by admin | Sep 18, 2020 | Mortgage News
The COVID19 lockdown brought the UK’s housing market to an emergency stop. It has now started moving again but still has to keep the Coronavirus very much in mind. At present, it looks like this is going to be the case for the immediate future at least, but what does the longer-term future hold for the mortgage industry?
A move to (more) remote working
While the government has called for office workers to return to their desks, the response from business has been varied, to put it mildly. Some business leaders are clearly eager to get staff back together. Others seem to be perfectly happy to continue with home-working, at least part of the time.
For the financial services industry, including the mortgage industry, working from home permanently could raise a lot of serious challenges. In particular, it raises questions about physical security and data security. These challenges may not be insurmountable, but they may take time and effort to resolve. In other words, it may not, currently, be possible for mortgage professionals to be fully and permanently remote, even if it was what they wanted.
On the other hand, it may be very possible for mortgage professionals to interact with clients (and colleagues) remotely. The age of the client will not necessarily be a barrier to remote interaction. This was demonstrated by the equity-release sector, which has been using telephone and video calls to replace in-person advice sessions.
The benefit of this to the business would be that advisors could be based in a central location rather than needing to travel to clients. The benefit of this to the customer is that (part of) the cost-savings from this could be passed on to them. There could also be a proviso that customers who felt they really needed a face-to-face advice session could still receive a personal visit from an advisor.
Increased reliance on virtual valuations
Having a reliable system for home valuations is key to a functioning property market and hence to a functioning mortgage market. That said, however, there is a difference between “reliable” and “unchanging”. The fact that the mortgage market has been able to continue functioning without physical valuations shows that they are not always necessary. They may be desirable, but that raises the question of how much value should be placed on a want rather than a need.
This may be a question the mortgage industry has to start answering sooner rather than later. The answer may be to keep using virtual valuations for lower-value and/or standardised properties and use physical valuations for higher-value and/or unusual properties. This approach could potentially reduce costs and streamline processes without placing the lender at serious risk of either deliberate fraud or human error.
More flexibility for verifying a person’s identity
Even in the 21st century, a person’s signature can have huge legal significance. Admittedly for really important documents, like wills, a person’s signature alone may not be sufficient. There may need to be additional witnesses and/or notarisation.
This fact created a challenge for the legal profession, which had to come up with a way to allow legal documents to be signed and witnessed while maintaining social-distancing rules. The current approach is to use “window witnessing”. Essentially, the relevant person signs a document while being literally watched through a window. The person then hands over the document to the witnesses who sign it themselves, while maintaining social distancing.
Although this deals with the immediate situation, it doesn’t exactly take advantage of the capabilities of technology. Going forward, the legal and financial services industries, including the mortgage industry, may benefit from pushing for more use of digital signatures and, if necessary, video-witnessing.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Sep 14, 2020 | Investment, Mortgage News
As part of the post-COVID transition, the government has introduced a new package of support measures for renters. Here is a quick guide to what you need to know.
The new rules in brief
From now until (at least) 31st March 2021, landlords will need to give tenants a minimum of six months’ notice before commencing any legal action to regain possession of their property. There are five exceptions to this where shorter notice periods may be applied. These are:
- breach of “Right to Rent” rules (3 months)
- over 6 months of accumulated rent arrears (4 weeks)
- anti-social behaviour (4 weeks)
- making a false statement (2-4 weeks)
- domestic abuse (2-4 weeks)
Additionally, from 20th September, if legal proceedings are raised, landlords must provide judges with all relevant information about their tenant’s circumstances, including the impact of COVID19. If they do not, the judge may adjourn the proceedings.
What the new rules mean in practice
Realistically, the only one of these rules which is likely to be a major issue for landlords is the one about accumulated rent arrears. This is likely to be particularly grating for landlords with mortgages. They will be expected to make their monthly payments even though they have no income from the property.
Hopefully, most, if not all, landlords in this situation, will have insurance and/or some other way of making the payments. If not, then they may need to work with their lender to determine a path forward. This may involve an agreement to sell the property as soon as feasible. In the worst case, it may involve foreclosure.
