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.

Visits to property website up 7% on January 2019.

I’ve just read that visits to Rightmove surpassed 150 million for the first time in January, making it the busiest month ever recorded. There were said to be over 152 million visits to the property portal in January, a 7% increase on January 2019. The top five busiest days ever on Rightmove were all said to be between 21st and 29^th  January, with Wednesday 29^th topping the list. There were reported to be over 5.7 million visits on that day, up 9% on the previous record set back on 24^th April 2019. Time spent by home hunters on the site was up 4%, with people spending a total of 1.17 billion minutes on there.

These are pretty remarkable numbers and ones that will hopefully relate into the prospect of rising activity levels, especially in the lead up to a usually active late Winter/early Spring period.

Unless you are incredibly lucky, you’re probably going to need a mortgage to buy your dream home.  A mortgage is the biggest debt you’re likely to ever take on, so you need to do your homework and understand more than just what the national press decide to publish about the Bank of England base rate being held at 0.75% again, or how much profit the banks are currently making! Or what a mate says in the pub!

Advice is crucial and ideally from a company who can offer ‘whole of market’ mortgages, not just products from a limited panel of lenders, like some Estate Agency chains or a Bank/Building Society who only offer their own or a limited set of products.

I guess what I am saying is think before you agree to use any in-house service of this type as overall, it may not always be in your best interests, and as this is the largest financial transaction you will be involved in at the time, it is important to feel comfortable about it.  Also, to have some independence in the event of any concerns or disputes makes great sense.

Finally, make sure you ask questions!  For example, if you’re not being offered ‘whole of market’ products and instead are being offered mortgage products from a ‘limited panel of lenders’, you may be missing out on the best product available to you. You are, after all, in the driving seat.

Don't panic just yet, but be aware of your mortgage rate and options

In historic columns I have used the word 'panic' to describe the possible rush to secure a good mortgage deal before they vanish when rates rise.  It’s not quite at that stage just yet, but we have seen some rate rises this week from both Santander and TSB.

However, there is another important term I think worthy of mentioning now and this is ‘Payment Shock’. A well worn term during the mid to late 90's and one which I think Mr Jannels 'senior' may have played a part in coining! It describes the potential increase in monthly mortgage payments when an incentive period, for example a fixed rate, comes to an end and the mortgage moves to the lenders standard variable rate. It is worth reflecting that a one per cent uplift on a mortgage of £200,000 may mean a monthly increase of circa £166 and, in many cases the rate may well increase substantially more than this.  Imagine the impact of a two or three per cent rise!  Not unusual if the lenders standard variable rate is in the late four per cent range. We know one that’s over six per cent! 

We try to keep a listening ear open to those in our sector who are considered 'gurus' and their predictions on interest rate rises and when they will happen. In truth, no one can be certain, other than that they will rise, although this has been mentioned for over ten years!  It is important therefore for mortgage borrowers to consider the potential of any rate increase (payment shock) and how it will affect them. A good time perhaps to consider a new fixed rate?

Finally, a commentator once wrote about consumers carefully researching prices for a new dishwasher or fridge and then shouting from the rooftops when they have saved £20 from shopping around. And, why not? Yet the financial press and advisers alike will regularly lament on the fact that borrowers will allow their monthly mortgage payments to continue regardless when they could be saving multiples of £20 every month especially when such a saving could go towards paying for life insurance, that they may not currently have! 

Lending down, purchases up and are you suitably protected?

UK Finance has confirmed that mortgage lending was down 4% year on year in June, amounting to £21.9bn.  Despite this, house purchases increased nearly 3% as 48,539 approvals occurred, compared to the previous year.  This is encouraging, and we’re seeing 49% of all business coming into impact specialist finance being house purchases.  There’s certainly a lot of properties being developed currently, so this should not be surprising! 

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 Aviva 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 high 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 Sainsbury’s Bank appeared to back up this trend, finding that while 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.

Finally, from where we see it, on the front line, I would dare to suggest that consumer confidence appears to be the highest it has been for some considerable time, despite the uncertain economic climates!  July and August are never normally this busy!  It is not just one geographical area either, although does appears to have a leaning to the south. What does seem to be apparent is that the demand is for ‘all types of mortgages' for all types of people!   From the straightforward, to the complex, to the commercial shop front, to the credit issues, to the first time landlord investing in their first Buy to Let property and so much more, we are seeing many different scenarios.  Why not visit our website at www.impactsf.co.uk and review all of our financial offerings and see how we can help you.

A computer can't listen to your mortgage needs and requirements!

