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Mortgages

Helpful Advice That All First Time Buyers Should Be Aware of

Buying a home for the first time can be both exciting and daunting in equal measures. Most first-time buyers have little to no knowledge or experience with the property market and therefore do not know where to start. We recommend using our Mortgage calculator UK to work out exactly how much purchasing a home would cost you. 

Worse still, conflicting information and advice only stand to further complicate the whole thing.

Getting on the property ladder is never easy, but the process can be simplified with a few common sense guidelines. From those who know the property purchase process better than most, here are a few helpful pointers all first-time buyers should be aware of:

1. There are schemes that could save you a fortune

First and foremost, it is important to leverage any existing schemes or incentives you may be eligible for. Examples of which include Right to Buy and Help to Buy, which depending on your circumstances could save you a small fortune on the market value of your home.

2. Establish your budget in meticulous detail

Working out how much you can afford to borrow means taking into account your current outgoings, your lifestyle and your financial future. It also means ensuring you leave yourself with a little room for manoeuvre, rather than pushing your finances and your budget to breaking point.

3. There are mortgages beyond the High Street

Depending on your requirements and circumstances, you could be better working with an independent lender away from the High Street. From poor-credit first time buyer mortgages to competitive Right to Buy mortgage deals and so on, there’s an extensive network of lenders to explore beyond the usual major banks.

4. Comparison sites are far from comprehensive

Carrying out an initial online mortgage comparison can be useful. However, the average online mortgage comparison site is not quite as comprehensive as it appears. If you want to gain access to the best deal in the UK from the most dynamic network of lenders, speak to an independent broker for advice. Before doing so, ensure the initial services they provide are offered 100% free of charge.

5. With deposits, bigger is better

If there is any realistic way of pulling together a bigger deposit, do it. Along with simplifying the process of qualifying for a mortgage, bigger deposits also pave the way for better deals. Simply by increasing your deposit from 15% to 20%, you could qualify for a much lower rate of interest and save a small fortune over the life of the loan.

6. Interest rates are not everything

Last but not least, it is vital to remember that the overall costs of a mortgage extend far beyond interest rates alone. You will also need to factor in arrangement fees, administration fees, valuation fees, legal fees, closure fees and (in some instances) early repayment fees. All of which should be considered carefully when evaluating how much you need to borrow and how much you can comfortably afford.

Whether you are ready to go ahead with a first time buyer mortgage application or simply considering the available options, we are standing by to take your call. Contact a member of the team at UK Property Finance anytime for more information.

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Other Finance News

Personal Data Security Practices Remain Substandard, Officials Warn

The recent introduction of the General Data Protection Regulation (GDPR) and the Data Protection Act 2018 are apparently having little to no bearing on the personal Data Security practices of many organisations in the UK. Particularly where insolvency is concerned, practitioners and FCA-authorised firms are still breaching even the most basic and important data protection guidelines.

This week, a joint statement was issued by the FCA, the FSCS and the Information Commissioner’s Office (ICO) to reaffirm the importance of heightened responsibility when dealing with personal data. The statement outlined apparent widespread data security malpractice, with emphasis on businesses attempting to unlawfully sell the personal data of their clients to claims management companies (CMCs).

Instances of unlawful personal data sales and distribution (both before and after a firm has gone into administration) are rife, claims the report from the regulators. The statement warns that by distributing personal data without the legal consent of those it concerns, they may be breaching the terms of both the General Data Protection Regulation and the Data Protection Act 2018.

All direct communications carried out by claims management companies could also be a direct violation of the Privacy and Electronic Communications Regulations 2003 (PECR).

The regulators promised to take action against those found to have breached any applicable data protection laws and policies, encouraging those who may be doing so to revisit and reconsider their practices and policies.

A Widespread Public Problem

Meanwhile, the UK’s data protection regulator has come under heavy criticism for failing to sufficiently protect the public from the risks of beh (behaviour advertising, eg remarketing) or targeted ads, which are ‘systematically’ breaking data protection and privacy laws.

