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!
28 May 2010
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.
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.
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.
24 April 2010
Mortgages with a barcode?
Homeowners rate buying a house more stressful than having a child. House buying tops the table of most ‘stressful life experiences’ with one in four (24%) homeowners finding it the most demanding and worrying thing they have done, according to research from Unbiased.co.uk
It is still First Time Buyers who are particularly hard hit needing a substantial deposit merely to get on the housing ladder and a significantly larger deposit to access the best rates.
According to creditaction, the typical first time buyer deposit in January was 25% (£38,348), with the average first time buyer loan being £115,044 and at an average of 3.08 times their income.
The reality continues with a YouGov survey revealing that 86% of 18-30 years olds could not currently afford to buy a home if they wanted to, despite recent falls in house prices. A massive 83% of 18-30 year olds also thought buying a new home was now more a pipe dream than a reality.
It shouldn’t be so. We have witnessed the suspension of Stamp Duty below £250k, lower property prices, more lenders looking to assist First Time Buyers with higher loan to value mortgages and other options, including Guarantor mortgages and Shared Ownership schemes. You really need to research and explore all the options available to make that important first step on to the property ladder a reality.
Meanwhile, house prices increased by 1.1% in March, partly offsetting February’s 1.6%fall, according to the latest Halifax House Price Index. This rise was the eighth rise in the past nine months. The average price is now £168,521, 9.1% above last Aprils low point.
House price confidence appears to be on the increase; if only the mortgage financing available could support such levels of optimism.
Let’s not be despondent though at the continuing tough market. Tesco Bank has confirmed plans to launch a mortgage range by the end of 2010 as it looks to build the brand into a fully-fledged retail bank. So whilst picking up your cornflakes, butter, bananas and sausages, you can also throw a mortgage in to your basket. I wonder if it will have a barcode so you can scan it in at the self-service check out?
It is still First Time Buyers who are particularly hard hit needing a substantial deposit merely to get on the housing ladder and a significantly larger deposit to access the best rates.
According to creditaction, the typical first time buyer deposit in January was 25% (£38,348), with the average first time buyer loan being £115,044 and at an average of 3.08 times their income.
The reality continues with a YouGov survey revealing that 86% of 18-30 years olds could not currently afford to buy a home if they wanted to, despite recent falls in house prices. A massive 83% of 18-30 year olds also thought buying a new home was now more a pipe dream than a reality.
It shouldn’t be so. We have witnessed the suspension of Stamp Duty below £250k, lower property prices, more lenders looking to assist First Time Buyers with higher loan to value mortgages and other options, including Guarantor mortgages and Shared Ownership schemes. You really need to research and explore all the options available to make that important first step on to the property ladder a reality.
Meanwhile, house prices increased by 1.1% in March, partly offsetting February’s 1.6%fall, according to the latest Halifax House Price Index. This rise was the eighth rise in the past nine months. The average price is now £168,521, 9.1% above last Aprils low point.
House price confidence appears to be on the increase; if only the mortgage financing available could support such levels of optimism.
Let’s not be despondent though at the continuing tough market. Tesco Bank has confirmed plans to launch a mortgage range by the end of 2010 as it looks to build the brand into a fully-fledged retail bank. So whilst picking up your cornflakes, butter, bananas and sausages, you can also throw a mortgage in to your basket. I wonder if it will have a barcode so you can scan it in at the self-service check out?
16 April 2010
The value of dealing with a Mortgage Specialist
There’s a new sound certain to gather volume in coming weeks and rapidly overtaking the wailings of politicians on the hustings! It’s the plaintiff sound of heads banging against a wall in frustration! These are the daily trials and tribulations of mortgage intermediaries dealing with some major mortgage lenders in the current climate.
As staff reductions and consolidations continue, mostly below the radar of national press, teams of underwriters, who brokers have established solid relationships, are being replaced by telephone ‘no can do’ teams and who, in most cases, to put it bluntly, are not helpful in the slightest. In fact, one of my colleagues has chased a lender for a response on an application for the last four days being constantly told “we are within our 48 hour service standards.” Perhaps they mean 48 working hours, so nearly seven business days? Some lenders have recently confirmed backlogs are in excess of ten days!
If, for whatever reason, a lenders underwriter decides to request one further bit of information, or needs additional clarification, then the fun begins. It is really frustrating to learn that some underwriters are not allowed to call and establish an answer which might take 30 seconds to resolve. Instead, we receive an automated email detailing requirements and once we’ve provided the information, we re-enter the ‘48 hour’ service standard queue and the cycle begins all over again. Assuming of course that the information returned does not get lost and is directed to the right department!