With technology taking over the world, and so many transactions taking place over the internet, it might be easy to be attracted to products online.  There is so much information readily available and over 11,000 mortgage products to choose from, but these types of things can get lost in translation.  Therefore, seek advice!  Yes, it may cost you a small fee to have someone research the market on your behalf and make recommendations, having first assessed your short to long term needs and requirements.  More importantly, it could save you thousands in the long run, versus choosing the wrong products yourself. In addition, any professional will probably seek to build a long-term relationship with you and contact you at the time your current rate is coming up for renewal to ensure you have the best rates available.

It doesn't matter whether you are experienced, or if this is your first time.  Property ownership can be complicated, so explore all the options and do your homework.  There are a huge number of lenders available to you and all have competitive edges and good criteria options for the right customer.  Make sure you understand everything at the outset so that you don't regret it later!

A good independent mortgage adviser will be able to review the whole market for you and can identify the best lending options and then deal directly with the lenders central processing units, speeding up the process from application to offer. That said, even in this area we know of at least one lender that is sixteen days behind on post or electronic updates!  

An experienced adviser will listen to your specific needs and timescales and ensure that they line you up with a lender who will match both. So, if speed is crucial, then you may need to consider working with a lender where the rate may not be the keenest on the market, but they will get the deal to completion within your target timescales to ensure you get the property of your dreams.  Remember, make sure you adviser looks at the whole market, and not just a limited panel of lenders ensuring that you get the widest choice of lenders and products (including exclusive deals) available to you.

A Bridging Loan could help you if you need something short term.

There is an abundance of choice for consumers across the mortgage market currently and this includes the bridging / short term lending sector.

Bridging Finance is the term most used for funds to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction. The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged. This can also be used for legitimate tax payments or short term business requirements.

More recently we’ve seen hesitation with new properties that would have sold with ease now coming across some delays as people decide whether to wait or not as the uncertainty of Brexit deepens. This inevitably might require the builder to look at refinancing their current and sometimes expensive development finance, whilst the properties remain on the market.

We’ve also just completed a Bridging Loan for a conversion of a Barn. The lender wanted full plans, permissions and a host of other information, but they offered short term funding with timescales of up to 18 months to get the conversion complete.

There are a myriad of other reasons for which short term lending can be applied and each application is looked at on its own merits before a lender will agree to assist. The best way to look at this is as a means to an end. These lenders will need certainty on the exit route (how will they get their money back?) and they will always insist on an agreement being in place from a traditional mortgage lender to provide a mortgage, at a given time and once any requirements have been fulfilled. Alternatively, the exit route might be from the sale of the same or another property. So, short term lending is designed to fulfill the need or desire to act quickly.

Finally, this type of funding has become more competitive over the years with some now offering rates as low as 0.44% per month for the right customer.  Obviously, individual terms and conditions apply and with these types of offerings, as always, seek professional advice!

An Independent Mortgage Adviser will review the whole market for you, not just a limited few lenders.

With technology taking over the world, and so many transactions taking place over the internet, it might be easy to be attracted to products online.  There is so much information readily available and over 11,000 mortgage products to choose from, but these types of things can get lost in translation.  Therefore, seek advice!  Yes, it may cost you a small fee to have someone research the market on your behalf and make recommendations, having first assessed your short to long term needs and requirements.  More importantly, it could save you thousands in the long run, versus choosing the wrong products yourself. In addition, any professional will probably seek to build a long term relationship with you and contact you at the time your current rate is coming up for renewal to ensure you have the best rates available. 

It doesn't matter whether you are experienced, or if this is your first time.  Property ownership can be complicated, so explore all the options and do your homework.  There are a huge number of lenders available to you and all have competitive edges and good criteria options for the right customer.  Make sure you understand everything at the outset so that you don't regret it later!

A good independent mortgage adviser will be able to review the whole market for you and can identify the best lending options and then deal directly with the lenders central processing units, speeding up the process from application to offer. That said, even in this area we know of at least one lender that is thirteen days behind on post or electronic updates!   An experienced adviser will listen to your specific needs and timescales and ensure that they line you up with a lender who will match both. So, if speed is crucial, then you may need to consider working with a lender where the rate may not be the keenest on the market, but they will get the deal to completion within your target timescales to ensure you get the property of your dreams.  Remember, make sure you adviser looks at the whole market, and not just a limited panel of lenders ensuring that you get the widest choice of lenders and products available to you.

