Posts with tag: mortgages

Paragon Updates Buy-to-Let Mortgage Range

Published On: June 1, 2016 at 9:28 am

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Today, Paragon Mortgages updates its buy-to-let product range for professional landlords, introducing six new products.

Paragon Updates Buy-to-Let Mortgage Range

Paragon Updates Buy-to-Let Mortgage Range

From today, 1st June, there are new two-year fixed rate products for buy-to-let landlords at Paragon, starting at a rate of 3.40% with a 1.50% product fee at 65% loan-to-value (LTV) for single self-contained units. A two-year fixed rate mortgage of 3.75% with a 1.50% product fee at 65% LTV is also available for Houses in Multiple Occupation (HMOs) and multi-unit blocks.

Alongside the two-year fixes, three new five-year fixed rate products are also available for those landlords looking to plan their finances for the long-term. Rates start at 4.20% with a 1.50% product fee at 65% LTV for single self-contained properties – for both individual and limited company investors.

Paragon Mortgages also offers a range of stepped fixed rate products, created for landlords that want an extra degree of financial planning. These five-year fixed rate products can either increase in rate each year until the end of the product term, or decrease, depending on the landlord’s preference.

The Managing Director of Paragon Mortgages, John Heron, says: “We have re-dated our existing product range and then added six new fixed rate products. The product range caters for different types of landlord, whether they be limited companies or individuals.

“The stepped rate products have been created to allow landlords that extra flexibility with their financial planning. With tax liabilities increasing from April 2017, a stepped rate product which moves from a higher rate to a lower rate could help landlords plan for a rise in their tax bill.

“However, intermediaries will need to talk to their landlord customers to ensure they fully understand how these products work and whether they would be suited to their circumstances.”

Although landlords face changes in the buy-to-let sector, this advice from Nova Financial’s Paul Mahoney will help you factor in any financial difficulties you may face: /preparing-future-economic-changes-buy-let-sector/

Repossession Rate to Stay Low in 2016, According to HML

Published On: May 13, 2016 at 11:33 am

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The repossession rate for homes in the UK will stay low over 2016 if interest rate rises are further postponed as anticipated, according to HML, the UK’s leading mortgage service firm.

Repossession Rate to Stay Low in 2016, According to HML

Repossession Rate to Stay Low in 2016, According to HML

In its annual forecast, the HML said that it expects a total of 10,326 repossessions in the UK during 2016, which would account for 0.09% of mortgages. The prediction arrives as the Council of Mortgage Lenders (CML) reports the lowest level of repossessions on record.

This figure would represent a second consecutive year of low repossession rates, although HML reports that the threat to the UK steel industry could mean more repossessions in South Wales and other regions where jobs are at risk.

The CEO of HML, Andrew Jones, says: “Repossession is an extremely difficult time for any household, and HML works with mortgage providers to identify those at risk and provide support during times of financial difficulty.

“Another year of low repossession rates is welcome, but we shouldn’t ignore the prospect of big increases when interest rates eventually rise.

“Those hit hardest by other financial pressures, such as unemployment, are at particular risk, and if the UK steel industry deteriorates, we can sadly expect repossessions to increase in communities that are affected.”

HML is the only company that publishes mortgage repossession forecasts broken down into the English regions, Wales, Scotland and Northern Ireland.

It expects Northern Ireland to have the highest repossession rate, at 0.27%, in 2016, with the South West and East Midlands having the lowest, at 0.06%.

HML’s figures vary significantly from those suggested by the CML in December last year, which forecast a sharp increase in repossessions, to 18,000.

HML believes that the difference relates to a change in expectation over the timing of interest rate rises, which the CML expected to occur in the second half of 2016, but is now not expected until 2017 at the earliest.

In September last year, HML stated that an interest rate rise would hit first time buyers particularly hard, expecting 20,000 to fall into arrears if the base rate rose by 1.5%.

