The final countdown has begun. From Saturday, borrowers will be faced with a whole new world when looking to apply for a mortgage. The Mortgage Market Review comes into effect from Saturday 26th April and borrowers need to ensure they are informed by keeping these three things in mind:
1. Affordability is the key
April is upon us and for those of us working in the mortgage industry we already know this means some big changes are on the horizon. However, many homebuyers aren’t aware of the implications of what lies ahead. If you have been thinking of getting onto the property ladder or already own a home but want to take advantage of the boost in home values in recent months by refinancing, then now is the time to familiarise yourself with the expected changes in the market.
What is the Mortgage Market Review?
The Mortgage Market Review (MMR), which is coming in on the 26th of April, is being introduced to give consumers a greater degree of financial protection, so although this can only be seen as a positive step, in reality what it means is that once the new rules come into play, there will be a lot more hoops to jump through in order to get your application approved.
The primary focus is that all mortgages will be sold on an advised basis only (limited exceptions available), so all clients wanting to get a mortgage will have to go through an extensive initial consultation with a sales adviser, where their financial situation (down to groceries and childcare costs) will be examined. Experts have said that this could take as long as 2 hours to conduct so it is important to make sure you are prepared in advance. Lenders will also require a large number of documents to support the application, so if you haven’t already, make sure you start saving all payslips, bank statements and other important financial papers that may be relevant to proving your ability to repay the loan.
Going direct could be a bad move
Fortunately, we at Springtide Capital have been geared up for these changes for a long time past. However, according to the FCA the same cannot be said for many of the lenders. The reforms are likely to impact lenders the most whilst they adapt to increased paperwork and the requirement to review existing processes and systems. Post MMR, lenders will rely much more heavily on their key broker partners to keep business flowing smoothly. What this means for homebuyers is that going direct to a high street lender rather than getting help from an independent adviser after April 26th is now far more likely to result in delays and problems with your mortgage application further down the line.
In this time of change, relationships are more important than ever. We have long established connections with hundreds of lenders and are poised to help you through what is set to be a challenging time for everyone involved. The MMR will show up the brokers that cut corners and will showcase the ones that continue to provide outstanding quality of service.
Henry Knight spills the beans on the three things we are keeping our fingers crossed for in this year’s Budget….
1- Stamp Duty
Whilst last years’ Funding for Lending and Help to Buy schemes went a long way to addressing the issue of helping struggling first time buyers onto the property ladder, we still believe that stamp duty is a significant obstacle to getting more homebuyers into their first homes. Therefore, we are hoping for an increase in the stamp duty threshold for all first time buyers up to the value of £600,000, in line with the terms of the Help to Buy scheme.
2- Help to Buy by Postcode
We are not only hoping to see an extension of the second phase of the Help to Buy, but we are also hoping for a much more targeted approach to how the scheme is operated. In order to reduce the growing disparity between London and the rest of the country, we would like to see Help to Buy 2 operated according to the different requirements of individual postcodes. Some regions are more in need of a housing market boost than others, which is why we are hoping that Help to Buy by Postcode is something the Chancellor looks to include a week from today.
3- Off setting interest payments on buy to lets
There has been some talk in the past that the Government may potentially remove the ability to offset interest payments for tax purposes on buy to let properties. We would strongly disagree with any decision to allow this as it would have a detrimental effect on the investment market across the whole of the UK.
So you’re looking for a mortgage? Or perhaps more importantly you’re actually looking for a mortgage broker, although you might not realise it yet. Looking for a mortgage is a daunting task. From variables and trackers to base rates and fees. Is it a minefield? Hopefully not if you have the right broker. Our speedy guide to finding the right mortgage broker should allay imminent pitfalls.
A wide range of deals
Finding the shining star in a sea of brokers is not easy. Henry Knight, Managing Director of Springtide Capital reveals that while most mortgage brokers will have access to the percentage of the market, some will operate on restrictive panels. Choose one with a wider range of options available and they’ll be the one most likely to help.
Experience it all
What kind of experience do they boast? If you are in need of a slightly more complicated deal you need a mortgage broker who can bring a hefty level of market experience. Don’t be afraid to ask.
It pays to know
You need to know what broker fee levels you are paying. This is incredibly important to find out before you have your first meeting; because not only are you paying fees associated with the mortgage, but you need to know what advice from your broker might you be paying for too.
