Posts with tag: mortgages

Together Explains its Changes for Buy-to-Let Portfolio Landlords

Published On: September 22, 2017 at 9:42 am

Tags: mortgages,portfolio landlords,PRA changes,property investors

Together Explains its Changes for Buy-to-Let Portfolio Landlords

Together has confirmed its continued support for buy-to-let portfolio landlords ahead of the Prudential Regulation Authority’s (PRA) underwriting changes, which will be implemented from 30^th September 2017.

The specialist lender has explained the changes that it plans to introduce for buy-to-let portfolio landlords – those with four or more mortgaged buy-to-let properties – who are subject to the new PRA regulations.

From 29^th September, the loan-to-value (LTV) across a customer’s portfolio must not exceed 75%, including mortgage-free properties.

Together will apply an overall portfolio interest coverage ratio (ICR) for customers who have had arrears on any mortgage or secured loan in the past 12 months, and will require proof of income, although, if there are no secured arrears, then this will not be applied.

The lender has updated its property schedule document to capture whether properties are tenanted and the repayment type of existing mortgages. There will also be two additional questions on Together’s broker portal, My Broker Venue, to find out how many mortgaged buy-to-let properties the customer currently owns and the length of time the customer has been a landlord.

Richard Tugwell, the Intermediary Relationship Director at Together, says: “As the buy-to-let sector prepares for further changes, it’s likely that we’ll see a move towards specialist lenders like ourselves that can offer the flexibility and personal approach that will be needed in many portfolio landlord cases. At Together, we have updated our processes to help make it as easy as possible for brokers to adapt to the changes, and applied our usual common sense approach.

“Earlier this year, we enhanced our buy-to-let product range, and we’ll be continuing to review both our products and processes as the changes come into effect. We have a specialist buy-to-let team responsible for underwriting these applications, and our roving underwriters and business development managers will provide any additional support that brokers may require.”

All new applications by buy-to-let portfolio landlords to Together will be processed in line with this new criteria from 29^th September 2017.

Make sure you’re ready for the PRA’s changes.

Buyers Wasting £370m on Unnecessary Mortgage Advice Fees, Broker Claims

Published On: September 19, 2017 at 9:52 am

Author: Em Morley

Categories: Finance News

Tags: brokers,homebuyers,mortgages

UK homebuyers are wasting £370m a year on unnecessary mortgage advice fees charged by brokers, according to independent broker One 77 Mortgages.

Buyers Wasting £370m on Unnecessary Mortgage Advice Fees, Broker Claims

All brokers receive a procuration fee from lenders for their work in arranging mortgages, the broker explains, which satisfies Financial Conduct Authority (FCA) and money laundering rules, as well as getting the business across the line.

However, One 77’s experts have hit out at the double dipping rife in the mortgage industry, which means that an extra charge for advice is levied on customers in approximately 75% of purchases.

That means that an additional fee, averaging £400, was slapped on 926,220 of the 1,234,960 residential property transactions completed last year, setting customers back a total of £370,488,000.

Homebuyers – who can be charged as much as 1% of the loan balance for advice by brokers – don’t realise that these charges are not essential and that, in many cases, a broker will negotiate these or back down on charging them altogether.

In many cases, brokers will not even raise them with their savvier or older clients, who are more likely to know that these fees are not set in stone. Instead, some brokers will levy them on less experienced or younger first time buyers, who know no different.

A minority of UK brokers, including One 77, only take the procuration fee paid by the lender.

The Managing Director of the firm, Alastair McKee, says: “It’s truly shocking that brokers are double dipping on fees in this way and stinging the consumer in the process. This is a colossal sum of money that’s being thrown away unnecessarily, in many cases by the people who can least afford it.

“As ever, it’s a case of buyer beware but, understandably, many less experienced buyers believe this is the norm across the board and that they have no choice but to pay. Many clients find it hard to believe that some brokers don’t charge broker fees.”

He continues: “This is a costly misconception, as that’s certainly not the case any more. If you shop around, there are a range of firms out there who don’t charge fees above and beyond what they receive from the lender, and that’s exactly the way it should be.

