After many years of excessively large monthly payments, thousands of ‘mortgage prisoners’ may finally be released from their restrictive and overpriced deals.

In the wake of the financial crisis of 2008, up to 250,000 borrowers found themselves trapped in high-interest loans with no allowance for transferring to a more competitive deal elsewhere. Many of them were stuck paying more than double the average APR of a competitive mortgage calculator in the UK, resulting in hundreds of pounds of additional outgoings each month.

The eventual intervention of the Financial Conduct Authority last year forced several banks and building societies to revisit and relax their policies for those affected.

To date, four lenders have confirmed policy changes to reflect the guidelines of the FCA: Halifax, NatWest, Santander, and West Brom Building Society will all make allowances for mortgage prisoners who are up to date on their repayments and are not seeking to borrow more.

It is estimated that this initial policy adjustment could result in 14,000 mortgage payers making significant savings on their monthly outgoings while reducing their overall mortgage debt. The overwhelming majority of those who remain locked into high-interest deals, however, may be forced to wait longer to be offered the same flexible facilities.

Imprisoned in high-interest loans

Speaking on behalf of MoneySavingExpert, Martin Lewis once again reaffirmed the responsibility of the government to take action against unscrupulous lenders profiteering at the expense of struggling borrowers.

“Mortgage prisoners are the forgotten victims of the 2008 financial crash,” he said.

“The government at the time chose to bail out the banks, but unfairly and immorally, hundreds of thousands of their victims were left without adequate help, trapped in their mortgages and the financial misery caused by it. And they have been forgotten ever since.”

“There is a moral responsibility to release money to free mortgage prisoners from their penury.”

“Intervention can and will save lives.”

Meanwhile, a statement released by the Treasury indicated that while the government is aware of the issue, no formal measures or even timelines to rectify it have been outlined to date.

“We know that being unable to switch your mortgage can be incredibly difficult,” read the statement from the Treasury.

“Thousands of borrowers will now find it easier to switch to an active lender or continue interest-only payments thanks to recent rule changes by the Financial Conduct Authority, and we have been working closely with the industry to ensure more is done to help those who are eligible to switch.”

“We remain committed to looking for practical new solutions for borrowers who are struggling.”

The importance of independent mortgage comparisons

Irrespective of market conditions or personal financial circumstances, the importance of conducting a comprehensive mortgage comparison before applying is paramount. Consult with an independent broker at the earliest possible stage for the impartial expert advice you need to make the right decision.

Likewise, if you believe you may be ‘imprisoned’ in a high-interest product and would like to discuss switching to a more competitive loan, an established broker can help you find and secure an affordable alternative.

There is an interesting disparity between the way in which male and female equity release customers choose to allocate their funds upon releasing the equity tied up in their homes. That is according to new data released by HUB Financial Solutions, which suggests that single women who raise money through equity release are significantly more generous with their subsequent capital than anyone else.

Specifically, it was found that single women raising money through equity release allocated a full quarter of the proceeds to gifts for friends and family. Single men in the same position were not found to be nearly as generous, allocating on average 13% of the money they released to the same gestures of generosity.

HUB Financial Solutions’ figures (collated from data collected during the first nine months of the year) also indicated that 50% of male equity release customers had financial motivations in mind when applying, such as restructuring debt or increasing their income.

Single male applicants were also found to be more likely to spend more of the funds raised on paying for divorce costs than women, a full 9% of the entire equity released, compared to just 0.5% with single female applicants.

Home improvements remain popular

As has typically been the case, there was no major gap between the number of men and women allocating equity release funds to home improvements. Around 11% of single male applicants intended to improve their homes with the money raised, with 13% of single women indicating the same intent.

A larger disparity was noted with vehicle purchases, however. Single women were found to have spent an average of 3% of their equity release funds on cars, compared to 5% with single men.

Speaking on behalf of HUB Financial Solutions, managing director Simon Grey commented on the growing popularity of using equity release funds to offer cash gifts to family and friends.

“Gifting is a key reason why many people use equity release. The money could be used to help their children or grandchildren finance a deposit on a property, to support friends and family through financial difficulties, or to contribute to tuition fees,” he said.

“It will be interesting to see over the coming months whether the priorities of equity release customers begin to shift as the country continues to deal with the coronavirus pandemic and the impact on people’s personal finances and those of their families becomes clearer.”

