BoE signals rate cuts over summer

From Mortgage Strategy:

Bank of England governor Mark Carney has warned monetary policy easing will be needed over the summer in a speech today aimed at reassuring markets.

Speaking in the Bank’s court room, Carney said a first assessment around easing would take place on 14 July with a full forecast outlined in the August inflation report.

Carney adds that if interest rates are too low the hit to bank profitability could reduce credit availability or increase its overall price.

He says: “I can assure you that in the coming months the Bank can be expected to take whatever action is needed to support growth subject to inflation being projected to return to the target over an appropriate horizon, and inflation expectations remaining well anchored.”

http://www.mortgagestrategy.co.uk/boe-signals-qe-rate-cuts-summer/?cmpid=msdaily_2411887&utm_medium=email&utm_source=newsletter&utm_campaign=ms_daily

Simplifying Serious Illness Cover 

A handy tool for all conditions covered by Vitality serious illness cover
http://www.vitalityconditionscovered.co.uk/

From 1^st April 2016 there going to be some changes to Stamp Duty Land Tax for buy to let property purchases.

An additional 3% Stamp Duty will be added to the existing rates when purchasing a buy to let or second home. The table below shows the new rates that will be payable:

BUY TO LET STAMP DUTY CHANGES
Band	Existing residential SDLT rates	Rates for BTL’s/2nd purchases
£0 - £125k	0%	3%
£125,001 - £250k	2%	5%
£250,001 - £925k	5%	8%
£925,001 - £1.5m	10%	13%
£1.5m +	12%	15%

It is important to note that spouses/partners will be treated as one unit. Minor children will also be included. So if a spouse/partner already owns a property in their sole name, the purchase of another property in your name will still be liable for the additional charges. You will however be able to claim a refund for the additional Stamp Duty paid if your spouse/partner sells the property within 18 months. This will have to be requested from HMRC.

If a parent is looking to help a child join the housing market they may also be liable. If a parent is named on the deeds it will be classed as a second purchase and therefore liable for the additional rate.

Foreign property is also included. If for example you own a property abroad and are looking to purchase a home in the Britain you will be liable for the additional rate.

There may be a few exemptions to the new rates however they haven’t yet been confirmed by the government. Landlords with 15 or more properties may be exempt from the additional charges. Also properties valued at £40,000 or less do not require a tax return and may not be subject to the higher rates.

The new rates apply to completions that take place after the 1^st April 2016. If however you exchanged on something before 25^th November 2015 and complete after the 1^st April, you will not have to pay the extra charges.

The chart below was published by the government and is a useful tool that illustrates who will be affected by the changes.

What do the two main parties plan for the housing market over the next 5 years?

This week both Labour and the Conservatives released their election manifesto for 2015. We wanted to see what the two main parties plan for the housing sector in the next 5 years. We have compiled all of the information directly from each party’s manifesto where they analyse what they will look to achieve over the following 5 years.

The Conservatives

We will double the number of first-time buyers, and help more people own their own home

·         We will extend Help to Buy to cover another 120,000 homes

·         We will continue the Help to Buy mortgage guarantee until the start of 2017, and the Help to Buy equity loan until at least 2020

·         From this autumn, we will introduce a new Help to Buy ISA to support people who are working hard to save up for a deposit for their first home. A ten per cent deposit on the average first home costs £15,000, so if you put in up to £12,000, government will put in up to £3,000 more. A 25 per cent top-up is equivalent to saving a deposit from your pre-tax income – making it effectively a tax cut for first-time buyers.

We will build 200,000 Starter Homes and more affordable housing

·         We will build 200,000 quality Starter Homes over the course of the next Parliament, reserved for first-time buyers under 40 and sold at 20 per cent below the market price

·         We will now go further, delivering 275,000 additional affordable homes by 2020. And we will offer 10,000 new homes to rent at below market rates to help people save for a deposit

We will extend the Right to Buy to tenants in Housing Associations

·         We will fund the replacement of properties sold under the extended Right to Buy by requiring local authorities to manage their housing assets more efficiently, with the most expensive properties sold off and replaced as they fall vacant.

