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.

This should be a time used wisely, not only to review life goals, but also financial situations.

Due to the current unfortunate circumstances, we are now becoming very used to the Coronavirus lockdown.  However, perhaps this should be a time used wisely, not only to review life goals, but also financial situations.

Do you have a Will?  Statistics show that only one in three people currently have a will in place, with the remainder leaving the state to take over and determine how their assets and belongings are distributed when they die. 

Do you have Life Insurance, Mortgage Payment Protection Insurance (MPPI), Accident Sickness and Unemployment cover, Critical Illness Cover, and more?  Any of these products might be beneficial to your personal circumstances or needs, especially if you have children, and with competition increasing, these types of products are not as expensive as you may think.

MPPI makes it possible for you to keep on paying off your mortgage, even if you stop receiving a stable income.  People tend to choose this option because it is explicitly designed to cover their mortgage payments.

We often associate protection needs with homeowners, but it was interesting to see recent data suggest that the majority of renters are putting themselves and their possessions at risk because they do not have vital forms of insurance in place. Research from one provider uncovered evidence that just one in five rental households had life insurance, compared to three out of five homeowners with a mortgage. The figures are particularly concerning because the number of renters in the UK is rising, a trend driven by higher house prices and other challenges which make it difficult for would-be first-time buyers to get on the housing ladder.

A further study from another provider appeared to back up this trend, finding that whilst 41% of homeowners had life insurance or critical illness cover, just 26% of those renting had such a policy in place.

People are very quick to insure their pet, Sky TV, their travel plans and their house contents, but forget their biggest asset and this frequently gets left to last, or until it’s too late.

All in all, to make sure your financial situation is better protected, you really should investigate all options to cover you, your family and your financial commitments.  Familiarise yourself with all the options available and do your research before committing.  As always, seek professional and open market advice.

You'd use a local shop over a supermarket. It should be the same with your mortgage broker.

Through this unprecedented time, I can’t stress enough that you should be using a mortgage broker to review your requirements and help arrange your re-mortgage to cut down your costs.  Yes, you can sometimes go direct to the lender, but is it right for you?  Is there a better rate elsewhere?  Have you read all the small print? How long are you tied in for?  Fixed or Tracker rate?  Can you apply whilst in the three-month mortgage payment holiday?  Will the lender take my ‘Furlough’ pay as income?  And so on.

At times like these, changing your rate can be a huge decision as we all look to cut costs in order to see the next few months through.  Without professional guidance, you might not only get the wrong deal, but you might also miss it.  A wide number of lenders have withdrawn products recently, yet only advised us the day after the products were withdrawn.  Some lenders, due to the volatility of the markets, have even reviewed full mortgage applications in with them, and withdrawn their initial approvals!  Worse, some have actually withdrawn fully issued mortgage offers! 

This is a sign of the times and now, more than ever, you should be using your local mortgage broker.  Just like the local shops competing against the supermarkets, everyone is struggling and that little mortgage product transfer you’re doing through the smart phone app to your high street lender, could be vital income to the broker who may have helped you out so many times in the past.  Don’t cut them out, let them help and advise you.  It is unlikely to make a difference to you in terms of rate or fees, but it can make a huge difference to income being generated for the mortgage broker in these challenging and difficult times.

Generally, the housing market is coming to a standstill as the Government requests everyone to stay at home.  This means that surveyors cannot visit the property and therefore a lender cannot lend on a property it has no idea of the value on.  There are remote systems that can provide Automated Valuations (AVM), but only a few lenders will currently take these as a base to which they can lend to and the risk curve will only allow an AVM up to 85% loan to value. In the main, most lenders will only allow 75% AVMs at the moment and only on re-mortgages.  As we all get used to working from home, this may change.

Yet, through adversity, there are rays of sunshine!  A number of lenders are looking at ways to increase volumes, reach out to help customers and keep the market going.  Some of these will be offerings only available through the broker market channel.  So, keep in touch, keep the relationship close and let’s work together to achieve the best outcome.  We are fully functional and working from home during normal business hours.  We continue to offer our free advice service, so speak to the team and we’ll help you as best we can.  Keep well.

