House Price Boost

Further to yesterday’s post about the rush of landlords to close in on the April deadline for stamp duty rises, the Evening Standard has reported that £30,000 was added to the average home in London as a result of this rush.

Paul Smith, chief executive of Haart estate agents, said in the article: “Our data shows there were 11 buyers chasing every property to come onto the market in March whilst transactions surged 19 per cent on the month.”

Phenomenal figures coming out of the capital but most likely not sustainable considering the 3% surcharge is now in place.  Whether this affects serious investors or not is yet to be seen.

Landlords Borrowing £7.1bn

The rush ahead of the stamp duty changes that came into effect in April seem to have seen buy to let lending soar according to the Guardian.

Paul Smee who is the Council of Mortgage Lenders (CML) director general, said in the article:  “These supercharged levels of activity are likely to be temporary and will fall back over the summer months.”

The issue is that there now may be an oversupply on the market.  This will be great for those looking to rent in certain areas as some rents may see a slight drop over the coming months.  What may be the flip side of this is potential mortgage arrears for all those landlords that have been caught up in the rush.

Mortgage Market

In an article in the FT Adviser today, the Association of Mortgage Intermediaries (AMI) has asked the regulator of the market, the Financial Conduct Authority (FCA), to leave the mortgage market alone.

AMI chief executive Robert Sinclair said in the article:

“After the five-year Mortgage Market Review and the two years taken to implement the Mortgage Credit Directive, …the sector be left alone.

“Some might applaud the FCA decision to challenge the results of its own MMR, but AMI is concerned this will only introduce uncertainty into what is still a fragile market.”

The reason for the comments come off the back of the FCA looking into beginning a targeted market study to look at the quality of business submitted by intermediaries.

Dip In House Price Data

City AM earlier in the week carried the story that the Halifax House Price Index noted a 0.8% decline in house prices in March.

The slowdown means that property prices have grown by just under 10% in the past year. Not too drastic but is it a sign of a bigger slowdown?

Martin Ellis, Halifax housing economist, said in the article: “Current market conditions remain very tight as the severe imbalance between supply and demand persists. This situation, combined with low interest rates and rising employment and real earnings, should continue to push house prices up over the coming months. Weakening sentiment regarding house price prospects and a dip in consumer confidence, however, suggest that annual house price growth may ease.”

Residential Mortgages Up To 85 Years Old

You can’t have missed this story this week.  Nationwide leap frogged over the Halifax’s announcement last week where they raised the maximum working age of applicants by announcing they would consider a mortgage up to someone’s 85th birthday.  This was widely covered including an article from the BBC.

What’s interesting is that lenders now seem to be happy considering these applications which is great and as this blog has written about in the past, far overdue.  There are restrictions to the Nationwide offering and this is a maximum loan to value of 60% with a loan cap of £150,000.  Therefore, it may not be for everyone but technically at 60% loan to value this would see the maximum property value (if you borrowing the full £150,000) being £250,000.

More lenders to follow? Absolutely.

100% Mortgages

There were many stories last week in and around the bank of Mum and Dad entering a would be top 10 lender in the UK if they were an official lender due to the amount of help they supply for deposits in the house buying process.  However, this was eclipsed on the news that 100% mortgages are back as reported in the FT.

The 100% has been back for a while and although the Barclays offering is an improvement on a previous incarnation of their family springboard product there are other 100% deals out there based on a different guarantee.  The Barclays proposition involves parents or family members depositing a percentage of the purchase price of the property with the bank over a period and during this period a guarantee is held on it.  Another 100% offering in the market from Aldermore sees no money down (or exchanging hands) and instead takes charge on a family member’s property provided loan to value limits aren’t breached.

Either way, these aren’t true 100% mortgages as we’ve seen in the past or will in the future.

Second Charges

Second charges have seen their popularity rise considerably according to an article in the Guardian.

A second charge is where the borrower looks to raise additional capital against their property with the help from another lender (other than the one who currently holds the main mortgage on their property).

The reason these are becoming so popular is because second charge lenders can sometimes consider a higher loan to value than traditional lenders.  They also have a higher tolerence for impaired credit which can help some borrowers.

The main downside can be when you look to remortgage your property when your original main mortgage deal comes to an end.  Not all lenders will allow a second charge in the background.

Buy To Let Criteria

It’s certainly a sector that the FCA said they would focus on and they have.  An article in the Telegraph today states that the time has come where buy to lets are no longer attainable for the average investor.

One of the main lenders that did buy to let mortgages up to 80% loan to value came out recently to say that they are now restricting their maximum loan to value to 75%.  They have also tweaked their rental calculation which sees the rent needing to be much higher in order for the buy to let to be affordable.

Where does this leave would be buy to let investors?  One answer is to have very deep pockets.  Another answer is to consider some lenders who are able to mix both personal income and rental income to meet any rental shortfalls (based on yield calculations).

Buying a home?  Time to talk mortgages.

As Spring arrives and the Easter weekend begins, a lot of people’s attention moves towards house buying.  You might well be considering your first purchase or moving home.  Either way, the mortgage landscape has changed dramatically in the last eighteen months and with the Mortgage Credit Directive now live it is as important as ever to make sure you are putting yourself in the best position.

Whether you are in England, Scotland, Wales or Northern Ireland the fundamentals around getting yourself prepared for buying a home is the same.

You may find yourself in a situation where the local property market around you is moving very fast and property is being snapped up very quickly.  If this is the case then getting an agreement in principle early and speaking to a broker like myself before you start looking is worth it.

When property prices rise then often the buyer has to compromise.  What this traditionally means is looking in a different area or looking at a smaller property as your money can’t stretch as far as it once did.  What a lot of people overlook though is deposit.

Your deposit can becomes less from a loan to value perspective in the following scenarios:

  • You’re buying a property that needs work and so you need to hold some money back for home improvements
  • You’re buying a property at a value higher than what the surveyor says it is worth and therefore the lender won’t acknowledge the extra you’ve paid ‘over’
  • You’re having to spend more money than you expected on costs such as stamp duty, solicitors or moving home as this wasn’t in your initial budget

In all the above it is imperative to have had a talk with your broker before looking for a property.

Why?  Some lenders, for example, will restrict your affordability (the amount you can borrow) if you are putting down a 5% deposit instead of a 10% deposit.  This could mean having to walk away from the property you have spent hours finding.  Therefore, having a discussion around this could prevent this.  Don’t waste this time and get an agreement in principle as early as possible.

Additional fallout from a rising property market can be that affordability (the amount you need to borrow) is stretched.  A broker like myself is there to put you in the best possible position for when you put an offer in by making sure the right amount can be attained for your monthly budget.

To put yourself in the best position for getting your agreement in principle as accurate as possible is to look out your paperwork (unfortunately).  Having your three month bank statements and three latest payslips (or if self-employed your accounts) to hand when speaking to a broker can save you a lot of time and heartache later.

There’s a lot more that could be discussed around the house buying process and too much for an article to cover.  If you want more information and are looking to obtain a mortgage get in touch (details are below).

Have a Good Friday.