28 May 2010

New lenders are very welcome

The sun’s been shining, two new lenders have opened for business, many interest rates have been reduced and Home Information Packs (HIPS) have been suspended! What a super week it’s been!

Aldermore have entered both the residential and buy to let mortgage markets. They are offering mortgages up to 80% loan to value on residential mortgages but, unlike most lenders these days, they will not credit score. Buy to Let mortgages will be offered at 75% of the property value and the lenders main target will be experienced landlords.

Precise Mortgages also launched into the Buy to Let market targeting high quality loans for prime customers up to 75% of the property value.

Both lenders are a welcome addition to an under funded market and in the Buy to Let sector, in particular, supports my previous articles advising that this area appears to becoming buoyant once again (although this may change if there are any dramatic changes to Capital Gains Tax in the forthcoming emergency budget).

A number of residential lenders have lowered rates during the last few days. There are some attractive long term fixed rates available, specifically over a five year term. If your mortgage is due for renewal in coming months, it’s worth exploring now to ensure you do not miss some fantastic opportunities. That said, no one can accurately predict what will happen with mortgage rates in the short term. However, most seem to agree that rates will go up, it’s just a case of when.

Finally, if you are contemplating selling your home, this has recently become cheaper following the suspension of Home Information Packs (HIP’s). On the 20th May, an order suspending HIP’s in England and Wales was imposed with immediate effect, pending primary legislation for a permanent abolition. Sellers will still be required to commission, but won’t need to have received, an Energy Performance Certificate (EPC) before marketing their property. Let’s hope this news will stimulate the market for those who were reluctant to sell due to cost, time and effort in getting a HIP arranged. Although this is great news, spare a thought for the large number of people in the HIP sector who may now lose their jobs and, of course, those poor soles who paid for their HIP on the day of the suspension announcement....let’s hope they get their money back!

27 May 2010

Is the Buy to Let market seeing a resurgence?

21/5/10 - Is the Buy to Let market seeing a resurgence? The Mortgage Works (the specialist lender arm of Nationwide) increased the amount they would lend against the value of a property to 80%. As First Time Buyers struggle to raise deposits to climb onto the property ladder and some turn to, or continue to rent, the Buy to Let market is buoyant. Such increases to the loan to value levels are a huge step forward and demonstrate that lenders have confidence in this area of the mortgage market. Although TMW are the only lender offering 80% currently, it is anticipated that other lenders will soon follow suit. This can only be good for both prospective and current landlords as competition returns to the market.

Purchasing a property for investment purposes, with property prices relatively low, is quickly becoming an alternative source to traditional long term investment vehicles. Obviously, tax implications should be reviewed with a professional adviser, but with some payment terms ranging from 5 to 40 years, and interest rates competitive, this is an option well worth investigating in some detail.

Buy to Let properties will often provide a modest monthly return over and above the mortgage payment. The additional amount can be used to supplement income, or, with flexible mortgages, can be used to “overpay” the mortgage and reduce the term.
Most lenders in this sector will require the rental income to exceed the mortgage payment by up to 25% and, after costs such as managing agents this should leave some spare cash to cover repairs, maintenance and landlords insurance. It should also enable a fund to be established to cover the mortgage payment in the event that there is no tenant in situ for a while. Remember that the mortgage still has to be paid!

Generally, Buy to Let should be considered as a long term investment. That said, it is a popular sector of the market and can provide a source of income (after expenses) and capital appreciation over time. Remember though that the value of property can fall as well as rise and you will need to take this into account in your planning.

04 May 2010

Mortgage approvals on the increase.

30/4/10 - Mortgage and financial markets are rife with news. Here is a quick review of those items which might be of interest:
Some 34,905 mortgages were approved in April, a slight increase on the March 33,360 figure according to the latest figures from the British Bankers Association. It suggests that the effect of the year-end change to Stamp Duty has now worked through, so although numbers appear subdued compared to the latter months of last year, house purchase approvals were 20% higher than in March last year.
The Financial Services Authority has found weaknesses in five banks over their handling of customer complaints and has referred two of the banks to enforcement for further investigation. The review looked at several banking groups responsible for over 70% of the complaints firms received and reported to the FSA and over 60% of those resolved by the Financial Ombudsman Service. Incidentally, the Daily Mail recently reported that one lender received over 1600 complaints every day between July and December last year!
Almost two-thirds of borrowers on tracker rate mortgages have failed to take advantage of low interest rates to overpay their mortgages, says unbiased.co.uk. Their research shows that 63% of borrowers have not overpaid even though charging rates are usually much lower than historically. The previous figure was 53% of borrowers in May 2009. Only 11% indicated that they were making occasional payments on top of current monthly payments.
Finally, Investec Specialist Private Bank says that increased lending restrictions from banks and building societies has resulted in a growing number of high net worth individuals finding it difficult to secure mortgages of £1m or more. It says many of these people are successful entrepreneurs who are being refused credit because their finances and wealth are not straightforward, and often other lenders are bound by rigid lending criteria which do not accommodate this. This is exactly the type of customer that can be helped by the smaller, specialist lenders who are not necessarily household names. Some private banks are really keen on this type of borrower as long as they can prove affordability beyond doubt. It is worth checking with your local and independent mortgage brokerage as they will have access to such institutions.