·         We will also create a Brownfield Fund to unlock homes on brownfield land for additional housing.

We will give you the Right to Build

·         We aim at least to double the number of custom-built and self-built homes by 2020, and we will take forward a new Right to Build, requiring councils to allocate land to local people to build or commission their own home, as you can do in most of Europe.

We will protect the Green Belt

·         We have safeguarded national Green Belt protection and increased protection of important green spaces

We will support locally-led garden cities and towns and prioritise brownfield development, making sure new homes are always matched by the necessary infrastructure to support them

·         When new homes are granted planning permission, we will make sure local communities know up-front that necessary infrastructure such as schools and roads will be provided.

·         We will ensure that brownfield land is used as much as possible for new development.

·         We will require local authorities to have a register of what is available, and ensure that 90 per cent of suitable brownfield sites have planning permission for housing by 2020.

·         We will fund Housing Zones to transform brownfield sites into new housing, which will create 95,000 new homes

We will help keep your council taxes low

·         We will encourage voluntary integration of services and administration between and within councils – for example, with the Troubled Families Programme and the Better Care Fund – to promote savings and improve local services.

·         We want local councils to help manage public land and buildings, and will give them at least a 10 per cent stake in public sector land sales in their area.

Labour

We will make sure that at least 200,000 homes a year get built by 2020

To help young people and families get on the housing ladder, we will give local authorities the power to give first call to first time buyers on new homes in areas of housing growth. And we will unlock a Future Homes Fund by requiring that the billions of pounds saved in Help to Buy ISAs be invested in increasing housing supply.

We will increase competition in the housebuilding industry by backing small builders, including through our Help to Build scheme, and by getting the public sector building again.

We will build more affordable homes by prioritising capital investment for housing and by reforming the council house financing system.

We will give local authorities powers to reduce the number of empty homes, including higher council tax on long term empty properties. And to boost the housing we need, we will start to build a new generation of garden cities.

For the 11 million people who rent privately, we will legislate to make three-year tenancies the norm, with a ceiling on excessive rent rises. A ban on unfair letting agent fees will save renters over £600. We will drive standards up by creating a national register of private landlords.

https://www.conservatives.com/manifesto

http://www.labour.org.uk/manifesto

Tesco Bank have announced that in the first half of next year they are going to open up their mortgages to the intermediary market. This is encouraging news for the industry, there have been a number of additions to the intermediary market including TSB earlier this year. The addition of lenders to the market provides more competition which often leads to better rates and also more variety in mortgage products for borrowers.

There has been a lot of talk over the last few months about a price war between mortgage lenders and it seems that this is set to continue. It provides people with an excellent opportunity to either purchase their first house or remortgage onto a more competitive rate. With competitive 5 year and even 10 year fixed rates available, it is a great time to find a fixed mortgage to give people a sense of security over what could be an unpredictable few years.

Your home may be repossessed if you do not keep up repayments on your mortgage.

A fee will be payable of £995 for mortgages up to £500,000, £1,500 for mortgages between £500,001 and £1,000,000 and £2000 is payable for mortgages over £1,000,000

This week the government published details of the implementation of the European Mortgage Credit Directive into the UK market. Although the government has made significant changes to the mortgage market already, there are some other changes to come. They are to be implemented by March 2016 however they are been put into place now in order to give the market as long as possible to prepare for them.

The first change is in the buy-to-let sector. Currently this area of mortgage lending is mostly unregulated because landlords are typically viewed as business borrowers therefore requiring less supervision. However the new legislation means that so called ‘accidental landlords’ will be subject to the affordability assessments as seen in the residential market. An example of an accidental landlord is someone who may have purchased a property with a mainstream mortgage, but due to a change in circumstances, they move away but decide to keep the property as an investment.

The second area is for the Financial Conduct Authority (FCA) to bring the regulation of  second charge mortgage lending more in line with first charge mortgages. The FCA believes that there may be a risk to consumers in this area from poor sales practices and ineffective affordability assessments.

