It has been an interesting week in the mortgage market with many rate changes and new product launches.
Some of the more noticeable include the launch of products, from our friends at Precise Mortgages, designed to assist those looking to purchase investment properties (Buy to Lets) in a Limited Company name. With the forthcoming removal of tax relief, from April 2017, landlords will only be able to offset mortgage interest at the basic rate of tax at 20%. This will affect higher rate tax payers, but also basic rate tax payers if they are pushed in to the higher rate bracket, perhaps as a result of their rental income. As a result, we are seeing more and more customers look at a Ltd Company Special Purpose Vehicles to hold their investment properties and provide more efficient tax benefits under current legislation. Obviously, tax advice should be sought as individual circumstances vary!
Sticking within this area, AXIS Bank, a relatively new lender, have lowered their rates by as much as 0.30% for their Ltd Company mortgage offerings. We are seeing more and more lenders launch into this arena and price their products very competitively.
More mainstream lenders, such as Santander, Shawbrook Bank, Coventry Building Society and Barclays have reduced a selection of their Buy to Let rates and some of their Residential rates by up to 0.5%.
Conversely, with lenders reducing rates and volumes for the New Year on the increase, we are seeing more people being declined. Not necessarily due to adverse credit, but because their credit score is not as high as they thought, and they don't meet the lenders requirements as a result.
Credit scoring is one of the most widely used means to assess a customers ability to obtain a mortgage. All credit scores include a credit search – this reviews your financial history, payments to utility suppliers, mobile phones, etc. Almost every financial institution from mobile phone companies to insurance companies will carry out a credit search before offering you their services. This can also be a negative though, as the more credit searches you have, the lower your credit score may be.
The high street lenders, in the main, use credit scoring. However, do your homework as many smaller lenders will offer just as attractive rates, but they will manually assess your ability to obtain a mortgage and use a human to assess your credit profile, rather than a computer aided credit score decision making system.