According to a recent report released by Alderidge Bank, since the beginning of the COVID-19 pandemic, 45% of first-time buyers have been rejected when applying for a mortgage.

The First Time Buyer index, which was developed and first published pre-COVID-19, shows that only 35% of the 2,015 survey participants were successful in securing a mortgage deal on their first attempt. This figure has significantly dropped from 48%, seen before the initial COVID-19 lockdown.

A whopping 45% of first-time buyers reported that they were rejected on their first application, with 20% of those also being rejected multiple times when applying elsewhere.

The most common reason for rejected first-time buyer mortgage applications is poor credit history, with 21% of participants stating this as the main reason for not being successful in securing a mortgage.

Administrative errors accounted for another 21%, while 20% of those surveyed claimed to not be able to afford the large deposit needed for the purchase.

With 49% of prospective first-time buyers having some sort of disruption to their jobs, lenders were understandably more cautious when it came to accepting applications, making it much harder to secure a first-time buyer mortgage.

The report showed that 35% of participants were put on furlough but had now returned to work. Just under 10% had remained on furlough, with a further 5% being made redundant or having had a significant reduction in income since the onset of the pandemic.

The head of mortgage distribution at Aldermore, John Cooper, stated: “It’s easy to see from the research why many first-time buyers can feel disheartened by the challenges when looking for their first home. They shouldn’t despair, though, as there are many options open to them. Specialist lenders, like Aldermore, are opening up the market to those with complicated income streams or past credit issues, ensuring that no borrower, whatever their background, feels excluded from the opportunity of getting on the housing ladder.

“I would also recommend getting help from a broker, which can be a great boost in navigating the many pitfalls and confusing processes. They provide a whole market view and cut through the jargon to provide options specific to new buyers’ individual circumstances.”

Equity release has become an increasingly popular option for retirees, as many homeowners face the daunting prospect of insufficient retirement income.

Official guidance from the Pension & Lifetime Saving Association’s ‘Retirement Living Standards’ states that to meet their basic living requirements, retirees need a minimum of £10,200 in their pension pots. In 2020, figures suggest that more than 85% of newly-accessed pension pots contained less than £10,000.

This would suggest that even with full state pension contributions, those concerned would find their finances stretched uncomfortably.

Meanwhile, average property prices in the UK have spiked by more than 13% over the past year alone. In the 10 years from July 2011 to July 2021, average property prices in the UK grew from £169,866 to £255,535.

In total, combined equity wealth among adults over 50 in the UK is somewhere around £3.8 trillion. Retirees who own their own homes could, therefore, be sitting on all the capital they need to get the most out of their retirement.

With a lifetime mortgage, aka equity release, those who are asset-rich but cash-poor could leverage some or all of the equity they have tied up in their home—precisely what millions are doing—in order to raise cash for a variety of reasons.

Applications for equity release

The latest figures from Legal & General indicate a number of patterns among intended applications for lifetime mortgages. One of the most common reasons for releasing equity is funding home improvements, with 41% of applicants indicating their intent to renovate their homes.

Around 17% said they intended to give some or all of the funds raised to their loved ones. Helping family members with mortgage deposit requirements to purchase their own homes is another popular application.

In the wake of the COVID-19 pandemic, there has been a major spike in the number of equity-release customers simply releasing funds to sustain their lifestyles.

Further growth is projected for the equity release sector

Speaking on behalf of Legal & General Home Finance, Chief Executive Officer Claire Singleton predicted further growth for the sector going forward.

“In recent years, people have become more accepting of the concept of equity release, which has helped the market grow. However, many potential customers are still unaware of the product’s flexibility and the broader benefits this can have both for individuals and wider society,” she said.

“We anticipate that as more people see the value in their property wealth increase, lifetime mortgages will cease to be seen as specialist’ option and instead become a more standard consideration among other at-retirement products.”

