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Mortgages

Extending a Mortgage in Later Life: Property Loans Post-Retirement

Extending a Mortgage in Later Life: Property Loans Post-Retirement

Approaching retirement with an outstanding mortgage can be an unsettling prospect; however it does not necessarily have to cause a major financial headache.

Increasingly, lenders are acknowledging the fact that more people than ever before need to borrow money beyond their retirement. Consequently, the market for post-retirement products and services is more dynamic and accessible than it has been in some time.

The affordability checks conducted by major banks and specialist lenders have changed significantly over the years. Today, eligibility is determined primarily on the basis of affordability – not simply the age of the applicant. This means that even if an individual’s income is set to decrease significantly when they retire, it will not necessarily count them out of the running.

As outgoings will also likely decrease and there may be other funds at their disposal, they could be eligible for a wide range of competitive products.  Things like a state pension, private pension income, investment income, buy-to-let income, salary or dividends could all be factored in when the lender conducts its affordability checks.

As affordability checks and related policies vary significantly from one lender to the next, independent broker support should be sought from the earliest possible stage.

“There are varying attitudes among lenders with regard to what income is acceptable such as pension, buy-to-lets, investments, etc,” commented Mark Harris, chief executive of mortgage broker SPF Private Clients.

“Independent legal advice and power of attorney may be required,”

No Shortage of Options Available

Older borrowers are being reminded to consider the wide range of flexible and affordable options available beyond the High Street. While some major banks are notorious for giving senior applicants anything but a warm welcome, some of the UK’s more flexible lenders consider all cases by way of individual merit.

There are even some specialist lenders with mortgage deals available with an upper age limit of 95. Though on the High Street, the maximum age by which a mortgage must be paid off in full is usually much lower.

“More lenders have now extended the maximum age to which they will consider lending such as the Halifax up to 80, Leeds building society up to 85,” said David Hollingworth, associate director, L&C Mortgages.

Retirement Interest-Only Mortgages

One of the newer options available for older borrowers looking to extend their mortgage is the retirement interest-only mortgage. These kinds of mortgages can run until the property is sold, on death or on a move into long-term care as opposed to having a term at the end of which the loan must be repaid.

“Retirement interest-only mortgages work in a similar way to standard mortgages in that they are assessed for affordability and you will need to make a monthly payment, but they do not have a set term,” commented Matthew Fleming-Duffy of Cherry Mortgage and Finance.

“There are also some more specialist lenders that offer retirement interest-only including Hodge and Livemore Capital.”

Equity release is another popular option, though must be considered strictly under the advisement of an experienced independent broker. The cost-effectiveness of equity release products differs significantly from one provider to the next and could in some instances adversely affect the borrower’s financial position.

“The potential issue with this is interest is still charged and will compound over the years, which in turn means that there will be less cash left to pass on to beneficiaries,” said Mr Fleming-Duffy.

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Other Finance News

Is the UK’s Unprecedented Housing Bubble About to Burst?

Average UK house prices continue to set consecutive records with each passing month, it has never been more expensive to purchase a home in the UK, or difficult for first-time buyers to get on the property ladder.

Months ago, even the most optimistic analysts had envisaged a year of relatively modest performance for the country’s real estate sector. Instead, what occurred was an unprecedented average house price increase of more than £22,000 over the past 12 months.

Growth that vastly exceeded the potential £15,000 maximum stamp duty saving.

Looking ahead, more brokers and analysts are predictingan inevitable burst for the current housing bubble. With average house prices hovering at all-time highs across much of the country, experts believe that what goes up must eventually come down.

An End to Frenzied and Often Blind Purchases

Prior to the withdrawal of the stamp duty holiday on June 31, it had become the norm for desperate homebuyers to make offers on properties without even visiting them in person.

As this temporary buying frenzy tapers off, market watchers are predicting an inevitable toll on the pace of monthly property price increases. A major lack of inventory is likely to shield the sector from a major crash, but significant falls could be on the horizon.