Warnings were issued last summer that the growing adtech (advertising technology) industry is already out of control, though little action has been taken to turn things around. The Information Commissioner’s Office previously agreed that real-time bidding (RTB) systems used in online advertising may be accessing and using people’s private information in an unlawful way.

“We have reviewed a number of justifications for the use of legitimate interests as the lawful basis for the processing of personal data in RTB. Our current view is that the justification offered by organisations is insufficient,” commented Simon McDougall, the ICO’s executive director of technology and innovation.

“The Data Protection Impact Assessments we have seen have been generally immature, lack appropriate detail, and do not follow the ICO’s recommended steps to assess the risk to the rights and freedoms of the individual.”

“We will continue to investigate RTB. While it is too soon to speculate on the outcome of that investigation, given our understanding of the lack of maturity in some parts of this industry we anticipate it may be necessary to take formal regulatory action and will continue to progress our work on that basis.”

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Mortgages

Banks Warned as Mortgage Prisoners Promised Help by the Government

Britain’s six biggest lenders have come under fire from ministers this week, as the row regarding thousands of ‘mortgage prisoners’ continues to escalate.  Treasury ministers issued an open letter accusing the banks of failing to help hundreds of thousands of struggling borrowers get a fair deal on their overinflated mortgages, work out how much a mortgage should cost you using our Mortgage calculator UK.

Britain’s six biggest lenders have come under fire from ministers this week, as the row regarding thousands of ‘mortgage prisoners’ continues to escalate.  Treasury ministers issued an open letter accusing the banks of failing to help hundreds of thousands of struggling borrowers get a fair deal on their overinflated mortgages.

New rules were introduced by the UK’s financial watchdog in October last year, designed to simplify the process of switching to a cheaper mortgage for those affected. Four months down the line, no decisive action whatsoever has been taken by any of the six leading lenders in the UK – Lloyds, Nationwide RBS, Santander, Barclays and HSBC.

Even more worryingly, the new rules will result in only one in 12 so-called ‘mortgage prisoners’ benefiting from a lower-rate deal.

Half a Million Homeowners Affected

It is estimated that around 500,000 homeowners across the UK were affected by the sale or transfer of their mortgages to unregulated or inactive lenders in the wake of the financial crash. This subsequently resulted in their mortgages being taken over by a fund or company that cannot or will not offer them a remortgage.

Unable to get a better deal with their loan provider and unable to switch to a new lender, these borrowers have become ‘imprisoned’ in excessively expensive mortgage deals they simply cannot afford. The FCA announced new rules in October last year that would make it easier for those affected to switch to a better deal, but so far nothing has happened.

None of the six biggest lenders in the UK have altered their affordability rules to accommodate those looking to switch to a more affordable mortgage. The government has therefore once again demanded that urgent action be taken by the country’s leading banks to comply with the new rules outlined by the FCA.

‘I have discussed with Andrew Bailey, chief executive of the FCA, and he is in agreement that these eligible borrowers should have the opportunity to access cheaper deals with new lenders,’ read the open letter written and published by economic secretary to the treasury John Glen MP.

‘Now that the FCA rule changes are in effect, I expect as many as your members as possible to move quickly to offer new deals to this group of eligible borrowers.’

Would the Changes Actually Help?  

The FCA has predicted that approximately 170,000 of these ‘mortgage prisoners’ will be able to reduce their mortgage payments by seeking a better deal from a new lender. Unfortunately, the FCA also estimates that no more than around 14,000 of these borrowers will benefit from the new rules and regulations, should they be implemented.

In total, around 156,000 of the borrowers affected have mortgage debts that exceed the market value of their home. As these borrowers are, in effect, in arrears, they would not be eligible for a new mortgage or a remortgage with most lenders.

Independent Expert Advice

If you have any questions or concerns regarding your current mortgage obligations or your eligibility for a competitive remortgage, we’re standing by to help.