We welcome the implementation of stricter affordability rules in order to help protect the consumer from poor sales practices as well as ensure that they can afford to pay back the loan. It will be interesting to see how this impacts current lending levels as it will be difficult to identify and evidence a professional landlord from an ‘accidental’ one.

Sources:

http://www.fca.org.uk/news/fca-outlines-approach-for-implementation-of-mortgage-credit

https://www.gov.uk/government/news/new-mortgage-regulation-legislation-published

For a while now we have heard in the news how competitive mortgage products are and this week we saw a glimpse of this in the longer term products. We saw the first 10 year fixed rate fall below 3% and it is possible that we could see others follow suit.

Given the uncertainty that lies ahead regarding interest rates it may not be a bad idea to secure a longer term product while the rates are at such attractive levels. When the interest rate is increased, which many economists are predicting will be later this year, it is unlikely we will see rates of this level for quite some time.

It is encouraging to hear that a new lender has entered the market. This sends out a positive signal in regards to the strength of the industry and offers even more competition to the market. There are also other lenders who are looking to open up their products to intermediaries this year.

For any advice on long term mortgage products please contact us on 01977 674455 or send a message via our website http://www.ramortgages.co.uk/contact.html.

Your home may be repossessed if you do not keep up repayments on your mortgage

A fee will be payable of £995 for mortgages up to £500,000, £1,500 for mortgages between £500,001 and £1,000,000 and £1,500 for mortgages over £2,000.

What are the changes to Stamp Duty?

After hearing the Chancellors Autumn Statement it is clear that the biggest impact to our industry will be the changes in stamp duty. It has been widely publicised over the last couple of days but we want to briefly inform you of what has changed and what impact this may have on you.

Effective from Midnight on the 3^rd December the new rules are as follows: “Under the new rules, no tax will be paid on the first £125,000 of a property, followed by 2% on the portion up to £250,000, 5% on the portion between £250,000 and £925,000, 10% on the next bit up to £1.5 million and 12% on everything over that.” (Source: bbc.co.uk)

As you can see this system is very similar to the way income tax works. It avoids any significant jumps in the amount you owe and will be a huge benefit to the majority of people purchasing a house.

So what does this mean for you?

Well based on an average family home of £275,000 the total stamp duty payable on the old system would be £8,250. With the new rules the amount payable is only £3,750 giving a huge saving of £4,500.

For people looking to purchase a house using the help to buy scheme the average Help to Buy home is £185,000. With the old rules the stamp duty would be £1,850 but using the new rules it is only £1,200, a saving of £650. This will help reduce the upfront costs involved in purchasing a house which can be a massive burden on first time buyers. (Figures taken from bbc.co.uk)

A study by the Office for National Statistics has shown that more than 4.6 million people are now self-employed. Research suggests that around half of these people will struggle to get onto or up the housing ladder.

For employed applicants, proving your income is relatively straight forward. In most cases you just need 3 of your latest payslips along with bank statements to back them up. For self-employed applicants however, it isn’t quite as straight forward. In most cases you will be needing 3 years accounts or SA302’s (which take at least 2 weeks to obtain causing a significant delay on the whole process).

The other issue is that with employed applicants it is fairly straight forward for a lender to decide how much is affordable to you however for people that are self-employed it can be open to interpretation. This can mean that even if a decision in principle is agreed, there is a good chance the amount a lender is willing to loan you could change once they have assessed everything.

Our advice to those people who are self-employed is to make sure that before applying for a mortgage you make sure you have suitable documentation to prove your income. It is also important to have a big enough pot of money for the deposit but also a little extra if needed to reduce the loan to value to keep the lender happy. Different lenders take into account different figures such as net profit, dividend and salaried income. For this reason the way in which your income is derived can significantly influence which lenders you should approach making it important to consult a mortgage advisor on the best route to take. 

After a quiet third quarter in the property market there is an expectation that things are going to pick up in the final three months of the year.