“For anyone looking to purchase a property, the advice is simple – hang fire. If the statistics are reflective of anything over the past year, the stamp duty holiday is of benefit to only one side of the coin – the sellers,” commented Ross Counsell, a chartered surveyor at GoodMove.

“If buyers can wait it out until the end of the new [tapered] deadline [of September 30], they should expect to save a significant amount of money.”

His sentiments were shared by Tom Bill, head of UK residential research at Knight Frank, who likewise predicted a gradual shift back to stability for the sector.

“In a similar way to rising interest rates, there will be a financial hit from ending the holiday but the wider point is that it signals a return to normality,” he said.

“The stamp duty holiday hasn’t just squeezed transactions into artificially short periods of time, it has also put people off entering the market,”

“A tax deadline there is no guarantee of meeting, together with stories of sealed bids, over-worked conveyancing solicitors and a shortage of removals vans will have deterred some,”

“Indeed, the second half of this year should see healthy levels of activity in the UK housing market. There is frustrated demand in the system, new supply is starting to pick up and the labour market is stronger than most economists predicted six months ago.”

No Immediate Alterations Expected

Whether the housing bubble will eventually burst or not, most experts seem to agree that there are no major alterations expected on the immediate horizon.

“It is no secret that the property market has been on a rampage in the last year. Spurred on by various Government initiatives, people unlocking savings and equity in their homes, or simply rethinking their living arrangements, there has been massive demand for houses,” commented David Hannah, principal consultant at property firm Cornerstone Tax.

“The question on everyone’s mind is what will the property market do next? It cannot go on forever increasing; however, current market trajectory shows no major signs of slowing down, it is not yet time to worry about a bubble bursting.”

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Mortgages

Right to Buy vs Remaining a Tenant: Can You Afford to Buy your Home?

The prospect of owning your home is particularly tempting when there is the offer of a huge discount on the table. Introduced in 1980 by Margaret Thatcher, the Right to Buy scheme provides qualifying council house tenants with the opportunity to purchase their properties at a heavily discounted rate.

Depending on how long you have lived in a council house, you could qualify for anything up to £84,200 off its true market value (£112,300 in London).

For the most part, eligibility is determined solely on the basis of the length of time you have resided in social housing. Full details of eligibility requirements can be found on the government’s official Right to Buy website, where there is also a quick eligibility quiz you can take to see if you could qualify for a discount.

But even if you are able to benefit from a significant discount on your home’s market value, there are other factors to consider before going ahead. Primarily, you need to consider objectively whether or not you can comfortably afford home ownership.

Additional Costs and Outgoings to Consider

The reduced purchase price of your home could be well within your means, in terms of the subsequent monthly mortgage repayments of course. Along with the price of the property itself, you will also need to consider whether the following can be comfortably covered by your budget:

  • Mortgage fees – setting up a mortgage can be surprisingly expensive, with a variety of arrangement fees, administration fees and setup fees imposed by most major lenders.
  • Conveyancing – this refers to the main legal fees you will need to pay when purchasing your home, for the services of a Conveyance Solicitor.
  • Survey – though not technically a legal requirement, it is essential to organise a thorough survey of your property to ensure there are no major issues prior to purchasing it.
  • Stamp duty – properties valued at less than £250,000 are currently exempt from stamp duty taxation, though the current suspension is set to expire at the end of September.

The total combined costs of these additional fees can often reach up to several thousand pounds, which needs to be paid up-front for the transaction to go ahead, as opposed to being covered at a later date. Funding can be arranged with bridging loans if needed.

Deposit Requirements

It may be possible to use your Right to Buy discount as a form of equity as an alternative to paying a deposit. This is something that differs significantly in accordance with lenders’ individual policies.

Are You Planning on Relocating?

It is important to remember that Right to Buy mortgage discounts are offered on the condition that the property’s buyer does not subsequently sell their home too quickly.

If you put your home on the market after perching it at a discounted price, you will be required to pay back a proportion of the discount as follows:

  • 100% if you sell in the first year
  • 80% if you sell in the second year
  • 60% if you sell in the third year
  • 40% if you sell in the fourth year
  • 20% if you sell in the fifth year

This could therefore significantly affect the affordability of your property purchase, if you intend to relocate at any time in the near future.