Completing a fact find and be mortgage ready!

First time buyer or home mover?  Either way know the process and be mortgage ready!

On any new purchase, the selling agent will seek to agree a number of deadlines with you, including the arrangement of mortgage finance. At this point you can shop around and should make sure that you speak to an independent mortgage brokerage who will assess your overall financial position and discuss your mortgage requirements with you.  Advisers are required to provide you with an Initial Disclosure Document detailing who they are; who regulates them; their scope of permissions; whether they are restricted to a small lender panel or ‘whole of market’; any fees and costs involved including any charged for advice or consultation.

A good adviser will complete a financial fact find ensuring that they fully ‘know and understand their client’s financial position and requirements.’  This is necessary before any ‘advice or recommendation’ can be provided.  Be patient as this process can be lengthy.  It is in your best interests however, ensuring that you receive the best possible advice designed to meet your personal mortgage needs and requirements. Once you’ve agreed the best mortgage for you, a decision in principle (DIP) will be completed, usually online with the chosen lender. This involves brief personal details, income disclosure and a credit search. Be wary here as too many credit searches will have a negative effect on your credit score.  We’ve had a few customers contact us for a mortgage recently who have been totally unaware that they have had a number of credit searches carried out having recently searched for competitive renewal quotes on their home or car insurance via comparison sites.  This, in a small amount of time can have a marked affect on your credit score, and as such, affect your ability to obtain finance, so read the small print and be aware! 

DIP decisions are normally instantaneous.  Assuming success, it is then up-graded to a full application. Payment for survey is made (sometimes free) and the valuer confirms to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more detailed in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost. That said, for older properties it should be considered a worthwhile investment as it could save you thousands in the long run.

The chosen lender will require information on income, identity, proof of residency as part of their due diligence requirements.  Assuming no issues arise, a mortgage offer should be issued. Then, subject to the solicitor’s conveyancing process, you are now on the road to completing your mortgage process!

The 'Boris Bounce' is having an effect!

The ‘Boris Bounce’ really seems to be hitting positively as activity in the mortgage market is booming.  We’ve seen an amazing first two months of the year, with February exceeding expectations (thank you to all who are dealing with us and well done team!).

But also for you, the consumer, this is a fantastic time to be looking at your finances.  Rates are low and lenders are looking at many different ways to attract new customers and keep existing (which I would not have said only a year ago).

Whether you want to fix your monthly payments for a period of time, or you fancy a low rate tracker mortgage, or maybe both - a tracker rate with the option to fix later on, there are plenty of great products currently available.  Many lenders are offering superb remortgage opportunities with minimal costs to change, including free standard valuations (lender survey on your property) and legal costs (solicitors or conveyancer to register the charge in the new lenders name).  Rates are competitively low and mortgage product choice is at its highest for some time.

It also surprises me how many people don’t think they can get a mortgage.  Pepper Money recently carried out some research that suggested 93% of people surveyed did not know they may get a mortgage with a CCJ registered as recently as 6 months ago. 

Another example, with our friends at Kensington, allows for some historic issues over three years ago and will look at rates starting from 4.69% for those with just a 10% deposit and no lender completion fee.  Terms and conditions obviously apply, but good to have options.   

Finally, a number of lenders don't use credit scoring systems (computer says no!) and prefer a manual approach, so don't think you cannot get a mortgage until you have tried!  Always shop around to find the best deal and always check the small print!  Naturally, I would recommend speaking to a professional who can search the ‘whole market’ and advise which are the most appropriate deals available to you.

Age should not be an issue when getting a mortgage.

Just because you’re over 65, it doesn’t mean you can’t have a mortgage!  But sometimes it can be harder to get a mortgage that is right and affordable, due to age restrictive terms, once you reach a certain milestone with the high street lenders.

