Posts with tag: finance

Will Interest Rates Finally Start to Rise this Year?

Published On: July 31, 2017 at 8:14 am


Categories: Finance News

Tags: ,,,

Last August, the Bank of England’s (BoE) base rate was cut to a record low 0.25%, down from a previous all-time low of 0.5%, where it had remained for more than seven years. But will interest rates finally start to rise this year?

The prospect of an interest rate rise in 2017 has been in the media a lot lately, so will it happen?

Portico estate agent recently attended a talk by the Economics Editor of The Sunday Times, David Smith, who gave his expert view on when he expects interest rates to rise and by how much…

Firstly, he gave his thoughts on the long-term future of interest rates: “It’s a very timely question. We sometimes forget how unusual a period we’re in for interest rates. It is ten years since we had the last increase in interest rates, so we’ve been on these ultra-low rates for a very long time.

“The BoE reduced the bank rate to 0.5% in March 2009 and, until the financial crisis of 2008/9, the bank rate had never been below 2%. Of course, we saw the reduction to 0.25% in August following the referendum and, within that, we’ve also seen a narrowing of margins, so mortgage rates have come down quite a lot, even in a period where official interest rates stayed.”

So why is the subject of interest rates a timely question?

“It’s a timely question because just last Thursday, the BoE was the closest it has come to an interest rate rise for quite a long time. Three members of the eight-strong committee voted for an increase in interest rates.

“And they did so because they fear that the rising inflation that we’re seeing is proving to be a little powerful. The Bank expected inflation to peak below 3% and now I think it’ll go above 3%, so it might be a bit more enduring than they expected even a month or so ago.

Will Interest Rates Finally Start to Rise this Year?

Will Interest Rates Finally Start to Rise this Year?

“The three officials who voted for an increase in interest rates were all external members of the embassy – in other words, they’re not the insiders like Mark Carney and his deputies, all of whom voted to keep interest rates on hold.”

Smith has one certain outlook for the near future: “I think it is quite likely that, in the coming months, at least one thing will happen: the emergency rate cover we had after the referendum will be reversed. It was responding to a danger that, in the end, wasn’t there. The economy didn’t fall off a cliff after the referendum – in fact, it held up very well, so I think the argument for reversing emergency rate cover is quite a strong one.”

So when does he think interest rates will rise?

He explains: “Look at the way the markets have interpreted the Bank’s vote; until recently, the expectation in the markets was that you wouldn’t see any increase in interest rates until beyond 2020. Now, the expectation is that it will be brought forward and we will probably see an interest rate rise next year – and it could come sooner than that. I envisage a situation where the cut in August last year will be reversed, maybe not as soon as August, but possibly by November this year.”

And what happens beyond that timeframe?

“Well, the guidance we’ve had from the Bank is that interest rate rises will be both gradual and limited. In other words, they will be done, as the Federal Reserve is doing in America, in baby steps, in a very gradual fashion.

“Where we’ll end up in terms of official interest rates, and, of course, you have to translate that into the interest rates that you actually pay, will be a new norm for bank rate of around 2%. I expect we won’t get there for two or three years, but that is the kind of guidance that we’ve had from the Bank of England. This compares with an average of 5% before the financial crisis, and it compares with an average of 12% we had in the 1980s.

“Despite it still being a low figure, it’s still quite an adjustment to move from 0.25% to 2%, even gradually, so it will mark quite a significant change for many people.”

Smith expands: “Once you get to 2%, I don’t see that we’re suddenly going to move back to the levels that scared us so much in the past. For the foreseeable future, I don’t think we’re going to see double figure interest rates; I think this low, single figure will be the norm, and I expect to see it throughout the 2020s.

“Something is starting to stir on interest rates that wasn’t necessarily expected and we will see a gradual move over the next few years up to 2%.”

In terms of buying property, what exactly does this mean?

He clarifies: “The rate increase will be slow and gradual over the next few years, when it eventually begins, so I don’t think anybody needs to react today. Plus, with the mortgage market still very competitive, the knock-on effect to rates available to purchasers will not be hard felt, at least not initially.

“That said, even a 0.25% increase can add a significant cost to a mortgage. For most people, the cost of living is already tight, so if you want to get a foot on the property ladder or make that significant step up, now is a great time to lock in a good rate.”