For more information on any of the above or to discuss the potential benefits of Right to Buy in more detail, contact a member of the team at UK Property Finance today.

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Other Finance News

UK and Singapore come to an agreement on the landmark Financial Partnership for Financial Services

A historical moment for financial relations has been made; signed by the chancellor; a new partnership between the UK and Singapore regarding financial services will boost jobs and investment in the UK.

  • Chancellor agrees new financial partnership between UK and Singapore
  • Will facilitate closer regulatory cooperation and help to boost jobs, trade and investment
  • UK and Singapore also commit to strengthen cooperation on areas such as green finance and cyber security

This new agreement that supports financial services will facilitate closer co-operation and allow a greater data pool, thus revealing opportunities to boost investment and trade between the 2 countries.

This tactic is part of the government’s plan to make sure the UK remain the leading financial centre; marking an important development in the UK’s strategy in pursuing financial global domination, now the UK is independent from the EU. This has all been made possible by Rishi Sunak and the Singapore’s Senior Minister and Chairman of the Monetary Authority of Singapore, Tharman Shanmugaratnam.

“Helps to grow the economy and create jobs”

After the Signing, the Chancellor of the Exchequer, Rishi Sunak had this to say:

“Our financial services industry helps to grow the economy and create jobs, and today’s agreement is a landmark step in showing the UK – as one of the world’s preeminent financial centres – is both open to the world and committed to maintaining the highest standards of regulation.

Our financial partnership will help increase investment and trade with Singapore and the Asia-Pacific region and boost collaboration on important areas such as fintech and green finance.”

The Partnership is supported by a memorandum of understanding, this aims to reduce frictions for firms serving UK and Singapore markets by showing that each other’s financial services regulatory regimes have similar goals; an additional memorandum of understanding on cyber security was too signed, providing a formal basis for co-operation between the UK and Singapore on the finance sector’s cyber security.

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Mortgages

Most High Street Banks Unwilling to Grant Mortgages to Furloughed Workers

Individuals who received government grants during the pandemic due to a loss of earnings are being unfairly scrutinised and automatically rejected by some of the biggest banks on the High Street.

A report published this week by the BBC suggests that several major lenders are refusing to accept mortgage applications from people on furlough, or those who received financial aid from the government during the COVID-19 crisis.

Brokers have reported that workers within the entertainment, hospitality and travel sectors are among the worst affected, being refused help outright irrespective of their current financial position.

Such applicants are being treated as ‘high risk’ cases by major lenders, purely on the basis of having received financial support they were legally entitled to.

“I almost feel like I am being treated like a bankrupt, in some way, that I am being penalised for something that wasn’t my fault,” hospitality worker Lisa Harding told the BBC.

A 49-year-old first-time buyer with a 10% down payment saved, Ms Harding said she cannot get her mortgage application through the door due to the fact that she was furloughed from her hospitality job during the pandemic.

Despite having now returned to stable full-time work, she cannot get a mortgage on the High Street.

“I feel unfairly penalised. Furlough has been brilliant in that it has protected my job. But I didn’t expect to come out of the other side – with a deposit, no debt, a perfect credit rating, all of the things that should make me an ideal first-time buyer – only to find out that banks just will not lend to me at all,” she said.

Self-Employed Individuals Also Struggle

The BBCs investigation found that the Royal Bank of Scotland and NatWest, two of the biggest lenders in the UK, have been automatically declining mortgage applications from individuals who used the government’s self-employment income support scheme (SEISS) during the pandemic.

“As it stands, we aren’t accepting applications from customers who have applied for a SEISS grant on or after 14 July 2020,” a spokesperson told the BBC.

“As a responsible lender this is part of the bank’s affordability criteria.”

Applications are being denied on the basis of SEISS grants alone, without taking the applicant’s wider financial circumstances into account.