“Looking ahead, we anticipate that products on the market will evolve to better serve the diversity of consumer needs, whether it’s innovation that helps people improve their quality of life, support their loved ones, or ‘green’ improvements to help better manage their impact on the world around them. The home is a vital part of an estate and is often an individual’s largest asset.”

“As people are living longer, accessing property wealth will become an increasingly important consideration to help meet financial goals and fund the retirement they dream of.”

Purchasing any residential property with the intention of letting it out can be an appealing prospect. In the UK, estimates suggest there are now approximately 2.65 million landlords operating within the private rental sector.

Does this mean that buy-to-let is the right choice for you?

Before making any major decisions regarding BTL investments, it is important to ensure you understand the benefits and drawbacks of becoming a private landlord.

What is buy-to-let?

The term ‘buy-to-let’ is used when an individual or business invests in a residential property to be ‘let’ out to tenants.

Rental properties are purchased using a specialist mortgage, which differs from a conventional home loan by way of both qualification criteria and overall borrowing costs.

Buy-to-let investments generate profits through monthly rent payments from tenants, which cover the costs of the mortgage and leave at least a small amount left over. Depending on the type of property and its location, rent yields and profits can vary from modest to exceptional.

What are the advantages of buy-to-let property investments?

The biggest benefit of BTL is its potential to generate a regular source of income for the owner of the property. Typically, rent is charged at a rate that not only covers the monthly mortgage payment but also all potential maintenance requirements for the property.

Buy-to-let property owners may benefit significantly from capital growth over time. Average UK house prices have been skyrocketing for some time and are predicted to continue doing so indefinitely. However, again, gains by way of property value increases vary significantly from one property type and location to the next.

BTL investments are considered among the simplest and quickest to exit, should it become necessary to do so at some point in the future. With demand for desirable homes at an all-time high, investors rarely encounter any difficulties selling their BTL properties for their full market value.

What are the disadvantages of buy-to-let property investments?

On the downside, qualifying for a buy-to-let mortgage is not quite as simple as qualifying for a traditional mortgage. There are higher deposit requirements and more extensive restrictions to take into account with regard to who is and is not eligible.

Interest rates and borrowing costs on a BTL mortgage are usually higher than those of a traditional mortgage. Prospective landlords must also take into account additional costs attributed to repairs, maintenance, and the general upkeep of their rental properties.

While demand for quality rental properties is insatiable across much of the UK, potential gaps between tenancies cannot be ruled out. During this period, the landlord is still required to make their monthly mortgage payments in the normal way, though without the benefit of rental income.

Independent expert advice

Before deciding on any BTL investment opportunity, it is essential to consult with an independent broker to discuss the options available. During your consultation, you will have the opportunity to determine your eligibility for BTL mortgage products and whether your financial situation qualifies you for life as a private landlord.

Call or e-mail anytime for more information on buy-to-let investments or to book your obligation-free consultation with a member of our team.

Once little more than a novelty, the UK’s build-to-let sector is slowly but surely finding its way onto the radars of major investors. In particular, Lloyds Bank has outlined an ambitious plan to build an extensive 50,000-strong BTL property portfolio by the end of the current decade.

Consequently, many private renters across the country could soon see their conventional landlords replaced with banks and businesses.

With available inventory at an all-time low and skyrocketing rents having become the norm, the future private rental sector has never looked brighter, at least for those buying or building properties to rent out to private tenants.

Build-to-let is the arm of the sector where new-build properties and flats are owned and managed by just one landlord after being built to order. Advocates of big business BTL insist that corporate ownership could solve many of the problems faced by renters today, ranging from unacceptable fees to “rogue” landlords and short-term leases.

Announcing its aggressive move into the BTL sector, Lloyds is establishing its own private home rentals subsidiary, Citra Living, with the intention of adding tens of thousands of homes to its property rentals portfolio by 2030.

This one corporate landlord alone would occupy a full 1% of the UK’s total rental stock.

