If you live in a council house or a housing association property of any kind, now could be the perfect time to purchase your home. The government’s Right to Buy scheme provides qualifying tenants with the opportunity to purchase the properties they live in at a significantly discounted rate.

As of April 6, 2019, the maximum discount available under the Right to Buy scheme was increased to £82,800, or up to £110,500 for qualifying properties in London.

For more information or to get your application underway, contact a member of the team at UK Property Finance today.

Why should you buy your home?

Eligibility under the Right to Buy scheme qualifies you for a once-in-a-lifetime price reduction on the property you live in. As much as £82,800 (or £110,500 in London) could be subtracted from the market value of your home, making it a far more affordable purchase. If buying a property through conventional channels isn’t an option, homeownership through the Right to Buy scheme could be well within reach.

Your home has the potential to be the single most valuable asset you will ever own. Right to Buy provides the opportunity to step on the property ladder for the first time while also providing the freedom to alter and improve your home in any way you like.

While there are significant responsibilities to homeownership, it nonetheless proves enormously beneficial for the vast majority of tenants who use their Right to Buy privileges. Eligibility for Right to Buy was recently relaxed from five years’ tenancy to just three years, resulting in tens of thousands of new tenants becoming eligible for the scheme.

There is currently no housing purchase programme in the UK that provides anything close to these kinds of discounts. The price reduction of up to £82,800 (or £110,500 in London) could make your home more affordable than you think.

If you believe you may be eligible for the Right to Buy or have any questions on how the programme works, reach out to a member of the team at UK Property Finance today or use our UK mortgage calculator to work out exactly how much a mortgage would cost you.

Right to buy scheme history

Far from a new programme, the UK government introduced the Right to Buy scheme in 1980. However, significant changes have been implemented over the years, relaxing eligibility requirements and significantly increasing maximum discounts.

Previously, the maximum discount available on a property was just £16,000. Now increased every April to compensate for inflation, the maximum discount now stands at £82,800 across England (£110,500 in London). Lower discounts of £24,000 and £8,000 are available in Northern Ireland and Wales, respectively.

Whether you’re ready to go ahead or simply considering the option of buying your property, we’d be delighted to hear from you. Contact a member of the team at UK Property Finance anytime for an obligation-free consultation.

Buying a home for the first time can be both exciting and daunting in equal measure. 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 in the 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 these 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.

1. 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 to manoeuvre, rather than pushing your finances and your budget to breaking point.

1. There are mortgages beyond High Street.

Depending on your requirements and circumstances, you could be better off working with an independent lender away from the High Street. From poor-credit first-time 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.

1. 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.

1. With deposits, bigger is better.

If there is any realistic way of pulling together a larger 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.

1. 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.

 

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.

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 were 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’ by 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 this 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 the economic secretary to the Treasury, John Glen MP.

‘Now that the FCA rule changes are in effect, I expect as many of 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 deal, 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.

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 to specialist, independent lenders.

Eligibility for 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

The availability of renovation mortgages for non-habitable properties is more limited, as most high-street banks are unwilling to lend to uninhabitable properties. 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 these include:

• Bridging Loans. A short-term lending facility designed for prompt repayment 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. This is 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.

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,” s 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 of 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 the Right to Buy to housing association tenants was “always a daft idea”.

Simply mentioning the words ‘subprime mortgage products” is enough to incite painful memories of the 2007 financial crisis. Prior to 2007, many mortgage lenders in both the United Kingdom and the United States were underwriting loans with minimal checks and, as such, agreeing loans for a wide range of applicants, some of which were completely inappropriate.

The poor underwriting standards initially arrived in the US but were soon implemented in the UK and many other countries as the majority of US lenders expanded around the globe.

It was this excessively risky approach to lending that was credited with fuelling the resulting crash; however, in the years that followed, regulators and mortgage lenders implemented new policies and procedures to prevent history from repeating itself.

The result is a much stricter lending approach and more regimented underwriting processes, making it increasingly difficult for borrowers with imperfect credit to obtain mortgages.

An unexpected turnaround

The 2007 financial crash had no real impact on the number of people looking to purchase homes, so those with imperfect credit were left stranded as the subprime lenders responsible for the irresponsible lending practices quickly exited the market in 2007. The remaining void is being gradually filled by a growing number of specialist UK-based lenders, and now, even if you were declared bankrupt just one year ago, you could still qualify for a mortgage today.

As competition grows among subprime mortgage lenders, interest rates and borrowing costs are also falling. A few past missed mortgage payments are no longer guaranteed to prevent you from gaining access to the mortgage market, and neither is the presence of CCJs on your credit file.