If you already own a property, Smith advises fixing your mortgage rate now: “I have had friends and colleagues who have stuck with a tracker mortgage under the belief that rates couldn’t increase in the short to medium-term. But this just isn’t true. Rates absolutely can rise, and they’re likely to, so if you have a great rate that is affordable to you and works with your circumstances, why not lock it in and have that peace of mind?

“Alternatively, if your current mortgage rate is coming to an end or you think you could get a better deal, consider remortgaging. But before you do, make sure you get your property re-valued. This will make your lender recalculate your loan-to-value, and a lower loan-to-value means a better interest rate and a larger choice of lenders.”

Will an increase in interest rates affect landlords or investors?

Smith says: “In the short-term, no. All lenders are now stress testing buy-to-let mortgages at 5.5%, so an increase is already factored into the lending and affordability. Most investors will also have planned or accounted for some sort of rise in their budgets.

“Nonetheless, as the rates gradually get closer to 2%, landlords will be looking to offset this increase and one of the obvious ways for this is via a rent increase. This is more market driven in terms of available housing and demand from tenants first and foremost, and this is what will lead rental prices over the coming years.”

Whether you’re a landlord, homeowner or aspiring first time buyer, how would a rise in interest rates affect you?


Mortgage Lending Remains Stable, While Complex Buy-to-Let is on the Up

Published On: July 26, 2017 at 9:41 am


Categories: Finance News

Tags: ,,

Mortgage lending remained stable last month, while complex buy-to-let borrowing is on the up, according to the most recent banking figures.

Mortgage Lending Remains Stable, While Complex Buy-to-Let is on the Up

Mortgage Lending Remains Stable, While Complex Buy-to-Let is on the Up

The latest high street banking data from UK Finance shows that consumer credit growth was 1.9% in June, compared with 2.1% in the previous month.

Gross mortgage borrowing totalled £13 billion last month, while net mortgage borrowing was 2.6% higher than in June last year.

Eric Leenders, the Head of Personal at UK Finance, comments: “June saw consumer borrowing from high street banks, which accounts for 45% of the overall credit market, maintain its slower pace, as rising inflation put pressure on household incomes. Housing activity remained relatively stable, with over 74,000 mortgages approved last month, while businesses continue to build their reserves, borrowing less and increasing their deposits at an annual rate of 6.1%.”

Meanwhile, the parent company of Paragon Mortgages – the Paragon Group of Companies – has today released its third quarter (Q3) trading update for the nine months to 30th June 2017.

The Group reported total lending and investment for the first three quarters of the year of £1.4 billion, with buy-to-let mortgage lending comprising £1 billion of the total.

Buy-to-let lending between March and June 2017 was particularly strong, at £458m, compared to £166m in Q3 2016, which followed the increase in Stamp Duty on additional properties.

Paragon’s healthy application flows reflect market share gains as a result of increasing demand from more complex and professional customers. The proportion of these customers in the pipeline rose to 70% during the quarter, up from 62% at the start of the year. At the end of the quarter, the pipeline of new buy-to-let business totaled £700m.

The Group also made good progress with its diversification strategy, growing new asset finance and other specialist lending by 66% to £330m in the nine months to the end of June.

The Managing Director of Paragon Mortgages, John Heron, says: “The buy-to-let market has been the subject of repeated fiscal and regulatory intervention in recent times. This is changing the nature of buy-to-let, and what we are seeing emerge is a more specialist market with a marked increase in more complex, professional landlord business. This is very well aligned with Paragon’s experience and capability, as underlined by today’s strong trading figures and by our early implementation of phase two of the PRA’s regulatory requirements for buy-to-let.”


Gross Mortgage Borrowing up by 9% in May

Published On: June 26, 2017 at 9:14 am


Categories: Finance News

Tags: ,,

Gross mortgage borrowing in May totalled £13.3 billion – much in line with recent months and 9% higher than a year before, show the latest high street banking figures from the British Banking Association (BBA).

Gross Mortgage Borrowing up by 9% in May

Gross Mortgage Borrowing up by 9% in May

Net mortgage borrowing in May was 2.4% higher than a year ago.

House purchase approval numbers of 40,347 in May were 3.3% lower than in May last year, and slightly down on the monthly average of 41,923 over the past six months.

Remortgaging approval numbers of 24,248 were 10% lower than in 2016, and down on the monthly average of 26,494 seen over the previous six months.

