by admin | Mar 12, 2021 | Mortgage News
The latest budget was, unsurprisingly, a lot more focussed on COVID19 than on the housing market. It is, however, also important for property professionals. Here’s a round-up of the key points.
An extension to the Stamp Duty holiday
Arguably it was almost inevitable that the chancellor would need to grant some sort of extension to the Stamp Duty holiday. After all, the logic behind this is, fundamentally, exactly the same as the logic behind the recent extension of the current Help to Buy scheme. The construction industry has been badly hit by COVID19 and now also has to deal with the full impact of Brexit.
This has resulted in delays both to the construction of new-build properties and to the legal completion process. Rather ironically, the Stamp Duty holiday may have exacerbated the latter problem by stimulating activity in the housing market.
With buyers facing the prospect of losing out on the Stamp Duty holiday through no fault of their own, arguably, the government had to act. If it hadn’t then, at best, it could have had a lot of upset buyers on its hands come election time. At worst, it could have led to buyers pulling out of sales due to being unable, or unwilling to pay the increased Stamp Duty.
What is interesting is that Rishi Sunak chose to extend the holiday until the end of June. Then there will be a further three months where the threshold is set at £250K. This means that even new entrants to the market could potentially benefit from it. It also means that there could be another “cliff-hanger” in three and then six months time.
Help for “Generation Buy”.
Back in October 2020, at the (virtual) Conservative party conference, Boris Johnson announced his intention to turn “generation rent” into “generation buy”. He indicated that the government would achieve this by introducing a scheme to guarantee mortgages of up to 95% of the property price.
Fast forward to March 2021 and the chancellor has now indicated what this means in practice. Essentially, the government is bringing back David Cameron’s Mortgage Guarantee scheme. Like the old scheme, it will be available to onward movers as well as first-time buyers. It will also be available on purchases of existing property. The current limit is set at £600K.
ISAs stay untouched
Given that the adult ISA limits have been the same since 2017, it was always highly unlikely that the chancellor was going to feel under any obligation to increase them. The one change was that the penalty for making irregular withdrawals from the Lifetime ISA will be going back up to 25% in April. It was temporarily reduced to 20% to help those affected by the pandemic.
The chancellor did announce the introduction of new NS&I “green bonds”. These are intended to help the UK meet its target of becoming carbon neutral by 2050. At present, it’s unclear whether or not these will have any direct impact on the housing market.
It is, however, worth noting that the government’s commitment to its “net-zero” target requires a switch to electric vehicles. This in turn requires the development of mass-scale charging infrastructure. Areas that get ahead of the curve here could see local house prices rise accordingly.
Widespread tax adjustments
The chancellor’s largesse on Stamp Duty has not extended to other personal taxes. Capital Gains Tax exemptions, Inheritance Tax and the Pensions Lifetime allowance all stay at 2020/2021 levels. The tax-free personal allowance and the higher-rate income tax threshold both stay at 2021/2022 levels.
At present, these freezes are scheduled to stay in place until 2025. This effectively means that people could find their take-home earnings eroded over time. In itself, this does not augur well for affordability. On the other hand, much will depend on how well the economy performs overall.
by admin | Feb 27, 2021 | Mortgage News
As anybody who has tried it will know, being your own boss isn’t always easy. In the early days, you may have to do just about everything yourself. This can really limit your personal life. Even once your business matures, you still have to deal with unique challenges. In particular, you have to face up to the fact that lenders may be very wary of dealing with you.
Business owners versus mortgage lenders
According to a survey from specialist mortgage broker Haysto, approximately one in six people reported having their mortgage application rejected because they were their own boss. More specifically 14% of company directors and 15% of sole traders reported being turned down for a mortgage due to their employment status.
Looking at this from a “glass-half-full” perspective, however, five in six people are having mortgage applications accepted even though they are their own boss. This clearly shows that it is possible.
Understanding mortgage lenders
The key point to remember is that mortgage lenders now have to act in accordance with the terms of the Mortgage Market Review. In simple terms, this means that they cannot just look at multiples of income. They must look at the applicant’s personal circumstances and assess their ability to afford the loan over the long term.
Keep in mind that lenders can be sanctioned if they are found to have made an improper loan. The safest approach for them, therefore, is to err on the side of caution. Then add in the fact that lenders have to think about their own finances. Nobody will be happy if a bank winds up in the sort of trouble the world saw in 2008.
