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Thousands of Mortgage Prisoners Set to Benefit from Lending Policy Overhaul
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.
Women More Generous Than Men with Equity Release Capital, Data Suggests
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.
Mortgage Lending Activity at a 13-Year-High, Nationwide Reports
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.
Top 10 Annual Increases in Property Purchase Search Locations Revealed
As predicted, the rural and coastal areas in the UK were the big winners on the 2020 property purchase landscape by a significant margin. That is according to the latest figures from Rightmove, indicating that Bruton in Somerset topped the table as the most searched-for place among people looking to buy homes this year.
Bruton achieved an impressive 72% increase in buyer interest compared to the same time last year, followed by Pitlochry in Scotland which jumped in popularity by 50% over the same period. Aylesford in Kent followed closely with 48%, after which Salcombe in Devon, a popular seaside resort for short breaks during the summer, proved 47% more popular than last year.
Both Dartmouth in Devon and Light Water in Surrey saw major gains in popularity, attracting 46% more buyer searches than at the same time in 2020.
The popularity of coastal and rural areas reflects the growing trend of relocating from crowded towns and cities to quieter and more tranquil regions among first-time buyers and movers alike. With people spending more time at home than ever before, buyers’ preferences and priorities have shifted wildly over the past 12 months.
Today, the desire to live close to work in a crowded urban centre has been largely replaced with the motivation to move to larger and often more remote properties, ideally with private outdoor living spaces or easy access to nearby green space.
These shifting priorities among buyers have also had a major impact on average asking prices across many regions of the UK. For example, Eccles in Manchester saw the biggest overall annual house price growth for 2020, with homes increasing in price by an average of 16%. This dwarfs the national average house price increase of 6.6% by a huge margin.
Impressively, a further six places in and around Manchester made it into the top 10 list of the highest annual property price increases in the UK for 2020. Wavertree and Chadderton proved particularly popular during the year, chalking up 12.2% and 10.9% average property price increases respectively.
“This year we’ve seen an uplift in the number of home-movers escaping to the country, and we think this trend will continue for now as people show their willingness to make significant life changes,” commented director of property data at Rightmove, Tim Bannister.
“The data highlights just how influential the unexpected events of this year have been in shaping the nation’s housing priorities, with many buyers determined to swap city streets for rural and coastal retreats.”
With home working set to continue as the new norm for the foreseeable future at least, the collective desire among UK homeowners to relocate to quieter and more sparsely populations across the country are likewise set to perpetuate indefinitely.
How Much Does Development Finance Cost?
Development finance is a specialised funding solution for experienced builders and developers. The funds are issued by lenders for the exclusive purpose of developing or refurbishing residential, commercial, and mixed-use properties.
Development finance differs from other types of commercial finance in that it is typically released in stages as the project progresses. In addition, lenders consider the projected value of the completed property, not just its value at the time of the application.
What costs are incurred with development finance?
Our online development finance calculator provides helpful insights into what to expect when applying for funding. Along with fixed or variable development finance rates (APR), as with most, if not all, finance products, there are various additional costs and commissions to factor in.
The most important of which are as follows:
Arrangement or facility fee
This is the initial fee charged by the lender for setting up the facility and to cover the administrative costs of arranging the loan. Arrangement fees vary significantly from one lender to the next, anything from 0% to 2%, and are normally added to the loan when the loan is agreed upon and the first instalment is made.
Broker fee
Due to the large standing costs involved in simply being a broker, it has become more common for brokers to charge a fee for the services they provide. Whether a fee is charged, the amount, and when the fee is due are things to verify with your broker before going ahead. In most cases, the fee can be added to the loan.
Commitment fees
This is something like a deposit or insurance policy for the benefit of the lender, which may be payable before due diligence begins. Development finance specialists undertake a variety of operational costs, which must be considered. These are often covered in advance by way of a non-refundable ‘commitment’ fee payable by the borrower.