Although the repossession rate looks set to remain low, concerns have been expressed about rising house prices, as the HomeOwners Alliance reports that the housing crisis is deepening.

Uncertainty Causes Slowdown in Mortgage Approvals in April

Published On: May 13, 2016 at 9:13 am

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A slowdown in mortgage approvals in April was caused by uncertainty in the economy, according to the latest Mortgage Monitor from the UK’s largest chartered surveyor, e.surv.

Uncertainty Causes Slowdown in Mortgage Approvals in April

Uncertainty Causes Slowdown in Mortgage Approvals in April

Seasonally adjusted house purchase approvals in April totalled 57,512 – down by 19.4% from the 71,357 loans granted the previous month. This significant decline follows a previous three-month average of 72,693 house purchase approvals since the start of the year.

e.surv believes that economic uncertainty is playing a role in this decrease, as are new tax changes for buy-to-let landlords.

Annually, house purchase lending has fallen by 14.9% from the 67,594 loans recorded in April 2015. Preceding this decline, annual rises of 20.2%, 17.9% and 14.7% were seen, as Stamp Duty changes triggered an uplift in overall lending levels. The drop also follows record high lending during the previous quarter, fuelled by buy-to-let borrowing.

The Director of e.surv, Richard Sexton, comments on the figures: “The mortgage market is entering a more turbulent phase. As lenders steer for safety, three different forces are at work. First and foremost are the effects of the looming EU referendum on confidence and certainty for the UK. Whichever way the result, financial markets could see rapid shifts in the days and weeks beforehand, and especially immediately afterwards.

“Secondly, the lending market is in one sense beginning to return to its normal rhythm after suffering a hangover from the party of buy-to-let activity seen earlier this year. As this excitement begins to wear off, a more normalised lending climate is beginning to reassert itself. Home lending is solid beneath this predicted surface slowdown, but now the headache is by no means over, as new economic risks cause understandable caution from lenders.”

He adds: “The third major break on mortgage lending is a deeper foreboding about the solidity of the UK economy – quite subtle, but potentially more major.”

Sexton advises lenders: “It’s crucial for lenders to manage risks in the coming months. There now looks to be completely different interest rate speculation on the horizon and all eyes will be on the Bank of England to see the next steps taken. With some calls to cut interest rates rather than raise them, lenders will have to remain even more alert to economic conditions. And slowing growth is a further sign which is adding to doubts over economic security in general.”

However, he concludes: “Despite all these ongoing risks, the underlying core of the lending market appears strong enough to weather such tests. For some first time buyers, prospects are improving and despite rising house price costs, lenders remain keen to help credit-worthy borrowers get on the property ladder.”

Recently, mortgage lenders were warned to tighten their lending criteria on buy-to-let products, due to new rules in the sector.

Rental arrears and repossessions fall in Q1 of 2016

Published On: May 12, 2016 at 10:51 am

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According to the most recent report from the Council of Mortgage Lenders (CML), repossessions in the first quarter of 2016 fell to their lowest on record.

Data from the report shows repossessions fell to 2,100, with 1,500 home-owner properties and 600 buy-to-let.

Should this rate continue during 2016, this would put the yearly number of repossessions at 8,400.

Falls

In addition, mortgage arrears continued to drop. For the first time in more than ten years, the number of mortgages in arrears of 2.5% or more dipped below the 100,000 mark.

There were 96,200 loans in arrears at the end of March, falling from 101,700 recorded at the end of December. What’s more, this was significantly down on the 111,200 recorded in the first quarter of 2015.

The decline in mortgage arrears and repossessions in recent years underlines the positivity surrounding the private rental sector. However, further data from the Ministry of Justice shows that eviction rates are much higher.

Statistics show that there were 42, 728 rental evictions in England and Wales by county court bailiffs in 2015. This was against just 5,594 mortgaged property repossessions by county court bailiffs.

