Posts with tag: mortgages

Intermediaries Expect Landlord Business to Stabilise in next 12 Months

Published On: August 15, 2018 at 9:02 am

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The majority (65%) of mortgage intermediaries expect the level of landlord business to stabilise over the next 12 months, according to the latest Financial Adviser Confidence Tracking (FACT) Index from Paragon, which is based on interviews with 200 mortgage intermediaries.

This report, covering the second quarter (Q2) of the year, marks the first time that intermediaries have forecast a stable outlook for landlord business since the 2015 Summer Budget, when then Chancellor George Osborne announced plans to phase out tax relief on landlords’ finance costs.

The first round of the tax changes, which are being gradually introduced between 2017-21, was implemented in the 2017-18 tax year and will affect tax payments due by midnight on 31st January 2019.

Alongside the 3% Stamp Duty surcharge on additional properties, and new Prudential Regulation Authority (PRA) rules on buy-to-let affordability and underwriting, the tax changes have had a significant effect on property transactions.

The latest figures from UK Finance show that buy-to-let mortgages for property purchases have dropped by around 40%, from 8,900 in May 2015 to 5,400 in June this year. Landlord remortgaging, however, has risen sharply over the same period, from 8,900 to 12,600.

Intermediaries say that almost half (49%) of landlord business is for a straightforward remortgage, with six out of ten landlords who are remortgaging looking to lock in a better interest rate.

Encouragingly, Q2’s FACT results also include the first increase in the proportion of landlords raising finance for portfolio expansion since 2015 – which is up marginally from 22% in Q2 to 23% – and a small rise in applications from first time landlords, edging up to 14% of the total.

John Heron, the Managing Director of Mortgages at Paragon, comments on the report: “It’s encouraging to see intermediaries forecast a more stable outlook for buy-to-let business after such a long period of negative sentiment. Purchase activity continues at much lower levels, but it is interesting to see the step-up in remortgage business, as landlords look to maximise certainty and minimise costs as the interest rate changes start to take effect.”

Remortgaging Bolstered by Interest Rate Rise, UK Finance Reports

Published On: August 15, 2018 at 8:05 am

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A surge in remortgaging during June was bolstered by this month’s interest rate rise, according to analysis of the latest UK Finance figures.

The report indicates that 37,400 new homeowner remortgages were completed in June, which is up by 8.4% on an annual basis. This £6.8 billion of remortgaging was 13.3% higher than in June 2017.

Meanwhile, 33,700 new home mover mortgages were completed in the month, some 7.9% fewer than in the same month last year. The £7.3 billion of new lending was 6.4% down year-on-year. The average home mover is 39-years-old and has a gross household income of £56,000, UK Finance found.

For first time buyers, there were 34,900 new mortgages in June, down by 3.6% annually. By value, this £5.8 billion of new lending was 1.7% lower. The average first time buyer is 30-years-old, with a gross household income of £42,000.

The report also shows that 5,400 new buy-to-let home purchase mortgages were completed in the month, some 19.4% fewer than in the same month of 2017. This £0.8 billion of lending was down by 11.1%.

Remortgaging Bolstered by Interest Rate Rise, UK Finance Reports

Remortgaging Bolstered by Interest Rate Rise, UK Finance Reports

There were 12,600 new buy-to-let remortgages in June, which is the same as in June last year. By value, this equated to £2 billion – also the same as 2017.

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The Director of Mortgages at UK Finance, Jackie Bennett, explains the data: “Remortgaging continued to dominate in June, with figures up 13% on the same period last year, as existing two and three-year products came to an end and borrowers opted for new deals.

“Despite a boost in recent months, speculation of a base rate rise saw the market remain relatively subdued, with year-on-year declines in activity among both first time buyers and homemovers, as customers adopted a wait-and-see approach.

“House price inflation has moderated in recent months, yet it still remains above earnings growth, and so affordability is still a challenge for would-be borrowers.

“And, although the full impact has yet to be felt, tax and regulatory changes continue to bear down on borrowing activity in the buy-to-let purchase market.”

Shaun Church, the Director at mortgage broker Private Finance, also comments: “Despite numerous pledges and incentives from Government to get more people onto the housing ladder, June showed a disappointing performance in the first time buyer market. Mortgage eligibility remains the key stumbling block for many prospective buyers, so the recent relaxation of lending criteria from major lenders could help boost activity among first time buyers in the future.

