Tag Archives: London financial adviser

Housing market shows rebalancing across regions

 

According to the latest UK Finance report, gross mortgage lending is estimated at £24.2 billion, with the market rebalancing in the North of the UK.

Highlights from the report included:

  • Housing market continues to grow modestly, dominated by first-time buyers
  • There is evidence of rebalancing across regions
  • Of the £24.2 billion in estimated mortgage lending, £13.2 billion was lent by High Street banks 

THE ECONOMY

Despite high levels of employment, with yet another 1% decrease in unemployment (now 4.3%); economic growth is slowing, with wage growth at 2.1%.

A lack of wage growth, combined with inflation running at 2.9% in August, has resulted in workers reducing savings and being more conservative with their spending. It is predicted that this will rise to 3% in October and then fall slowly after that.

As inflation rises, the Bank of England Monetary Policy Committee (MPC) may see fit to introduce modest monetary tightening in the form of a 0.25% base rate change. With already tightening budgets, this may propel home owners to secure the current and more favourable mortgage deals through their mortgage consultant.

HOUSING

A slowdown in the economy can also dampen the housing market. However, 12-month averages remain in line with predictions, showing activity that resembles 2015 figures, according to UK Finance. Despite economic challenges, lending sits at £24.2 billion in August.

First-time buyer activity continues to grow, owing to the various Government schemes and the appetite for new-build properties. This is, however, not the case for home movers, whose lack of help from schemes and shortage of available property discourages them from selling.

Buy-to-let still suffers from changes to tax and remains flat, however, remortgage activity among home owners is still increasing, as rates remain competitive.

According to UK Finance, there is also evidence to show that there is a shift away from London, with the North of England, Wales and Scotland showing signs of stronger housing activity. This may be due to affordability challenges, making outer London areas more appealing. UK Finance also identified that of the £24.2 billion in estimated lending, £13.2 billion was lent by High Street Banks.

REGULATORY

The housing market currently has a number of Government schemes aimed at stimulating certain areas of the market, all of which will end at some point and new ones launched. According to the UK Finance report, the Bank’s MPC minutes showed the committee voted unanimously to close the drawdown period for the Term Funding Scheme on 28 February 2018, as planned when the scheme was originally introduced back in August .”

In addition, the report also confirmed that buy-to-let landlords with a portfolio will be subject to stricter rules when they apply for a new buy-to-let mortgage, where underwriters (those who make the final decision on a mortgage application) will look at the risk of funding them. Although not set in stone, they will look at a landlord’s experience and how profitable they are with their existing properties. The report confirmed the date of 30th September 2017 for implementation.

Henry Knight, Managing Director, Springtide Capital commented: “As wallets are squeezed with inflation, low wage growth and the rumour of an interest rate rise, it’s a good time to review your mortgage with a consultant. The mortgage market is extremely competitive at present.

“Notably, the gross mortgage lending figures show that only £13.2 billion was lent by High Street banks, perhaps demonstrating what we see at Springtide Capital, that specialist lenders are sometimes better placed to fund some clients and their individual circumstances.”

For more information, please visit www.springtidecapital.com or call 020 3040 4400.

First-time buyer demographics have changed

 

The latest report from the English Housing Survey (EHS), shows a shift in first-time buyer demographics: revealing a distinct change in the age, deposit size and source of deposit finance compared to a decade ago.

Highlights of the survey include:

  • One in five (21%) first-time buyers were aged between 35 and 44 years in 2015-16, up from 16% in 2005-06
  • In 2015-16, three-quarters (74%) of first-time buyers were couple households, a marked change from 2005-06 (66%)
  • Over the same period, the proportion of first-time buyer households with dependent children increased from 23% to 37%
  • Two-thirds of first-time buyers pay a deposit up to 20% of the purchase price, 29% getting help from their family (up from 22% ten years ago)

Source: English Housing Survey (2015-16) 

Research paints a different picture of first-time buyers

The EHS research paints a very different picture of the journey that some first-time buyers may go on when compared to ten or twenty years ago. By understanding these changes and the attributed factors, we can see why the knowledge, experience and guidance of mortgage consultants have become more valuable than ever before.

In 1995, around 20% of first-time buyers were aged 16 to 24. They may have raised funds for their deposit on their own, have submitted a single mortgage application, and they may not have had children at the time of purchasing their first home.