Legal fees
The applicant will also be expected to cover their own legal costs, even if the lender has its own in-house legal team that handles all pressing matters. Solicitors in general require an up-front payment before commencing their services.
Valuation fees
The current and projected future value of your property (or properties) must be independently verified and presented to the lender. Typically, development finance specialists allocate surveyors they know and trust to perform valuations, though the costs are always covered by the customer.
Monitoring fees
This refers to the costs incurred by the lender of quantity surveyors hired to monitor the progress of the project at various stages. Development finance is released in instalments at agreed milestones as the project progresses, and this requires careful, continuous monitoring.
Exit fee
Lastly, lenders often charge an exit fee for development finance. This could be imposed by way of a commission on the entire value of the loan, a fixed fee agreed upon when the loan was taken out, or a percentage of the total value of the completed project.
Almost 74,000 Londoners Bought Homes Outside the Capital in 2020
City workers’ mass exodus from the UK’s biggest towns and cities in search of space and tranquilly continues, new data from Hamptons International Lettings suggests. Throughout the course of 2020, it is estimated that Londoners seeking sanctuary from city life purchased almost 74,000 homes outside the capital.
Outmigration from densely populated urban centres continues to be the major real estate trend of the moment, with millions having indicated their intent to purchase properties in rural, countryside, or coastal locations.
The latest figures from Hamptons International Lettings suggest that 73,950 homes outside the capital were purchased by Londoners this year. This equates to the largest proportion of Londoners fleeing the city in more than four years, despite the housing market having been shut down in its entirety for more than seven weeks.
Had the real estate market not been shut down during lockdown, it is estimated that the figure would be significantly higher.
Shifting property purchase intent
In total, Londoners purchasing properties outside the city spent a combined £27.6 billion on homes away from the capital, which was the highest figure recorded since 2007. To put it into context, the total value of all residential property sales in the northwest of England last year reached just £24.8 billion.
During the first two quarters of the year, just under 7% of properties sold outside London were purchased by London residents, which is somewhere in the region of 24,500 sales. This then skyrocketed during the closing two quarters of the year, as the dangers posed by the pandemic grew along with the appeal of less densely populated rural and coastal retreats.
As a result, 7.8% of residential properties sold outside London went to London residents during this six-month period, which is just under 49,500 properties. The value of which came to around £18.4 billion. That is more than the total property purchases by Londoners outside the capital for any full year between 2008 and 2013.
Seeking sanctuary further afield
Hamptons International Lettings’ newly published data also suggests that Londoners setting their sights on properties away from the city are also purchasing properties significantly further away from the capital than before.
During 2020, Londoners purchasing properties outside the city moved an average of 40 miles from the capital for the first time in more than 10 years. During Q1 of this year, the average distance moved by Londoners stood at approximately 28 miles.
Interestingly, first-time buyers looking to get on the property ladder for the first time proved more likely to stay loyal to the capital, at least in terms of distance. Those living in London who purchased properties for the first time outside the capital moved an average of 26 miles, according to the data published by Hamptons International Lettings.
Their study also noted an uptick in the number of movers setting their sights on larger properties with private outdoor living spaces, with fewer movers looking to purchase small homes or flats than in previous years.
Lockdown Restrictions Fail to Hamper Housing Market Activity in the UK
Most of the United Kingdom is once again in some form of lockdown. Nevertheless, there is something distinctly different about lockdown 2, particularly when viewed from a financial perspective.
Lending and borrowing remain challenging subjects for providers and customers alike, though not nearly on the same level as when the pandemic first hit.
Why Lockdown 2 is different
When COVID-19 made its unwelcome arrival at the beginning of the year, the decision was made to shut down the country practically in its entirety. Rather than simply being slowed down or altered in trajectory, vast proportions of the economy were brought to a screeching halt.
The housing market was one of the main examples (and victims) of the first lockdown, which for several weeks ceased to exist.