Whinge over! It could have been much worse (really!) but here I am, hanging on to the phone (20 mins so far) waiting for someone to talk to me. But, they keep saying that I am really important to them, so I will hang on for just a little while longer…!
What this all demonstrates is the value of dealing with a specialist mortgage intermediary as we will take this painful flack on your behalf. Imagine you are dealing with the lender direct and this happens to you! There really is no better time to utilise the expertise and staffing levels we can provide for you. Let us take the strain on your behalf to push the mortgage through to an early completion.
As staff reductions and consolidations continue, mostly below the radar of national press, teams of underwriters, who brokers have established solid relationships, are being replaced by telephone ‘no can do’ teams and who, in most cases, to put it bluntly, are not helpful in the slightest. In fact, one of my colleagues has chased a lender for a response on an application for the last four days being constantly told “we are within our 48 hour service standards.” Perhaps they mean 48 working hours, so nearly seven business days? Some lenders have recently confirmed backlogs are in excess of ten days!
If, for whatever reason, a lenders underwriter decides to request one further bit of information, or needs additional clarification, then the fun begins. It is really frustrating to learn that some underwriters are not allowed to call and establish an answer which might take 30 seconds to resolve. Instead, we receive an automated email detailing requirements and once we’ve provided the information, we re-enter the ‘48 hour’ service standard queue and the cycle begins all over again. Assuming of course that the information returned does not get lost and is directed to the right department!
Whinge over! It could have been much worse (really!) but here I am, hanging on to the phone (20 mins so far) waiting for someone to talk to me. But, they keep saying that I am really important to them, so I will hang on for just a little while longer…!
What this all demonstrates is the value of dealing with a specialist mortgage intermediary as we will take this painful flack on your behalf. Imagine you are dealing with the lender direct and this happens to you! There really is no better time to utilise the expertise and staffing levels we can provide for you. Let us take the strain on your behalf to push the mortgage through to an early completion.
12 April 2010
Few consumers really know what it would cost to replace all of their household goods
So now it’s confirmed. The election will be on 6th May. I will step back from commenting on political issues. There will be enough elsewhere! So, this week I thought I would review home building and contents insurance.
Buildings insurance is compulsory wherever a mortgage is in place. Whilst contents insurance is optional, it is often packaged together with buildings insurance, generally representing better value for the homeowner and value is more important than ever. According to the AA’s benchmark BIP index, quoted premiums in this area have risen for eight successive quarters.
So, why the rise in buildings insurance when house prices have been depressed? Claims experience affects pricing. The harsh winter and last year’s floods has led to an upsurge in claims for buildings damaged by snow, ice and water. The cost of rebuilding and repairing homes to the higher standards required by building regulations has been steadily rising – and it’s the cost of rebuild, not market value, that dictates the sum insured - and the most that an insurer is likely to pay out.
The homeowner has responsibility of ensuring that the sum insured is right. There is a real danger of both over and under-insurance as most homeowners don’t know the full rebuilding cost of their property. A lenders mortgage valuation will provide an estimated rebuild cost, but you should always consider a second opinion.
When it comes to contents insurance there is a persistent issue with under-insurance. Few consumers really know what it would cost to replace all of their household goods, and very few have a full inventory of their possessions. It is worthwhile systematically visiting every room – remember the garage and loft - and listing everything. People naturally think of the bigger ticket items, like furniture, TV and jewelry, but it’s amazing how many forget to include other pricey items like clothes and tools.
When assessing, it is important to identify the valuable items. Most insurers include a reasonable limit for unspecified high risk and valuable items, but do check that it will be adequate and that the single item limits are appropriate. If in doubt, speak to your local independent and whole of market mortgage and insurance provider.
Buildings insurance is compulsory wherever a mortgage is in place. Whilst contents insurance is optional, it is often packaged together with buildings insurance, generally representing better value for the homeowner and value is more important than ever. According to the AA’s benchmark BIP index, quoted premiums in this area have risen for eight successive quarters.
So, why the rise in buildings insurance when house prices have been depressed? Claims experience affects pricing. The harsh winter and last year’s floods has led to an upsurge in claims for buildings damaged by snow, ice and water. The cost of rebuilding and repairing homes to the higher standards required by building regulations has been steadily rising – and it’s the cost of rebuild, not market value, that dictates the sum insured - and the most that an insurer is likely to pay out.