Rental arrears and repossessions fall in Q1 of 2016

Rental arrears and repossessions fall in Q1 of 2016

Experiences

A more detailed look at the CML data highlights experience in both the home-owner mortgage market and the buy-to-let market. Arrears rates are greater amongst home-owners than buy-to-let landlords, but the repossession rate is less. Lenders obviously look to avoid repossessions to allow home-owners breathing space. However, many landlords look to protect their position more quickly on buy-to-let as tenants move on.

CML director general Paul Smee commented, ‘we cannot completely avoid the risk of any individual household experiencing arrears or repossession. But lenders continue to work very effectively to help their borrowers through periods of difficulty when they do occur and borrowers should be reassured that most cases of arrears can be resolved and will not lead to repossession.’[1]

Smee believes, ‘the key to dealing with difficulty is to tackle it early and to communicate with your lender as soon as you think you may be facing problems.’[1]

[1] http://www.propertyreporter.co.uk/property/repossessions-and-arrears-continue-to-fall.html

 

Should You Pay Your Mortgage Off Now?

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

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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?

Barclays Launches 0% Deposit Mortgage for Homebuyers

Published On: May 4, 2016 at 11:24 am

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Barclays has launched a 0% deposit mortgage for homebuyers, as research suggests that 25% of all first time buyers need help from the bank of mum and dad to purchase a property.

According to data from Legal & General, family and friends are expected to provide deposits worth a total of £5 billion, averaging £17,500 per property, for 300,000 mortgages this year.

A total of 256,400 mortgage borrowers will receive parental support, 27,500 will get help from friends, while 22,500 will accept funding from grandparents.

Legal & General believes that a lack of housebuilding and the impact of low annual wage growth (2%) against rising house prices (currently increasing at 7.6% per year) are the main reasons that first time buyers are struggling to get onto the property ladder.

Barclays Launches 0% Deposit Mortgage for Homebuyers

Barclays Launches 0% Deposit Mortgage for Homebuyers

The CEO of Legal & General, Nigel Wilson, comments: “If we are ever to end or reduce our reliance on the bank of mum and dad, we need a new innovative approach to housing. Helping first time buyers is necessary, but not the whole solution.

“We need to modernise housebuilding and make it more efficient so that we can increase supply and quality for all forms of tenure, and all income and age groups, from students to pensioners.”

He adds: “Families clearly cannot continue to use all of their net wealth to help their offspring onto the housing ladder without putting their own financial stability at risk.”1

In London – which has the highest and fastest house price growth in the UK – this year, 51% of buyers will receive assistance with their mortgages.

However, Barclays has now announced that the 0% deposit mortgage has returned. With its family springboard mortgage, buyers will no longer need to put down a deposit.

This deal previously allowed those with a 5% deposit to get onto the property ladder, as long as someone else – often the homebuyer’s parents – put cash equating to 10% of the property price into a savings account linked to the mortgage.

Under the new deal, only the 10% contribution is needed. This cash will be returned to the borrower’s parents after three years, with interest added, provided the borrowers have kept up with their mortgage repayments.

The lender has also raised the maximum amount that homebuyers can potentially borrow as a multiple of their income under the deal. Those with an income of more than £50,000 per year will now be able to borrow up to 5.5 times their income, as opposed to 4.4.

A buyer with a 0% deposit could get a three-year fixed rate of 2.99% under the family springboard mortgage, while someone with a 5% deposit could get a rate of 2.79%.

Parents putting cash into the savings account will receive an interest rate of 2%.

The need to raise the huge deposits required is often named the main barrier to getting onto the property ladder by first time buyers. Recent research by Barclays found that 35% of prospective buyers are forced into asking their parents for help.

A separate study by Experian shows that 27% of Britons aged 55 and over have given financial support to someone to help them buy a house, despite 15% saying they are not financially comfortable themselves.

1 http://www.propertyindustryeye.com/bank-of-mum-and-dad-is-a-top-ten-lender/