2021 is 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 a 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, 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 have 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.

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 entirely different.

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 they 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 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. It is 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 project 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 from 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 detailed 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.

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 for 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 make 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 the 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 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.

In the bridging market, the term regulated bridging remains the most commonly searched term of all. The only major change is the addition 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 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 past 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 with 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 the best advice.”

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%

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.”

Stamp Duty Savers May Have Actually Lost Out, Experts Claim

The stamp duty holiday in England and Northern Ireland was introduced to motivate movers and first-time buyers to take action in order to stimulate the stagnant housing market. Many thousands took full advantage of the offer, making savings of up to £15,000 on typical stamp duty liability.

Property experts are now claiming that the “knock-on effects” of the stamp duty holiday have actually left most new homeowners out of pocket. Even where the maximum £15,000 saving was leveraged, skyrocketing property prices have resulted in buyers paying more than they would have prior to the initiative’s introduction.

Commenting on behalf of Cornerstone Tax, principal consultant David Hannah highlighted the effects a sudden spike in demand has had on the housing market. According to the latest figures from Nationwide, average property prices have increased approximately 13.4% over the course of the past year.

This equates to around £22,000, significantly more than the £15,000 maximum stamp duty saving.

Consequently, many homebuyers will have found that the savings they made were nullified by the additional costs of purchasing a property.

The rush to borrow money

Others were so preoccupied with rushing home purchases that they unwittingly took out mortgages that were not the most cost-effective options available. Research suggests that up to 2.4 million movers over the past year overpaid by many thousands of pounds, having not selected the most economic products to suit their requirements.

In addition, approximately 13% were forced to borrow additional money at a cost in order to pay the fees associated with home purchases that they had not budgeted for.

Estimates now suggest that the average cost of moving house has risen to just under £9,000; combined with the enormous spike in average house prices over the past 12 months, the potential £15,000 stamp duty saving pales in comparison to the additional costs.

An inevitable bubble

Mr Hannah went on to comment on the real estate market’s current lack of stability while emphasising the importance of affordable homes as a means to solve the country’s growing housing crisis.

“The initial saving was obviously enticing; however, as the holiday and therefore the property market gathered momentum, the knock-on effects of this have resulted in an increase in costs for many buyers, rather than the huge savings initially hoped for,” he said.

“Of course, a spark in the property market has knock-on effects for the rest of the economy, providing work and growth for everyone involved in building, selling, processing, and moving people into homes.”

“However, growth must be sustainable and stable, and if we want people to really benefit from a better property market, we need more homes that are more affordable to more people—and to avoid a bubble bursting.”

June Property Price Growth Escalates to a Sixteen-Year High

June saw the highest annual property price growth since February 2007, with an incredible 10.7% rise in house prices. Take away the London growth rate figures, and that figure rises even higher to a huge 13.9%.

The East of England and the North West have seen a dip in growth rates in the month of June, but only very slightly. It’s been over a year since any area of the UK saw a fall in house prices, in spite of the pandemic and its catastrophic effect on the UK economy.

June showed the North West to be ahead of the game, with property prices showing an annual increase of 17.3%. Data shows the North West has taken the lead in the tables for the last nine months. Areas that have shown the most growth are Greater Manchester (23%), Warrington (22%), and Merseyside (19%).

Over the previous seven months, the areas that have shown the lowest annual house price growth include Greater London and the East of England, with Greater London having the lowest growth of just 1.2%. House prices in London dropped a huge 7.4% in May when compared to the previous year. Prime central London areas have seen dramatic house price drops as buyer habits changed due to the pandemic, opting for larger properties outside the city. On a month-to-month basis, June saw a rise of just 0.8%, although an improvement from March to May’s negative rates.

Director Richard Sexton stated:

“Over the last twelve months, our index has shown the average price of a home sold in England and Wales has increased by some £32,500, or 10.7%. If we exclude London from this, then the figure is a very considerable 14%. Nevertheless, even including the capital, this is the highest annual rate since February 2005. It is now fourteen months since any of the areas in our index have recorded a fall in house prices, and this is while the UK economy has been under the severest pressure it has faced in living memory.

“Any slowing of price rises in the period of March to May because of the initial expected end of the stamp duty holiday has been short-lived. This is in part because of the extension of the holiday but also because of the more general optimism in the economy, which has seen many transactions that were previously postponed come back online.

“Mid-April, even before the stamp duty holiday ends, the government has introduced further fiscal support in the shape of its 95% loan-to-value mortgage guarantee scheme. This is giving continued support and confidence to borrowers and mortgage lenders, many of whom have re-introduced their own higher LTV lending to the market. This is good for the market and for home movers.

“This fiscal support, combined with the UK’s monetary policy of historically low-interest rates, continues to make home moves more affordable and has meant buyers can take advantage of cheaper borrowing and the savings they have made in lockdown to make their home moves.”