Often, retired people have managed their finances successfully over the years and enter retirement mortgage free.  At the same time, many, whilst having no mortgage, also suffer from reduced income.  Others may wish to continue their mortgage past normal lender retirement age, whilst they may still be working.  There are schemes where equity can be turned into a mortgage (not necessarily equity release) and where off-spring may be able to assist with the repayments in order to secure and protect their inheritance whilst also ensuring a comfortable retirement for their parents.  This is not right for everyone, but it is certainly worth talking to a qualified adviser to review all possibilities.

According to some industry reports, there are an estimated 100,000 people due to come to maturity on their interest only mortgage in 2020, aged over 60.  Many will probably have no way of repaying their interest only mortgage.  Some will have endowments that didn’t meet expectations, or maybe the house has not increased in price as much as hoped.  Stricter mortgage rules and lending criteria has made it harder for those over 65 wanting to re-mortgage.  However, despite the high street being almost a closed entity, there are plenty of other options (not that your current lender is likely to advise them - they just want their money back!).

The lender has the right to request repayment of their loan at end of the mortgage term.  If the customer has no way of repaying this and has just continued to pay the interest over the last twenty-five years or so, they face the possibility of having their home repossessed or being forced to move out.  On the high street, the end of the loan term will normally hit those aged between 65 to 75.  This is not new news but does highlight that many people are still burying their head in the sand and hoping this will go away or the lender may be lenient.

There are a number of lenders that recognise that 'normal retirement' age is no longer set in stone and people continue to work long into later life. These are not high street names and as such, are not known to everyone.  But with some having no maximum age at all, at least they will consider helping out and could keep you in your family home for years to come.

Fixed or Tracker rate? What's your preference?

So, do you go Fixed, or do you go Tracker?  A question we are asked many times every day!

With a fixed rate, you know that every month your mortgage payment will be exactly the same until the product period ends. Normally this can be two, three, five or ten years.  However, you will have a penalty to pay, if you decide to leave during the fixed rate product period.  Note that the mortgage product period and the term of the mortgage are two different entities.  The fixed rate product period might be for five years, but the mortgage itself might be for twenty-five years.  Make sure you understand the difference as after five years you could be moving on to the lenders Standard Variable Rate (SVR), which could be a lot higher (possibly in excess of 5%).

With a tracker rate, this will normally be an interest rate charged in addition to the Bank of England base rate, currently 0.75%, and will move immediately any changes occur.  However, most tracker rates have no penalties to leave.  So, great if you are planning to move imminently or have bonuses due and want to repay a large lump sum off your mortgage.  They can also be cheaper than a fixed rate, but obviously have more risk of increasing rates too.  

For those sitting on the lenders SVR – WHY?!  The lenders SVR tends to be more expensive than other products available and you should act now as you’re probably paying too much as it is!  And lenders can alter their SVR when they choose.

So, in short, the fixed or tracker conundrum is down to personal choice.  A number of clients visiting impact are looking for a longer-term fixed rate for certainty and to help manage their monthly budgets.  But a number are still happy to take a short-term tracker rate and are confident that rates will not fluctuate too much in the coming months.  Either way, there are some good products available with minimal set up costs and it does seem to be a ‘race to the bottom’ with regards to pricing currently.

One thing to think about though – if you are contemplating a tracker rate for now, with the intention of changing to a fixed rate later on, be aware that if rates start to rise you might find that the fixed rates have already increased before the tracker rate even starts to.

Being Self Employed shouldn't affect you getting a mortgage.

A large myth suggests that because you are self-employed, you will find it harder to get a mortgage. Maybe that was so a few years ago, but not today.

Yes, the financial crash took its toll on the self-employed and quite rightly killed off the ‘self certification’ type deals (no proof of income).  But today lenders are quite happy to lend to those who are self-employed and have a good track record.  The majority of lenders require two years accounts and will tend to average your last two years figures.  However, there are also some lenders who will look to assist you even if you are in your first year.  Some will also consider just last year’s figures, even if you have been self-employed for longer.

Generally, the longer you’ve been self-employed and the more years accounts you have, the larger number of lenders you will have who are willing to assist.

