Posts with tag: buy to let mortgages

Accord Cuts Rates on its Entire Fixed Buy-to-Let Range

Published On: August 9, 2016 at 10:34 am

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Accord Buy to Let has reduced rates on its entire fixed rate buy-to-let range by up to 0.3% and has launched new remortgage options on its three and five-year fixed rate products.

Accord Cuts Rates on its Entire Fixed Buy-to-Let Range

Accord Cuts Rates on its Entire Fixed Buy-to-Let Range

The new buy-to-let range from the Yorkshire Building Society Group’s intermediary-only lender includes a new two-year fixed rate deal at 1.94% with a £800 fee available to remortgaging landlords at 60% loan-to-value (LTV), with a free standard valuation and standard legal fees included.

Accord Buy to Let is also offering a three-year fixed rate product at 2.64% at 65% LTV, with an £800 fee. The mortgage comes with £500 cashback on completions for landlords expanding their portfolios, along with a free standard valuation and standard legal fees for remortgages.

The lender has also updated its five-year remortgage deal, available at 3.09% at 60% LTV, with the same £800 fee and a choice of either a free standard valuation and £300 cashback on completions, or a free standard valuation and standard legal fees.

The Commercial Manager at Accord Buy to Let, Chris Maggs, comments: “We have reduced rates across our entire fixed range to ensure we are offering competitive options to suit all circumstances.

“We also hope the added incentives such as cashback on completion and free standard valuations will prove popular with brokers and landlords looking to get the most from a mortgage.”

Many landlords will be seeking the most competitive buy-to-let mortgage deals at this time, as they face tax hikes and new regulations.

As of 1st April this year, landlords must now pay an extra 3% in Stamp Duty when they purchase a rental property.

In addition, the amount of tax relief that landlords can claim on their mortgage interest payments will be cut from April next year. The change will affect many landlords, as it may push some investors into the higher tax bracket.

Furthermore, landlords must be aware of forthcoming legislative changes regarding energy efficiency. From 2018, all rental properties must have an energy efficiency rating of E or above. One investor has spoken out insisting that the Government should support landlords with these costs.

Take a look at Accord’s updated range to see whether investing further into the buy-to-let sector is viable for you.

Important Information for Landlords on New Underwriting Rules

The Bank of England has recommended that mortgage lenders become stricter about buy-to-let underwriting rules. To ensure that property investors have the key points they need, we have important information for landlords on the new underwriting rules.

Commercial finance broker CPC Finance has broken down the key points of the Prudential Regulation Authority’s underwriting consultation:

In March this year, the Bank of England’s Prudential Regulation Authority (PRA) proposed in a consultation that mortgage lenders should be stricter when deciding whether or not to approve a loan.

The PRA’s aim is to ensure that lenders conduct their business in a sensible manner, thereby preventing a loosening in buy-to-let underwriting standards and limiting inappropriate lending and the potential for excessive credit loss.

What is a buy-to-let mortgage? 

Mortgages are classed as buy-to-let if at least 40% of the land is used – or is intended to be used – as or in connection with a dwelling, and the land subject to mortgage cannot at any time be occupied as a dwelling by the borrower or a related person, and will be occupied on the basis of a rental agreement in Great British Pounds.

Affordability tests 

Important Information for Landlords on New Underwriting Rules

Important Information for Landlords on New Underwriting Rules

The PRA has proposed that all lenders use an affordability test when assessing a buy-to-let mortgage contract, either in the form of an interest cover ratio (ICR) test and/or an income affordability test.

The ICR is the ratio of the expected monthly rental income from the buy-to-let property to the monthly interest payments, which take into account likely future interest rate rises. Currently, the standard minimum threshold that lenders work with is 125%.

When assessing the minimum ICR requirements, the PRA recommends that, among other things, lenders give consideration to all costs associated with letting the property, where the landlord is responsible for payment. These include: management and letting fees, Council Tax, service charges, landlord insurance, repairs, void periods, utilities, gas and electrical certificates, license fees, ground rent, and any other associated costs.