Yorkshire Building Society and TSB said such applications would be considered, though the applicant would need to present extensive evidence of the recovery and financial performance of their business.

Many banks are imposing much higher deposit requirements for self-employed workers; at Santander the minimum deposit requirement for self-employed individuals applying for a mortgage is now 25%.

The BBC reported that most of the lenders it reached out to including Virgin Money, TSB, Yorkshire Building Society and Lloyds have said that they were not currently accepting mortgage applications from individuals on furlough.

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Bridging Loans

Second Charge Lending Back To Pre-Pandemic Norms

Having successfully broken the £100 million barrier in June the UK’s second charge lending sector is back to its pre-pandemic norm. According to the latest figures published by Loans Warehouse, total second charge lending activity hit just over £104 million last month, which is the highest rate since the COVID-19 crisis began.

The report from Loans Warehouse painted a predominantly positive picture for the second charge sector, with the slight exception of an increase in completion times. Due to the applications involved in processing such high volumes of applications, the average second charge completion time in June was 17 days.

“The second charge lending market has now officially hit pre-pandemic levels of lending and surpassed the £100m barrier,” commented Loans Warehouse managing director, Matt Tristram

“With figures reported directly to the Loans Warehouse Secured Loan Index in June from multiple lenders, second charge lending totaled £104.3 million in June 2021 – a post pandemic high.”

“Lending increased 16% month-on-month and highlighted an incredible 365% record breaking year-on-year increase but let’s remember, this was one of the pandemic lows for second charge lending. A more realistic comparison would be lending figures from June 2019 which incredibly were all but identical to June 2021 with £105m reported by the FLA.”

“This is also a landmark month with Optimum Credit posting lending figures of £37.9m which is believed to be the most lent by a single lender since the Credit Crunch of 2006!”

Better Access to Equity for More Borrowers

Mr Tristram went on to highlight the effect high-equity loans have had on the sector, as borrowers continue to enjoy access to high LTC loans for all purposes.

“One of the biggest impacts on mortgage lending during the pandemic has been on the level of equity available to borrowers. Second charge lending continues to offer an alternative method of raising capital for many, as such we will have highlighted the split of lending over 85% LTV,” he said.

“In the year to date we have now recorded £493m in second charge lending and monthly new lending figures continue to improve.”

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Mortgages

2021 Predicted to be a Big Year for Remortgage Activity

The hysteria surrounding the temporary stamp duty holiday will live long in the minds of many. Not that it has yet come to an complete end, with the extension of certain privileges to homebuyers having once again been extended until the end of September.

By acting fast, homebuyers picking up properties for no more than £250,000 still stand to make significant savings.

But while much of the attention has been focused on this sector, the UK’s remortgage market has also been booming this year. More importantly, the same is predicted to continue for the months to come, which could result in 2021 becoming one of the biggest years for remortgages in some time.

Optimistic Projections

According to the latest figures released by CACI, a total of £183.2bn of mortgages will mature this year. There will be certain times during the year when major spikes will occur in the number of mortgages exiting their initial fixed or variable period. For example, approximately £29bn of mortgages will be moving to standard variable rates in October.

This represents a huge contingency of customers, new and existing, who need to prepare for significantly higher mortgage rates within the next few months. All at a time when their financial situation may already be far from perfect, as the effects of the COVID-19 pandemic continue to linger.

The sheer size and potential of the remortgage market for the rest of the year has prompted a growing number of lenders to introduce incentives and review their pricing structures, in order to make their products more appealing.

For lenders, it represents an invaluable opportunity to help borrowers avoid the potential costs of being shifted to a less competitive SVR mortgage. For the borrower, the sheer competition among lenders is likely to result in rock-bottom remortgage rates as the ‘price war’ plays out.

The Benefits of Broker Support

This is likely to continue emphasising the importance of independent broker support. It is inevitable that many borrowers will find themselves in a position where the most cost-effective option is to remortgage with a new lender. A process that begins by conducting a whole market comparison, factoring in the various costs and potential penalties involved in transferring providers.