Fast forward to the findings from 2016 EHS, and you’ll find that there are fewer youngsters able to afford a house in the 16 to 24 age bracket. First-time buyers could be slipping into the 25+ bracket as it takes longer to save the level of deposit now required for their first home – house price growth has been outpacing income growth for more than twenty years. As a 25+ mortgage applicant, they may also be a couple and have children.

The hard facts

According to the EHS, Londoners are choosing to raise a deposit of up to £94,088 (mean value) to secure a favourable mortgage rate on their first home, with 29% turning to family to help raise funds ­– a 7% increase in a decade.

While working hard, saving even harder and raiding the bank of Mum and Dad, 74% of first-time buyers will have teamed up with another person and 37% will have children before they buy their first home ­­­– 8% and 14% higher respectively since 2006.

The EHS also found that those purchasing their first property were in the two highest income bands, now accounting for nearly two-thirds (66%) of first-time buyers, compared with 58% ten years ago.

How does this affect a mortgage application?

A mortgage consultant needs to take all of the changing demographics and factors into account, and Springtide Capital is no different.

A joint application, an older applicant, a larger mortgage and having children impacts affordability. A joint application, for instance, increases the amount of evidence of income required, but equally, it increases the chances of funding with two incomes instead of one. The age of the applicant and the period in which they require the mortgage is reflected in the affordability of monthly payments, as is the age restrictions and period of mortgage allowed by lenders.

The affordability of funding for a house (prices having outpaced income for many years) and the costs of running a household with children also needs to be considered. All this has to be reviewed by an experienced mortgage consultant, who not only works out the affordability but also the correct lender to suit an individual’s needs – it’s become more of a balancing act.

Henry Knight, Managing Director, Springtide Capital commented: “First-time buyers are an essential cog in the housing market machine: without them, the market slows – they allow existing property owners to release equity and re-invest in the housing market. At Springtide Capital, we pride ourselves on understanding a changing market and identifying which product and lender are suitable for each applicant.”

Mid-priced boroughs in London drive up house prices

 

Image source: Rightmove

According to property search portal Rightmove, the average price of a newly marketed property in Greater London has jumped by 1.4% (+£8,656) this month.

The reason? The outer London mid-priced boroughs have helped to drive the property price average to £649,772. The Rightmove report contrasts this with the smaller increase of 0.4% (+£2,941) in Inner London.

As people look for more space and value for money further afield, it pushes up demand in those areas, which in turn pushes up prices.

Boroughs seeing the biggest price hikes

The boroughs seeing the largest increases this month are dominated by those in the mid-price range broadly between £600,000 and £700,000 and sitting either side of the new overall London average of £649,772. The five whose monthly rises stand out are all in Outer London: Ealing (+6.3%) Harrow (+4.8%), Kingston-upon-Thames (+3.9%), Barnet (+3.8%), and Brent (+3.7%).

Miles Shipside, Rightmove Director and housing market analyst comments: “While these prices are beyond the reach of many, these boroughs with average newly-marketed asking prices between £578,000 and £723,000 are in the mid-range for London. With growing needs for space, many Londoners are faced with trying to afford these prices when trading up, and get more for their money further out of the capital. This trend, rather than a recovery in all sectors of the London market, has helped to push the price of property coming to the market to record highs.”

Springtide Capital’s view

Henry Knight, Managing Director, Springtide Capital, commented: “As buyers look for more space to grow and more affordable prices, the appeal of moving to outer London increases. However, these commuter-route hotspots are bound to increase in price as the demand goes up, it’s becoming harder for people to find affordable property even in outer London.”

Later life lending market has grown substantially

 

According to the latest report from the Equity Release Council, the total value of equity release lending in Q3 2016 grew more than a quarter (26%) year-on-year.

In an ever-ageing population, lenders have found themselves providing over £2bn in 2016 in lifetime mortgages, increasing the market share to 33%. The report went on to identify that one-off payments were often used for clearing outstanding mortgages or other debts in addition to funding home improvements, travel or providing a living inheritance.

High-street lending criteria

FACT: Many people are turning to specialists in providing later life lending as they fall outside of high-street lending criteria.

Rather than simply looking at the age of the applicant, later life lending specialists understand the need for this type of funding (for those aged 55 or over), and base funding on the value of the property it is secured against.

There are many reasons why someone would need funding later in life and although they include a lump sum or equity release for holidays, they are usually for house repairs, gardens, accessibility improvements and the awareness that their income may not be sufficient in their retirement.

The simple fact is that specialist lenders have spotted a need, and they are responding by helping people. Whether it’s to help a family member on the property ladder, enriching retirement income or making much-needed home improvements – Springtide Capital offers tailored lifetime lending solutions from a number of lenders.

