Posts with tag: finance

Mortgage Lenders Forced to Refund £27.5m to Buy-to-Let Landlords

Published On: June 9, 2016 at 9:29 am


Categories: Finance News

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The West Bromwich Mortgage Company has been forced to refund £27.5m to thousands of buy-to-let landlords who had taken out tracker mortgages.

The Court of Appeal has ruled that the mortgage lender – an arm of the West Bromwich Building Society – was wrong to increase its charges for lifetime buy-to-let tracker mortgages.

In September 2013, the mortgage lender announced in a letter to borrowers that its tracker rate would rise by 1.9%, despite the Bank of England (BoE) base rate staying the same.

Mortgage Lenders Forced to Refund £27.5m to Buy-to-Let Landlords

Mortgage Lenders Forced to Refund £27.5m to Buy-to-Let Landlords

The same letter also suggested that the lender would call in mortgages with just 30 days’ notice if the firm decided they were unprofitable businesses.

Around 6,500 landlords could now receive refunds.

Action against the lender was taken by Mark Alexander, a former mortgage broker who was backed by 350 landlords, who believes that they had been sold tracker mortgages on the basis that the interest rate would be fixed to the BoE’s base rate, which has remained at 0.5% since March 2009.

The lender argued that its small print allowed it discretion to change the rate.

Alexander lost his case at the High Court. However, he won the right to appeal, raising more than £500,000 in backing.

Yesterday, he won at the Court of Appeal, with the result automatically applying to other landlords in the same position.

The West Bromwich Building Society said that it would record a loss in the current financial year as a result, but insisted that its overall financial position remains strong.

The Chief Executive of the firm, Jonathan Westhoff, stated: “At all times, we acted to ensure we were treating customers fairly and that our approach was in the best interests of the society and its members as a whole.

“We will now contact all affected borrowers and ensure we process promptly any reimbursement they are due.”1

Alexander said the ruling sent a clear message to other lenders who have acted in a similar manner.

As well as ruling that the West Bromwich Mortgage Company was not entitled to vary interest rates in the absence of a change in the BoE base rate – which the mortgages were designed to track – the Court of Appeal also said that the lender was not entitled to call in mortgages unless they were in arrears.


Property Repossessions Rate Drops by Over 50%

Published On: June 3, 2016 at 8:40 am


Categories: Property News

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The property repossessions rate has dropped by a huge 51% over the past year, according to the latest study by chartered surveyor e.surv.

The firm found that the gap between repossessions in the north and south has almost halved in the last 12 month.

In 2015, repossessions in the north fell to a rate of 2.1 per 1,000 households, compared to 1.4 per 1,000 in the south. This leaves a gap of just 0.7 between the two halves of the country.

In the previous year, the difference stood at 1.3, as the north recorded a repossession rate of 4.1 per 1,000, while the south saw a rate of 2.8. Therefore, the divide between the north and south has now dropped by 46% over a year.

Across England and Wales as a whole, total property repossessions have decreased by 51% in absolute terms, from 39,928 in 2014 to 19,672 in 2015. The average rate of repossessions is now 1.7 per 1,000 households, down from 3.4 per 1,000 in the previous year.

The Director of e.surv, Richard Sexton, comments on the findings: “Repossession levels are retreating, and the narrowing north-south gap is the strongest sign of this decline. Fuelling these improvements has been the triple combination of rising employment, low inflation and a consistently low base rate. More people than ever are managing to hang onto their homes and keep up with repayment schedules. Alongside this, many homeowners are remortgaging to take advantage of the flurry of new deals on offer from lenders. These factors have significantly helped those struggling across England and Wales to get their finances back on track.

Property Repossessions Rate Drops by Over 50%

Property Repossessions Rate Drops by Over 50%

“The lending market is also playing an important role. This is the era of responsible lending, with prospective homebuyers benefitting from the variety of mortgage options on offer, increased regulatory tests and plenty of advice on how to secure the right deal. The outlook for 2016 seems promising, with increasing numbers of potential buyers finding themselves in a more financially secure position.”

Bolton continues to have the highest repossession rate in England and Wales, a position that it has held since 2004. Within the town, 3.5 per 1,000 households had their homes repossessed during 2015.

Sunderland was not far behind, with a repossession rate of 3.1 per 1,000, accompanied by Oldham at 3.0, Liverpool at 3.0 and Bradford at 2.7 per 1,000 households.