According to a report by Reuters, the credit conditions survey showed that in the third quarter of 2014 there was the biggest fall in the amount of credit the lenders were able to supply since the last three months of 2008, when the Lehman Brothers collapsed. (http://reut.rs/10IHmRT)

We have already seen a number of lenders reducing their rates and others are expected to follow in a battle to gain market share and hit end of year targets which may have slipped away due to the quiet summer.

This could be an ideal time to either obtain a new mortgage or remortgage a current property to secure a cheap fixed rate product. There is an expectation of an interest rate increase at some point next year which means we may never see rates this cheap for some years.

As we mentioned in one of our previous blogs ‘What documents will I need when applying for a mortgage?’ we advised obtaining a copy of your credit report before applying for a mortgage. This is so you can accurately calculate how much money you can afford to borrow and also eliminate any delays further down the line that could arise from having a discrepancy on your file.

This week Experian published an interesting article about the top 10 myths of credit. We have highlighted some of the points we found interesting and that should be considered prior to applying for a mortgage.

The first myth is that items in your credit history stay on file forever. Credit reports are designed to give lenders a good picture of your current situation so any issues in the past are irrelevant. Most information about your credit history is therefore held for around six years.

The next interesting myth is that friends and family living in your home affect your credit rating. The only people who can affect your own credit rating is people who you have a financial connection with such as being on a joint mortgage. Living with someone is not a financial connection.

The final myth is that it doesn't matter how many credit accounts you have. Lenders want to be sure that you can afford more credit, so they prefer it if you don't already owe large amounts on multiple accounts. They can also favour customers who aren't heavily reliant on the credit they already have. So try to keep your regular borrowing on cards to less than 25% of your credit limits if you can.

To see the full list of the top 10 credit myths go to http://ex.pn/1l27VsL.

It has been 5 months since the Mortgage Market Review (MMR) was introduced and there does not appear to be a sign of things settling down any time soon.

One of the key parts of MMR is the change in how a borrower’s affordability is calculated. There have been a number of stories in the press of how customers with excellent credit scores have never missed a mortgage payment but are unable to secure low fixed rate products due to the change in affordability calculations. From our perspective it hasn’t been that we have been unable to obtain a mortgage for clients but it has taken much longer than it once did.

You must also be prepared for the process to take slightly longer. In an article by the Telegraph we saw that 56% of mortgage offers take longer than two weeks to get to an offer stage in comparison with 44% last year. Just 9% of mortgage approvals are made within five days, compared to 13% last year and 25% in 2012. (http://bit.ly/1lPhFsm)

This is what appears to be the biggest issue. Time. In another article by The Telegraph we saw that some banks are now conducting 3 hour interviews to apply for a home loan. (http://bit.ly/1tohh6y) If you wanted to speak to three different lenders this would take up a significant chunk of your time. By contacting an experienced mortgage consultant you avoid having to have numerous interviews with the different lenders. We spend around an hour with our clients discussing their circumstances and requirements in the comfort of their own home, before contacting numerous lenders to find the best available product.

Due to the heavy increase in mortgage activity this year, we have seen many lenders competing to offer the most attractive mortgage rates along with added incentives.  Leeds Building Society as an example, did shakeup of their buy-to-let products and offered free valuation and free legal advice. Halifax are offering cash back to first time buyers with a Halifax current account.

This week we also saw builders using incentives to attract a large proportion of the busy property market. As reported in the Yorkshire Evening Post, Ben Bailey Homes launched an exclusive ‘Express Move’ incentive. “The scheme has been designed to help buyers find their perfect home at the development and move in quickly. Those who reserve a property this summer can benefit from a whole host of added extras, with stamp duty paid, legal fees and mortgage valuation fees covered and a themed landscaped garden worth £5,000 included in the price”.

The incentives offered don’t just stop at free legal advice and fancy gardens, one Russian bank took the incentives to a whole new level and has begun offering cats to clients who obtained a mortgage through them! (http://www.bbc.co.uk/news/blogs-news-from-elsewhere-28951981)

As always it is important to look passed the initial incentives that lenders offer no matter how great they may seem. It is very important to look at the whole picture. Although getting cashback and free cats sounds great, these products aren’t always the best option to take. 