Some lenders do not require to see your full accounts but will require an accountant’s certificate to be completed.  This differs lender to lender. Some will require a full set of accounts and/or an accountant’s certificate!  Some will require this and/or tax year overviews and more.  All can be requested via HMRC.

They may also require to review business bank statements to review day to day cashflows and possible projections for future income, including potential contracts, etc.

This can also change depending on the make up of your self-employment, whether a sole trader, partnership, Ltd company director and so on.

Deposit requirements can range lender to lender, but the bigger deposit you have, the greater the number of deals will be available to you.

Finally, plan ahead.  Six months ahead of your mortgage requirements, make sure you have your house in order.  Check your bank statements are in good order, check you have the right accounts and relevant paperwork from your accountant.  Don’t have too many credit searches in a short amount of time as this could affect your credit score.  Ensure you are on the electoral role and have decent breathing space on card limits and loans.  All of this should put you in a good position before the lender even looks at their ability to lend to you!

Mortgage borrower demands are shifting!

In recent months there has been some much-needed attention drawn to customers who have experienced some type of adverse credit. Many specialist lenders and building societies are leading the way both in terms of the education process and through some innovative and highly competitive product ranges.

There is no hiding from the fact, or should there be, that borrowing demands are shifting and many high-street lenders are struggling (or unwilling in some cases) to adapt to them. The fact is that growing levels of credit related issues are emerging. In the vast majority of cases these remain minor, but this doesn't stop concerns being raised over credit histories and consumers future ability to secure a mortgage.

Recent research from specialist lender Pepper Money suggested that the majority of people who have experienced credit problems in the last three years are worried about being declined a mortgage. Its survey found that 69% of those who are seeking a mortgage or remortgage in the next 12 months are concerned about having their application declined due to their credit history.

We have spoken to many clients who, due to their credit history, felt that they couldn’t get a mortgage or remortgage from their current lender. On the back of this, we are forming even stronger alliances with a variety of lenders to help get this message across and ensure that our staff have the knowledge and access to the types of deals which can help such borrowers to achieve their homeownership aspirations.  It's these types of fresh approaches which will enable us to assist more people with the appropriate solutions and help clients put their past credit issues behind them.

Whether it’s a CCJ, Default, IVA, payday loan, missed payments, bankruptcy or even a previous property Repossession, lenders are looking to assist clients who have had these issues.  Yes, depending on the level of adverse credit, the rate maybe slightly higher than a standard high street mortgage, but we use specialist lenders as stepping stones on the road to credit repair (obviously, all subject to terms and conditions), with the ultimate target of returning to the high street lender option as quickly as possible. 

Let’s hope that 2020 is the year that this sector of the mortgage market starts to generate headlines for the right reasons.

Moving forward to the challenges ahead.....and Happy Christmas!

This time last year, I was predicting that we’d have got over the shenanigans of Brexit and be moving forward in to the unknown, yet positive, challenges that lie ahead. 

How we can be no further forward still is beyond me.  But at the same time, I can’t believe the year has gone and I’m writing my last column for 2019!

The mortgage world has been pretty flat with figures estimated to be only a slight increase on 2018.  On the upside, choice of mortgage product is at it’s all time high and rates are incredibly low.  Great for the end consumer!

The festive period can be a time for reflection.  It can also be a time when many people start looking at new properties to move to. Or they may already be committed and are packing ready for the removal lorry, or they take time to review what mortgage they have and question if there is anything better out there. That is of course, if they are not simply taking a holiday, and why not?

Whatever your plans, it makes sense to review your current mortgage deal and see if there is a better option and perhaps look to secure a competitive rate for a few years. Whilst I always err on the optimistic side of a rates argument, we are entering a truly unknown era as we plan for Brexit (again) and there is no history to prompt what the immediate and longer-term implications will be.

Technology was due to take over the mortgage market in 2019 and despite millions being spent, this has only had a small impact.  Circa 72% of all mortgages generated are still via brokers/intermediaries.  You are entering into the biggest debt of your life and questions need answering.  You just can’t beat the human touch…. for now.   Many lenders have yet to evolve with the digital era and those who will win will be the ones offering quality technology, but also the human impact for those who prefer or need it.