In the north, 73% of towns recorded a higher repossessions rate than the national average. Areas that managed to record a lower rate than average include Carlisle at 1.2, Derby at 1.4 and Leicester at 1.5.

Sexton explains: “The north is battling to change its reputation as a repossession hotspot. Repossessions overall may be dropping, but the reclaiming of homes remains an acutely northern problem. Across the region, almost three-quarters of towns are seeing substantially higher than average repossession rates. Homeowners in Bolton are still, more often than most, struggling to make mortgage repayments and even in Manchester and Liverpool – two of the north’s most prominent cities – repossessions are prevalent. The north has faced heightened challenges to the south in recent years – the loss of public sector jobs, manufacturing industry decline and a tough recession – all of which hit homeowners and potential homebuyers. However, economic conditions in the north are now receiving more attention, with the northern powerhouse initiative and the future promise of devolution drawing more towns into the national spotlight.”

Meanwhile, London recorded the biggest improvement – the repossession rate in the capital dropped by 54% to 1.6 per 1,000 households in 2015, from 3.5 in 2014. The news arrives despite London’s continued struggle with high house prices.

Sexton continues: “London is turning over a new leaf when it comes to repossessions. The capital may boast the country’s highest earners, but still people struggle to keep up with payments. Progress has been made and London’s average repossession rate has more than halved. But there is still cause for concern; some London boroughs are seeing higher rates than the England and Wales average, and there seems to be a fundamental mismatch across the capital. Due to higher house prices, homebuyers and homeowners living in the capital face higher repayments, meaning an unexpected event such as a job loss can have severe financial repercussions more quickly. London is presumed to be the wealthiest region but real poverty remains, meaning repossessions continue.”

Should You Pay Your Mortgage Off Now?

Published On: May 8, 2016 at 8:44 am


Categories: Finance News

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With mortgage rates currently at the lowest level ever, there is only one way for them to go – up. So should you be thinking about paying off your mortgage now?

Paula Higgins, the CEO of the HomeOwners Alliance (HOA), insists that it all depends on your financial circumstances and future plans. She suggests answering the following questions before you decide:

What is the main reason to pay off my mortgage early?

The HOA claims that paying off your mortgage early will probably leave you better off in the long run. “Generally, if you have debts (such as mortgages), the best thing to do with your savings is pay off those debts, because with rare exceptions, mortgage rates are higher than savings rates,” says the organisation.

Being mortgage-free can also make it easier to downsize in other ways, such as going part-time, and often makes it cheaper and easier to buy and sell your home. “Generally, a smaller mortgage gives you greater freedom and security,” explains the HOA.

What is the biggest reason not to pay off my mortgage early?

“Opportunity cost,” answers the body. “The money in your savings account is yours to do what you like with.” Once you have paid off your mortgage, it will be difficult to get the money back again, unless you take out a new loan, which could be difficult, as lenders have been tightening their conditions for some time now.

What things do I need to consider when deciding to pay off some or all of my mortgage? 

Should You Pay Your Mortgage Off Now?

Should You Pay Your Mortgage Off Now?

You must compare the interest rate on your mortgage to the interest you could receive on a savings account, advises the HOA. You should also check whether you would pay tax on those savings. You must also find out if there are any penalties for repaying your loan early.

In terms of your personal finances, ask yourself whether you are expecting any windfalls, such as selling a business. You may also have alternative investments that you’d like to make.

Importantly, remember to have a rainy day fund in place. The HOA suggests a minimum of three months outgoings, but six months is safer. Think about the costs that you’re expecting, such as school fees. If you have some large outgoings planned for the near future, put this sum aside rather than paying off the mortgage, advises the firm. If you are expecting a decline in income, you might want to keep extra savings to tide you over when the time comes.

How do I work out how much money I will save by paying off my mortgage? 

You should find out what your monthly interest payment is, either by asking your lender or working it out from the interest rate that you’re paying. Then, find out what interest you are receiving on your savings and how much tax you pay on that. If your monthly mortgage payment is greater than the interest you are receiving after tax, you will be better off paying off your mortgage.

Will I be better off using the money to buy something else? 

The HOA says that sometimes, you can earn more from using your savings in some other way than paying off your mortgage, however, investments such as a second property or stocks and shares come with risks.