In addition, established brokers are able to provide access to special deals and incentives that are not available on the High Street. Often, applying via a broker is the only way to gain access to the most competitive deals available.

Should it prove the case that competition among lenders peaks over the autumn period, an intensive market comparison (incorporating specialist independent lenders) could hold the key to significant savings.

Whether you are planning ahead or fast approaching the end of your introductory fixed-rate period, we would be delighted to conduct an extensive comparison on your behalf to find you an unbeatable deal. Call the team at UK Property Finance anytime for an obligation-free consultation.

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Mortgages

A Brief Introduction to Self-Build Mortgages

The appeal of building your own home from scratch is undeniable. Purchasing an attractive property is one thing but customising every aspect of your dream home from the ground up is something else entirely.

But what must also be taken into account when considering a home building project is obtaining the appropriate funding. Self-build mortgages are widely available in the UK but are not quite the same as conventional home loans.

What is a Self-Build Mortgage?

Self-build mortgages are home loans granted for the purpose of building a property from scratch. They differ from a conventional mortgage because there is no specific security for the property to issue the loan against.

Instead of being granted the money as a lump sum, a self-build mortgage is released in a number of stages. This helps mitigate at least some of the risk for the lender, who can decide if and when further funds should be allocated to the project.

At Which Stages Are Self-Build Mortgage Funds Released?

Policies vary between lenders, but most allocate funds across the same basic series of stages as follows:

  • Upon purchasing land and obtaining planning permission
  • When the foundations for the property are laid
  • Upon completion of the basic structure
  • When the roof is fitted and the property is weatherproofed
  • After the first fix jobs are completed (like plastering)
  • When the second fix stage is completed (plumbing and electrics)
  • Upon certification of completion by a surveyor

The amount of money released at each of the stages will be specified in the loan contract, which varies significantly from one lender to the next.

What Types of Self-Build Mortgages Are Available?

There are two primary types of self-build mortgages, categorised on the basis of when the funds are released:

  • Advance – This type of self-build mortgage provides the borrower with the funds they need prior to each major stage of the build. Often the only viable option for those who do not have significant funds on-hand to cover the costs of the project in advance.
  • Arrears – This is where the funds are released following the completion of each major projects stage. This is sometimes a more cost-effective option as it is considered lower-risk by the lender and is also the most widely available type of self-build mortgage.

Who Qualifies for a Self-Build Mortgage?

Lending criteria for a self-build mortgage are slightly different to those of a conventional mortgage. For example, you will usually need a larger deposit to qualify – typically a minimum of 25% of the total project costs.

Depending on the type of mortgage you intend to apply for, you may also need to provide evidence of having enough money available to cover the initial stages of the project. Lenders expect to see detail projections and breakdowns of costs, along with evidence that all possible contingencies have been planned for.

Getting a Good Deal on a Self-Build Mortgage

As with all home loans, the key to getting a good deal on a self-build mortgage lies in comparing as many options as possible from a broad pool of providers. At UK Property Finance, we conduct whole-market comparisons on behalf of our clients, in order to find unbeatable deals from an extensive network of specialist lenders.

Call today for an obligation-free consultation, or email anytime and we will get back to you as soon as possible.

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Mortgages

Brokers are seeing a Spike in Activity from Newly Employed Mortgage Applicants

The number of broker searches including the term ‘time in current employment’ has increased significantly, new figures from Knowledge Bank suggest.  Appearing within the top search terms of the first time, it is a strong indication that brokers are doing business with more clients who have recently started new jobs.

More specifically, customers are looking to take out mortgages available to those who have not been in their current role for a long period of time.

This transition marks a shift experts have been predicting for some time, triggered by the withdrawal of the government’s furlough initiative and extensive job losses. Over the past six months, millions have either switched roles or been forced to find new employment entirely.

Borrowers Facing Financial Difficulties

Along with ‘time in current employment’, other top-ranking search terms suggest more clients are approaching brokers in difficult financial situations.  During May and June the number of searches for ‘defaults registered in the last three-years’ increased significantly.