Finally, I really appreciate you reading my column!  I’ve tried to provide an unbiased insight to what happens in the mortgage world, with a little bit of humour along the way!

A huge thank you to everyone who has instructed impact sf to source and arrange their mortgage during the past twelve months. It has been a fantastic year, including a brand name change and a new additional office in Barttelot Road!  We have a fantastic team and they are a truly hardworking and knowledgeable group of people.  Best in the business!

On behalf of all the staff and directors at impact specialist finance, we wish you and your families a very Happy Christmas and a Relaxing and Prosperous New Year!  Bring on 2020!

Which mortgage calculator do you use?

There is a wide range of mortgage calculators and affordability calculations available which will help you to find out ‘How much can you borrow?’.  However, the only true response will be from the lender and normally only once they have carried out a credit search and reviewed your credit score.  Only a few years ago, the loan offered could easily have been up to 8 x income with the minimal of fuss.  Times have changed, and rightly so!  Those were times with little control and the lengthy recession bore testament!

Today it is so much more intense!  For example, a lender will require to know your monthly budget spend figures, right down to every direct debit on your bank statements, including council tax, insurances, mobile phones, and possibly lottery payments and gym membership!  From these monthly outgoings, the lender will look at affordability and decide from there what mortgage amount might be available to you. It maybe restrictive depending on your monthly outgoings, but it can also be very generous depending on what little outgoings you have!   The lender has a duty to make sure you can afford your mortgage today, as well as when rates rise and specifically to it being considered affordable over a 5 year period.

 

But this also means that what was once an affordable mortgage may suddenly become unaffordable due to the perception the lender has on consumer spending habits, both historically and projected for the future.  

We have seen the phasing out of income multiples and the introduction of affordability models.   So, no more straight forward 4 or 5 x income discussions.  The amount you can borrow will depend on your monthly net income against expenditure and living costs.  However, this also works positively for the right loan to value, right affordability and right customer, as lenders are willing to offer a little bit more. 

With the increase in requirements, the time taken in research prior to recommendation for a suitable mortgage product has also increased, as have the lenders own underwriting procedures.  So, beware if you are in a rush!   

A large portion of the UK adult population has experienced credit problems..

The festive period is traditionally a time for giving, but for some people - especially those with a family to support - it can prove to be a difficult one to successfully manage. It is a season where we see more people, from all walks of life, seeking some form of supplementary borrowing, a factor which can generate additional monetary worries and financial stress, perhaps even leading to adverse circumstances down the line.

On a positive, more forums and sources of advice/information are readily available for people to discuss topics which may have previously been considered taboo and difficult to address. Although money matters and financial education are areas where there is certainly still room for plenty of improvement.

One recent lender issued a study to brokers on the world of adverse credit to encourage greater understanding and more open discussion around this subject matter. After all, this is an area which is not going away anytime soon. According to the lenders research, a large portion of the UK adult population has experienced some form of adverse credit. 15% of all participants surveyed reported that they had previously missed payments on credit commitments; had CCJs, defaults, secured or unsecured arrears registered on their credit file; or had entered a debt management plan (DMP) in the last three years.

The research outlined that adverse credit is most common amongst people who are the prime age to be homebuyers and remortgagers. The majority of people who experienced adverse credit in the last three years are said to be aged between 35-44 (43%). This compares to 33% who are aged between 18-34, and 23% who are 55+. It’s also important to point out that it’s not just the less affluent proportion of society who pick up adverse credit on their record. The report added that 61% of the adults who have experienced adverse credit in the last three years and are planning to buy a property in the next 12 months are associated with a higher income.

There are plenty of specialist lenders who will consider those who have had all types of credit issues, subject to terms and conditions, and rates are probably a lot lower than you would think.  As always, seek professional advice from the specialists.

Complex deals are considered depending on the clients scenario

Actually placing a mortgage with a lender is not normally difficult. The hardest part, in the recent climate, is getting the mortgage through to completion!