Assessing suitability

As equity release continues to grow in popularity, experts are warning prospective applicants not to make any major financial decisions without first seeking expert advice. Consulting with an independent broker, such as UK Property Finance, is particularly important to assess suitability for equity release and compare the market for a competitive deal.

Equity release is not for everyone, though it can represent a real financial lifeline for those who are asset-wealthy but cash-poor. Use our UK mortgage calculator to find out more accurately what you’ll be paying.

The UK housing market’s return to strength following the initial COVID-19 lockdown exceeded all analyst and economist expectations. That is according to the latest figures from Nationwide, which indicate that more than 100,000 mortgages were approved by lenders in November alone.

This would make November the busiest month for mortgage approvals in the UK for more than 13 years.

House price growth due to the temporary suspension of the real estate market is credited with much of the elevated activity towards the end of the year. The same can also be said for the temporary stamp duty holiday, which is set to expire on March 31.

During the last three months of the year, there was a flurry of interest among prospective buyers looking to make the most of the stamp duty break before the deadline.

Banks are struggling to cope with demand

Even at a time when the employment situation in the UK was looking worse than it had in decades, record numbers of people were applying for mortgages and setting their sights on property ownership, with many using UK mortgage calculators to find out the costs much more accurately. This surge in interest had a knock-on effect on average house prices, which spiked an impressive 7.3% during December alone. However, experts are warning that those who have yet to set their plans to take advantage of the stamp duty holiday may have already run out of time. Particularly where banks and lenders are offering high LTV loans with minimal deposit requirements, there is still a major backlog of applications that many are struggling to cope with.

“The good news is that the banks are increasingly eager to lend, and we have started to see major institutions return to lending to buyers with small deposits, in a boost for first-time buyers,” said a partner at Knight Frank Finance.

“The bad news is that many banks still haven’t worked through a backlog of applications that built up during the lockdown and subsequent surge in activity during 2020 and will likely struggle to cope if activity picks up during the first months of this year.”

A rapid slowdown is predicted

Accelerating house prices and the March 31 deadline of the government’s stamp duty holiday will inevitably impact demand and general housing market activity going forward; however, it is now likely that the economic impact of the third national lockdown, imposed as of January 5, 2020, could influence the housing market. The rate at which transactions are delayed, suspended, or cancelled altogether remains to be seen, though at this stage, what is troubling many of those operating within the industry most is the prospect of the new lockdown continuing until March or even later.

COVID-19 and the first national lockdown plunged the entire UK property market into a state of unprecedented chaos. For the most part, the sector was shut down in its entirety, rendering it impossible for most property sales and purchase transactions to go ahead.

Buy-to-let landlords were also hit hard and, in many instances suddenly found themselves with tenants who simply couldn’t afford to pay their rent. Elsewhere, buy-to-let landlords faced the prospect of their properties sitting vacant indefinitely, causing issues with their own property loan repayments and general overheads.

In total, it was estimated that 54% of tenants contacted their landlords at some point during 2020 to discuss a rental holiday.

A more reassuring outlook is ahead

Despite all the doom and gloom the past 12 months brought to the buy-to-let sector, experts are predicting a more positive year ahead. The residential property market across the UK in general has seen a surprising and continued strength, which most anticipate will continue throughout 2021.

Buy-to-let landlords are also expected to enjoy a more prosperous year ahead, particularly those who take advantage of the government’s temporary stamp duty holiday within the next few months.

Speaking on behalf of Ludlow Thompson, chairman Stephen Ludlow commented on the surprising yet welcome performance of the buy-to-let sector in the face of such adversity.

“The buy-to-let market has continued to provide a reliable return on investment for landlords, even during the worst of the pandemic when other forms of investment went through a period of intense volatility,” he said.

“The historic resilience of residential property means many private investors are still looking to add to their holdings, particularly before March 2021, when the stamp duty holiday ends.”

Shifting priorities and preferences among movers

Mr. Ludlow also went on to provide advice for new and existing landlords looking to make the best of the current situation and adapt to their tenants’ shifting priorities.

“We would advise existing and prospective landlords to consider re-purposing their properties to meet the changing needs of tenants,” he said.

