Craig Upton

Craig Upton

Craig Upton has worked with UK Property Finance Ltd for over 18 years writing content for the websites and online finance publications. Craig writes website content, press releases and articles on popular financial brands in the UK. Creating strategic partnerships and supporting data with extensive research in the latest trends Craig is well versed with most products within the financial sector. Craig has worked within the online marketing arena for many years, having worked with British brands such as FT.com, Global Banking Finance and UK Property Finance, specialising in bridging loans and specialist mortgage finance. Craig has gained a wealth of knowledge and is committed to publishing unique content for our readers on various financial platforms supporting the products offered by UK Property Finance.

Energy Efficiency Upgrade Costs a Major Concern for British Households

Research suggests that most UK households are concerned about climate change and believe that steps need to be taken to safeguard the environment for future generations. A recent study conducted by the Office for National Statistics found that three in four (76%) Brits believe that climate change is a pressing issue that should be prioritised.

However, a separate study conducted by Cornerstone Tax found that a sizeable proportion of homeowners are being discouraged from boosting the energy efficiency of their properties due to the high costs involved. Around 45% of homeowners have investigated the prospect of making their homes more energy efficient but deemed any changes too expensive to go ahead with, without discounts or contributions from the government.

In addition, 22% said that they had taken steps to make their homes more energy-efficient but were unable to go ahead with their planned upgrades due to planning restrictions.

A major source of CO2

With around one-fifth of all CO2 emissions in the UK coming from residential properties, the importance of making collective improvements to household energy efficiency is clear. Consequently, the government recently outlined new legislation that would make it a legal requirement for all homes in the UK to have an EPC rating of C or above by 2035.

Energy efficiency is a priority shared by around 36% of households across the country, according to the report from Cornerstone Tax. However given the potentially high costs of conducting the necessary upgrades and improvements, around a quarter (23%) of those who would like to improve energy efficiency at home have made no effort to do so.

“It’s clear to me that the government will need to go further in incentivising these types of developments if they wish to see more people carrying them out,” said James Morley, business development director at Cornerstone Tax.

Even so, Mr Morley was keen to point out the potential savings that can be made by conducting energy-efficient improvements to their homes. Examples of this include loft insulation, solid wall insulation, ground-source heat pumps, and double glazing, which, according to Morley, can translate to savings of up to £890 per year in reduced energy costs.

Affordable funding

Commenting on the findings, group chairman of Cornerstone Tax, David Hannah, told Mortgage Introducer that affirmative action from the government was necessary to steer things in the right direction.

Specifically, he suggested that the government should “offer soft loans to householders in the same way they did to businesses during the pandemic”, enabling homeowners to spread the costs of their energy-efficient upgrades over several years at a lower rate of interest.

“While the current reduced VAT charges on energy efficiency expenditure are welcome, they do not cover a wide enough range of products and are ultimately only a small help to hard-pressed families,” he said.

“The net gain of reduced carbon emissions by insulating, allowing double glazing and other energy efficiency and heat/power self-generation measures vastly outweigh the costs in terms of the environment. Again, the government could assist with medium-term loans in the region of 10-year soft loans to enable these properties to be brought up to modern energy efficiency standards.”

Is it Possible to Save on Stamp Duty When Buying a Home?

When the stamp duty holiday came to an end, millions of movers and first-time buyers once again found themselves facing painful levies on already elevated home purchase costs.

In the UK, stamp duty land tax (SDTL) is payable upon the purchase of a home, calculated in accordance with the value of the property.

In England and Northern Ireland, you pay nothing on the first £125,000; 2% between £125,000 and £250,000; 5% between £250,000 and £925,000; 10% on the proportion between £925,000 and £1,500,000; and 12% on anything over £1,500,000.

Different rules apply in Wales and Scotland, but stamp duty is nonetheless payable on most properties.

But what few homebuyers realise is that it is perfectly possible to at least reduce the amount of stamp duty you are liable for. In fact, Shane Mockler, head of new business SDLT at Cap Ex Associates Tax Ltd., said that around 25% of buyers needlessly overpay.

“It’s estimated that one in four transactions overpay due to the various types or property acquisitions that are incentivised by the UK government,” he said, adding that “there are almost 50 reliefs and exemptions available to purchasers of property in the UK.”