This week we heard that Lloyds Banking Group cut the amount it is prepared to lend by 70 per cent from £500,000 to £150,000. This appears to be a tough decision on first-time buyers, who make up around 85 per cent of Help to Buy sales, especially in areas where house prices continue to soar making it even harder for first time buyers.

We also heard that the Scottish Government's Help to Buy scheme has run out of money for this financial year - only three months after a new round started.

However given this, the Help to Buy equity loan scheme seems to be more popular than ever, with a 91 per cent rise in completions during June, taking the total number of home purchases supported to 27,167 since the scheme’s inception in March 2013. In June there were 4,357 completions, up from May’s 2,274 completions. In total over the second quarter there were 7,772 completions, up from 6,524 in the previous three months. Virgin also removed its £30,000 minimum income cap on Help to Buy equity products. (Source: FT Adviser)

Although there is some mixed news at the moment regarding the Help to Buy scheme and we have seen a decline in the number of enquiries, we don’t expect this to be the continuing trend. The Help to Buy scheme is still an excellent incentive in our opinion and one in which people should take advantage of whilst it is still around!

This week we have seen a number of mortgage lenders refresh their buy-to-let products including Leeds Building Society, Coventry Building Society and Virgin.

This is due to the rise in demand for buy-to-let mortgages recently. According to the Council for Mortgage Lenders the proportion of the mortgage market taken up by buy-to-let deals rose to 13.4% in the first quarter this year compared to 12.9% in the first quarter of 2012 and 13% in the final quarter of 2013. (http://www.landlordexpert.co.uk/category/property-investment-news/)

Here at RA Mortgages we have seen the number of requests for advice on buy-to-let mortgages rise with a large number of people looking to remortgage existing loans to find a better rate and also to secure a fixed deal to protect them from any rate increases. Research done by Mortgages for Business shows that the number of five-year fixed buy to let mortgages has doubled since 2012. 

It is an excellent time for new and existing buy-to-let investors to look at securing a mortgage. As well as the already mentioned refreshed mortgage products from numerous lenders, rents in the UK are increasing as well. The HomeLet Rental Index shows that the average UK private home rent rose by 6.3% over the year to June 2014. The average rent in the UK now stands at £862 a month, compared to £811 a year ago.

One thing that we stress is that before diving into anything make sure that you have taken the time to consider the best possible options for you and consult a mortgage professional on the most suitable investment strategy for yourself.

Should I buy or rent? Here are our top 5 reasons why buying could be the right option now

Many people have rented rather than purchased property over recent years, principally because of barriers such as the difficulty in saving such large deposits and being able to afford a mortgage. Thanks to a market place where more people are moving, often utilising incentives such as the help to buy scheme, we are seeing the number of first time buyers increasing.  So why is now a better time to buy rather than rent? Here are 5 good reasons to buy:

1.       Friendly low interest rates

As things stand the cost of a mortgage is relatively cheap. With interest rates at a record low many lenders are offering great products including fixed rates which providing financial security over the next few years. 

2.       The money you earn is securing you an asset – not somebody else!

Renting is relatively easy however you are handing over your hard earned cash for someone else to own something you could have for yourself.  At least, when you have a mortgage you are working towards owning the house, when renting you pay someone else to own the property without ever having the opportunity to own it yourself.

3.       Help to Buy ends in 2020

Although 2020 seems a long time away and leaves plenty of time for potential home buyers the chance to access the scheme.  Many factors can change. A government regime change may mean early closure of the scheme and there is always the potential for interest rate increases. We would advise making the most of this scheme as soon as you can, while other factors in the housing market remain positive.

4.       It’s a busy housing market

Lots of activity in the housing market means there a lots of people looking to move. We have noticed that activity has picked up, particularly in lower value property meaning there are now options for people working on a lower budget.