However, a number of lenders are happy to think outside the box and take a manual approach to lending.  One recent example was with the Harpenden Building Society who helped complete a £1 million interest only deal on a new build flat for a client in their 50’s.

The transaction was for a very upscale 19th floor new build property situated on the South Bank of the River Thames in London. It had a valuation of circa £2 million with some units in the development having restrictions to borrowers over 55’s and was above a commercial property.

As this was also over a twenty year term, this took the clients age in to retirement.  However, as the property was to be let out, the building society took this into consideration, along with their residential property and allowed the deal to proceed.  This was on the basis there was enough equity in the properties to repay the lenders loan if they needed to.

This example highlights the value attached to many building society lending propositions, in terms of their flexibility and approach to more criteria-based lending. 

But as with all funders, try not to give lenders an excuse to decline your application or refuse to lend to you. Try to pay bills on time, don’t miss payments, and especially not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision to lend to you. Lenders can re-credit search/credit score you right throughout the whole mortgage process.

Finally, we are seeing general processing delays across the market.  Some lenders are up to ten working days behind on processing and we have experienced recent telephone calls taking over an hour to receive any kind of response!  These are just on the broker side so who knows how customers are faring!  So, speak to your local (and long established) independent and whole of market brokerage and let them take the stress away from you.

Be prepared in advance of applying for a mortgage.

When applying for finance, if you don’t appear on the electoral roll or don’t have any credit, some lenders may consider that you don’t exist, financially!  This has been a hurdle in the finance world for some time, more so now with the evolution of technology.  It seems that lenders only need to find the smallest of excuses to not agree a mortgage request.  Historically, lenders were often more amenable if an applicant could not be located on a credit search. Today, if you have no regular credit commitments or do not appear on the electoral roll at your current address, be prepared for a possible knock-back or at least the request for further proof of residency, etc.

The market has been pretty quiet this week, with only a few lenders making headlines and reducing rates. I suspect the market is still coming to terms with an unexpectedly buoyant August and preparing their offerings for a good run to the end of the year.  Rates generally are decreasing, and this makes it a good opportunity to review what’s available to you.

We are experiencing a large number of ‘complex prime’ enquiries lately. One example is for a property which is currently converted in to two properties, but where there is only one registered title.  Another example was of a full conversion of a barn into a dwelling.  One further - for tax purposes – where the customers were seeking to purchase a number of investment properties in a Limited Company name with their company structure designed purely to hold properties.  These are live examples which certainly have a lender home. They just need a bit of extra thought and the location of lenders who don’t fit the normal credit scoring mentality.

Finally, getting a mortgage through lenders in the current climates can still be challenging. One day it’s easy to get a case through, the next, it’s a nightmare!  So whatever you do, try to not give lenders any excuses to decline your application or refuse to lend to you. Try to pay bills on time, don’t miss payments where possible and, especially, not mortgage payments!  Any missed (or sometimes late) payments will be registered on your credit file and this is normally used as the basis of a decision whether to lend to you, or not!

Looking at Buy to Let? Visit the Property Investor Show

If you are contemplating moving into the Buy to Let sector (buying a property to rent out), then I would recommend making a visit to the Property Investor show/exhibition that takes place on 4^th and 5^th October at the London ExCeL Centre.  There will be over 100 exhibitors and over 50 seminars that will assist in answering all your questions about the Buy to Let sector and the highs and lows of being a landlord.  It’s free to attend and there will also be a good (Horsham based!) mortgage adviser on site to assist with all mortgage related enquiries.  

The Buy to Let sector has been through some interesting times recently and it always seems to be this area that is targeted when it comes to tax and regulatory changes.  I always stipulate that any property investor should have a good set of experienced property professionals around them when it comes to advice and recommendations, especially with regards to in-depth tax advice from an accountant who understands property, limited companies and all the new rules surrounding landlords and, where applicable, portfolio landlords.

In addition, minimum energy efficiency standards (MEES) were introduced in April 2018.  The standards affected all new lets and tenancy renewals in the private rented sector to have a minimum energy performance rating of E.  From April 2020, this will also cover existing tenancies.   Landlords will be unable to rent properties until any works are done and the minimum rating is achieved.  