How do I find out about any penalties? 

You should ask your lender if there are any penalties for paying off your mortgage early. Usually, these penalties decrease towards the end of a fixed rate or discounted period. Often, you can pay off a certain amount, such as 10%, per year without incurring penalties. The HOA believes that if the penalties are small, it could still be worth paying off your mortgage early.

Do I have to pay off the whole mortgage? 

“No – often you might just want to make a capital repayment that only partially pays off the mortgage,” says the HOA. However, all the same arguments about being better off doing this still apply. Even if you do have enough money to pay off your whole loan, you should still try to keep some aside for a rainy day fund, urges the organisation.

Will paying off my mortgage affect my ability to move home?

If you are planning to move to a similar priced or cheaper property where you will also not need a mortgage, then paying off your loan will make it easier and cheaper. However, if you have a portable mortgage and would need a loan on a new, more expensive home, then it might be wise to stick with your mortgage and use your savings to increase the deposit for the new home.

Should I accept my parents’ offer to pay off my mortgage and for me to pay them instead?

This is a tricky one, says the HOA. You should find out how much interest they will charge, but it ultimately depends on how well you get on with them. If they will charge less than your mortgage lender, then you will clearly be better off. You may also be able to reach a deal where both parties are better off. However, there are risks with this situation, so it is a good idea for both sides to get independent legal advice.

Could paying off your mortgage be right for you?

Bank of England Expects Buy-to-Let Mortgage Lending to Drop Sharply

Published On: April 14, 2016 at 8:31 am


Categories: Finance News

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Activity in the buy-to-let mortgage sector is expected to drop sharply in the coming months, according to a survey by the Bank of England (BoE).

The BoE’s Credit Conditions Survey, which records the predictions of UK banks and building societies, found that lending to owner-occupiers is likely to increase significantly in the second quarter (Q2) of this year, but the opposite will happen for buy-to-let landlords.

The survey’s results arrive as the Council of Mortgage Lenders (CML) reports that £3.7 billion was lent to landlords in February, a huge 61% rise on the same month last year.

The CML claims there were 48,000 loans approved for house purchase in February – consisting of 22,000 loans for first time buyers and 26,000 for home movers. It also found there were 10,300 buy-to-let loans for house purchase.

Bank of England Expects Buy-to-Let Mortgage Lending to Drop Sharply

Bank of England Expects Buy-to-Let Mortgage Lending to Drop Sharply

All of these figures are up on the previous month and significantly higher than the previous year, with 11.1% more loans to first time buyers and 13.5% more for home movers.

The Director General of the CML, Paul Smee, comments: “Activity has been boosted by landlords seeking to complete purchases before tax changes in April. We do not expect activity to show such strong year-on-year growth later in the year.”1 

However, some analysts believe that there may be too much pessimism regarding the sector.

The Director of mortgage broker Anderson Harris, Jonathan Harris, says: “Buy-to-let goes from strength to strength, but of course, figures will be skewed by landlords bringing forward purchases to beat the Stamp Duty deadline.

“It is highly likely that purchase numbers will slip, although we expect remortgaging to continue to thrive, as landlords squeeze every penny out of investments to help cover other tax changes, such as the reduction in mortgage interest tax relief.”1

Despite the forthcoming changes, Paul Mahoney, a finance expert at Nova Financial, insists that “buy-to-let is not dead”, and explains how the changes will affect you: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Yesterday, we reported that the number of people showing interest in buy-to-let property fell by over a quarter in March compared with the previous month.

New data from e.surv also suggests that mortgage lending dipped over the past month, as buy-to-let activity eased. However, it was still the strongest Q1 for mortgage approvals since 2007.

The firm estimates that there were 67,173 house purchase loan approvals in March, down by 9.1% on February. It believes that first time buyer mortgages accounted for 11,487 of these loans.

For the first three months of the year, e.surv calculates a total of 210,468 house purchase loan approvals, up 13.5% on Q1 2015.


Buy-to-Let Mortgage Rates Drop to Record Lows

Published On: April 12, 2016 at 12:04 pm


Categories: Finance News

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Buy-to-let mortgage rates have dropped to record lows, according to data from comparison website Moneyfacts.

After learning that they will be hit with a reduction in mortgage interest tax relief and higher Stamp Duty, landlords have finally received some good news.