Other advances approved were 4.8% higher by number than in May last year.

The BBA’s latest data also shows that consumer credit growth was 5.1% in May, compared with 6.4% in the previous month.

This decline was driven by weaker growth in personal loans and overdrafts, with annual growth dropping from 6.3% to 4.8%, while growth in credit card borrowing also slowed, from 6.4% to 5.5%, reflecting weaker retail sales volumes in May.

The Managing Director of Retail Banking at the BBA, Eric Leenders, comments: “This month’s figures show that, in the run up to the General Election, credit growth in personal loans, cards and overdrafts has slowed, which was reflected in lower spending; with increased household costs affecting growth in deposits and saving.

“Businesses appear to be weighing up their options before raising finance to fund projects or developments. After a long period of subdued company borrowing, overall growth is starting to stabilise at a modest rate.”

The complete figures and analysis from the high street banks for May 2017 can be found on the BBA’s website here:

Remain up to date with all changes and developments in the mortgage market by signing up to our monthly newsletter for FREE here: /register/

How Brexit is Hitting your Finances – One Year On

Published On: June 23, 2017 at 9:21 am


Categories: Finance News

Tags: ,,,

Today marks a year since the EU referendum, when the country voted for Brexit. So how is the outcome hitting your finances 12 months on?

The Editor in Chief of, Hannah Maundrell, looks at what has changed: “A year on from the Brexit vote and we still aren’t any clearer on what the future holds. We are all playing a waiting game and the reality is, we need to get comfortable with uncertainty until we’ve disentangled ourselves fully from the EU – this will take time.

“Our wallets have started to take a hit; thanks to the fall in the value of sterling, food, fuel and energy prices have risen since the vote and, when you travel, your holiday money now buys you less in many parts of the world. Wage growth has slowed, despite increases to minimum pay, and the Bank of England base rate has remained at rock bottom, frustrating savers who are getting little in return.”

How Brexit is Hitting your Finances - One Year On

How Brexit is Hitting your Finances – One Year On

However, she notes: “We have to remember all the big stats are based on averages – whether it’s inflation, wages or house price growth. How and if you’ll be affected depends entirely on what you’re spending money on.

“It’s not all bad; mortgage rates are still at a record low, savings rates are creeping up slightly thanks to challenger brands, unemployment has fallen, and it looks like house prices and rents are becoming slightly more affordable too. We’re starting to be more measured in our spending and borrowing, which will put less pressure on our household finances if prices continue to rise.”

Maundrell advises: “Don’t waste time stressing about what Brexit might mean for your finances, focus on getting on top of them instead so you’re in the best possible place to enjoy whatever happens down the line. It’s as simple as keeping track of what cash you’ve got coming in and going out, looking for easy ways to pay big companies less, like switching your mortgage, paying off expensive borrowing and squirreling away any spare cash you can afford so you have an emergency fund to fall back on just in case times get tight.”

So what have the positive effects of the Brexit vote been?

More of us are in work: Unemployment fell to 4.6% in April – the joint lowest rate since 1975.

Bad news for landlords, good for tenants: Average rents have dropped for the first time in eight years, to £901 a month – 0.3% lower than the previous year, although this varies significantly at a regional level.

Mortgage rates are at a record low: The cheapest two-year fixed rate mortgage is now at 0.99%, with a £1,495 fee.

Small boost for savers: Savings rates, although still lower than inflation, have crept up slightly, with the best buy two-year fixed rate account paying 2% AER.

Property market cooling: House price growth has tailed off slightly, although the average property now costs somewhere between £207,699 and £220,706, according to the latest figures. The picture differs at a regional level, with the north still pacing reasonably well, while London and the South East are dropping off.

What about the middle ground?

Consumer spending is coming under control: We’re spending less on luxury goods than before Christmas, with an annual decline of 1.2% on non-food purchases. In May, year-on-year spending rose by just 0.9% – the lowest annual rate of growth since April 2013. Sensible spending isn’t good news for British businesses, but it shows that we’re more in control of our money than before Christmas, when spending peaked.

And what have the negative effects been?

Inflation has soared: It’s now at 2.9% – up from 0.5% in June last year. This is predominantly a result of falling sterling and the increased cost of importing goods from abroad, which is starting to hit our pockets.

Fall in the value of sterling: You now get fewer euros and dollars for your pound, so going abroad costs more and your holiday cash will buy you less when you get there. £500 currently gets you around €560 or $620.