The path towards the long-term post-COVID future
In principle, nobody knows what the future will bring until it arrives. In practice, the current direction of travel in Westminster seems to be one of more protection for tenants. At some point, the government (or a government) is going to need to address the increased risk this creates for landlords. Until then, however, landlords are going to need to select their tenants very carefully (or exit the residential buy-to-let) market
Rather ironically, however, landlords will also need to be very careful not to put themselves on the wrong side of the law when they select their tenants. Firstly, it is legally questionable to place a blanket ban on letting to tenants on benefits. It’s also questionable how much sense this makes given that tenants can end up on benefits during a tenancy. Secondly, landlords must be very careful to avoid breaking the Equality Act 2010, particularly when carrying out “Right to Rent” checks.
Alternatives to residential buy-to-let
The dynamics of the UK’s property market mean that it’s hard to see residential buy-to-let becoming unprofitable – provided that investors approach it in the right way. At the same time, it’s understandable that some buy-to-let investors may want to investigate other options. Here are some you may wish to consider.
Taking in lodgers
Instead of letting out whole properties, you could look at properties which are large enough for you to live in yourself and have space left over to let out.
Short-term lets
In cities, short-term letting has become somewhat controversial. In rural areas, however, short-term lettings often provide a much-welcomed boost to the local economy. At present, the “staycation” market is keeping the sector going very nicely. Over the long term, it’s to be hoped that international tourists will return.
Holiday lets are one area which might actually benefit from Brexit. If the UK’s exit from the EU leads to a weaker pound, then the UK will become more affordable to international tourists.
Commercial property
Even if there is a reduced demand for office space, there will still be a need for other kinds of commercial property.
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by admin | Sep 3, 2020 | Insurance News, Mortgage News
Even a global pandemic couldn’t keep the UK’s housing market closed for long and now it’s very much back in business. In fact, it’s moving into peak house-buying season. This means that both buyers and sellers need to think about what they need to do to make their moves happen. For most buyers, that means getting a mortgage. In fact, it means getting the right mortgage.
Getting the right mortgage can make such a huge difference to the overall state of your finances, that it’s worth taking expert advice to get the very best match for your situation. It may save time if you consider the following points before your appointment.
Do you want a fixed rate?
Currently, this is likely to be a major issue for many (potential) borrowers so it’s worth thinking about carefully. The key point to understand is that the major benefit of a fixed rate is stability. You will know exactly how much you are going to pay each month over the payment term.
There is, however, a cost to this stability. Lenders know that they are the ones shouldering the risk of interest-rate rises and they factor this risk into the cost of their products. In other words, a fixed-rate mortgage may end up costing you more than a competitive floating-rate product.
What’s more, fixed-rates are offered for set periods (again to mitigate risk). This means that you need to think about what you will do once the fixed period ends. If you simply drop onto your lender’s standard variable rate, you may well end up finding yourself getting a very poor deal for your money. You could ask your lender to switch you to a new product. If, however, they won’t, or you don’t like their other offers, then you’re looking at paying the more expensive rate or remortgaging with all that implies.
A note on negative interest rates
There has been some speculation in the media that the Bank of England could end up implementing negative interest rates. This may leave borrowers wondering what it could mean for them. The first point to note is that, at present, the issue of negative interest rates is pure speculation. The second point to note is that, even if it does, there is absolutely no guarantee that it’s going to result in a bonanza for borrowers.
Those on a fixed rate are not going to see any change. That’s exactly what a fixed rate means. It doesn’t change no matter what happens. Those on variable rates could, in theory, see themselves being paid to borrow. In practice, however, they may find that there is a clause in their contract which says that their rate will never drop below a certain amount no matter what happens.
Obviously, borrowers are free to remortgage (assuming they meet the relevant eligibility criteria) but it’s hard to see UK lenders falling over themselves to issue mortgages which effectively cost them money. That’s before you get into the issue of assessing affordability and thinking about how borrowers would cope when life returned to normal.
Is a traditional repayment mortgage right for you?
For many people, a traditional repayment mortgage is exactly the right way to go. You pay off the capital and interest over the life of the mortgage and at the end of the term, you own your house outright.
There is, however, a difference between many people and everyone. For some people, interest-only mortgages are the most sensible option, even in the residential market. For others, offset mortgages could offer welcome flexibility in uncertain times.