First-time buyer exemption

For example, first-time buyers are exempt from stamp duty when purchasing properties valued at £300,000 or less. This translates to tens of thousands of annual property transactions where no stamp duty is payable. First-time buyers purchasing properties valued between £300,000 and £500,000 pay 5% stamp duty, but only on the amount above £300,000 rather than the entire price. This amounts to a potential saving of up to £5,000.

Mixed-use properties

Mixed-use properties and properties with a commercial element can (in some instances) qualify for a partial stamp duty discount, with the maximum rate payable being 5%. This includes properties such as a flat connected with a shop or properties bought alongside forests or farmland. But as all mixed-use properties are unique in terms of both their configuration and their eligibility for stamp duty relief, expert legal representation is usually needed to know where you stand.

Unconventional homes

Certain types of homes considered ‘unconventional’ may qualify for a stamp duty discount or could be considered exempt from stamp duty entirely. For example, homes that do not occupy permanent land space, such as mobile homes, caravans, and houseboats, are exempt from stamp duty, irrespective of their location and value. Elsewhere, properties considered unfit for human habitation at the time of their purchase may qualify for a lower stamp duty band.

Removable fixtures and fittings

Comparatively few homebuyers know that when buying a property, stamp duty does not apply to the “chattels” of the home. “Simply defined, chattels are movable objects that cover things such as carpets, curtains, furniture, ovens, fridges, and other movable objects that are left in the house by the vendor,” explained Mockler. By contrast, fixed furniture and fittings like bathrooms, kitchens, and built-in wardrobes are liable for stamp duty and must be included in the respective calculations.

Annual House Price Growth Hits a 17-Year High

Record cost-of-living increases continue to have little to no impact on the UK’s collective appetite to get on the property ladder, as demand continues to outpace supply in all areas of the country. According to Nationwide, insatiable demand has propelled annual house price growth to its fastest pace in more than 17 years, an astonishing 14.3% year-on-year growth rate in February.

This is the fastest annual growth the market has recorded since November 2004, even as the UK faces unprecedented inflation and an escalating cost-of-living crisis.

The figures from Nationwide indicate that the average asking price for a UK home increased by around £33,000 over the past year alone. It now costs £265,312 to buy a home in the UK, making the prospect of homeownership increasingly less plausible for an entire generation of would-be homebuyers.

Nationwide commented that the sector had demonstrated “a surprising amount of momentum given the mounting pressure on household budgets and the steady rise in borrowing costs”.

House prices are up 20% in two years

Three consecutive interest rate hikes and record-high energy costs are doing little to dampen house price acceleration across the UK. Average house prices are now more than 20% higher than they were at the beginning of 2020 before the pandemic plunged the country into lockdown.

Once again, London recorded the lowest average house price growth at just 7%, though it remains home to the UK’s highest average prices by a considerable margin.

“A combination of robust demand and a limited stock of homes on the market has kept upward pressure on prices,” said Nationwide’s chief economist, Robert Gardner.

Demand for homes is being sustained by the current strength of the UK job market, along with the extent to which many first-time buyers used lockdown to save towards deposits on their first homes.

An Inevitable slowdown to follow?

For the most part, analysts have written off the prospect of a housing bubble entirely. However, market watchers believe that a gradual slowdown in average house prices is inevitable and will creep into the equation towards the end of the year.

The Office for Budget Responsibility, for example, predicted that house prices would fall in 2022. As living standards continue to plummet in the face of unprecedented living costs, many would-be buyers may be forced to rethink or delay their property purchases while struggling to make ends meet.

Speaking on behalf of Pantheon Macroeconomics, senior UK economist Gabriella Dickens said that while March had brought little other than record-breaking performance for the housing sector, it would also most likely represent the “peak for house price growth” this year.

“For starters, mortgage rates look set to rise further in the coming months,” she said.

“In addition, we expect housing demand to be hit by a sharp drop in households’ real disposable incomes.”

High Earners at Risk of Becoming Mortgage Prisoners

Many high-earners with large mortgage obligations are finding themselves unable to refinance as lenders tighten lending criteria following the recent tax increases. Many homeowners who bought during the pandemic, when the market was booming, may find themselves trapped and unable to move if they have gone beyond their means to buy the property.

With lenders taking the recent cost of living increases into account when considering refinancing loans, the likelihood of being approved has massively decreased. Lenders are looking at high earners, especially those who are paid by dividends and are considering the increased tax on dividends when looking at affordability.

This month, Santander announced that they will be adjusting their lending criteria to include the recent energy, fuel, inflation, and tax hikes.