“Being paid twice for doing the same work is simply unjustifiable.”

The latest Home Buyer Survey from Tesco Bank reveals that some recent homebuyers were stung by unforeseen costs during the purchasing process, as well as how difficult it now is to buy a home – the average deposit needed has topped a huge £60,000!

Average Homebuyer Deposit Rises to over £60,000, Finds Tesco Bank

Published On: September 19, 2017 at 9:22 am

Author: Em Morley

Categories: Property News

Tags: deposits,first time buyers,homebuyers,homeownership,mortgages

In its second Home Buyers Survey, Tesco Bank has revealed that the average deposit needed to buy a home has risen to over £60,000.

Having assessed the finances of UK homebuyers, Tesco Bank found that most buyers wish to purchase a home to have an investment for the future, to provide security for their families and to be independent.

For most people, buying a home is the largest single transaction that they will ever make. Perhaps, then, it’s surprising that some homebuyers take a relatively short period of time to decide whether the house they are looking to buy is right for them.

Average Homebuyer Deposit Rises to over £60,000, Finds Tesco Bank

In fact, Tesco Bank found that 28% of homebuyers decided to buy their new property on their first viewing, while the majority (78%) made the decision to buy in less than a week.

The study also revealed that the main reasons for moving home are financial, with 42% of customers saying that their move was motivated by the desire to build equity and provide security for the future (29%). Other reasons included a need to move to a bigger home, to move in with a partner or to start a family.

Tesco Bank’s data shows that the average mortgage taken out by UK homebuyers is currently £170,994, with the highest mortgages being borrowed in London and the lowest in Wales.

It was found that homebuyers save an average of over £500 per month to help them buy a property, rising to £844 in the capital. Rather worryingly, almost four in ten recent homebuyers had no savings left after they’d moved home.

But perhaps the most off-putting statistic for those looking to buy their own homes is the average deposit size, which now stands at £61,607. For those in London, the situation is much worse, with an average deposit of £90,685, while those in Wales are perhaps better off, with just £41,407 needed to buy a home.

Given this, it is unsurprising that the research also revealed the reliance that many homebuyers place on parents or family to climb the property ladder. Tesco Bank found that 40% of recent homebuyers received financial support from their family to purchase the property, with 65% of those receiving these funds as a gift.

Disturbingly, the study showed that reliance on family continues with age, with almost a fifth of customers in their 40s relying on help from their family to purchase a home.

And it’s not just deposits that are denting homebuyers’ finances. The report indicates that the financial pressure of a house purchase does not stop at the time of the purchase, and homebuyers’ spending habits continue to change in order to make repayments.

While it is encouraging that 45% don’t have to make cutbacks, 30% did have to reduce social spending, a quarter have reduced the number of holidays they take, while one in ten are working longer hours or taking on an additional job to meet their mortgage repayments on a new home.

As a potential interest rate hike is frequently in the news at present, Tesco Bank has asked homebuyers what an increase in interest rates would have on their household finances. The study revealed that a third of customers would have to reduce their discretionary spending to continue meeting their mortgage repayments if rates rose even slightly.

But a positive did arise out of the research, with Tesco Bank finding that the average homebuyer can save on their monthly repayments by ensuring that they remortgage at the end of their fixed-rate term when compared to the Standard Variable Rate (SVR). With a current average SVR of 4.39%, compared to a typical two-year fixed rate of 1.95%, customers could save £274 per month on their monthly repayments.

Despite the financial challenges that buying a new home can bring, positively, more than four in ten homebuyers feel more confident about their financial situation over the next year, while seven in ten were prepared for additional moving fees, such as Stamp Duty, legal fees, estate agent fees and removal costs.

Nevertheless, over a third of respondents reported experiencing a nasty surprise during the home buying process, including the unforeseen maintenance needed on the property, move-in dates changing or being delayed and additional costs or fees.

This highlights the importance of being prepared for any eventuality that can arise; being informed about the home buying process is key.

Landlords, could you offer any support to tenants who are trying to buy their first homes?

Is there a Gender Property Gap when it comes to Mortgage Affordability?