In short, therefore, if anyone wants to get a mortgage, they’re going to need to make sure that they satisfy a lender on all counts. This can be a particular challenge for the self-employed. That said, the challenge is not unique to them. Zero-hours contract workers and those on variable incomes are both in much the same situation. Here are some tips on how to address it.
Look after your credit records
Make periodic checks with the credit bureaux to ensure that your credit record is up-to-date and accurate. Keep it healthy by always making the minimum payments in full and on time. Pay extra if you can.
Reducing the balance on loans lowers your debt-to-income ratio. Reducing your balance on lines of credit (e.g. credit cards) doesn’t have quite the same effect. This is because you still have access to the credit. That said, staying comfortably below your credit limit is an indicator that you can manage your money.
Build up your deposit
Deposits protect your lender from house-price falls and from borrower defaults. Given that COVID19 and Brexit are both still running their course, it’s understandable that lenders will probably be particularly wary of these possibilities.
It can be hard to build up a deposit, especially when you’re renting. It may, however, be possible for you to get some help with it. For example, the Lifetime ISA is designed to help either with the purchase of your first property or in your retirement. It benefits from government bonuses.
Choose your lender with care
Lenders may all work to the same basic set of rules, but they still have some scope for individual decision-making. They may also have varying degrees of understanding about the realities of being self-employed.
Going to a mortgage broker may be a convenient way of getting guidance on which lenders are most likely to give you a yes. If you don’t want to go down this route, then at least do your research carefully. Check which lenders have the best track record of dealing with people in your situation.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Feb 19, 2021 | Mortgage News
According to data from Halifax, first-time buyers now have to put up an average deposit of £57,278 to buy their own home. That’s £10,829 (23%) more than the previous year. First-time buyers in London have to pay over double this with an average deposit of £130,357. Here is a quick look at the drivers behind these figures and what can be done about them.
House price inflation
The most obvious reason for larger deposits is rising house prices. Despite COVID19 and Brexit, the UK has recently seen intense house-price inflation. While coincidence does not necessarily mean causality, it’s certainly interesting that this growth spurt started at the same time as the Stamp Duty holiday.
The Stamp Duty Holiday
The Stamp Duty holiday may have made a lot of people very happy. It is, however, unlikely that first-time buyers were amongst those rejoicing. They already benefited from a Stamp Duty discount. The Stamp Duty holiday effectively negated this. It put them back on the same footing as onward movers and made them only slightly better off than investment buyers.
In principle, the effect of the Stamp Duty holiday should already be starting to wear off. The closer it gets to the end of March deadline, the harder it will be for buyers to get from offer to completion by the deadline. In practice, there are two reasons why the impact of the Stamp Duty holiday might be felt for more than the next couple of months.
Firstly, the government may choose to extend the Stamp Duty holiday. It may choose to extend the overall deadline. Alternatively, it may choose to extend the holiday to anyone who has an offer accepted before the current deadline, thus giving them more time to complete. Even if it does neither, it might choose to alter Stamp Duty banding to bring in some revenue without creating a major shock in the housing market.
Secondly, what goes up does not necessarily come down again at all. Even if it does, it may not come down quickly. In other words, the end of the Stamp Duty holiday may see house prices stop rising or at least slow down their rise. It may not, however, lead to them actually falling.
Nervous lenders
At the end of the day, deposits are there to protect lenders against risk. This includes the risk of house price falls and the risk of lender default. Each lender has to decide for themselves how much of a deposit they require from each applicant. In simple terms, the more nervous a lender feels about a situation, the more likely they are to demand a high deposit.
Right now, average deposits are running between 19% in the North West to 27% in London. What’s more, they may also impose restrictions on the source of deposits. These actions may reassure anyone concerned about falling house prices triggering a rerun of 2008. They do, however, have a disproportionate impact on first-time buyers. They cannot benefit from an existing property increasing in value to help cover the cost of the deposit on a new one.
A way forward
Navigating a path through this situation could be tricky for all concerned. First-time buyers should certainly do everything they can to save for a deposit. This may include making use of the Lifetime ISA with its government-funded bonus system.
Industry, regulators and the government may, however, have to come together to organize further support measures for first-time buyers. Realistically, lenders’ hands are tied by the need to work within the framework of affordable and responsible lending. Regulators could loosen these rules, but there would be a risk to doing so.