Lenders must also take into account any tax liability associated with the property, including the tax relief change coming into force from April 2017.

Personal income

If personal income is being used to support the mortgage, an income affordability test will be used to assess whether that income, in addition to any rental income from the property, is sufficient to support the mortgage payments.

Types of income include: employment, rental income on all properties, pensions, savings, and investments.

In terms of outgoings to deduct from income, the borrower’s income tax, national insurance payments, credit commitments (such as loans or credit cards), tax liability associated with financing the property, committed expenditure (for example, school fees), both personal essential expenditure and that related to the property (see above), as well as living costs, must be considered.

In regard to personal income, the lender may obtain details of actual expenditure. Alternatively, it may use statistical data or other modelled data appropriate to the composition of the borrower’s household.

Interest rate rises 

The PRA proposed that in all affordability testing, lenders should take into account likely interest rate rises over a minimum period of five years from the expected start date of the buy-to-let mortgage term (unless it is fixed for five years), or for the duration of the mortgage contract if shorter than five years.

Even if the projected interest rate indicates that the borrower’s interest rate will be less than 5.5% during the first five years of the mortgage contract, the lender should assume a minimum borrower interest rate of 5.5%. Mortgage providers should also account for a minimum increase of two percentage points in buy-to-let mortgage interest rates, and regard any indication of rises from the Financial Policy Committee, as well as market expectations.

However, landlords must be aware that yesterday, the Bank of England decided to cut interest rates for the first time in seven years: /interest-rate-cut-affect-you/

Who do the new rules apply to?

The new underwriting rules will apply to all buy-to-let mortgages, regardless of whether the borrower is an individual or a limited company. They will also apply to remortgages larger than the original loan, but not where there is no additional borrowing beyond the amount currently outstanding under the existing buy-to-let contract.

Portfolio landlords

If a landlord has four or more mortgaged properties, they are considered a portfolio landlord, and lenders will be expected to have a specialist underwriting process in place for these borrowers.

Additionally, the SME supporting factor (the reduction of the capital requirements on loans to SMEs by 24%) should not be applied to loans where a buy-to-let business is the intended purpose.

As a result of these new rules, most property investors will likely see a reduction in the amount that they can borrow and will need to find more of their own money to meet the shortfall. As the stress testing calculation will also apply to remortgages, this will limit the amount of capital raised for re-investment from within a landlord’s own portfolio.

Be aware that these measures will affect all buy-to-let landlords and should be taken into account when next talking to a broker or lender about finance.

Keep up with the latest information for landlords at Landlord News.

Buy-to-Let Mortgage Arrears to Drop Below 7,000 by the End of the Year

Published On: July 25, 2016 at 9:34 am

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Buy-to-let mortgage arrears are expected to drop below 7,000 by the end of the year, according to Keystone, the complex buy-to-let, commercial mortgage and short-term finance lender.

The prediction, based on official Council of Mortgage Lenders (CML) data, suggests that the number of buy-to-let mortgages in arrears across the UK will fall below 7,000 by the end of 2016.

Latest official estimates indicate that 9,300 buy-to-let mortgages were in arrears in the first quarter (Q1) of the year, down from 10,300 in the previous quarter and 11,300 in Q1 2015.

Buy-to-Let Mortgage Arrears to Drop Below 7,000 by the End of the Year

Buy-to-Let Mortgage Arrears to Drop Below 7,000 by the End of the Year

Keystone’s forecast estimates that, as of Q2 2016, 8,500 buy-to-let mortgages are in arrears by more than three months in the UK. This is expected to fall to 6,600 by Q4 2016.

The Managing Director of Keystone Property Finance, David Whittaker, comments: “The referendum result was unexpected, the precise impact is unknown, and it is still rather early to tell what will happen. But we have seen no let-up in demand for buy-to-let mortgages and we don’t expect to see any change in the downward trend in buy-to-let arrears as a result. Landlords are confident – and lenders have no reason to feel any differently.”