Contact a member of the team at UK Property Finance anytime for an obligation-free consultation with a member of the team.

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Bridging Loans

2019’s Most Important Bridging Trends

Both in an economic and political sense, 2019 will go down in history as one of the UK’s most unstable periods. This did not stop bridging finance activity once again showing remarkable strength and resilience, with the sector having performed better than expected throughout the entire 12-month period.

This is perhaps attributed in part to the fact that average monthly interest rates on bridging loans fell to new record lows in Q1 and Q3 – 0.74% during both quarters. Stricter borrowing criteria on the High Street may have also contributed to the subsector’s strong performance, which is now lined up for an even more impressive 2020.

Heavy Activity and Growing Regulation

In total, the bridging finance sector issued loans with a combined value of £732.7m last year. Of which approximately 39% of all transactions were representing impressive growth from the 36% recorded in 2018. The highest levels of bridging loan activity were recorded during the first three months of the year, totaling approximately £185.32 million in loans issued.

There were no big changes in applicants’ motivations for taking out bridging loans last year, as the following figures demonstrate:

  • Auction purchases – 7%
  • Investment purchases – 23%
  • Business purposes – 9%
  • Chain break – 18%
  • Heavy refurbishment – 14%
  • Re-bridge – 11%
  • Regulated refinance – 6%
  • Unregulated refinance – 9%
  • Other – 5%

On the whole, the most popular reason for applying for bridging finance throughout each quarter of the year was for purchasing an investment property (23%). Interest rates across the board remained lower than 2018 throughout the year, averaging 0.76% for the year – down from 0.81% in 2018.

Average LTV Decreasing

Interestingly, the average LTV requested on bridging finance in 2019 fell from 55% to 53%. This indirectly suggests that applicants are actively seeking lower contributions to the planned purchases and investments, rather than taking on unnecessary debts.

It was also noted that the average completion time for a bridging loan in 2019 had increased to 47 days from the previous year’s 45 days. The average loan term for bridging finance last year stood at 12 months, up from the 11-month average of 2018.

Second charge loans occupied a significantly bigger share of the bridging market in 2019, accounting for around 20% of all loans issued in 2019 – an increase from the 17% recorded a year earlier.

Compare the Market with UK Property Finance

The key to accessing the best possible deal on a high quality bridging loan continues to lie in comparing the market in its entirety. At UK Property Finance, our experience and expertise extend to all types of bridging loans for all purposes.

We will help you find an unbeatable deal by comparing exclusive offers from our extensive panel of lending partners across the UK. For more information or to discuss your requirements in more detail, contact a member of the team at UK Property Finance anytime.

Categories
Mortgages

What is a Renovation Mortgage?

A renovation mortgage is a specialist type of home loan, designed to fund domestic property improvements, extensions and alterations. Options vary significantly in accordance with the nature of the project and the personal circumstances of the applicant.

Some larger renovation mortgages are provided in stages as the project progresses, while others are transferred in the form of a single lump sum.

A renovation mortgage may be repaid over several years like a traditional mortgage, or with a single payment upon completion of the project and the successful sale of the property.

Most high street lenders will offer mortgage products exclusively for residential properties that are considered habitable. Mortgages cannot usually be secured against properties that are:

  • Uninhabitable
  • In need of conversion
  • Derelict or dilapidated

This can make it difficult to access a traditional mortgage or remortgage for the purpose of renovating a property in a poor or uninhabitable condition. In this case, it may be necessary to direct your applications exclusively at specialist independent lenders.

Eligibility on these types of renovation mortgages is established in the same way as a traditional mortgage – proof of income, financial status, credit history and so on.

Is a Renovation Mortgage Necessary?

A renovation mortgage may be necessary if you have insufficient funds available to cover the costs of a renovation project. If your property is in desperate need of repair but still considered habitable, you will usually be able to borrow 80% to 90% of its value at the time.

