by admin | Jul 3, 2020 | Mortgage News
The UK has been in some form of lockdown since 23rd March. It’s impossible to know for sure what impact that had on the spread of the Coronavirus. It is, however, very clear that it has had a significant impact on people’s finances. The challenge now is to transition back into “business as usual” while still supporting those who need a bit of extra help.
The economic impact of COVID19 (so far)
Over 10 million people have received financial assistance through the Coronavirus Job Retention Scheme (about 8 million) or Self-Employed Income Support Scheme. The CJRS was due to close at the end of July but has now been extended until the end of October. That said, the nature of the scheme is due to change slightly.
At present, the government is paying 80% of salaries up to £2500 per month and employers may (or may not) top this up to the full amount. Employers cannot ask furloughed employees to do any work for them, but employees can take second jobs and/or freelance. From August, employers will start to have to make contributions towards the scheme, but they can also start bringing employees back to work on a part-time basis. Alternatively, they could make them redundant.
Only time will tell, but, at present, it is impossible to rule out the possibility that the requiring employers to contribute directly to the furlough scheme (as opposed to indirectly through taxes) will lead to businesses reassessing their staffing needs and potentially deciding to cut back. This means that lenders may need to be prepared for more borrowers getting into difficulty, if only temporarily.
FCA measures to protect mortgage holders
Since March, both residential and buy-to-let mortgage-holders have been able to request mortgage holidays (provided that they were up-to-date with payments). Initially, these were for up to three months. In June, the FCA extended the respite period to the end of October.
Although payments are stopped, interest continues to accrue (unless the lender agrees to waive it which they are not obligated to do).
Provided that borrowers follow the correct procedure (i.e. agree the holiday with their lender rather than just cancelling payments), the payment break will be ignored by the credit-scoring agencies.
At the end of the holiday period, the borrower and the lender have to agree on a way forward. In particular, they need to establish whether the borrower can afford to go back on a standard repayment plan. If so, they need to determine how the borrower will make up the missed payments (e.g. by adding them to their regular payments or by extending the mortgage term). If not, they need to work out what potential solutions are available.
A cautious note of optimism
Although the post-Coronavirus environment could be a challenging one for lenders to navigate, it does not have to be a disaster. There are grounds for at least cautious optimism. For example, according to statistics from the Bank of England, during April, consumers paid back a record £7.4 billion in consumer credit and also increased deposits in banks and building societies by £37.3 billion.
The fact that people were able to make these payments shows that some people at least had some level of income over and above what they needed to cover their basic necessities.
There are still people in work and as more businesses reopen more people should be able to get back into earning money through active employment (as opposed to through support schemes). Even where jobs are lost, the employees in question may have savings and/or insurance to help tide them over. They may also receive redundancy payments to ease the transition.
Your property may be repossessed if you do not keep up repayments on your mortgage.
The FCA does not regulate some forms of buy to let mortgages.
The FCA does not regulate letting agents and we act as introducers for them.
by admin | Dec 27, 2019 | Mortgage News
All things considered, it’s probably fair enough that the news has been dominated by the question of what Boris Johnson’s election victory means for Brexit. It’s probably also fair to say that Brexit will have a huge influence on the UK over the coming years, if not decades.
It is, however, also important to note that Brexit is only one issue among many. The economy in general and the housing market, in particular, are also key issues for UK residents and while they will almost certainly be influenced by Brexit, they will also be influenced by various other factors, not least of which being government policy and practice. With that in mind, here’s a quick overview of what the election could mean for mortgages.
The Brexit issue
Having just said that Brexit is only one issue among many, there’s no getting away from the fact that it is likely to be a very important issue. Given that the Conservative win makes a hard Brexit massively more likely, it’s probably safe to assume that this will have an adverse impact on the Pound, at least over the short term. This assumption can be supported by a look at the way the currency markets have reacted to Brexit-related news and, in particular, the way the Pound has dived since it was announced that Boris Johnson intended to try to make it illegal to delay Brexit any further.
In and of itself, a weak Pound is bad news for some and good news for others. It does, however, have the potential to push up inflation and if that happens there will be one of two outcomes. Assuming that the government sticks to the current rules on inflation (i.e. a target of 2% with a 1% margin of error either way), this would effectively force the Bank of England to raise interest rates, which, of course, is bad news for borrowers. That being so, borrowers might want to look for a fixed rate, possibly a longer-term fixed-rate, to give themselves reassurance.
Any remortgaging decision should be taken with care and not just because there tends to be quite a bit of upfront expense and paperwork. Fixed-rate mortgages can be relatively expensive, partly because they are still something of a niche market and partly because they essentially combine two products, a mortgage and an insurance policy. At the same time, however, while there is a limit to how far interest rates can drop (unless you believe the government would use negative interest rates), they can rise indefinitely.