Published On: September 19, 2017 at 8:13 am

Author: Em Morley

Categories: Property News

Tags: affordability,homeowners,homeownership,mortgages

We’ve all heard of a gender pay gap, but is there a gender property gap when it comes to mortgage affordability on the average home?

Online estate agent eMoov.co.uk has highlighted the gap in mortgage affordability between men and women, based on the gap in their average salaries.

The deficit between the average salary for men and women, plus the ever-increasing cost of homeownership are two widely debated topics. So what happens when you combine the two?

eMoov has analysed the latest Office for National Statistics (ONS) data for the average wage over a ten-year period (2006-16) for both men and women, and then looked at their mortgage affordability, at 4.5 times that wage. The agent then highlighted the gap in purchase power between the two, showing mortgage affordability as a percentage of the average house price at the time.

Is there a Gender Property Gap when it comes to Mortgage Affordability?

The last ten years

Over the past ten years, typical mortgage affordability of male homebuyers has been 72% of the average house price – 15% more than for female homebuyers (57%). This deficit remained around this level until 2013. It peaked at 17% in 2009, with the make salary allowing 79% mortgage affordability on the average house price, to just 62% for women, with the higher threshold of affordability largely due to the market crash.

Since, the gap has started to close and today sits at 12%. But, with house prices again finding their way back to pre-crash peaks, mortgage affordability for the average salary has dropped to 65% for men and 53% for women.

Despite this gap, the high cost of UK homeownership means that, since 2006, both average wages have lagged behind house prices where mortgage affordability is concerned.

By property type

The 2009 slump in house prices saw the highest mortgage affordability as a proportion of the average property value, with men tipping 52% for a detached property, 83% for a semi-detached home, 97% for a terraced house and 91% for a flat. In contrast, female mortgage affordability only hit 41% for a detached house, 65% for a semi, 76% for a terraced home and 71% for a flat.

Today, that has fallen again, with men sitting at 43% of the average value of a detached home, 69% of a semi, 80% of a terrace and 72% of a flat. For women, this drops to 35% of a detached house, 56% of a semi, 65% of a terrace and 58% of a flat.

The Founder and CEO of eMoov, Russell Quirk, comments on the findings: “It’s a welcome sight that the gap in salary between men and women, and in turn mortgage affordability, has started to close over the last few years, but a gap remains none the less. Homeownership provides enough hurdles for the current generation of first and second time buyers as it is, without gender having to play a role.

“The only saving grace is that many are in the position to buy with their partner and so the combined mortgage affordability of both is enough to see them onto that first rung of the ladder.”

He adds: “While the increasing growth in property values due to a severe lack of supply is an issue, the second side to it is the lack of growth in the average wage. If this was addressed, it would at least go some way in bridging the gap for those struggling to buy at present.”

Foundation Home Loans Open for Business for Portfolio Landlords

Published On: September 15, 2017 at 9:28 am

Author: Em Morley

Categories: Finance News

Tags: buy-to-let mortgage,mortgages,PRA changes,underwriting changes

Foundation Home Loans has confirmed that it will continue to provide its range of competitive mortgage products to portfolio landlords ahead of new underwriting changes.

Foundation Home Loans Open for Business for Portfolio Landlords

The lender has outlined its portfolio lending proposition for intermediaries ahead of the 30^th September 2017 deadline for the new Prudential Regulation Authority (PRA) underwriting standards.

Overall, there is very little change to the lender’s approach and underwriting criteria. Keeping the data requirement for background portfolios to a minimum, Foundation Home Loans will verify key data points electronically.

Background portfolios must have:

A maximum aggregate portfolio loan-to-value (LTV) of 75% – this is calculated across the whole portfolio, including unencumbered properties.
A minimum aggregate rental cover ratio will be 125% – stressed at 5.5%.

Intermediaries will continue to access Foundation’s existing products via its easy to use online system, where they can now upload details of the portfolio from a spreadsheet.

As before, borrowers may have unlimited background portfolios and finance up to £2m with Foundation. The lender provides a competitive product range for individuals and limited companies, and recently launched a House in Multiple Occupation (HMO)/multi-unit block product.