“The remortgage rally has continued into summer, no doubt bolstered by the speculation of August’s rate rise. Borrowers may be thinking they have missed the boat to lock into rock bottom rates following the base rate rise, however, rates remain very affordable. Those lingering on a standard variable rate are urged to consider swapping to a fixed rate now, as they could potentially save thousands in the long-run.”

The Group Operations Director at Just Mortgages and Spicerhaart, John Phillips, offers his thoughts: “These latest figures show that the housing market is struggling, especially amongst home movers, where activity is down 7.9%. I think the main reason for this is not that people don’t want to move, but they are reluctant to because Stamp Duty is so high that they are not prepared to shell out thousands of pounds just to move. So, they are staying put.

“The trouble is, while remortgaging is up, which is good – but is more to do with rate rises than anything else – the UK economy needs people to move house, because it has a positive knock-on effect on so many other sectors. So, if the Government wants to fix this, it needs to make a bold statement.

“The Stamp Duty cut has worked for first time buyers, but we need similar incentives for the rest of the market. I would like to see an 18-month suspension of Stamp Duty across the board. This gives the market seven months or so before the Brexit deadline in March, and a year afterwards, to let things settle.”

Mortgage Arrears and Landlord Possession Actions at “All-Time Historic Low”

Published On: August 10, 2018 at 8:59 am

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New data released yesterday has confirmed that mortgage arrears and landlord possession actions have remained historically low, decreasing yet again since last year.

The latest Mortgage and Landlord Possession Statistics in England and Wales report was published 9th August, comparing data from April to June 2018 to that from April to June 2017. UK Finance’s Mortgage Arrears and Possessions report was released the same day, providing its second quarter (Q2) update. Both provide data showing a decline in mortgage arrears and possessions.

Jackie Bennett, the Director of Mortgages at UK Finance, comments: “Arrears and possessions are at an all-time historic low since we first started collecting this data over 24 years ago.

“While this is positive, last week’s base rate rise, coupled with the disappointing uptake of the Support for Mortgage Interest (SMI) loan, could see arrears creeping up in the coming months.”

She continues: “With well over 90% of new loans taken out at fixed rates, most recent borrowers will see no immediate impact from the Bank rate increase. However, anyone with concerns about managing their mortgage should contact their lender to discuss the advice and support available. Repossession is always a last resort.”

Kate Davies, the Executive Director of the Intermediary Mortgage Lenders Association (IMLA), also responds to the data: “We welcome the news that the figures for arrears and possessions continue to decline. These figures reflect both the considerable efforts made by lenders to treat borrowers in difficulty with forbearance, and the tighter affordability rules introduced by the financial services regulator, which has prevented some borrowers from over-stretching themselves and getting into difficulty with mortgage repayments.

“Last week’s base rate increase inevitably prompted speculation that arrears and possessions might begin to tick up once again. However, this data tells us that it is highly likely that the vast majority of households with a variable mortgage rate would still be able to cope if their lender passes on a small rate hike.”

She concludes: “Lenders are acutely aware that any change to mortgage rates, combined with the impact of rate rises on other loans, can put pressure on household debt. This underlines the importance of borrowers having access to suitable mortgage deals, which is why our members recently pledged to do more to help a minority of UK borrowers who are stuck on reversion rates.”

Most Buy-to-Let Landlords are Choosing Fixed Rate Products

Published On: July 27, 2018 at 8:09 am

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The majority (93%) of landlords financing buy-to-let properties chose fixed rate products in the second quarter (Q2) of the year, according to the Buy-to-Let Mortgage Index from Mortgages for Business.

The specialist buy-to-let broker found that five-year fixed rate products, in particular, were the most popular choice for its landlords, with 69% of investors choosing this option.

David Whittaker, the CEO of Mortgages for Business, comments on the findings: “We’ve been recommending five-year fixed rates for a long time. At the moment, there is very little difference in pricing between fixed and variable rate products. In today’s uncertain economic climate, particularly the road crash Brexit negotiations, fixing makes a lot of sense, especially as the average price is just 3.52%. Why wouldn’t landlords make them a part of their business strategy?”

Arrangement fees

The index also found that an increasing number of lenders are offering mortgages free from arrangement fees. In Q2, a fifth of all products had no fee attached, which is up from 14% in Q3 2017.

This reflects a wider study by Moneyfacts.co.uk, which revealed that over a third of mortgages on the market (for all types of buyers) are now fee-free.