The affordability issue
Whatever your views on Brexit, hopefully, you will benefit from the fact that the saga appears to be coming to a close and that, one way or another, we can all move on. As is always the case in life, this is likely to be easier for some people than others. For example, people in professions for which there is high demand globally may feel confident about their ability to “keep calm and carry on”, whereas other people may feel rather more vulnerable.
If you already own your home and are having concerns about how to pay your mortgage over the long term, then it might be a good idea to speak to a professional financial adviser. They might be able to help you find options you might otherwise have overlooked, which could be anything from taking advantage of the rent-a-room scheme to looking for a mortgage product with some degree of flexibility, such as an offset mortgage.
If you are looking to buy your first home and are concerned that Brexit could make it harder for you to get a mortgage, then you may want to look at products such as the Lifetime ISA and/or the Help-to-Buy scheme, to see if they could make it easier to build a substantial deposit and thus increase your attractiveness to lenders.
Your home may be repossessed if you do not keep up repayments on your mortgage.
by admin | Oct 10, 2019 | Mortgage News
It’s no secret that it can be tough to get on the property ladder, either as a genuine first-time buyer or as someone who’s bought before but gone back to renting for whatever reason, for example, to spend some time abroad. The good news is that, in spite of all the challenges, it is possible. Here are some tips to make it happen.
The less you spend on rent the more you can save
This may seem like stating the blindingly obvious but it’s one of the many realities of life which can be a whole lot easier in theory than in practice. To be perfectly blunt, putting together the deposit you will need to buy a home of your own is likely to be a lot easier if you are prepared to make compromises on where you live in the present. Living with your parents may be the ultimate example of this (their house, their rules) but this is not necessarily a practical option for everyone.
For those living away from home, making compromises may involve choosing a smaller space over a bigger one, accepting a longer commute, or choosing a less-desirable area over a more chic one. Obviously, all of these options have to be subject to the common-sense test. There is a limit to how small a space a person can reasonably live in for an extended period of time and there is no point in choosing to live in a place where the housing is affordable but the commute is long if it means that you are just swapping housing costs for commuting costs (and time) and you clearly want to avoid living in a place which is actively unsafe. All the same, however, all things being equal, you should probably give preference to the place with the lowest housing costs as rent is typically a substantial expense and hence anything you can do to reduce it can make a real difference to how quickly you can save for a deposit.
Always look for ways to increase your income
The nature of your employment will largely determine how feasible it is for you to earn extra money in your main job, but if you’re in a position where you get a fixed salary for (officially) fixed hours and have little scope to earn extra on top and you’d prefer to stay in that job, at least for the foreseeable future, then you can still look for other ways to earn extra money. Getting a second job can bring all kinds of complications (including your current employer being unhappy about it, you new employer making requests which conflict with your main job and your tax being messed up, although this last should not happen), but there is nothing to stop you setting yourself up as self-employed and building your own little side-hustle. Just remember that you will need to register as self-employed and pay taxes on whatever you earn.
Take care of your credit rating
If you’ve saved and worked to put together a solid deposit, it would be heartbreaking to be turned down for a mortgage because of silly mistakes such as going over the limit on a credit card or missing a payment. Standard advice here is to put all payments on Direct Debit so that you never miss one, however, there is an alternative approach, which may save you a little money, at the expense of some organization. Put as many payments as you can on manual and pay them the moment you have the money to do so, for example on payday or when you get your earnings from your side hustle (remember to set aside money for taxes). This will minimize the interest you pay.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Aug 30, 2019 | Mortgage News
While the Bank of Mum and Dad must be one of the financial media’s favourite clichés, like many cliché’s it’s grounded in truth. Even with a university education leading to a professional job, today’s generation of young people can struggle to save the hefty deposits needed in the modern housing market while also paying rent. Unofficial “bridging loans” (or straightforward advances on their inheritance) can go a long way towards helping young adults to get the keys to their first home. If you’re a parent contemplating assisting your child with a housing purchase, here are some points to consider.
Do your sums thoroughly before you speak to your child
Look after yourself first. It isn’t selfishness, it’s self-care, which is very different. If you wind up giving your child a sum of money which will (or could) leave you financially stretched (even if the child agrees to pay it back), then you risk laying the ground for all kinds of problems from the entirely practical to the emotional. Do your sums thoroughly, so that you only offer money you are sure you can live without, not just in a best-case scenario but also in a worst-case scenario.