How Advisers Can Better Support Clients in a Turbulent Economic Climate

The financial impact of the COVID-19 pandemic is likely to be felt by the people of the UK for some time. Job security has gotten steadily worse, investment performance has been turbulent, and savings rates have been slashed.

Consequently, it is of little surprise that more people are turning to financial advisers and brokers for advice. This constitutes an important opportunity for advisers to play a key role in helping their clients negotiate the economic uncertainty that lies ahead.

What all advisers must do

First, advisers need to acknowledge and appreciate the fact that their client’s circumstances will be extremely varied and dynamic from one to the next. Some may have held onto their jobs and even prospered, resulting in additional savings for potential investment purposes.

Elsewhere, many entrepreneurs and self-employed workers may have largely missed out on the government’s financial support package. In this case, they could be in a much more vulnerable position than they were prior to the pandemic.

Consequently, it is essential for advisers to dig as deep as possible to understand why a customer may have reached a decision regarding a specific financial product or strategy. All of these must fall within due diligence protocols, along with FCA guidance on how sensitive conversations should be broached.

Essential safety net

Brokers and financial advisers are interpreted by their customers as important safety nets in difficult times. They provide access to the information and insights needed for educated decisions to be made.

Now more than ever, it is essential for advisers to adopt a dynamic, thoughtful, and creative approach when providing guidance. This includes familiarising clients with products, services, and options in general they may not be aware of. For example, tools like equity release, where there are cash flow issues, methods of reducing tax obligations, and how to safeguard savings for the long term,

When providing support and suggestions, advisers also need to be mindful of how the financial position of the client could result in them needing different types of support.

With younger people, the main goal could be to mitigate as much financial disruption as possible from the COVID-19 crisis to enable them to get on the housing ladder. For clients approaching retirement, the main objective could be to ensure they get maximum value from their pension savings and continue to generate an income stream, even when they have retired.

Unprecedented events and economic uncertainty

In times of widespread economic uncertainty, advisers have the unique opportunity to simplify and improve the lives of the clients they work with. Ultimately, it is up to the customer to make all the important decisions regarding their financial position, objectives, and any action to be taken.

However, it is the responsibility of the adviser to provide them with all the information, insights, and support they need to ensure they make informed decisions.

Following a year spent primarily in lockdown, the priorities of most people have shifted radically from pre-pandemic times. Subsequently, advisers must provide an increasingly flexible, accommodating, and proactive service in order to help their customers overcome the challenges of the past year and the ones yet to come.

Importance of Good Advice at an All-Time High, Says Fleet Mortgages CCO

Late last week, Brightstar Group’s Specialist Lend Virtual Expo and a side panel of specialist finance brokers got together to discuss the current lending landscape. The annual event is held to enable brokers to share and access the insights needed to provide better service to their customers.

The day-long event was organised to offer the latest insights to help introducers develop and grow their specialist mortgage businesses.

Representatives of some of the most notable specialist lenders in the UK attended the event, including Together, Fleet Mortgages, United Trust Bank, and many more.

A perfect storm

Along with a panel discussion on ‘the state of the specialist lending nation’, the UK’s turbulent buy-to-let market was also discussed at length. Chief commercial officer at Fleet Mortgages, Steve Cox, said that the sector is currently in the midst of a “perfect storm” resulting from rising tenancy demand and low-interest rates.

Consequently, he stated that the importance of distributors and specialist lenders providing quality advice for the benefit of their clients is at an all-time high. He said this was particularly true for those who may have faced credit issues over the course of the past year as a result of the COVID-19 crisis.

“These customers are not easily placed on the high street; they absolutely need a mortgage broker and quality advice at the epicentre of their housing needs and wants for the foreseeable future,” he said.

His sentiments were shared by Vida Home Loans corporate sales manager, Chris Holcomb, who said that although the long-term outlook for the sector is good, the effects of COVID-19 are likely to be felt for some time to come.

“Specialist lenders have become vital in making sure these landlords have access to the support they need,” he commented, in relation to landlords who may have incurred credit score damage during the pandemic.

“With a new generation of borrowers with impaired access to credit, many landlords will need the support of a strong specialist lender that takes a flexible and human approach to lending, especially when dealing with complex circumstances.”

Another successful event

Celebrating the conclusion of another successful meet-up, Brightstar Group CEO Rob Jupp called the event a ‘ground-breaking moment’.

“It’s absolutely wonderful to be able to achieve another ground-breaking moment by hosting such a well-run, well-supported, and well-attended event,” he said.

“I’m extremely proud of Michelle Westley [head of marketing at Brightstar Group] and her fabulous marketing team.”

To which Ms Westley added, “We put a lot of work into creating The Specialist Lending Virtual Expo and developing a content programme that could make a tangible difference to broker businesses.”

“So, we are really delighted that so many brokers turned up on the day and that there was such great engagement with all the 16 exhibitor stands, the panel debate chaired by Rob Jupp, and the 11 keynote speakers.”

“Overall, just over 300 delegates attended the event, and we are already receiving really positive feedback.”