Lewis Shaw, of Shaw Financial Services, explained: ‘With lenders now really starting to tighten their belts, we could easily see a scenario where over-leveraged borrowers with big mortgages may struggle to remortgage as lenders’ affordability models are adjusted in line with tax rises and the cost of living crisis.’

He added, ‘Business owners who pay themselves in dividends will be at particular risk, being squeezed from every direction.’

‘Not only do they have to cope with the employer’s National Insurance increase, corporation tax hikes, and higher dividend tax rates, hitting their own disposable income, but they also have to face down calls from staff for wage increases. It’s a brutal balancing act.’

Graham Cox, of the Self Employed Mortgage Hub, said: ‘Many company directors have paid top dollar for large, overpriced properties during the past two years.

‘The Stamp Duty holiday, exceptionally low mortgage rates, housing stock shortages, and the ‘race for space’ have driven up house prices to absurd heights.

‘But, with an additional 1.25 per cent on dividend tax in the 2022–23 tax year, the National Insurance hike, huge cost of living increases, and steadily increasing mortgage rates, lenders’ affordability criteria are already tightening.

‘When the time comes to remortgage, it’s possible overstretched business owners could be left stranded on unaffordable standard variable rates. It depends on whether their existing lender is willing to provide a new deal.

‘Nonetheless, if house prices go into sharp reverse, which is a distinct possibility, we’re looking at negative equity, repossessions, and a whole world of pain.’

Santander stated that the new increase in national insurance, increased household outgoings, and dividend tax will be factored into the affordability test.

Graham Sellar, of Santander, said: ‘We adjust our mortgage affordability calculation on an annual basis, using updated household spending data from the ONS and taking account of other factors, including the Bank of England base rate alongside national insurance and tax threshold changes.

‘We have adjusted affordability on this basis every year for the last ten years.’

This comes following the Chancellor of the Exchequer’s announcement of a 1.25% increase in dividend tax and national insurance contributions (from 12% to 13.25%). Tax on dividends has increased by 1.25%, so for basic, higher, and additional tax earners, it becomes 8.75%, 33.75%, and 39.35%, respectively.

Adding to the misery, energy price caps have risen from £693 to £1971 at the start of the month.

Imran Hussain, of Harmony Financial Services, said: ‘With living costs spiralling out of control and NI and dividend income tax rates rising, it should not come as a surprise that lenders will have to adjust how much they will allow people to borrow.

‘They have a responsibility to ensure all borrowing is affordable. Some have done so already, while others are doing so.’

Bridging Loans for Property Development: How Does it Work?

Specialist development finance is a popular choice for property developers and construction companies, providing prompt access to significant sums of money for extensive and ambitious projects.

However, there are scenarios where a bridging loan for property development could be a better choice. Unlike development finance, bridging loans are issued in the form of a single lump sum. Not released in a series of stages as the project progresses. In addition, qualifying for a bridging loan can be fairly straightforward, whereas development finance is offered exclusively to established property developers.

But how does a development bridging loan work, and what are its key features? More specifically, what makes a bridging loan for property development a better choice than a standard commercial loan or mortgage?

Typical applications for property development bridging loans

A bridging loan can be used for any legal purpose, with few restrictions as to the potential applications for the funds. Some of the more common uses of property development bridging loans are as follows:

  • To pick up low-cost properties at auction and to fund the subsequent renovations required.
  • To purchase a plot of land quickly and beat rival bidders to the punch.
  • To commence and complete a project as quickly as possible when time is a factor
  • To fund any kind of property development project as a new or experienced developer.

Property development bridging loans can also be a useful facility for subprime applicants who would otherwise be unable to qualify for a conventional property loan or mortgage.

How does a development bridging loan work?

A development bridging loan is a strictly short-term facility designed to ‘bridge’ a temporary financial gap. Ideal for time-critical purchase and investment opportunities, a bridging loan can be arranged and issued within the space of a few days.

Repayment typically takes place six to 18 months later, in the form of a single lump-sum payment inclusive of rolled-up interest. Monthly interest applies at rates as low as 0.5%, negotiable in accordance with the size and nature of the loan taken out.

Maximum loan values are tied to the assessed value of the assets used to secure the loan, which is typically the home or business property of the applicant. Lending policies vary, but most bridging finance specialists are willing to offer anything from £50,000 to more than £10 million.

How much deposit do I need for a development bridging loan?