Figures from Moneyfacts show that mortgage lenders are cutting their rates significantly in order to encourage landlords to continue to invest in the buy-to-let sector, despite the changes.

Indeed, buy-to-let mortgage rates have been continuously decreasing over the past five years, with the fixed rate sector experiencing notable reductions. The table below shows the average rate changes across the market:

[table id=5 /]

Charlotte Nelson, a finance expert at Moneyfacts, explains the changes in the sector: “The buy-to-let market has faced intense pressure recently, but despite this, rates have continued to fall across all fixed sectors. For example, the average two-year fixed rate has fallen by 0.71% in just two years, while the average five-year fixed rate has dropped by an equally significant 0.76% over the same period.

Buy-to-Let Mortgage Rates Drop to Record Lows

Buy-to-Let Mortgage Rates Drop to Record Lows

“While the new rules and Stamp Duty changes could potentially take the shine off buy-to-let investment, property is often seen as a safe bet, and with rental properties in demand and rent high, buy-to-let remains an attractive proposition.”

Nelson also suggests that pensioners are boosting the buy-to-let sector, as many take advantage of the new freedom rules introduced in April last year. During the past 12 months, almost £3 billion has been paid out in cash lump sum withdrawals, according to the Association of British Insurers.

Nelson believes it is “highly likely that some of this money has been accessed with buy-to-let in mind.”

She continues: “Savings rates are currently so poor that many are looking elsewhere to fund their retirement, so lenders have tried to capitalise on this new pool of cash by offering some of the best rates the buy-to-let sector has ever seen.

“In addition, providers also cut rates in the run-up to the Stamp Duty changes in order to attract those keen to buy before they were implemented, which has further aided the downward slide in rates. However, while the current pressures on the market are not yet causing rates to rise, borrowers should remember that they will now be facing tighter lending rules, including stricter affordability checks, so it is even more important for potential landlords to seek financial advice to see if buy-to-let really is the right option for them.”1

Despite many changes affecting the buy-to-let sector, including stricter affordability checks as a result of the European Union’s Mortgage Credit Directive, Nova Financial’s Paul Mahoney insists that buy-to-let “is not dead”, and explains how the forthcoming changes will impact your lettings business: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/


Budget was “Reasonably Positive”, Believes Finance Expert

Published On: March 22, 2016 at 10:32 am


Categories: Finance News

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Thankfully, the Budget 2016 did not focus too heavily on residential landlords, and what it did include regarding the private rental sector was mostly expected.

One finance expert explains how last week’s Budget will affect property investors, believing that the changes are “reasonably positive” for private landlords.

Nova Financial’s Paul Mahoney begins: “The announcements were a mixed bag for property investors.

Budget was "Reasonably Positive", Believes Finance Expert

Budget was “Reasonably Positive”, Believes Finance Expert

“The Stamp Duty Land Tax (SDLT) changes were confirmed as expected with a slight surprise regarding that it will apply to limited companies purchasing over 15 properties. Some were hoping the changes would be delayed, but that wasn’t to be.”

Indeed, many industry experts had called upon the Government to either delay or scrap the Stamp Duty plans.

Although the Chancellor’s announcement that the 3% Stamp Duty surcharge will be implemented on 1st April as planned, it was somewhat surprising that large-scale property investors will also be subject to the change.

Mahoney explains further tax changes: “The personal income tax threshold was increased, and the higher tax rate threshold increased. This is good news for smaller landlords who earn limited income or were borderline with the higher threshold, and also for those able to split income with a lower earning partner.

“It gives some breathing space and further ability to avoid the mortgage interest deductibility changes from the summer Budget, which will now only affect those earning more than £45,000 – up from £42,000.”

Additionally, Capital Gains Tax (CGT) changes were announced.

Mahoney gives details: “CGT was reduced by 8% for all levels of income, but unfortunately, residential property has been excluded from this change, which potentially makes commercial property a more attractive option for some, but in reality, the status quo has been maintained for residential landlords.

“Commercial property SDLT has also been increased with a change to a similar threshold system as residential property.”

So what will affect you?

“Overall, not much has changed for residential landlords, aside from a slight increase in the tax-free threshold and higher tax threshold, which is positive. We therefore view the Budget as reasonably positive, given that the negatives were already known.”

Previously, Mahoney has explained how all of the forthcoming changes to the buy-to-let sector will affect residential landlords: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/