Are we there yet?
Mortgage applications are taking longer to process. Read our blog post on that here. You should always as your broker how quickly they think they will be able to process your application. It’s crucial to make sure your application has the best chance of being processed as quickly as possible in a market as buoyant as this.
What kind of strategy and methods does the broker and its team have in place to handle your application if something goes wrong? Ask them to be specific about their relationships with particular lenders. Make sure you note their experience in case your application gets tricky.
The instincts of most contractors, when faced with the question of how to obtain a mortgage, are overly pessimistic. Mortgages for the self-employed are generally viewed by those in search of them as unrealistic pipe dreams, reserved only for the lucky few.
But are these sentiments of doom a realistic assessment of the current contractor mortgage market? Or is it the case that mortgages for self-employed individuals are actually relatively easy to obtain, provided you go about applying in the right way?
We’ve noticed an increasing number of clients stating how complicated and time consuming the mortgage application process is these days. Compared to the golden days of 2007 when applications were processed in around 10 days, due to regulatory changes and forensic accountancy, it now takes much longer. What can you, the mortgage applicant, do to speed things up on your side?
Henry Knight, Managing Director of Springtide Capital has put together a quick 5-point guide to the pitfalls and perils of getting your paperwork in order.
1. For purposes of identification make sure you have an up to date passport. If using your driving licence, ensure it is showing your current home address.
2. You will need to have a proof of address. Lenders will only accept a hard copy that has been posted to your address, rather than an online version. It must be addressed within the last three months and show the current address in its correct format. Many lenders also expect to see the first initial of the clients name showing.
3. If you are employed, you must obtain the last three months payslips and last two years P60s. These are the documents that people often have issues locating. However, you can normally obtain duplicates from your HR department if you cannot locate them.
4. If you receive a bonus, you must also demonstrate the latest pay slips for this. Again, it can be tricky to find so ask for assistance in your accounts or HR department if you cannot find the hard copy.
5. If you are self employed, you will need an SA302 form from the last three years as well as the last three years accounts. Few people have heard of an SA302 form and they are not sent out automatically. You will need to phone HMRC to request the documents and they will insist on posting them out. HMRC also only send these by second class post meaning they can take 10-15 days to come through.
Last year saw UK property prices rise by 7.5%, with a record number of homes sold at £1million and above. With supply remaining limited, growing demand for UK property is a trend that is showing no sign of abating in the year ahead.
The financial crisis made it harder for homebuyers to get access to finance, therefore property prices stagnated for some time. However, as the economy picks up again, we’ve noticed a number of high street lenders re-entering the market in response to a high demand for finance at the top end of the market. Post 2008, most buyers looking to put their foot on the £1million plus ladder had to secure finance from the private banks as opposed to the regular household lenders, such as NatWest, Santander, Virgin, Halifax and Woolwich who have now re-entered this market.
This is great news for buyers, as the emergence of more lenders is likely to increase competition and lower rates. Lenders will be marketing their deals as favourably as possible, and buyers will be spoilt for choice.
There are now three words on everyone’s lips when it comes to mortgages; help, to and buy. This year continues to bring exciting revelations from the market, as the second phase of the initiative was recently brought forward by three months. All the major lenders have now announced their involvement in the Help to Buy scheme and outlined their individual terms and criteria. It is my view, however, that we will have to wait until the early part of next year to see real competition among lenders flourishing in the market. Continue reading
The natural inclination for consumers in a low interest rate environment is to seek value from long term fixed rate products. We are currently seeing lenders competing most aggressively in the five year fixed rate market which has been driving down prices and therefore retaining the greatest consumer appetite. Two of the most popular fixed products at present include Clydesdale Bank’s 5 year fixed rate at 60% LTV on a rate of 2.69% with a £999 fee and Accord’s
5 year fixed rate at 75% with a rate of 2.89% and a £1,845 fee.
The UK housing market is looking buoyant again. Lending levels continue to rise and there are a whole range of new and affordable products coming to market. This good news flies in the face of any market commentators who had made gloomy predictions about housing market recovery last year. Stories of negative growth, a generation of renting and even talk of a triple dip recession dominated our national headlines just over a year ago.