Technically speaking, there is no specific deposit requirement for a development bridging loan. Most lenders are willing to offer loans with a maximum LTV of 70% to 80%. This would therefore mean that the investor would need to cover the other 30%/20% of the costs, but not in the form of a deposit in the conventional sense.

A higher loan-to-value ratio can sometimes be negotiated, often up to 100% LTV. An alternative option is to take out a bridging loan with an LTV of 70% or 80% and use a second- or third-charge loan from a separate provider to cover the additional costs.

As all development bridging loans are bespoke agreements between the issuer and the borrower, terms and conditions can be negotiated to suit all requirements and preferences.

Getting the best deal on a development bridging loan

All bridging loan applications are assessed on their individual merit, highlighting the importance of presenting a convincing case.

Specifically, there are four factors that will determine the competitiveness or otherwise of the loan you are offered:

  1. Your exit strategy: Your lender will expect to see evidence of a viable exit strategy, i.e., when and how you intend to repay the loan. For example, by selling the property you plan to purchase after renovating it, you raise the capital needed to repay the loan, resulting in additional profits for you to retain.
  2. Available assets: All property development bridging loans are secured against viable assets – usually residential or commercial property.  However, some lenders are willing to accept other assets of value, ranging from vehicles to business equipment to intellectual property to company shares.
  3. Credit history: Poor credit will not necessarily count you out of the running for a competitive bridging loan. Most lenders are willing to work with subprime applicants, but a good credit history could help you qualify for the best possible deal.
  4. Experience: Understandably, lenders will usually reserve their best deals for applicants with an established track record in the property development sector. The more experienced you are, the more likely you are to qualify for a competitive bridging loan.

With each of the above, your broker will provide the independent support and advice you need to present a convincing case to your preferred lender.

Your broker will also negotiate on your behalf to ensure overall borrowing costs are kept to the bare minimum.

Cutting Mortgage Costs to Combat Rising Inflation

Property owners who are finding it increasingly difficult to keep up with mortgage payments due to the high inflation rates are being actively encouraged to remortgage in order to bring down monthly mortgage payments.

According to a report released by the Joseph Rowntree Foundation, the rising price of energy is set to hit the poorest hardest, with households looking to spend around 18% of their income on gas and electricity after April this year.

To add even more stress to families, the energy price cap set is about to rise in conjunction with an increase in national insurance contributions. With inflation at a thirty-year high, services and goods are going to become increasingly expensive as we move through 2022.

According to L&C Mortgages, property owners will find that their mortgage repayments will be around seven times that of their energy bills, and as such, they are encouraging homeowners to look at changing their mortgage in order to reduce monthly outgoings.

David Hollingworth from L&C Mortgages commented: “It’s easy to focus on the costs that are climbing rapidly, like energy bills, and many homeowners will feel the pinch due to the price cap rise in April when council tax and national insurance changes will also begin to bite.

“Many of these elements are out of our control, but the mortgage is often a substantially higher outgoing and could offer a silver lining for homeowners.

“Fixed-rate mortgages offer a chance to save thousands for those that have drifted onto a lender’s standard variable rate.

“Cutting the biggest household bill could offer savings that mitigate the inevitable increase in other costs but also give the chance to shelter payments from any further interest rate rises.”

An analysis by L&C Mortgages shows families have an average monthly mortgage cost of around £900 and average energy costs of £118. Energy costs are expected to rise by approximately 50% over the coming months, and it is suggested that reducing monthly mortgage payments could significantly help in keeping monthly household outgoings down.

There has already been a hike in mortgage interest rates in response to rising inflation. Some lenders have passed the base rate increase on to SVR (standard variable rate) clients. This means that should a homeowner decide to remortgage from an SVR mortgage with a rate of 3.91% to a fixed mortgage rate of 1.36%, they could potentially save themselves around £2,200 per annum. A decrease of as little as 0.65% on mortgage interest could completely offset the effect of rising gas and electricity bills.

With inflation, energy costs, and mortgage rate increases guaranteed to put most families in the UK under immense financial pressure, changing to a low fixed-rate mortgage could be the perfect solution to alleviating some rising monthly costs.

Bridge Loans for Bad Credit Applicants

Raising funds for a property purchase for buyers and developers with a less-than-perfect credit history can prove to be quite challenging. Lenders offering traditional mortgages are cautious about approving loans to clients with previous financial issues as they are viewed as high-risk.

For those in this situation, bridging finance is a viable option to consider. But can you get a bridging loan if you have bad credit? In most cases, the answer is yes!