Despite wider uncertainty in the lending market following the EU referendum, Keystone reports that it is continuing to write new business.

The firm has confirmed that all three of its funding lines are still open: Paratus AMC funds Keystone’s buy-to-let products; Together funds ranges aimed at residential and commercial landlords with some adverse credit; and Aldermore Bank funds Keystone’s Loyalty Range – a series of buy-to-let mortgage rates exclusively available to Keystone customers who have other Keystone-Aldermore products.

Whittaker continues: “There are many landlords out there who still need finance, particularly professionals who are in the process of remortgaging to secure a solid five-year fixed rate or selling their personally-owned portfolios to their limited companies.

“We have ensured Keystone has the funding lines in place to provide landlords with the solutions they need and in the four weeks since the vote we have forged ahead with our lending. We are increasing traction with brokers and investors. Optimism is the keyword here.”

Keystone has recently launched an online portal, KASS, which allows brokers to submit and track all Classic Range cases and earn an increased procuration fee of 0.6%.

In response to CP11/16, the PRA’s consultation paper, which proposed stricter underwriting criteria for buy-to-let, Keystone has introduced separate stress tests for individual and limited company borrowers applying for products in the Classic Range.

For individuals, the new formula of 145% at pay rate or notional rate of 5.25%, whichever is higher, will be applied to term trackers and three-year fixed rates. For borrowers choosing a five-year fixed rate product, the pay rate will be used.

Stress tests for limited companies will remain at 125% of pay rate or notional rate of 5.25%, whichever is higher, for term trackers and three-year fixed rates. For limited company borrowers choosing a five-year fixed rate, the pay rate will be used.

Whittaker adds: “We’ve also improved our criteria for landlords looking to finance larger multi-units. We’re accepting six flats in a block as standard and we’ll consider up to eight on a case-by-case basis. Keystone is tackling market changes head on.”

Mortgage Trust Updates its Range of Buy-to-Let Products

Published On: July 5, 2016 at 9:19 am

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Mortgage Trust, a specialist lender, has updated its range of buy-to-let products for the summer months.

Mortgage Trust Updates its Range of Buy-to-Let Products

Mortgage Trust Updates its Range of Buy-to-Let Products

The new range includes two, three and five-year fixed rate deals, at up to 80% loan-to-value (LTV).

The lender’s competitive new rates begin at 2.95%.

Mortgage Trust offers a selection of products from The Paragon Group. Its mortgages are aimed at landlords with small portfolios, and are available throughout England, Wales and Scotland.

The new summer range includes a two-year fixed rate deal at 2.95% up to 75% LTV and a two-year fix at 3.25% up to 80% LTV.

For those planning their finances over the longer-term, the new range also offers a three-year fixed rate deal at 3.30%, available with no product fee.

The Director of Mortgages at Mortgage Trust, John Heron, comments: “With this product refresh, we are giving customers yet more choice, and a competitive range of products to support their investment plans. With short and longer-term fixes, and with lending up to 80% available, these products will support ongoing investment in buy-to-let, crucial for supporting the ever growing demand for private rented sector properties.”

Ahead of last month’s EU referendum result, finance expert Paul Mahoney, of Nova Financial, advised landlords to prepare their property investment strategy for the future.

Following the Brexit vote, property expert Howard Leicester insisted that the result may be beneficial for the buy-to-let sector.

Worryingly, however, recent research from Moneyfacts.co.uk found that the number of mortgages available for first time landlords has dropped significantly over the last five years.

If you are thinking of investing in the sector for the first time, you may struggle to find a competitive deal. However, this new range from Mortgage Trust may include a product that supports you on your buy-to-let journey.

Existing landlords will also benefit from the competitive rates on offer this summer.

Drop in Mortgages for First Time Landlords

The number of buy-to-let mortgages for first time landlords has dropped to a record low, according to new research from Moneyfacts.co.uk.

Annually, however, the overall amount of buy-to-let mortgages has risen, which would lead one to believe that the availability of deals for first time landlords has also grown.

