those who may have had a credit blip in the past.

Meanwhile, the new Shared Ownership scheme will allow buyers to purchase a minimum share of 10% compared to 25% previously, and will permit staircasing in instalments of 1%, rather than 5% or 10% currently.

In addition, a new 10-year period will be introduced for maintenance and repairs, whereby the landlord or housing association will be required to cover costs rather than homeowners.

Due to the complexity of both schemes, it is vital to seek good, impartial, independent, and professional advice before entering into any agreements.

The issues facing first time buyers, homeowners and potential movers!

To say that the government is currently under a substantial amount of pressure is something of any understatement. Keeping political points of view or persuasion on the sidelines, the handling of the coronavirus pandemic and Brexit remain huge issues which are dominating time, resources and attention.

I fully appreciate the importance of tackling these concerns and the major toll they are having on the health – physically, mentally and financially – of the UK population. However, there are also a number of other areas which the government can ill-afford to ignore across the housing and mortgage market.

The problems facing mortgage prisoners are mounting and a recent report from the London School of Economics (LSE) has put the onus and ethical responsibility on the government to solve the mortgage prisoner crisis quickly and recommended a package of measures to do so.

Another situation which is cause for great concern revolves around cladding, and finding appropriate solutions for such deputes should also be high on the government’s agenda. Through no fault of their own, all too many people continue to find themselves in a position where it is neigh on impossible to sell certain property types or even remortgage them - which is an unacceptable outcome.

There are also question marks in the air around whether the government will extend the stamp duty deadline in light of some lending, survey and conveyancing backlogs which are having knock-on effects on a growing number on housing chains. A trend which will only intensify in the coming weeks.

These are just some of the issues facing first-time buyers, existing homeowners and potential homemovers. In the current economic climate, there are many extra layers of complexity for all those involved in the mortgage journey. And this really does outline the importance of impartial, independent financial advice when it comes to  overcoming a growing number of challenges and ensuring that people have access to the right kinds of financial options to match their current, and future requirements.

So, speak to a specialist, impartial, independent adviser about your property related needs in this increasingly uncertain marketplace.

A number of factors are driving activity throughout the Buy to Let sector

It’s fair to say that the money pages often tend to focus on the negative parts of the Buy-to-Let (BTL) market rather than the positive ones. I’m sure you will continue to see headlines around landlords selling property, but what you are less likely to read about is the continued resilience being shown by lenders, landlords, developers and investors - both domestic and overseas.

A number of factors are driving activity throughout the BTL sector. The obvious one being that a growing number of landlords are taking advantage of the current climates to expand their portfolios and tap into some changing tenant demands and priorities – in relation to property type, flexible home working capacity, location and outside space.

Houses appear to be more in demand than flats and it’s widely suggested that a greater number of people are looking to rent for longer. The return of the student population has also played a key role in both increased activity and demand. There was no guarantee of this happening during the early summer months and this represents a significant proportion of the BTL market, especially for professional landlords. The more specialist areas such as holiday lets and ex-pat BTL are also seeing additional options emerge and there is also growing demand among first-time buyers looking to enter the BTL market.  

This was highlighted in recent data from Legal and General which showed that criteria search combinations for first-time buyers, first-time landlords and non-owner occupiers have seen an 18% increase since the beginning of September. The data also showed that ‘holiday lets’ was the second most searched term among mortgage advisers in September, moving from the top spot in August. International travel restrictions have fuelled an increase in demand for ‘staycations’, with many choosing to holiday in the UK rather than travelling abroad.

The importance of the private rented sector continues to rise as the housing supply gap widens, the amount of affordable housing being built lessens and demand for rental property will only grow. These factors are generating more opportunities for landlords and lending appetites are escalating to provide some highly competitive funding options.

So, if Buy-to-Let is something you are considering, speak to the professionals and especially a specialist in this area, in order to make the right impact..

Demand across the rental market remains strong.