Rising energy costs: There have been major energy price hikes from five of the big six suppliers, while British Gas is expected to put prices up from August. The average variable tariff is now around £1,129 per year and the cheapest is about £880 per year.

Real wages aren’t keeping up: While on average wages grew by 2.1% in the year to April (including bonuses), they dropped by 0.4% in real terms, as they’re not keeping up with inflation.

Sluggish economy: Economic growth slowed slightly more than expected, to just 0.2% in the first quarter of 2017.

LendInvest Hires Second BDM in North to Satisfy Regional Demand

Published On: June 20, 2017 at 9:31 am


Categories: Finance News

Tags: ,,

LendInvest, the specialist mortgage lender, has appointed its second Business Development Manager (BDM) in the north of England to satisfy regional demand.

LendInvest Hires Second BDM in North to Satisfy Regional Demand

LendInvest Hires Second BDM in North to Satisfy Regional Demand

Sophie Mitchell-Charman joins the team from Mint, where she worked as a Bridging BDM. With over 12 years’ financial services experience, Sophie has worked as both a broker and a BDM, bringing a wide-ranging skillset to the role.

Based in York, Sophie will travel throughout the north of England, with a particular focus on the North East. She will source deals across LendInvest’s full product range, from pre-construction finance to development exit.

The appointment is LendInvest’s third hire outside of London and second in the north, following the recruitment of Peter McDermid as BDM for Scotland in July 2016 and Damien Druce as a Manchester-based BDM in November 2016.

The firm continues to complete a growing number of deals outside of London, with five new deals completing in Scotland alone this month. These hires are a direct response to increasing demand for LendInvest’s short-term property finance.

The Chief Commercial Officer of LendInvest, Matthew Tooth, says: “We’ve seen an increasing demand in the northern market. Hiring our first northern BDM at the end of last year has highlighted the potential within the region, one which Sophie, alongside Damien Druce, is more than equipped to capitalise on.

“Sophie’s breadth of experience as both a BDM and a broker puts her in a brilliant position to cultivate business in an area that is strategically important for our business development plans.”

Sophie adds: “As LendInvest’s profile continues to grow in the north, I am very excited to join the team during this crucial time of rapid national expansion. What will truly make the difference in the region is the diverse product range that LendInvest is offering; a suite truly tailored to a broad spectrum of borrowers.”

Congratulations to Sophie!

Together Launches New Specialist Buy-to-Let Range

Published On: June 13, 2017 at 8:13 am


Categories: Finance News

Tags: ,,,

Together has launched a new, specialist buy-to-let product range, created to support property investors as they expand their portfolios.

Together Launches New Specialist Buy-to-Let Range

Together Launches New Specialist Buy-to-Let Range

The finance provider has also increased its maximum loan size to £2m.

Aimed at landlords and investors with multiple properties, as well as those looking to secure finance on Houses in Multiple Occupation (HMOs) and semi-commercial properties, the new, specialist buy-to-let range is tailored for complex situations, and applies across both first and second charge loans.

The higher loan size of £2m is available for first charge applications on both the standard and specialist buy-to-let products, and spans most property types.

The maximum loan size for second charge has also been increased to £500,000.

The Commercial CEO of Together, Marc Goldberg, says: “We’re seeing continued demand for buy-to-let lending, with an increase of 44% in 2016, so we’ve developed this new product range to support property investors as they build their portfolios. As a leading buy-to-let lender, we’re committed to improving and enhancing our products in line with market needs, and our increased loan size of £2m is reflective of the growing demand for larger loans.

“The buy-to-let sector is in a period of transition and, whilst there are a lot of changes taking place, it’s also an exciting time for the market as it adapts and evolves. In fact, we’re seeing that long-term investors are not being deterred, but are perhaps focusing on lower loan-to-values and using larger deposits to take the various changes into account.”

He continues: “We’re very much committed to growing our buy-to-let business and have a dedicated team in this area whose knowledge of the market is second-to-none. We look at applications from all types of customers, including limited companies, and apply our common-sense philosophy to each lending decision. Our recent growth in this area is a clear indication of our success, and we hope that this will continue as we move forward.”

A recent study by Mortgages for Business suggests that landlords still have an appetite for future property investments – Together’s new, specialist buy-to-let range may have come at the right time!