Other incentives were also on the rise, including: cash back, free valuations, and free legals for landlords remortgaging their properties.

The average flat arrangement fee, however, increased slightly in Q2, to £1,389. At less than £1,500, Mortgages for Business insists that this still represents reasonable value.

Limited company products 

The index also shows that the number of lenders offering mortgages to landlords borrowing via a limited company increased by three in Q2 (The Mortgage Works, Kensington Mortgages and LendInvest). Half of all buy-to-let lenders now offer products to corporate landlords.

Remortgaging continues to outstrip purchases, although there were still more buy-to-let purchase transactions by landlords using limited companies.

Pricing and yields

Overall, Mortgages for Business reports that pricing remained fairly flat in Q2, despite a rise in swap rates. This suggests that lenders continue to absorb costs in order to remain competitive.

At an average of 8.6%, the broker found that Houses in Multiple Occupation (HMOs) produced the highest gross annual yields for landlords in Q2.

Buy-to-Let Special Report States “Increasing Shift Towards Areas with Higher Yields”

Published On: July 25, 2018 at 9:54 am

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The Mortgage Lender has commissioned a special report, which has found that buy-to-let investors are increasingly on the look out for properties that are cheaper and result in a higher yield.

Martin Ellis, the UK’s leading housing economist, is the author of the report. He has also predicted a rise in interest rates by 0.25% within the next few months and that house price growth will increase by no more than 2-3% by the end of this year.

Peter Beaumont, The Mortgage Lender deputy chief executive, said: “Our special report on the buy-to-let market looks at the macro and micro economic environment for buy-to-let investors and the factors that are likely to influence landlords’ investment choices over the coming years.

“It also highlights the need for a flexible and competitive buy to let mortgage market to facilitate continuing investment in a sector of the housing market that has grown in significance as home ownership has declined and demand for good quality residential property has increased.”

Currently, buy-to-let mortgages represent nearly 13% of new mortgage lending in the UK. It has fallen by 28% in 2017 and is now at £10.7 billion, in comparison to £14.9 billion in 2016. However, despite this fall, 2017 still saw growth, with an annual average 67% higher than what it was in the period from 2009 to 2013.

Buy-to-let remortgage activity has also been stable, with the volume of lending in 2017 only 0.6% lower than it was in 2016.

There has been a considerable amount of growth within the private rented sector (PRS) in recent years. 4.7m households in England are currently renting privately, which amounts to one in five. 46% of those aged 25-34 years old live in the PRS. This is almost double the statistic from 2006, which stood at 24%. The amount of tenants aged 35-44 years old in the PRS has also substantially increased over the last ten years, from 11% to 29%.

Moneyfacts Data Shows Increase in Buy-to-Let Mortgage Products

Published On: July 4, 2018 at 10:03 am

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Recent data reveals that there has been a record number of first-time landlord mortgage products entering the market. This is despite worries that such products may begin to dwindle, along with demand, due to the recent exodus of landlords from the rental market.

The latest research from Moneyfacts.co.uk shows that the number of deals to first-time landlords has increased considerably by 13% since the start of this year.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said: “It is great news that first-time landlords have more choice than ever before, increasing by a whopping 339 buy-to-let (BTL) products in just two years. Not only do first-time landlords have more choice, but they have also seen rates fall by 0.36% over the same period.

“Despite market uncertainty, providers are certainly not shying away from offering this risky group deal. Providers know all too well that many borrowers on their mortgage books will be coming to the end of their term and reassessing their deal, so they need to attract new business. As such, they’re enhancing their ranges and offering these extra deals to entice those customers who are new to the market, thereby breathing new life into their mortgage book.

“While multiple regulations and tax changes may have put some borrowers off becoming a landlord, it seems many are undeterred. In fact, it has been reported that Accord has seen the number of applications from aspiring landlords double over the past 12 months.

“This is little surprise when many consider bricks and mortar as a safe bet. With savings rates low, many are looking to get better returns elsewhere. Also, while rents are high and mortgage rates for first-time landlords are still falling, the potential for a decent return is high.

“Potential investors should not get ahead of themselves however. Since September 2017, they face checks and questions about their finances and will need to do their homework to ensure they get the best deal.

“Of course, BTL is not without its risks, and anyone seeking to enter this sector would be wise to seek the advice of a financial adviser to see if this is the best route for them.”