“With people spending more time at home, having extra space both indoors and outdoors has become more important than ever. Outdoor areas and home offices are both in very high demand, as is accessibility to high-speed internet.”

Working from home has triggered a major shift in priorities and preferences among home buyers and property renters alike. The more time people spend in and around their homes, the greater their interest in more spacious and comfortable properties with private outdoor living spaces.

Rural and coastal towns and villages have become property hotspots for buy-to-let investors and homebuyers as attention turns increasingly away from cities and major urban city centres.

Independent brokers and financial advisors across the country are projecting a successful year ahead for the equity release market. With interest among customers having remained surprisingly high throughout 2020, even in the face of major economic uncertainty, three-quarters of experts anticipate significant market growth over the next 12 months.

Specifically, new data published by Canada Life suggests that many financial advisors anticipate the value of the equity release market to exceed £6 billion in 2021 for the first time.

Modest yet reassuring gains

The figures from Canada Life suggest that around 42% of financial advisors experienced growth in their equity release activities during 2020. While this is not particularly impressive growth, it is nonetheless reassuring given the financial impact and uncertainty of the COVID-19 pandemic.

Many had expected the market to grind to a complete halt, when in reality it remained ‘business as usual’ for a surprising proportion of lenders.

As a result, 62% of advisors now believe that the equity release market will be operating at pre-lockdown levels by the end of the second quarter next year. It’s also widely predicted that the market’s performance will continue to accelerate indefinitely as more people than ever before express an interest in equity releases.

Changing priorities and purchase intent

Meanwhile, Canada Life’s figures indicate a series of interesting shifts in how those planning to release equity in their homes intend to allocate the funds raised. Evidence also suggests that the average equity release customer age in the UK will also reduce: 50% of advisors predict a spike in popularity among younger homeowners next year.

45% of experts also see more equity release customers applying for bigger loans, releasing much larger proportions of the equity tied up in their homes.

As for the allocation of the funds, 70% of advisors predict that their customers will give portions of the proceeds to their children or grandchildren next year. 65% see equity release funds being used to pay off debts, marking a slight reduction from the 71% recorded in 2020.

The primary motivations among equity release customers for leveraging the money tied up in their homes are expected to remain the same next year. These include paying off the debt during retirement, concerns regarding insufficient pension savings, and the ongoing volatility of the stock market. Get help working out the costs of paying a mortgage using our UK mortgage calculator.

In addition, the impact of COVID-19 on people’s finances, income, and long-term financial stability is also likely to influence decisions regarding equity release.

“There is no doubt 2020 has been challenging for many reasons, but it is great to see so much positivity looking forward to next year,” commented Alice Watson, Head of Marketing at Canada Life.

“Advisors are clearly anticipating a growth in demand driven by both improved awareness of equity release and families reassessing their finances in light of the pandemic. Predictions around a shift in customer age and an increase in loan size point to a move in how homeowners view their home as a financial asset, much like pensions or ISAs.”

“The world is changing around us, but closer to home, we need to consider how best to use our overall wealth to provide the secure financial futures we seek. Advisors are best placed to show clients how to plan for that future.”

Contrary to popular belief, bankruptcy will not necessarily count you out of the running for a mortgage. A history of bankruptcy on your file can create additional challenges, but it does not make qualifying for a mortgage impossible.

It is simply a matter of carefully considering the options in order to pair your requirements with an appropriate lender you can count on.

How soon after bankruptcy can you get a Mortgage?

In the immediate aftermath of declaring bankruptcy, qualifying for any kind of credit can be extremely difficult. Particularly when major banks and lenders are concerned, those who have recently been declared bankrupt are excluded from almost all lines of credit across the board.

Any history of bankruptcy in your financial history will appear on your credit file for a period of six years. During this period, you can expect to be scrutinised by the vast majority of mainstream lenders when applying for lines of credit. The more recent the bankruptcy, the lower the likelihood of qualifying for a loan.

If you are considering applying for a mortgage during this period, you will need to take your business to a specialised lender. Away from the UK High Street, there is an extensive network of flexible and accommodating specialists who welcome applicants with flawed credit histories. Even those with recent bankruptcies are not necessarily ruled out of contention. You can even use our UK mortgage calculator to work out the cost.