Even buyers who do want a traditional repayment mortgage may prefer one with more modern options, such as the ability to take payment holidays or to drawdown equity (both within agreed limits).
Your property may be repossessed if you do not keep up repayments on your mortgage.
Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration
by admin | Aug 21, 2020 | Mortgage News
If you’re a potential first-time buyer then you may currently be very confused by all the headlines regarding the health, or otherwise, of the property market. There’s an easy way to deal with this confusion – ignore them. Focus on the fact that homes are meant to be places where you live. The fact that they also tend to increase in value over the long term is simply a useful bonus.
With that in mind, here are some questions you should be asking yourself before deciding whether or not to aim to buy now or wait until later.
Am I 100% sure I can service a mortgage over the next 5+ years?
When it comes to mortgages (and by extension home-buying), this is the key question. Ideally, you should be confident that you can service a mortgage over the entire term (without having to sell your home). In the real world, however, the length of mortgage terms means that it’s close to impossible to know what you’ll be doing (financially or otherwise) at the latter part of them. You should, however, be totally confident about what you’re doing for the next five years and if you’re not, then you’re probably better off renting.
Remember that buying a home and being unable to keep up with your mortgage can work out a very expensive and painful experience particularly if you end up in negative equity (owing more than your house is worth). You are especially vulnerable in the first five years or so of ownership. This is not only the time when you’ll have the least equity in your home, but also the time during which you’ll still be swallowing up the purchase and moving costs.
Am I 100% sure I can commit my deposit money over the next 5+ years?
Similar comments apply here. Once you convert your cash into bricks and mortar it stays converted until you sell your home. Selling your home within the first five years of purchase can see you having to take a hit on the transaction costs, not to mention having to deal with a whole lot of upheaval. In short, if putting together a deposit would leave you very short of cash, then you might be better off renting. Even with insurance, you have to think about what would happen if you had any sort of emergency.
Do I want to stay in one place over the next 5+ years?
In principle, you have the option to buy a house, live in it for a while yourself, then let it out while you go to live elsewhere, for example, if you go to work overseas. In practice, the amount of administration and cost this can involve means that it’s probably only worth even considering in very niche situations.
For example, you’ll have to change every product associated with your house, including your mortgage and insurance, from residential-property products to investment-property products. You’ll also need to meet all your legal and compliance obligations regarding the maintenance of the property and the welfare of your tenants.
This means that these days, you should buy a property on the assumption that you’ll be living in it yourself until you’re ready to sell it. If you’re thinking of letting your property on a non-residential basis (for example allowing holiday rentals for part of the year) and/or having a lodger, then you would need to check with your mortgage lender and your insurance provider(s) to make sure that this would be acceptable to them.
For completeness, if you are thinking of using your main home as a holiday let for part of the year, then you should also check with your local council to make sure that this is permitted.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Aug 14, 2020 | Mortgage News
If you have a mortgage, then it’s likely to be a significant part of your monthly outgoings. This means that getting the very best product for your situation can make a real difference to your finances and can definitely be worth making a bit of effort to obtain it. At the same time, remortgaging is not necessarily the right decision for everyone, so it’s important to think carefully before you decide whether or not it’s right for you. Here are some points to consider.
Can you exit your current mortgage?
As always, before you consider whether or not you should, it’s advisable to check whether or not you can, or at least whether or not you can without penalty. If you got a special deal on your mortgage then you may find that there is a lock-in period during which you can only exit the product if you pay a penalty. You might still want to do your sums to see if there is a case for remortgaging, but you should be realistic about the impact such a penalty might have.
Could you get a mortgage now?
The affordability criteria have been in place for several years now, however, these are minimum standards, not targets. In other words, there’s nothing whatsoever to stop lenders from tightening up their acceptance criteria beyond the minimum requirements. It’s, therefore, a good idea to do some research on what deals are available now and who is likely to qualify for them.
You also need to be realistic about how you’ve managed your finances since you’ve had your current mortgage. If you’ve found yourself in challenging financial times and that has been reflected in your payment history, then you may find it difficult to find a lender who will take you on now. Your situation may be somewhat easier if you took an arranged payment holiday due to COVID19-related issues. It does, however, very much remain to be seen how lenders are going to deal with these over the long term.
