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.