5.       It’s your house – do what you want with it!

When purchasing a house you earn the right to design, furnish and decorate it exactly how you want - there are no landlords to answer to.

If you want more advice on the schemes available you can find more detail on www.homesandcommunities.co.uk/help-to-buy

Do you really understand what the cost of purchasing your dream property is?

An increase in interest rates has been a hot topic over the last few weeks in the finance world. With house prices rising month on month some experts feel the housing market is beginning to overheat. One way in which the Bank of England can look to counteract this issue is by increasing interest rates but how much will this really affect homeowners?

One research study by Experian (Telegraph) shows that buyers are already underestimating their potential mortgage repayment by £500 a month. This could rise to nearer £650 if interest rates do in fact increase. Given that the Telegraph estimates that an interest rate increase could affect two out of three mortgage borrowers, this could have a significant impact on people’s lives.

What we recommend

There is a lot of uncertainty at the moment about how much people can really afford due to recent rules introduced by the FCA and also what impact an increase will have. We recommend that people take caution when calculating your budget for a new house and consult an experienced mortgage professional to gain accurate figures on how much you can afford, but also to ensure that your monthly budget is not hurt too much by your mortgage payment!

How has the mortgage market changed in the last 3 months?

In April 2014 the FCA implemented a new set of rules within the mortgage market place known as the Mortgage Market Review (MMR).  One of the principle aims of this is for banks to have much stricter control only lending money to those that can afford it.  The issue? Every banks interpretation of this is different and no two mortgage clients are identical.

The industry has seen a significant fall in mortgage approvals since April. Is this due to less people being eligible for a mortgage or is it down to the length of time to process a mortgage to approval stage?

From a brokerage perspective it is not due to less people being eligible. We have noticed that it has taken much longer to progress mortgage applications through to an offer stage in comparison to pre MMR times. One key contributor to this is the new documentation requirements.

Those who are self-employed looking to purchase or remortgage a property, would be advised to request your HMRC confirmation of earnings (SA302’s) as soon as possible. They can take up to two weeks to obtain. ‘Self employed’ also includes any shareholder of a limited company with more than a 20% share in the business.  If you don’t have these this will delay the process for yourself and any vendor of a property you are buying.

Due to the housing market moving upwardly the number of applications has naturally increased. As the volume of applications has risen, valuations are taking longer to complete. 

What do you need to know?

It is important for those looking to purchase a house that you take into account the time it will take to receive an offer. We are seeing a lot of pressure, especially by estate agents, to get valuations done and the mortgage approved by the lender in order to fully secure a property with the vendor.

The most complicated aspect of the introduction of MMR is affordability. Most lenders had moved away from an income multiples systems already, however MMR has meant the introduction of yet more complex models assessing affordability.

In addition to this, no two lenders are using the same method of calculating affordability, so we are seeing a real variance in the amount people are able to borrow from lender to lender.

We recommend consulting someone who has experience and knowledge of the different requirements for each bank.  It is too complex for individuals to calculate what they can afford, especially through comparison websites as they are not complex enough themselves to calculate if you can genuinely borrow money off their best buy listings.

By contacting a mortgage consultant to discuss your current circumstances, you will get an idea of what you could borrow and understand the budget for a new home. 

What documents will I need when applying for a mortgage?

Due to the recent introduction of the new rules in the mortgage market review, many people are unclear as to what documents they will require throughout the mortgage process. In order to prepare you we have created a list below for all residential and buy-to-let mortgage applications.

In addition to the documents below it may be a good idea to get a copy of your credit report to ensure that there are no issues you are unaware of before applying for a mortgage. Some useful websites are:

·         http://www.checkmyfile.com/

·         https://www.creditexpert.co.uk/

·         http://www.equifax.co.uk/

Here is the list of required documents:

1.      Proof of identity (passport/driving licence)

2.      Proof of address (utility bill/mortgage statement)

3.      Evidence of income (payslips/accounts and SA302’s)

4.      P60 (latest if available) 

5.      Bank Statements for the last 3 months

6.      Proof of any additional income

7.      Proof of deposit