On the upside, the availability of Buy to Let mortgages is at its highest for some time with loans available up to 85% of the property value and five-year fixed rate deals, with only three year redemption penalties recently being launched.  One lender has recently launched two-year rates from 1.99% and five-year deals from 2.99%.  Terms and conditions obviously apply and every case is looked at and underwritten on its own merits

With interest rates so low and demand for rented properties increasing, and no clearly defined solution to help first time buyers, I can only see this sector growing over the foreseeable future.   

Bank of Mum & Dad now 10th largest lender in the UK!

First Time Buyers trying to get on the property ladder will turn to the Bank of Mum and Dad to borrow more than £6.3bn this year, according to a report from Legal & General.  This equates to  being the equivalent of the country's tenth biggest mortgage lender!

The average parental contribution for homebuyers this year is £24,100, according to L&G.  This is up by more than £6,000 compared to last year.

The report also suggested that thousands of UK buyers were reliant on their parents to either get onto the housing ladder in the first place, or upgrade to a larger home.  Almost a fifth of those who said they had, or would help a family member buy a home, said it was because they felt it was their personal responsibility to help out.

The financial services firm also warned that parents' generosity could hurt their standard of living in retirement.

First Time Buyers currently have a good number of options available to them, including mortgages up to 95% of the property value and where possible, parental guarantor mortgages.   This includes ‘Joint Borrower, Sole Proprietor’ arrangements.

We've also seen a marked increase recently in enquiries for Right to Buy properties and those looking to purchase on a Shared Ownership basis:

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be substantial, and applicants must have been a public sector tenant for at least three years.  Some lenders will allow borrowing of up to 100% of the purchase price.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period. 

Shared Ownership Schemes are normally provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, even those who may have had financial credit blips in the past.  So, always seek advice.

It's the holiday period....but be wary of how you spend, if you're planning to change mortgages soon.

The holiday period is most definitely in full swing and it’s precisely why I feel the need to be a pain and reiterate that whatever is spent on credit cards has to repaid!  If you are looking to review your mortgage in the next few months and load the credit card during the holiday period, remember that lenders will use the balance and offset against your income, before working out what you can borrow. That includes interest free credit cards, loans, HP agreements and student loans. They are all taken into account.

The holiday period can also be a time when many people do one of three things in the mortgage sector. Firstly, they start looking at new properties to move to. Or they may already be committed and are packing ready for the removal lorry.  Or they take time to review what mortgage they have and question if there is anything better out there. That is of course, if they are not simply taking a holiday, and why not?

Certainly, once the holiday is over, then it makes sense to review the current mortgage deal and see if there is a better option and perhaps look to secure a competitive rate for a few years. Whilst I always err on the optimistic side of a rates argument, we are entering a truly unknown era.  Boris is now steering ‘UK PLC’ and we have never left Europe before, so there is no history to prompt what the immediate and longer term implications will be.

Therefore, take the chance to look and see if a re-mortgage to a medium to long term fixed rate might benefit you.  There are millions of people on lenders standard variable rates enjoying complete and deafening silence from their current mortgage lender.  Why the silence?  Simply because lenders are comfortable with you paying over the odds and expanding their margins! They are under no obligation to offer you a better deal when you come to the end of an incentive term and you automatically flip onto their standard variable rate. It is always worth looking for a better deal and many lenders will welcome you with free valuation and legal initiatives and a difference of 1% can save you a substantial sum over a few years.  And that might just be a nice contribution towards your next holiday!

Don't jump on the first offer. Always do your homework!

So, your mortgage is coming to the end of its product term.  You may have fixed for an amount of time, maybe two, three or five years.  And now your rate is due to change to the lenders variable rate, which in the main, is higher than the rate you are currently on, and your monthly payments are about to increase.  But hold on, your current lender has seen the light and decided to offer you some 'fantastic' products to keep you.  Even though you are four months out of your product change, they've given you just fourteen days to take the ‘new product’ and stay with them.  After this time, they can’t guarantee the ‘new product’ will be available to you.  What do you do?