The homeowner has responsibility of ensuring that the sum insured is right. There is a real danger of both over and under-insurance as most homeowners don’t know the full rebuilding cost of their property. A lenders mortgage valuation will provide an estimated rebuild cost, but you should always consider a second opinion.
When it comes to contents insurance there is a persistent issue with under-insurance. Few consumers really know what it would cost to replace all of their household goods, and very few have a full inventory of their possessions. It is worthwhile systematically visiting every room – remember the garage and loft - and listing everything. People naturally think of the bigger ticket items, like furniture, TV and jewelry, but it’s amazing how many forget to include other pricey items like clothes and tools.
When assessing, it is important to identify the valuable items. Most insurers include a reasonable limit for unspecified high risk and valuable items, but do check that it will be adequate and that the single item limits are appropriate. If in doubt, speak to your local independent and whole of market mortgage and insurance provider.
02 April 2010
Guarantor Mortgages, great for First Time Buyers
First time buyers are still struggling to get on to the property ladder. So, this week, I thought I would evaluate an option available to first time buyers in the form of guarantor mortgages.
Some lenders will allow a family member to act as a guarantor. Usually, the guarantor will need to prove they can afford their own residential mortgage and also the proposed mortgage they wish to guarantee. For example, if their mortgage was £100k and the proposed mortgage was £100k, the lender would look to ensure the guarantor could afford the total £200k loan. So, based on standard income multiples of, say, 4 x income, the guarantor would need to prove income of £50k. There are many ways of calculating affordability and every mortgage case is different. Lenders income multiples vary. Some assume the guarantor has no other loans. Some lenders offer a limited liability guarantee, so guaranteeing a smaller proportion of the loan. Although a guarantor mortgage is traditionally associated with first time buyers, there are products in the market that cater for those looking to move home or re-mortgage. You will probably need a minimum deposit of 15%.
The Post Office has confirmed that they will shortly be lending 90% mortgages aimed at first time buyers. At the moment it has not given any more details about the product, but says it wants to target those on low incomes. Let’s evaluate. I’ll make assumptions that they mean £20k (and below) and four times income, so £80k. Add in a 10% deposit (plus solicitors and valuation fees) and you are looking at a purchase price in the region of just £90k! This move was announced by a Government spokesman so the cynic in me asks if the headline was designed to win votes? Rates are likely to be quite high and, interestingly, the funding line is from Bank of Ireland.
Nationwide have confirmed that house prices rose by 0.7% in March, compared to a 0.8% drop in February. Prices sit 9% higher than a year ago, say the lender.
Finally, the WSCT Business Awards 2010 voting deadline is drawing close (9/4/10). If you have not voted yet, please take 2 minutes to do so. Local companies have had a rough ride over the last few months and need your support and your votes!
Have a great Easter!
Some lenders will allow a family member to act as a guarantor. Usually, the guarantor will need to prove they can afford their own residential mortgage and also the proposed mortgage they wish to guarantee. For example, if their mortgage was £100k and the proposed mortgage was £100k, the lender would look to ensure the guarantor could afford the total £200k loan. So, based on standard income multiples of, say, 4 x income, the guarantor would need to prove income of £50k. There are many ways of calculating affordability and every mortgage case is different. Lenders income multiples vary. Some assume the guarantor has no other loans. Some lenders offer a limited liability guarantee, so guaranteeing a smaller proportion of the loan. Although a guarantor mortgage is traditionally associated with first time buyers, there are products in the market that cater for those looking to move home or re-mortgage. You will probably need a minimum deposit of 15%.
The Post Office has confirmed that they will shortly be lending 90% mortgages aimed at first time buyers. At the moment it has not given any more details about the product, but says it wants to target those on low incomes. Let’s evaluate. I’ll make assumptions that they mean £20k (and below) and four times income, so £80k. Add in a 10% deposit (plus solicitors and valuation fees) and you are looking at a purchase price in the region of just £90k! This move was announced by a Government spokesman so the cynic in me asks if the headline was designed to win votes? Rates are likely to be quite high and, interestingly, the funding line is from Bank of Ireland.
Nationwide have confirmed that house prices rose by 0.7% in March, compared to a 0.8% drop in February. Prices sit 9% higher than a year ago, say the lender.
Finally, the WSCT Business Awards 2010 voting deadline is drawing close (9/4/10). If you have not voted yet, please take 2 minutes to do so. Local companies have had a rough ride over the last few months and need your support and your votes!
Have a great Easter!
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