Subprime mortgages: A brief definition

The term ‘subprime’ is a relatively broad term that generally refers to anyone with a credit history considered below acceptable norms. Specifics vary significantly from one lender to the next, but a subprime borrower is always characterised as an applicant who would not qualify for a mainstream mortgage.

Some banks refer to subprime borrowers as ‘adverse or bad credit’ applicants, but the meaning remains unchanged.

One of the few areas where most banks now agree relates to the somewhat outdated nature of the terminology. The UK mortgage market has changed exponentially since 2007 and continues to evolve at a rapid rate. As credit scores become increasingly involved in the decision-making process, the more forward-thinking banks are looking to see the entire category reclassified to the term “specialist lending’. Rather than penalising anyone with an imperfect credit history, they would like to see more factors taken into consideration. Work out how much a mortgage would cost you using our mortgage calculator. UK

Learning from mistakes

The fact that subprime mortgages are once again available does not indicate that the market is again out of control. In fact, quite the opposite. Most lenders continue to impose robust and extensive checks when assessing eligibility for all mortgage products.

What makes today’s lending landscape different from 2007 is the way in which credit history is only one of the deciding factors used by the UK’s specialist lenders.

Regulation imposed by the Financial Conduct Authority and the Prudential Regulation Authority since the financial crash has made it all but impossible for banks and lenders to irresponsibly underwrite. Some products that were widely available before the crash, such as self-certified mortgages, have now been completely erased from the market.

Mortgage lenders are increasingly focusing on proof of provable income, existing debts, and monthly outgoings. They have also provided a general stress test in order to approve applicants (or otherwise) for home loans. As a result, borrowers with a poor credit history who are nonetheless in a strong financial position at the time of application are not automatically discounted from mortgage borrowing.

Is a disaster waiting to happen?

Critics argue that the resurgence of the subprime mortgage market represents a disaster waiting to happen. They claim that any approach to subprime lending flies in the face of responsibility on the part of British banks and lenders. They also believe that what is happening now has echoes of the years leading up to the 2007 financial crash.

Arguments like these entirely overlook the fact that the mortgage lending sector in the United Kingdom is more restricted today than it has ever been. Even if the UK’s biggest banks wanted to engage in risky mortgage lending activity, they’d be prohibited on a legislative level.

 “The mortgage industry has successfully implemented regulatory and other safeguards to guarantee that their customers borrow only what they can afford to repay,” read a recent statement from the trade association UK Finance.

 “2014’s Mortgage Market Review banned self-certification mortgages, tightened the rules around interest-only mortgages, and required affordability to be checked more stringently.”

For the time being, therefore, there is no direct evidence to suggest that another ‘subprime’ lending crisis is on the horizon. If anything, it remains disproportionately difficult for consumers with an imperfect credit history to qualify for a mortgage, and in the eyes of most major banks and high-street ‘lenders, ‘subprime’ borrowers continue to represent a risky investment that they will not accommodate.

A small victory for common sense

Consumers with imperfect credit have always argued that credit scores provide a flawed overview of a person’s financial status and activities. You could have a terrible credit score yet be sitting on a personal fortune of millions.

You could also have made a few minor mistakes years ago, but you have conducted your finances in an exemplary manner since.

Blemishes on your credit report currently remain visible for six years. Irrespective of your financial status and subsequent responsibility, it is evident for that period. Thankfully, some of the UK’s more dynamic lenders accept these flaws in your credit rating, provided other areas of your finances are being handled correctly.

Most lenders are still afraid to use the term subprime mortgage but readily accept applications from those with ‘imperfect’ credit or borrowers looking to improve their credit score.

The largest and most established UK mortgage lenders, however, are still, for the time being, steering clear of subprime lending entirely.

A market of growing relevance

The market for subprime mortgages in the UK currently exists as a strictly ‘not on the High Street’ lending channel. You cannot simply walk into a branch of a major lender with poor credit and expect to be offered a mortgage deal. They would be unlikely to offer you any kind of credit facility, so major loans and mortgages would definitely be out of the question.

UK subprime lenders continue to operate primarily in the specialist lending sector and are typically accessed through a specialist broker. Subprime products and services are tailored to meet the unique requirements of the individual borrower.

Even with a heavily damaged credit score, all applications are considered on merit. Imperfect credit often equates to higher overall borrowing costs, but it is still perfectly possible to access a competitive deal. With some consumers struggling to maintain perfect credit scores, subprime mortgages are becoming increasingly relevant in the UK. Working with a specialist mortgage broker means gaining access to an extensive ‘alternative’ loan market that is not generally available on the high street.