This means that the bulk of the support is likely to need to come from the government. It could potentially come in the form of extra financial support, tax breaks, borrowing guarantees or some combination of all of these.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Feb 12, 2021 | Mortgage News
New research from mortgage broker Habito suggests a worrying lack of awareness about how mortgages work. It shows how a lack of financial education can have a serious impact on personal finances. Here are some of the key takeaways.
Ignorance is not bliss
Almost 20% of people did not know whether or not they were on their lender’s standard variable rate (SVR). In other words, they do not understand one of the most fundamental points of their mortgage.
Almost half of the respondents did not understand what remortgage was. The source of confusion varied.
- 6% of respondents did not know the term remortgaging
- 8% of respondents thought it was the same as taking out a second mortgage
- 17% of respondents thought it meant taking on more debt or was only done out of need.
To be fair to the last set of respondents, remortgaging can be used as a way to cover other expenses. It can also be used as a debt consolidation tool. It may therefore be that these respondents have heard about it in that context and not really understood its wider meaning.
Inaction can be expensive
Just over a quarter of people knew that they were on their lender’s SVR. This means that either they did not understand the impact of this or they did understand the impact but were not taking action to remedy it. This could be because they did not see it as a priority or it could be because they felt they were not in a position to do so.
Interestingly 11% of people felt uncomfortable about having lenders scrutinize their finances. This is just under half of the people who knew that they were on their lender’s SVR. That could be a coincidence but it could also be cause and effect. In other words, people might grit their teeth and pay more than they needed rather than expose their financial situation to view.
There may also be a connection with the findings of separate research by another mortgage platform, Haysto. This highlighted the stress and frustration felt by people who had been turned down for a mortgage.
If people feel like their finances are too precarious for them to have a reasonable chance of being accepted for a new deal, they may not even try to apply for one. This possibility would tally with the fact that data from the Bank of England shows that between February and November 2020 remortgaging dropped 33%.
A little knowledge can be dangerous
A worrying one in ten people thought that paying their lender’s SVR would help them to clear their mortgage quicker. On the one hand, it’s great that people have grasped the general importance of paying as much as you can towards debts.
On the other hand, it’s very concerning that some people clearly do not understand the difference between capital and interest. Assuming this ignorance carries over into other areas of their lives, they could easily also be overpaying on other products such as loans and credit cards.
A possible way forward
While acknowledging the importance of personal responsibility, it is also important that businesses and governments are responsible too. As a minimum, the government/FCA could place an obligation on lenders to remind people when they are due to be switched onto the lender’s SVA.
This reminder could contain a clear explanation of the next steps, including the possibility of remortgaging. It could also have pointers to other sources of information such as the Money Advice Service.
If the government wanted to take this a step further, it could restrict the percentage of mortgages lenders could have on the SVR. This could be done either via a direct cap or by taxation.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Feb 5, 2021 | Mortgage News
The year is still relatively new but the first month has proved both eventful and informative. Now, therefore, seems like a good time to review the mortgage landscape. With that in mind, here are some factors which could drive the mortgage market in 2021.
COVID19
It says a lot about the pandemic that it has easily knocked Brexit off the top spot in this list. Sadly, the end of 2020 did not lead to the end of the pandemic. On the plus side, vaccination is now starting to become a reality. This means that all being well, 2021 will be the year COVID19 is finally eradicated, or, at least, brought under control.
Of course, for various reasons, vaccination roll-outs are progressing at different rates in different places. This could end up having a major economic impact around the globe. If so, then, it probably should be assumed that the UK will be impacted to some extent.
That said, in the case of the UK, the impact could end up being neutral to positive. Right now, the UK is very much ahead of the curve on vaccinations. This means that it could, potentially, reopen its economy relatively early.
Initially, its trading options might be limited due to the ongoing impact of the pandemic in other countries. On the plus side, however, the U.S. is also pushing ahead with vaccinations. If it can also reopen its economy quickly, the UK may have the chance to develop a valuable post-Brexit trading partnership.
Brexit
Technically, Brexit is now complete. In practice, it’s clearly going to take some time for everyone to adapt to it. In the meantime, some companies are pulling out of the EU/NI market. Other companies are finding ways to adapt to the practicalities of Brexit.