You may have recently been declared bankrupt, but you may also be in an extremely strong financial position with a provable source of income. Likewise, you may already own one or more properties, against which you may be able to secure a loan to access the funds you need.

Bankruptcy need not prevent you from qualifying for a mortgage, but it is essential to seek independent advice before applying. Consult with an independent broker to discuss the available options and choose an appropriate course of action.

What size deposit do you need?

With all types of ‘substandard’ finance, bigger deposits make it easier to qualify for a competitive loan. During the first couple of years following bankruptcy, you may be required to provide as much as 40% as a minimum down payment. Over the subsequent two to three years, this could fall to as little as 25% or even 15%.

If you declared bankruptcy six or more years ago, there is a good chance you will qualify for a mortgage with a deposit as low as 10% or even 5%. Though it is worth bearing in mind that the larger the deposit you provide, the more likely you are to be offered a competitive rate of interest and reduced overall borrowing costs,

Larger deposits often hold the key to not only qualifying for a poor-credit mortgage but also ensuring you access a competitive deal. If possible, it is therefore worth considering offering a down payment that exceeds the lender’s minimum requirement.

Which lenders offer bankruptcy mortgages?

On the UK High Street, the list of lenders that specialise in bankruptcy mortgages is relatively short. In fact, any evidence of bankruptcy whatsoever is likely to count you out of the running with the vast majority of mainstream lenders.

This is why it is important to set your sights beyond the usual high-street names if you are looking to get a good deal with a history of bankruptcy. With the help of an established independent broker, your requirements and financial position can be paired with an innovative and accommodating lender who specialises in post-bankruptcy mortgages.

By working with an independent specialist, you are far more likely to both qualify and be offered a competitive deal you can afford. Particularly if you are otherwise in a strong and consistent financial position, your history of bankruptcy may not be held against you.

Speak to an independent broker to arrange a whole-market mortgage comparison, including the specialist lenders you won’t find on any UK high street.

Let-to-buy can be a fantastic option where selling your home the conventional way is impossible or not preferable. For an overview of borrowing costs and typical let-to-buy rates, use our helpful let-to-buy calculator.

How does let-to-buy work?

Let-to-buy bears many similarities to a classic buy-to-let investment opportunity. With let-to-buy, the whole process works in reverse.

Many homeowners, upon finding their dream property, encounter difficulties selling their current home. In other instances, those who have spent years or decades investing heavily in their current home would rather hang onto it than sell it.

In both instances, let-to-buy could be the ideal option. This is where you retain ownership of your current property, let it out to tenants, and use the rental payments to cover your current mortgage. You are then free to take out a new mortgage on the property you intend to buy, leaving you with just one mortgage to pay from your own income.

Your tenants effectively pay your previous mortgage, and you ultimately end up with the two homes under your ownership.

Switching mortgages

Let-to-buy can be flexible and affordable, though it is not without its complexities. Letting out a property under the terms of a standard mortgage usually goes against most lenders’ terms and conditions.

It is therefore necessary to switch the mortgage on your current home to a specialist buy-to-let mortgage, as you will subsequently be letting the property out to tenants rather than living in it. This may also mean a higher APR than the prior conventional mortgage, along with additional borrowing costs applicable to buy-to-let mortgages.

This is one of many reasons why comparing the market in its entirety for a competitive deal is essential. After gaining a basic overview of what is on offer with our let-to-buy calculator, call to arrange an obligation-free consultation.

Establishing affordability

All applicable costs of a let-to-buy need to be carefully considered before applying for a new mortgage or buying a second home.

For example, owning a second property may increase stamp duty liability. Rental income tax is also payable on the money earned by letting out a property.

In addition, becoming a landlord means taking responsibility for the upkeep and maintenance of two homes. Mortgage arrangement fees, legal fees, valuation fees, and completion fees may also apply. all of which should be discussed with a broker before applying. You can even use our UK mortgage calculator to work out all the costs.

Let-to-buy is therefore not an ideal solution for all homeowners but can prove a profitable venture for many.

Independent broker support

If you have any questions about the let-to-buy process or are considering investing in a second home, we can help. Book your obligation-free, cost-free consultation with one of our experts to discuss the options available.

We will help you assess affordability, eligibility, and whether letting go is the right move for you. Call or email anytime to learn more.