Mortgages for purchases on the increase

The new Governor of the Bank of England, Mark Carney, gave a fairly broad hint that the bank’s base rate, currently 0.50%, will remain static for a few years yet. Some of the comment was based upon the current level of unemployment and it was suggested that, unless this rose above 7% nationally, the rate should stay low. Whilst there is no guarantee, much can happen in a short time financially as we all know, this is a real confidence boost for those people who are looking forward in terms of their borrowing requirements. This can relate to either mortgage, personal or business borrowing and the broad brush hint can be a means to boosting more confidence in all of these sectors. Of course, the downside of this is that savers may not get much of a return on their hard earned investments during a sustained low rate period.

For borrowers on a low rate base rate tracker the prediction may also be good news and for new purchasers there is every reason to feel more confident in an ability to afford a mortgage in the next few years ahead although a longer term fixed rate may still be worthy of consideration. It is never a bad thing to know what your monthly payment will be and for how long and this may be considered prudential financial planning.

We have noticed an upturn in property sales transactions in the last few weeks and have even heard that a number of properties have been the subject of multiple offers with would be purchasers vying hard to make a successful offer. None of us know if this is likely to be the norm moving forward but it is undoubtedly another pointer towards an upturn of confidence in the current market.

If you are looking to take advantage of very competitive rates in the marketplace for either a purchase or re-mortgage then ensure that you take qualified and independent advice.      

Buy to Let takes a hit

The Buy to Let market has been hit hard this week as two of the major players make significant changes to their criteria.

BM Solutions (part of the Lloyds Banking Group) have withdrawn their House to House product.  What does this mean?  Well, the majority of investment mortgages, or better known as Buy to Lets work on a required rental calculation.  Most use a 125% rule.  Therefore the rental payment must be 125% of the monthly mortgage payment, usually based on the actual interest pay rate.  If the rental payment was short in calculation, then the loan offered would be reduced to fit.

The now defunct House to House product ignored this requirement and looked at the Buy to Let using the customer’s income and expenditure.  It was one of the only products in the market that offered this option and was incredibly useful for properties where rental coverage did not cover the mortgage payments by the required rental calculation.  The lender would consider the customers income when considering loan amounts.

The Mortgage Works (part of Nationwide) have also made a number of changes to their Buy to Let offerings.  These include the withdrawal of their regulated Buy to Let offering.   A regulated Buy to Let is where a sizeable portion of the property is rented out to a family member.  They have also withdrawn the option for clients to buy a property from a relative. 

With property prices still low, First Time Buyers struggling to get on the property ladder and returns on savings still relatively unattractive, many have invested in property as a long term investment.  This area of the mortgage market has been buoyant and as such, many lenders are incurring service issues.  So these are substantial moves by two major lenders begging the question if this is the start of more negative things to come?   Let’s hope not!

Short Term Lending is on the increase!

The ‘Short Term Lending’ market has been flourishing recently. Specifically geared at speedily arranged loans, normally with a monthly rate of interest and pre-agreed with an ‘exit’ route, the term ‘Bridging Finance’ is quickly becoming a household name.

With many lenders in the market, offering loans up to 75% of the property value (sometimes higher with additional security offered) these types of loan are calculated and charged on a daily/monthly basis, with some even offering to roll up the interest (no monthly payment). Interest rates start from 0.75% per month and normally are arranged over a period of between 1 to 18 months. Most will carry a lender fee, an assessment fee, some will include early repayment charges and possibly an exit fee. However, for the right scenario, these loans provide a superb funding line.

Ideal scenarios for Bridging Finance include –

1) Refurbishment – allows you to buy and refurbish property quickly
A loan to support with the purchase of a property and then undertake the refurbishment before it is eventually presented to a mortgage company or bank for long term re-mortgage finance, or sold.

2) Purchasing properties at auction
Short Term Loans can be arranged very quickly and can be ideal where there are tight deadlines to meet. A typical 28 day completion from purchasing an auction property is usually easily achievable. A pre-auction valuation is considered a must.

3) Funding under value purchases
A loan based on the actual value of a property and not the purchase price. Thus, when purchasing a property, under value, you may have the ability to borrow up to 90%of the cost of a property (subject to valuation) and then re-finance the transaction using a traditional lender later on.

4) Chain breaking or not sold your property yet
When the chain breaks or you have not sold your property but found one you have fallen in love with, bridging finance may enable you to complete on the purchase before you have sold your existing home.

These are just some examples, there are many others.

However, where there are positives, there can be negatives! Many lenders have set a minimum term for a property to be owned before they will allow a remortgage to occur. This is usually six months. So please ensure this is factored in to any purchase, budget calculations, etc before committing to any Short Term Funding/Bridging Finance. For more information, or to discuss a specific scenario, please contact AToM.