Mortgage lenders are facing particular challenges because the Brexit deal was much more focused on goods than services. This means that lenders need to figure out how they’re going to manage existing customers who reside in the EU/EEA. They are also going to have to figure out how, or indeed if, they can onboard future customers from the EU/EEA.
There are already reports of financial services companies withdrawing or restricting facilities to customers based in the EU. Presumably, lenders in the EU are also withdrawing or restricting facilities to customers based in the UK for exactly the same reason. Both sets of customers can apply to mortgage lenders in their country of residence for property located abroad.
In principle, the UK could regain access to the EU (and vice versa) by coming to an equivalence agreement. In practice, this could still be a delicate situation for financial services as equivalence agreements can be revoked at any time. Lenders might, therefore, be reluctant to invest heavily in EU/EEA markets knowing that they could have the rug pulled out from underneath them (and indeed vice versa in the EU/EEA).
Remote working
According to data from people solutions consultancy New Street Consulting, there were three times as many remote jobs advertised in November 2020 as there were in November 2019. This will be in addition to the existing jobs which went remote during the pandemic and will now stay that way.
It may be too soon to declare the end of the office. It does, however, seem almost inevitable that many companies will at least scale back their office space. What’s more, the fewer trips staff are making to the office, the less important it is to live close to it. In other words, any shift to remote working has clear implications for the property market and hence the mortgage market.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Jan 29, 2021 | Mortgage News
DIY can make for good entertainment. Type either “Room makeover” or “DIY disaster” into a search engine and you’re sure to get plenty of results. On a more serious note, however, it can be advisable to do some thinking before you decide whether or not to tackle DIY. If you do, then it’s advisable to do some more thinking on the best way to go about it.
Renters beware
Renters should generally avoid DIY completely unless they have explicit permission from their landlord. Simple bits of DIY may have a very low chance of going wrong. The problem is that if they do go wrong, you could find yourself in a whole lot of trouble with your landlord.
If you are going to ask your landlord’s permission, be very clear about exactly what you intend to do. Get permission in writing and then stick exactly to what was agreed. Make sure you’re clear on whether or not you can leave the changes in place when you move on.
If you can’t then think about the practicalities of rolling them back. For example, you may find it a lot easier to cover up paint than to take down even “renter’s wallpaper”, let alone traditional wallpaper.
People with old houses beware
Even if you live in a historic property, it’s probably fairly unlikely that you’ll find an oyster-shell wall or a fabulous wall mural in it. There is, however, at least the possibility of, literally, uncovering surprises, good and bad.
This means that if you’re planning on renovating an old house, you need to expect the unexpected and be ready to deal with it. That alone could be reason enough for home DIYers to leave well alone and just call in the pros.
The pros may also be in a better position to advise what materials can (or must) be used (or not used) in an older property. For example, some properties may require the use of traditional lime plaster to ensure breathability (and hence avoid condensation). In other cases, however, it may be appropriate to use modern materials but in a sympathetic manner.
Beware of your utility infrastructure
If you’re working anywhere near electrical wiring or plumbing (for gas or water), then you need to make sure that all the relevant supplies are turned off. Even so, you need to be very careful to avoid damaging them. The cost of putting right that damage could far exceed any savings you would have made by going down the DIY route.
If you’re tempted to attempt any DIY involving your utility infrastructure, then do your research thoroughly before you make a decision. Get it wrong and you could run into a whole world of pain. In fact, devaluing your home could be just one of a long list of problems you need to address.
Beware of working around windows
Take glass seriously. Even if you’re only doing something fairly basic like putting up a new curtain rod or installing shutters, you still need to protect the glass from both impact and vibrations. This isn’t just about keeping your window in one piece. It’s also about avoiding you (or anyone else) getting injured by broken glass.
Beware of working at heights
If you can’t reach something easily, get a ladder (or proper step stool). Do not just try to stretch or stand on a regular chair. Firstly you need to keep yourself safe. Secondly, if you’re going to do a job, do it properly. Raise yourself to a height where you can see and work comfortably and effectively.
Beware of paint cans
Spilt paint may not devalue your home, but it can certainly devalue your floor. Cover the floor properly. Pour as much paint as you need into a tray and keep that on a cover. Keep the lid on the paint can unless you’re actually pouring from it.
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