The purchase market is currently buzzing. In a throw-back to some of the heady days of old, we’re hearing stories of bidding wars and properties being snapped up before they even come onto the market. It’s clear that whilst the raising of the stamp duty threshold has certainly worked to accelerate activity across the housing market, changes in people’s working and financial circumstances are affecting their decision-making process. Meaning that the value attached to good, professional advice has never been higher.

Demand across the rental market also remains strong as many potential homebuyers from the pre-lockdown period are currently being forced into renting for longer due to lingering economic and workplace uncertainty. And some demands over the size, quality and location of these rental properties are also shifting.

Here at Impact Specialist Finance, we’re seeing a swell of activity within the buy-to-let (BTL) marketplace as a wide range of investors, developers and landlords are looking to take advantage of the stamp duty tax break. This was reflected in research from cherryplc.co.uk which outlined that more than half of brokers have seen an increase in buy-to-let purchase business in recent weeks. 57% of brokers said they had seen a rise in purchase business, compared to just under 12% who reported an increase in demand for capital raising on a remortgage.

In addition, more than 30% have seen an increase in individual purchases and nearly 27% have seen an increase in limited company purchases. There has also been an increase in the number of clients with more specialist BTL requirements, with nearly 8% of brokers seeing a rise in demand for houses of multiple occupancy (HMOs) and almost 4% seeing more enquiries for lending on both multi-unit blocks of flats and holiday lets. This uplift within the intermediary market is reflective of increased momentum across the board as the more professional end of the landlord spectrum are actively looking to add to their portfolios and acting swiftly on the opportunities that are currently presenting themselves.

Confidence around the BTL proposition is growing as more and more lenders are re-entering the market after a temporary break due to lockdown restrictions and competition is swiftly rising, especially amongst specialist lenders and with the option of 85% loan to value now being back on the table.

Many challenges remain but the importance attached to private rented sector is all too evident. And the sector - alongside a robust advice process – will continue to evolve to meet this growing demand, not to mention ever-changing landlord and tenant needs.

Rates being pulled quickly, have your paperwork ready!

The current climates continue to affect the mortgage market in many ways.  We’ve seen lenders pull rates quickly, decreasing rates one day and increasing them the next.  We’ve seen some lenders remove the higher LTVs (Loan to values) 95%, some removing 90% and others removing 85%.  We have seen some lenders launch limited edition products and others have not re-entered the market at all!  All signs of the times and of the fast-moving pace of the money markets. 

The only certainty seems to be uncertainty and where lenders may have previously considered clients on furlough, or those who have taken bounce back loans within their businesses, this may have changed as lenders look to ensure clients can afford the mortgage for the next six months and onwards.  Some require a letter from the client to confirm this whereas others may require to view bank statements to prove they have the funding. 

Some lenders may have previously taken all of a client’s bonus or commission when working out affordability, but more recently have reduced this to 50% of received monies.  We’ve seen one lender limit the maximum term of the mortgage to 25 years for first time buyers and change their acceptance on where deposits come from, for example - gifted deposits.  

With changes happening quickly, it is vital you get all the documentation required to the lender as quickly as possible to secure your rate and that product availability.  Especially as some lenders are receiving pre-covid volumes of business, but only with 50-70% of normal staffing levels.  This means that some lenders can be weeks behind and if you only provide certain items, you may find that you go to the back of the queue when the outstanding items required are submitted, which extends the delays. 

Most lenders will no longer prioritise the valuation of the security property.  They will assess the whole mortgage application and confirm agreement to proceed before instructing the valuation.  Be aware of this as Estate Agents need the valuation instructed asap.  Depending on the lender you go with, this could take a few weeks.

Finally, expect this to continue for some time.  Not just because of the ongoing pandemic, but also with the stamp duty temporary changes taking effect, a lot of people are trying to move before the end of March deadline.  Good for the property market, but who knows what may happen with processing, criteria and resulting inevitable delays over the coming weeks and months.