Some specialist lenders will offer up to 100% of the property’s value, subject to its condition and the viability of the project.

Non-Habitable Properties and Renovation Mortgages

Availability of renovation mortgages for non-habitable properties is more limited, as most High Street banks are unwilling to lend on uninhabitable property. Where available, specialist renovation mortgages for these types of properties may be offered with an LTV of 60% to 90% of the current value of the property.

Extensive inspections of the property may be necessary to establish its agreed value, typically organised by the lender and paid for by the borrower. Work out the cost of a mortgage using our UK mortgage calculator. 

Renovation Mortgage Costs and Deposit Requirements

Most renovators using renovation mortgages to fund projects are required to come up with around 15% to 20% of the total project costs. Deposit requirements vary from one lender to the next and may be negotiable, so it is worth shopping around.

Additional costs to factor in when considering a renovation mortgage include the following:

  • Survey and design fees
  • Legal fees
  • Administration fees
  • Monthly interest
  • Early repayment fees (where applicable)

Alternatives to Renovation Mortgages

Depending on your requirements and budget, you may find an alternative financial product more suitable than a renovation mortgage. Examples of which include:

  • Bridging Loans. A short-term lending facility designed for prompt repayment, which can be used to fund almost any type of property improvement project.
  • Mortgage Extension.  It may be possible to raise additional funds by extending or increasing your existing mortgage with your current lender.
  • Personal Loans. If you need a relatively modest amount of money, you could consider funding your project with an unsecured personal loan.
  • Remortgage. An accessible and affordable option if you already have sufficient equity in your home or any other property you own.

At UK Property Finance, we can help you make sense of the available options and find your ideal renovation loan at a price you can afford.

Categories
Mortgages

Right to Buy Home Sales Up 4% Year on Year

Despite its accepted imperfections, the UK Government’s Right to Buy scheme continues to grow in popularity across much of England and Wales.  According to the latest figures from the Ministry of Housing Communities and Local Government, a total of 2,531 properties were sold under the double housing initiative between July and September 2019.

This indicates growth of approximately 4%, when compared with the same period the year before.

For Q2 2019/2020, local authorities collected a combined £215.7 million in revenues under the Right to Buy initiative. This is an increase of around 5% from the same period in 2018/2019, when total revenues collected under the scheme came to £206.4 million. On average, homes sold under the Right to Buy scheme during the second quarter for £85,200.

The numbers released by the Ministry of Housing Communities and Local Government indicated 1,394 home sales during Q2 2019/2020, representing an impressive 11% increase from the same period the year before.

Under the Right to Buy scheme, qualifying tenants (upon meeting specified length-of-tenancy requirements) are automatically given the right to purchase their home, with discounts available of up to £82,800, increasing to £110,500 for qualifying properties in London. Work out the cost of a mortgage using our UK mortgage calculator.

Lower discounts of £24,000 and £8,000 are available in Northern Ireland and Wales respectively.

Housing Association Right to Buy

Meanwhile, the government continues to demonstrate strong confidence in its Right to Buy affordable housing scheme, despite criticism from some councils and housing providers. 

In response to a recent Commons question from Tory colleague Sir Christopher Chope, Housing Minister Esther McVey reaffirmed the government’s commitment to the impending rollout of a similar Right to Buy scheme for housing association tenants.

A pilot version of the scheme is currently underway in the Midlands, which has so far seen approximately 6,000 tenants given the opportunity to purchase their housing association properties at a lower price.

Once the pilot is complete, additional areas will be added to the programme “in due course”, said McVey.

Late last year, the Commons came under criticism for allocating approximately £190 million to what was labelled a “ludicrous housing association right-to-buy lottery” by opponents to the project. It was suggested that the funds should be spent on more immediate crises, such as the implementation of additional measures to prevent the deaths of homeless people during the winter.

In addition, Labour’s Steve McCabe stated outright that extending Right to Buy to housing association tenants was “always a daft idea”.

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