Five years ago, just 434 buy-to-let products were available for first time landlords, compared to 813 today. The proportion of buy-to-let mortgages available to first time landlords has also fallen, from 82% five years ago to 75% today.

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Drop in Mortgages for First Time Landlords

Drop in Mortgages for First Time Landlords

The Finance Expert at Moneyfacts.co.uk, Charlotte Nelson, comments: “Despite all the changes to regulation in the buy-to-let market, the number of buy-to-let mortgages has increased; however, first time landlords have been missing out on this boost in product numbers. Indeed, the percentage of the market that is available to new landlords has now dropped to just 75%, down by around 10% in two years.

“As first time landlords don’t have a proven track record in managing rental properties, offering them a buy-to-let mortgage poses a greater risk to the lender, and it’s this risk that is making the number of first time landlord deals remain relatively static.”

She continues: “The additional regulation in the buy-to-let market and the added economic uncertainty following the Brexit vote means even more lenders may reconsider whether first time landlords are a safe bet. As a result, would-be landlords are likely to face more probing questions about their finances than their more experienced counterparts.

“Nevertheless, high rents and rock-bottom mortgage rates mean that buy-to-let is still an attractive proposition for aspiring landlords, particularly those who are fed up with the dismal savings options currently available. However, buy-to-let is not without its risks, so anyone considering it as an option should seek the advice of an independent financial adviser to determine whether it is the best choice for them.”

Investors could pay £10,000 more to secure mortgage

Published On: June 16, 2016 at 8:53 am

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Buy-to-let landlords are set to fork out a further £10,000 to secure a mortgage, following a crackdown on so-called dangerous debts by British lenders.

This new clamp down on worrying debts by lenders is pushing up mortgage costs for buy-to-let landlords. It is thought that banks and building societies will begin to make the substantial fee changes from September 2016.

PRA crackdown

Industry watchdog, the Prudential Regulation Authority (PRA), is concerned that some buy-to-let landlords are stretching themselves too thinly and will as such face difficulties when interest rates eventually rise.

As a result, the PRA is to force lenders to enforce stricter criteria tests, to ensure their investor can afford the repayments on the loan.

At present, investors must prove they can earn enough from their rental yields to cover their repayments. However, the new plans will require plans to see whether or not they could continue to meet these payments, should rates rise by 2%.

Tests

Under these new tests, banks and building societies will demand evidence of a yield of at least 5.2% to qualify for a 25% deposit loan. In essence, this would mean that a borrower would have to earn £7,800 per year in rent on a £150,000 home before paying their mortgage.

This means that investors would either have to raise rents or cut borrowing to ensure that they are covered.

Peter Armistead, of Armistead Property, believes savvy investors will be able to cope with these changes by purchasing cheaper property, with greater yields.

Mr Armistead said, ‘clearly, the investors most at risk are those with smaller deposits who buy property in parts of the UK where rents are low compared with house prices.’[1]

Investors could pay £10,000 more to secure mortgage

Investors could pay £10,000 more to secure mortgage

Regional rates

Continuing, Armistead said, ‘this is a particular problem in places such as London and the South-East where the average annual returns between 2010 and 2015, was just 4.86% in outer London and 4.71% in the City, according to LendInvest. House prices in London are about five times what they are in parts of the North West, but salaries are only 30% higher.’[1]

‘Manchester and Liverpool deliver some of the best rental yields, with Manchester recording average annual rental yields of 6.02% over five years, followed by Liverpool with 5.15% yields. An average residential property in Manchester is just £155,000, while a flat in a good area, costs as little as £120,000. A property in Manchester can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper,’ Armistead added.[1]

Concluding, Mr Armistead said, ‘Landlords will find the best returns in urban areas, with a concentration of students and young professionals. If investors can purchase cheaper properties with better yields, they will have the opportunity to protect and boost their profits in the longer term.’[1]

[1] http://www.propertyreporter.co.uk/landlords/pra-crackdown-sees-btl-investors-pay-an-extra-10000.html