One recent example a customer showed us, had some very attractive rates.  However, when we looked, the same lender was offering better rates through the intermediary sector, with the same fees, etc.  I always say do your homework, and lucky this customer did as it saved them 0.1% on the rate over a three year period.

Even though some lenders put a deadline on any new offerings, remember most are contacting you three or four months before your product changes, so there is plenty of time to review your options and choose the best rate for you nearer the time.   This is a pretty straight forward process to arrange and normally they will have minimal paperwork and fee requirements.

As both a specialist mortgage provider, as well as whole of market (including the high street lenders), impact specialist finance has seen an increase recently in this type of transaction and why wouldn’t you stay with your current lender if they offer you a great product? 

But sometimes they don’t offer you a product at all!  It doesn’t mean they won’t!  It just means that you should find an experienced mortgage specialist who may be able to open up a door to a wide range of opportunities available to you. This is the biggest debt you have so take your time, ignore the ‘time pressures’ and ensure you seek advice, so you don’t regret it further down the line. 

AVM, Homebuyers, Building Survey - Which valuation is right for you?

With every mortgage, the lender will require to know that they are lending money on a suitable property.  This will entail a valuation and normally a surveyor will visit the subject property.  This is a fairly basic valuation and is for the lender, paid for by the borrower, and it should not be relied upon as a guarantee that the property is sound and fit for purpose.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes.  They have no obligation to tell you what is in the report or give you a copy!

In some cases, they will not actually visit.  This is because they can often access detailed information electronically, normally called an Automated Valuation Model (AVM), where a mathematical system calculates the property’s value based on a number of comparable properties and other in-depth calculations. 

Therefore, you should always consider the benefit of an independent survey on the property you are purchasing to ensure that any and all defects are noted before signing contracts. There are two main types of survey available, aside from the standard lender mortgage valuation.

Homebuyer Report - a standard format set out by the Royal Institution of Chartered Surveyors (RICS). This will not focus on every aspect of the property as a building survey will (below), but will advise on urgent matters needing attention. It may advise if items (a leaky roof for example) might have an adverse effect on the value of the property, or if further investigations are required.

A Building Survey – an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required and provide extensive information on major or minor defects.

Both will comment on whether the agreed asking price is reasonable, whether it reflects the condition of the property and should give you peace of mind whilst making the biggest purchase of your life!

Finally, if you have any burning questions or items you would like me to discuss, I’m always looking for content ideas, so please don’t be shy to ask!  You can email me at dale@impactsf.co.uk or call me on the number above.

Another lender closes it's doors citing 'cost of funding'. Should we be worried?

I mentioned last week that the mortgage market is buoyant.  And it is.  However, there have been some ‘ripples’ in this with three well known lenders (in the specialist sector) closing their doors, or revisiting their funding options in the first quarter of the year.

Sadly, last week there was another casualty of the uncertainty of funding lines (and Brexit) that is facing us all as Magellan Homeloans shut their doors.  Being a local specialist lender, based in Leatherhead, this is a real shame as they considered mortgages for those with a credit blip, help to buy schemes and specialist buy to let.

The Lender’s CEO stated ‘The competitive landscape has continued to shift, mortgage loan interest rates are reducing when the cost of funding is rising, and some lenders are taking on more credit risk despite the volatile economic backdrop. Magellan has prided itself on maintaining excellent credit standards whilst helping customers who have been disenfranchised by high street lenders. However, we do not wish to compete in a market which we view as unsustainable.”

We obviously wish all their team well for the future.

Is this the start of further lenders pulling out of the market…..who knows?  But we are set for a long period of uncertainty and if you are looking to review your mortgage finances, maybe you shouldn’t hang around. 

Conversely, with some lenders recently reducing rates and chasing completion volumes, 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 customer’s ability to obtain a mortgage.  All credit scores include a credit search – this is a review your financial history, payments to utility suppliers, mobile phones, etc.  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.  And make sure you deal with someone who has access to the whole market, so you get the best possible options for your requirements.