Elsewhere, the term ‘capital raising for debt consolidation’ was one of the top searches in the second charge market. Brokers have reported an influx of clients considering second charge mortgages to clear debts built up over the course of the past year, when many struggled with reduced income or a complete loss of income.

Another term that saw a spike in numbers over the past couple of months was ‘soft footprint at DIP stage’ – reflecting the ferocious competition among prospective-buyers for desirable properties. In the real estate sector, agents are now routinely demanding that prospective-buyers have a decision in principle in place prior to permitting viewings.

The growing number of searches including the term ‘soft footprint at DIP stage’ suggests that brokers are proactively seeking prompt decisions from lenders on behalf of their customers, while at the same time safeguarding their credit scores.

Over in the bridging market, the term ‘regulated bridging’ remains the most common searched term of all. The only major change is the entry of ‘light refurbishment’ to the top five search terms for bridging finance applications.

A Reassuring Outlook?

Experts have since commented on the findings, highlighting the partially positive nature of people pursuing and taking up new employment opportunities.

“The news that more people are starting new roles is certainly a positive. These may be fuelled by the pandemic, which has shifted priorities and increased opportunities in some industries due to flexible working,” commented Knowledge Bank operations director Matthew Corker.

“However, the increasing number of searches for ‘defaults’ and ‘capital raising for debt collection’ is a concern for the economy,”

“Although we have moved passed the stamp duty deadline, the appetite for moving does not look set to dissipate any time soon. With this rush of clients, brokers do not have time to spend hours every day on the phone to lenders and updating spreadsheets with the latest criteria. Using a comprehensive criteria search system can save brokers a massive amount of time, and also ensure they are providing best advice.”

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Mortgages

Mortgage Choice Hits a New Post-Pandemic High

The number of mortgage products available on the UK market has reached a new post-pandemic high, according to the latest data published by Twenty7Tec more than 800 new mortgage products were introduced in June alone.

This represents a 6.6% growth on the month prior, bringing the total number of mortgage products now available to more than 13,000. This is the highest number recorded since March 2020 prior to the COVID-19 crisis.

Activity from first-time buyers accounted for a reassuring 20% of total market activity in June, suggesting that the withdrawal of the stamp duty incentive has not had a major impact on interest. July 1st saw the partial return of stamp duty obligations return to normal rates, though home buyers purchasing properties valued at £250,000 or less will continue to be exempt until the end of September.

95% LTV Mortgages Proving Popular

The figures published by Twenty7Tec also indicate that the government backed 95% LTV mortgage initiative is proving popular, total search volumes for 5% deposit mortgages accounted for 5.15% of all activity in Q2, up from just 1.37% in Q1.

First-time buyers unable to offer a 10% or 20% deposit can now apply for a 95% LTV loan with several major High Street banks. However, some have commented on the extent to which lenders are scrutinizing the 5% deposit mortgage applicants, making it difficult for those without flawless credit and a very high annual household income to qualify.

Mortgage Product Availability Now at 65% Previous Volumes

Commenting on the figures, director at Twenty7Tec Phil Bailey said that while the numbers are reassuring, there is still a long way to go until the market gets back to its pre-pandemic norms.

“The end of June saw a huge final push for closure of documents. It’s quite funny that we bash solicitors constantly for being really slow and inefficient. But it’s amazing how, when there’s a financial, commercial element how quickly they suddenly get stuff through. Lenders, brokers, solicitors, conveyances, the land registry, everyone just upped their game,” he said.

“I think that one big lesson from the past year is that the various parts of the market are, slowly, coming together a little more and understanding about the timeframes in which each works. Being able to predict with more certainty how various parts of the market will react to changes, is critical to the evolving mortgage and housing landscape. Surely data has a big part to play here?”

“We saw a huge rise in the number of products on the market this month – up 804 products. Yet we’re still only at 65% of the previous volumes of products on the market. So, given that all searches and ESIS document volumes are still well up on the highs of last year, every product is having to work harder as demand is outstripping supply.”

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