A bridging loan is a short-term, secured loan, usually 12 months, that is fast to arrange and is paid back in full at the end of the loan term, as set out by an exit plan. The exit plan assists the lender in assessing the suitability of the applicant and will have a significant impact on whether the loan is approved or not. So, for example, if a buyer is planning on paying the bridging loan with a mortgage at the end of the term, this may be a red flag for the lender as the chances of a buyer with credit problems being accepted for a mortgage may be low, and therefore the risk is high.

Not all lenders are willing to lend to bad-credit customers, so it is imperative that you only approach the ones that are. A competent, all-of-market broker will be invaluable when it comes to finding the right lender for a buyer’s individual circumstances.

Under what circumstances can I apply for a bridging loan?

Lenders who offer loans to clients with credit rating issues typically accept the following situations:

  • Low credit score or no credit record at all
  • Mortgage arrears
  • Late payments
  • Individual Voluntary Arrangement and DMPs (Debt Management Plan)
  • CCJs (County Court Judgements) and defaults
  • Repossession
  • Bankruptcy

What are the eligibility criteria for bad credit bridging finance?

Although a credit check will be done, lenders will look at many other factors when considering an application:

  • Exit strategy: This is important as it will indicate to the lender whether the loan can realistically be repaid.
  • Security: This is collateral offered by the buyer that can be used to offset the loan if repayments are not made. The greater the security offered, the more funds can be raised.
  • Business plan: If the loan is for development or commercial purposes, lenders will need to see a viable business plan.
  • Experience: For developers and investors, this experience will give the lender more confidence in their ability to complete the project successfully.
  • Deposit: The size of the deposit will have an impact on a successful application. The bigger the deposit, the better, as you will be offered more competitive interest rates. The majority of lenders will require a 30% to 35% deposit.

Only a few specialist lenders will accept non-standard strategies, which can include circumstances such as repaying the loan through inheritance or investment.

Should I use a broker for adverse credit bridging loans?

Consulting an experienced broker will significantly improve your chances of being accepted for a bridging loan. Brokers are likely to be able to easily identify the lenders who will be willing to say yes, which is important as a declined application from the wrong lender may further impact your credit record.

Mortgage Approvals at Lowest Level Seen for Sixteen Months

October 2021 saw the lowest level of mortgage application approvals since the middle of 2020, primarily due to the end of the stamp duty holiday, according to figures released from the Bank of England.

BOE data shows a total of 67,200 home buyer mortgages approved in the month of October, a drop from 71.851, and a significant decrease from 104,547 reported in November last year.

The report also indicated a sharp fall in amounts advanced to buyers during the month, showing a net mortgage lending figure of £1.6 billion, a drop from £9.3 billion recorded in September.

The fall follows months of frenzied property buying, with figures for the year up to September for property sales, reaching £500 billion, largely due to the stamp duty holiday. The tax break led to a rush for buyers to complete before the deadline date at the end of September. The pandemic also changed the priorities of buyers, with many seeking larger properties.

“October’s decrease was driven by borrowing brought forward to September to take advantage of stamp duty land tax relief, before it was completely tapered off,” the Bank of England commented.

October saw an increase in re-mortgaging activity as lenders competed for clients by offering ultra-competitive deals. The month saw a total of 41,642 remortgages approved, up from 32,745 recorded in the same time period in 2020.

The head of residential research at the property firm Savills, Lucian Cook, stated: “There is no great surprise to see a fall in the number of mortgage approvals in October, given the distorting effect of the end of the stamp duty holiday in September.”

His data showed that £513 billion was spent in the UK property market, in the year up to September. This is the first time this figure has exceeded the £500 billion mark and £170 billion higher than pre-pandemic levels.

“That reflected the unusual coming together of three key factors, the so-called race for space as people looked to trade up the housing ladder, the cheap cost of mortgage finance and the added impetus of a stamp duty holiday,” he commented.

“Activity in the more expensive price brackets continues to hold up strongly, so we expect to see a higher than normal spend in 2022, though it’s difficult to see how spending next year can match the extraordinary levels of late across the market as a whole without such a mix of strong drivers.”

Housing analyst and Chief Executive of Twindig, Anthony Codling, commented that he though the BOE’s figures for mortgage approvals are “comforting” and indicated that the property market was moving back to normal levels following the end of the stamp duty holiday.

“At 67,199, mortgage approvals in October were 2.7% ahead of their 10-year average, suggesting that the housing market is a long way away from the cliff edge,” he said.