Be aware, however, that a good mortgage broker may be able to find deals which you would never have found on your own, so don’t give up if the market looks tough.
Are you able to cope with the current practicalities of remortgaging?
When you remortgage, you basically go through the standard mortgage application process all over again. This means getting a valuation and this means getting a surveyor on-site. This means dealing with all the COVID19 protocols. Are you able to implement them? If you’re not confident about this, then it’s safer to hold off remortgaging until you are (or until COVID19 ceases to be an issue). At the end of the day, while remortgaging can save you a lot of money, nothing can compensate you (or anyone who visits you) for the damage COVID19 can do.
Can you get a better deal from your current lender?
Before you make a final decision on whether or not to go ahead with the remortgaging process, it may be worth checking in with your current lender to see if they can make you a better offer. That could give you the benefits of remortgaging without the cost and paperwork.
Are you remortgaging for the right reasons
Last, but very definitely not least, it’s important to be scrupulously honest with yourself about why you’re remortgaging. There’s a big difference between remortgaging to save money on a mortgage you’re confident you can afford and remortgaging to try to make ends meet.
If your finances are that tight, then you really need to get financial advice and look at all your options very carefully. You may find that you can keep your home, but even if you can’t, you can vastly improve your chances of selling and moving on our own term, rather than waiting for foreclosure.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Jul 31, 2020 | Mortgage News
Prior to the lockdown, average house prices were predicted to rise by up to15% over the next five years. With COVID19 having sent the world into a tailspin, that might now be overly optimistic. It does, however, seem reasonable to expect the housing market to hold on and possibly even see growth. This is because the same positive factors still largely apply.
The “Brexit bounce”.
Houses are long-term purchases. There are lots of reasons for this, but most of them revolve around the fact that buying one usually involves a number of up-front costs and, it has to be said, corresponding administrative work.
This means that you generally want to be sure that you can stay in one for at least five years before you even contemplate a purchase, especially if you’re a first-time buyer and hence potentially qualify for special help.
Additionally, the fact that most buyers need mortgages means that they have to think carefully about their ability to service a mortgage over at least five years (which will be checked by a lender in any case).
For all of these reasons (and more), the extended delay over implementing the result of the Brexit referendum has really acted as a strong brake on the housing market. Hopefully, the fact that Brexit is now finally happening (regardless of your views on it), will allow both potential buyers and potential sellers to make plans in which they can have some degree of confidence.
Admittedly, this does depend on finding a post-COVID19 “new normal” but the signs are that this appears to be happening already. The lockdown is easing, businesses are reopening and while the economic situation remains challenging, there at least appears to be light at the end of the tunnel.
Significant investment in transport infrastructure
HS2 is, at the very least, delayed, and it will be interesting to see whether COVID19 will force the government to cancel it (or give them a face-saving reason to cancel it). Even if HS2 is cancelled, there is still very likely to be a focus on continuing to develop the infrastructure in the north of England. This will be partly for economic reasons (to encourage growth in the area) and partly for political ones (to hold on to electoral gains).
On that note, the expansion of Manchester Airport is already going ahead. In principle, the third runway at Heathrow should also go ahead, but there is always the possibility that this will be cancelled, possibly to placate those who are opposed to HS2 on cost and/or environmental grounds. Crossrail, however, is already underway.
Since none of these developments is complete (in fact neither HS2 nor the third runway at Heathrow are actually under construction yet), it’s impossible to say what specific benefits they will bring. It is, however, fair to say that improvements to infrastructure, especially transport infrastructure often lead to increased house prices along the route, particularly near to stops.
Economic stability (possibly growth)
The fact that the “Northern Irish issue” appears to have been resolved (or, at the very least, that there is a path to resolution), should hopefully make it much easier for there to be a smooth transition out of the EU.
It is probably fair to say that the EU’s desire to encourage members to remain in the block rather than going it alone will have to be balanced with a pragmatic approach to keeping trade flowing between the UK and the single market. It’s definitely fair to say that the UK has long traded on a global basis and hence should be able to continue to do so successfully. If this is the case and there is, at least, economic stability, then this is likely to have a positive impact on the housing market.
Your property may be repossessed if you do not keep up repayments on your mortgage.
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