Set expectations clearly right from the start
In addition to deciding how much you can afford to give your child, you also need to decide whether the money is a gift or a loan and if the latter on what terms it will be given. This may seem like a harsh comment, but loans between family members can be fraught with pitfalls even if they’re documented in such a way as to make them legally-binding contracts. Let’s be honest, as a parent if your child fails to pay back a loan as agreed, are you really going to take legal action against them? What if they experience a negative life event (sadly it can and does happen) and genuinely can’t pay it back, at least not in the time agreed, perhaps not ever? On that point, if you do decide to advance money in the form of a loan, it is a very good idea to document this formally, rather than just “taking it on trust”. That way, if your child does run into financial difficulties, you will have a claim on their funds in the same way as any other creditor (and it is entirely up to you what you do with any funds you are given from their assets, you can give it straight back to them if you wish), whereas an undocumented loan is very likely to be ignored in any insolvency process.
Think about how your actions will impact other people
In principle, you can, of course, do whatever you like with your own money. In practice, however, other people will have an opinion on your actions and sometimes this is entirely understandable. In particular, if you have more than one child, being fair to each of them can be more complex than it sounds. From a purely mathematical perspective, you could just give (or loan) the same amount of money to each on the same terms (although if you were going for real mathematical precision, the money would have to be given at the same time to negate the effect of changes to interest rates and inflation). Life, however, is about more than mathematics, for example, if one child went to a traditional university and received financial support from you during their studies, while the other undertook an apprenticeship and paid their own way, would it really be fair to give them both the same amount of help towards a deposit on a property? That’s a question only you can answer, but it’s definitely worth consideration.
The FCA does not regulate some forms of bridging loans.
Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
by admin | Aug 18, 2019 | Mortgage News
Even though the government seems to have been subjecting buy-to-let property investors to a non-stop barrage of financial attacks, the fact still remains that the laws of supply and demand still favour property investors. At this point in time, however, it is no longer possible for investors simply to blunder into property blind and wait for a rising tide to do its work. Now property investors really have to be careful to buy the right properties, in the right locations at the right prices and to be completely sure that their numbers add up. With this in mind, here is a quick guide to the key points of buy-to-let finance.
Mortgage Tax Relief is coming to an end
This fiscal year is the last year in which Mortgage Tax Relief will exist at all and only in a very reduced form. The announcement that Mortgage Tax Relief was to be abolished was widely reported in the financial press, as was the fact that the change meant that some landlords might be better off switching to a limited company structure. This is a complex topic and might be worth discussing with a financial professional. The more simple point to remember is that you will need to factor this change into your financial calculations, especially since you are no longer permitted to charge “add-on” fees to your tenants.
A ban on “add-on” fees
Picking up on the previous point, as of June this year it will cease to be permitted to charge tenants any extra fees over and above their rent. This is entirely separate to the ban on letting agents charging fees to tenants. In principle, this should not actually make any difference to a landlord’s finances because it will simply mean that instead of fees being charged at the time the service is rendered (or shortly thereafter), they will be factored into the level of rent charged, however this does put the onus on the landlord to have a totally clear view of everything which they will need to charge to the tenant rather than only thinking about it when the job needs to be done and billed.
The removal of the “wear-and-tear” allowance
This is another change which really is probably more about administration than finance, the old 10% “wear-and-tear” allowance is no more and now landlords have to itemise each deductible item. In short, if you have never been in the habit of holding onto receipts for maintenance and upgrades to property, then you need to start developing it.
Stamp duty tips against investors and towards first-time buyers
The 3% surcharge on second or subsequent properties, has been a fact of life for some time now, however, the decision to relieve first-time buyers of the need to pay stamp duty is rather more recent. In principle, improving affordability for first-time buyers as compared to other buyers (especially investors) could make it more difficult for investors to secure quality property, but, then again, the fact that buy-to-let landlords will simply pass on their expenses to their tenants may counterbalance this.
The issue of affordability
Anyone interested in starting a buy-to-let portfolio (or expanding an existing one), should be aware that mortgage lenders are now obligated to undertake affordability checks on “portfolio landlords” currently defined as a landlord with four or more distinct mortgaged Buy to Let UK rental properties (or seven or more for remortgage applications without capital raising). This definition could, of course, be updated and/or the requirement for affordability checks extended to all landlords seeking mortgages.
Regulatory issues
As a final point, letting residential property is now a highly regulated activity and regulations can and do change so landlords must keep appraised of them otherwise they risk financial penalties, even if their only offence was an administrative error with no real-world impact.
Your property may be repossessed if you do not keep up repayments on your mortgage.
The FCA does not regulate some forms of buy to let mortgages.
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