Meanwhile, John Lewis has also outlined plans to build homes to rent out privately as part of its five-year strategy to expand “beyond retail” Specifically, the company said at least £400 million would be invested in new ventures, with the aim of generating 40% of its overall profits from non-retail activities within the next 10 years.

“Entering the ‘build to rent’ market also allows us to furnish properties using John Lewis Home products and deliver Waitrose food,” it said.

How private renters stand to be affected

Some analysts and experts are optimistic about the potential for larger banks and corporations to move into the buy-to-let sector. They believe that by taking control of the market at least partially away from smaller landlords, private tenants may be afforded more protection and rights.

“The hope is that a larger corporate landlord such as Lloyds Bank would have the infrastructure, expertise, and finances to ensure that they comply with their legal obligations, as opposed to smaller and ‘rogue’ landlords, meaning tenants should be provided with the information and protection they are entitled to,” commented Hodge Jones & Allen housing team partner Sophie Bell.

There are those who only envisage problems for tenants and the sector long-term, should the trend of corporate BTL property ownership become popular over the coming years.

By 2030, Lloyds Bank has set its sights on building at least 50,000 homes, which would subsequently make it the single biggest BTL landlord operating in the UK.

“The only upside for consumers is that it may, and I emphasise the word may bring lower rents if there are more properties to occupy,” warned Lewis Shaw, founder of Shaw Financial Services.

“However, the likely outcome is that the opposite will happen; it would be very easy for large institutional investors or lenders to monopolise large swathes of an area and increase prices.”

Nobody takes out a mortgage with the intention of missing payments. Unfortunately, nobody knows what may be around the corner either.

The events of last year reminded the world just how unpredictable things can be at the best of times. For a number of reasons, any homeowner could suddenly find themselves in a position where they simply cannot make their scheduled monthly mortgage payment.

In which case, what happens next?

While it is true to say that a missed mortgage payment can lead to heavy penalties and credit score damage, this is not always the case. It depends entirely on the policies of the lender and how the issue is handled by the mortgage payer in question.

One missed mortgage payment

For example, missing one mortgage payment and having until now paid every instalment on time might not be the end of the world. Just as long as you contact your lender as quickly as possible to explain why you are unable to pay this month, they are likely to show leniency.

If you choose not to speak to your lender and simply fail to pay the instalment, you are likely to incur fees and penalties. In addition, the missed payment could be logged on your credit history if it is not made within 30 days of the agreed-upon due date.

Two missed mortgage payments

Missing two mortgage payments in a row is likely to set alarm bells ringing with your lender. Again, missing a couple of mortgage payments and having contacted your lender to explain your situation may result in no action being taken against you. Contrary to popular belief, lenders would always prefer not to have to chase missed payments and go through the complications of reporting credit issues to the relevant bureaus.

Two missed mortgage payments in a row with no notification could see you facing even heavier penalties, along with significant damage to your credit score. It is therefore essential to contact your lender and openly discuss the issue if you are unable to pay.

Three missed mortgage payments

At this stage, the lender may decide to commence repossession proceedings. You will most likely be contacted several times by phone, after which a formal demand letter or ‘notice to accelerate’ will be sent by post.

This is essentially a final warning, indicating that repossession will take place if you do not settle your debt as quickly as possible.

Four missed mortgage payments

If you allow your debt to escalate and remain unpaid for 120 days or more, your lender will almost certainly provide you with formal notice of its intent to recoup its capital via the appropriate legal channels. Along with the long list of penalties and levies already incurred, you may now also be billed for the bank’s own legal fees.

Even at this late stage, your lender will most likely make every reasonable effort to allow you to keep your home and repay your debt. An agreement could be reached to repay a smaller amount each month until your situation improves, or perhaps take a temporary payment break. Either way, it is the sole responsibility of the debtor to contact their lender at the earliest possible stage in order to avoid eventualities like this outright.