The UK is currently under a second lockdown, once again having an impact on the economy. Nevertheless, today’s lockdown is different from the previous lockdown in that the activities that are the lifeblood of the real estate market have been permitted to continue.
Property valuations can still go ahead, inspections can take place, and transactions are being processed as normal. Or at least, as close to ‘normal’ as things are likely to get in the foreseeable future.
Pent-up demand fuels market activity
What is also interesting is the way in which pent-up demand from the first lockdown continues to fuel market activity during the current lockdown. In what is usually a time of near-universal reluctance and fear over ongoing economic uncertainty, movers and first-time buyers alike are choosing to go ahead with their property purchases regardless.
Lenders and brokers alike have also cited the government’s recently extended stamp duty holiday as a catalyst for the current spike in activity. For those able to complete qualifying transactions before March 31, 2021, savings of thousands of pounds are still available. an opportunity many are apparently finding too good to pass up.
Alternative lending options
Applications and general housing market activity may be on the up, but lockdown is once again bringing one major challenge into the mix – extended application processing times and the subsequent delays and complications that accompany them.
Even now, many prospective homebuyers are finding themselves in a position where the March 31 stamp duty deadline is too close to call. Major banks and High Street lenders are not only tightening their restrictions in regard to who can qualify for a mortgage but are also taking longer than ever to process applications and release funds.
This has spurred many applicants to consider alternative lending options, such as bridging loans. Accessed via an experienced independent broker, a bridging loan can provide a fast-access alternative to a conventional mortgage. often released within a matter of days.
The extent to which the rollout of the COVID-19 vaccine influences any of the above remains to be seen. As far as the housing market in general is concerned, you need only look at fast-accelerating property prices in key areas to see how strongly the sector is performing—even in the face of a second national lockdown.
Reports of Scams Rise as Stamp Duty Holiday Deadline Looms
A leading independent financial advice watchdog in the United Kingdom has issued a warning to prospective home buyers, regarding widespread reports of scams in the run-up to the conclusion of the temporary stamp duty holiday.
Motivated by significant potential savings and driven by what is becoming a race against time, enthusiastic buyers are increasingly playing into the hands of fraudsters. The looming March 31 stamp duty holiday deadline is being taken advantage of by criminals across the country, tricking buyers into paying money into fraudulent accounts.
Specifically, phishing emails requesting payment information from home buyers have been cited as a major problem by UK Finance.
Huge losses, rising instances of identity theft
According to the watchdog, more than £16.2 million was stolen from personal accounts during the first half of 2020 alone, primarily due to scams involving emails containing new payment details.
Instances of identity theft, in general, are also up, posing a major risk to those attempting to rush transactions to take advantage of the stamp duty holiday before it expires.
“Moving house can be a stressful time; however, it’s vital to remember to take steps which could keep you safe from scams,” commented the managing director of economic crime at UK Finance, Katy Worobec.
“This includes letting your bank and other organisations know that you’ve changed address, making sure your mail is secure, and ensuring the recipient’s bank details are correct when paying large amounts of money during the house-buying process, such as your deposit.”
UK Finance has once again urged buyers to be vigilant against such attacks, advising caution and scrutiny where any emails are received that contain new payment details or requests for payments to different accounts.
Duplicate invoices for services provided should also be monitored, as should any emails or telephone calls asking customers to confirm information such as their bank account numbers or login credentials.
Identity theft prevention
To reduce the risk of falling victim to identity theft, UK Finance has advised homebuyers to verify every payment request or information request with their bank and/or real estate agent directly, before providing any information or transferring any funds.
All incoming communications regarding payment information or requests for personal data should be treated as suspicious until verified by contacting the appropriate provider directly.
The temporary stamp duty holiday introduced by the chancellor has removed all stamp duty liabilities for anyone purchasing a property with a market value of £500,000 or less.
This amounts to a significant discount on the overall purchase price for the vast majority of buyers until March 31, augmenting the sum normally expected by way of a deposit.