With Foundation’s products, there is no minimum income and no minimum period of employment or self-employment.

The Director of Marketing at Foundation, Jeff Knight, says: “Our research, undertaken amongst intermediaries and portfolio landlords, highlighted a need for a proposition that is simple and pragmatic – something that has always been at the heart of our approach. Therefore, we have not had to change much at all and will continue to provide a straightforward proposition to intermediaries.

“Indeed, portfolio landlords already represent around 50% of our business, so, unlike other lenders, this is very much business as usual for us and our intermediary partners.”

At the same time, the lender is increasing its maximum loan size across its buy-to-let range – a move made in response to increasing demand.

With immediate effect, the maximum individual loan size will increase to £1m for loans up to 65% LTV. For loans up to 75% and for HMOs, the maximum loan size remains at £500,000. There is no change to pricing.

Knight comments: “We have been receiving an increasing demand from intermediaries for larger loan sizes, so this is a simple move in response to that. As a growing specialist intermediary lender, we will continue to identify ways to expand our product proposition to the market.”

Bank of England Hints at Rate Rise in “Coming Months”

Published On: September 15, 2017 at 9:01 am

Author: Em Morley

Categories: Finance News

Tags: base rate,interest rates,mortgages

The Bank of England (BoE) has said that higher inflation and a pick-up in growth could lead to a rate rise in “the coming months”.

Members of the Bank’s nine-strong Monetary Policy Committee (MPC) voted seven to two to keep interest rates on hold at 0.25%.

Bank of England Hints at Rate Rise in “Coming Months”

But the MPC was talking in much stronger terms about a rate rise, analysts said.

The pound climbed more than 1% against the dollar to $1.3363 after the BoE’s announcement.

The Bank’s Governor, Mark Carney, comments: “The majority of members of the MPC, myself included, see that that balancing act is beginning to shift, and that in order to… return inflation to that 2% target in a sustainable manner, there may need to be some adjustment of interest rates in the coming months.

“Now, we’ll take that decision based on the data. But yes, that possibility has definitely increased.”

In minutes of its latest rate decision, the MPC said there was a “slightly stronger picture” for the economy since its forecasts last month, thanks to signs of a firmer housing market, stronger employment, and a rebound in retail and new car sales.

The nine policymakers on the panel believed “some withdrawal of monetary stimulus was likely to be appropriate over the coming months”.

The Director of mortgage broker Private Finance, Shaun Church, comments on the latest news: “Over 2.2 million first time buyers have bought a home with a mortgage and benefitted from low mortgage costs since interest rates fell to 0.5% in March 2009.

“Although the BoE hasn’t raised rates this time around, the message is clear that consumers should be aware this might happen sooner than expected. When rates do eventually rise, it will be the first time over two million people have experienced this as a mortgage holder, and more rises are likely follow.”

He continues: “However, while today’s rock bottom mortgage rates can’t last forever, further base rate rises are likely to be gradual and mortgage rates won’t necessarily rise at the same rate. Healthy competition between lenders should ensure that mortgage pricing remains low for some time yet. Homeowners therefore have plenty of time prepare for a slight increase in pricing in the coming years.”

Ishaan Malhi, the CEO and Founder of online mortgage broker Trussle, adds: “With the BoE once again choosing to hold interest rates at 0.25%, anyone with a mortgage should be thinking about how they can take advantage of the situation. Borrowers should check what level of interest they’re paying on their mortgage and whether they could save money by switching to one of the more competitive deals on the market. Switching mortgage can now be done on a mobile in a matter of minutes, whether that’s on the bus to work, or waiting for the kettle to boil, and could shave hundreds of pounds off the average household’s monthly outgoings.

“Rock bottom interest rates offer the perfect opportunity for homeowners to overpay on their mortgage, increasing equity in their home and bringing down their debt. It’s easier than ever to stay on top of your mortgage, and the rewards for proactively managing it can far outweigh savings made by switching energy or internet provider. At a time when prices are rising and wages are struggling to keep pace, now’s the time to dust off that old mortgage statement and see what else is out there.”

We will keep you updated of any changes to interest rates at Landlord News.