18 December 2014
Quite unbelievable that this is my last column of the year, where has the time gone? It's been a busy year but at the same time, frustrating, testing, enjoyable and thankfully full of both hope and opportunities.
As we shut the door on 2014, we look forward to next year and the promise of good things that lay ahead.
We have a new housing minister (again!) who looks like he may understand our markets and could be the right man for the job. The housing market itself is vastly under delivering the number of properties actually needed, so house building and growth in 2015 will have to be on the increase.
The new Mortgage Market Review regulations have settled down and are now a daily part of our lives. We look forward to the next big thing to impact our lifestyles - the EU Mortgage Directive, due in 2016! And, of course, we have the Election just round the corner. Exciting times!
However, lending for 2014 is expected to reach circa £200bn. Many mortgage pundits are expecting this to increase to £225bn in 2015, an increase of 12% (+). This will ensure lenders remain competitive to attract new business and meet targets and this can only be a good thing for the end customer.
Finally, a heartfelt thank you for reading my column. I've enjoyed providing a (hopefully) unbiased weekly insight to what happens behind the scenes in the mortgage market. What an eventful year it has been to report on!
Thank you to everyone who has instructed AToM to source and arrange their mortgage during the past twelve months. It has been a fantastic year and we have enjoyed growth in both volume, November saw more than £24.5m in new applications and staff numbers, with our headcount now over 25 between our two Horsham offices! They are a great team.
On behalf of all the staff and directors at AToM, we wish you and your families a very Happy Christmas and a Relaxing and Prosperous New Year!
11 December 2014
There's really only one place to start this weeks column and that's with the superb news released by the Chancellor in regard to changes to Stamp Duty.
With effect from Thursday 4th December, stamp duty will be applied as a progressive tax. Buyers will pay no tax up to the first £125,000, they will be charged 2% on the additional portion up to £250,000, then 5% on any additional portion up to £925,000 and 10% on the additional portion up to £1.5m and 12% on any portion above.
This is a big step forward and very positive for house purchasers. On the old scheme, a person buying a property at £300k would have paid 3% equating to £9,000. On the new scheme, there is nothing to pay on the first £125k, 2% to pay on the £125k to £250k (£2,500), and 5% on the remaining £50k (£2,500) making the new total £5000, a saving of £4,000 in total.
Although this is a hugely positive and much applauded move, there is still much uncertainty about customers actually being able to achieve a mortgage. Until lenders criteria is truly relaxed and funding becomes more widely accessible, cash buyers are likely to be the main benefactors of these rewards rather than the first time buyer or home mover.
Recent data published by the Bank of England has reported that the average Lender Standard Variable Rate, the rate that which many customers revert to after their promotional or fixed rate period ends, has risen to 4.53%. This is up 0.16% over the last year, despite the average two year fixed rate dropping by over 0.75% in the same period and the Bank of England base rate not changing for over five years. They have also noted that the largest proportion of mortgage borrowers have not experienced a rate rise for more than five years (some for more than seven) and are concerned about the possibility of what is generally known as ‘payment shock’. For example, on a £100k mortgage a 1% rise in rate will mean a monthly increase of circa £83.33! For some, this points towards the possible need to consider a fixed rate to avoid this possibility. Maybe time to talk to your independent mortgage adviser?
03 December 2014
It was interesting to see many of the national press last week covering stories on how difficult it now is to get a mortgage if you are aged over 40. The articles suggested that many first time buyers are now not able to purchase their first home until they are 40 years old, or even up to 50 years old, report some lenders. However, this can then limit the availability of mortgage finance, as many lenders want loans to be paid off by normal retirement age (67). With the Mortgage Market Review (MMR) rules now firmly embedded in the day to day calculation of mortgage finance and lenders making decisions based on the customers ability to pay back what they have borrowed, age can now affect affordability. Especially for the more mature applicant or if a customer wants to retire before the end of the mortgage term. Of course a shorter term means a hike in monthly repayments which affects affordability issues, and so on.
Despite many high street and household name lenders setting a maximum age at the end of the mortgage term, usually circa 70 years old, there are an increasing number of smaller building societies and other specialist lenders who will consider a much older maximum age of 80+. This will be subject to affordability, lending criteria and the customer working or having a defined income long after normal retirement ages.
The rules and regulations are there to protect the end consumer, and in the main are working as required. We will see criteria relaxed over time, and they will need to be as many customers are now working long in to their later years.
So the bottom line is that just because you are aged over 40, does not mean that mortgage finance is unavailable to you. But be wary that any lender will want a full and detailed explanation on how you will continue to make your monthly mortgage payments if the term of your loan exceeds 'normal’ retirement age – whenever that may be!