A viable alternative

With a lifetime mortgage, the amount a person can borrow depends on their age and the value of their property and they won’t have to make any repayments before the end of the plan whilst still owning their home.

How it works:

  • The interest payable on a mortgage is usually rolled up and added to the loan
  • Funds can be accessed through either a lump sum or by using the drawdown functionality on the mortgage
  • The loan is paid back in the event of death or when moving into permanent long-term care

Please be aware that taking out a lifetime mortgage could reduce eligibility for means-tested benefits and affect a person’s tax position. Taking out a lifetime mortgage may also reduce the options for moving or selling a home and carry consequences concerning inheritance.

To understand the features and risks of a lifetime mortgage, speak to one of our qualified specialists, who will provide you with a personalised illustration.

A lifetime mortgage will reduce the value of your estate, will not be suitable for everyone and may affect your entitlement to state benefits.

Gross mortgage lending continues to rise, hitting £18.9 billion in January

 

According to the latest Council of Mortgage Lenders’ (CML) report, gross mortgage lending for January is estimated at £18.9 billion, up 2% compared to a year ago.

Other highlights included:

  • First-time buyer numbers continue to recover in 2016, but home mover numbers remain weak
  • The Housing White Paper was recently published but is unlikely to have an impact on the housing market this year

THE ECONOMY

Driven predominantly by consumer spending, the economy grew 1.8% in 2016, prompting the Bank of England’s Monetary Policy Committee (MPC) to revise up growth for 2017 to just above that of 2016, at 2.0%, within the February Inflation Report.

CML stated that: “…inflation poses a risk to consumer spending as it continues to rise this year and is expected to peak at 2.8% by around this time next year. The latest figures show inflation reached 1.8% in January and there are already signs that it is putting pressure on consumer spending, as retail sales in January contracted for the first time in over three years.”

The economy is still creating jobs, with the employment rate of people aged from 16 to 64 who were in work at 74.6%, the highest since comparable records began in 1971.

HOUSING

House purchase approvals seem to be increasing, having reached 68,000 in December 2016, a marked increase on December 2015, which saw a low of 61,000. Due to these promising figures, the MPC has revised up its forecast to 71,000 per month.

CML added that: “We don’t have a breakdown of lending yet for January, but given recent trends, it looks likely to show that first-time buyers and remortgage activity continue to be the drivers of lending.”

“CML regional data shows in some areas, such as greater London, the number of home movers fell to their lowest levels for 25 years, highlighting the acuteness of this issue. The imbalance is likely to continue underpinning house price values.”

REGULATION

The Housing White Paper was published earlier this month and announced that a lot of small adjustments were needed to fix the chronic housing shortage. The impact of which, is not expected to be seen until 2018 and beyond.

Landlords will be subject to new tax relief changes for buy-to-let properties in two months, as part of a four-year transition.

Henry Knight, Managing Director, Springtide Capital commented: “We do not expect a surge of activity prior to this change, however, many landlords are already planning ahead in order to reduce the impact. I would encourage anyone who requires a mortgage to invest in a buy-to-let property to contact a member of the Springtide Capital team on 020 3040 4400.”

 

Six secret steps to mortgage success for the self-employed

 

For some, obtaining a mortgage when you’re self-employed, may seem like walking up the down escalator – fruitless. We’re sharing our experience with you, to give you a smoother ride to success – your mortgage isn’t a dream, it’s a spreadsheet and SA302 form away from reality.

Why is it so tough?

It boils down to two things: the mortgage market review (MMR) which made all borrowing rules tougher (to protect you) and proving your income.

When you’re salaried, it’s easier for banks, as you represent less of a risk, with a steady income each month – if you’re self-employed, this is often not the case, with busier and quieter income periods. The banks will also be looking at how quickly people pay you, forecasted income and how much profit you make.

It’s responsible to ensure you can afford a mortgage

On a positive note, it’s good that a lender or bank ensures that you can afford the mortgage in the first place, it’s no different to an employed person in that respect – the rules are there to protect you.

We submit many successful mortgages for self-employed people, it’s all in the preparation and choosing the right lender for your circumstances, which may or may not be a mainstream bank.

In order to allay the worst fears of self-starters everywhere, we’ve put together the following checklist for self-employed mortgage applicants.

  1. Get your SA302 form

self-employed-mortgage-application-documents

We’ve written about the SA302 form before. This is the one page tax calculation document you get from HMRC after you’ve submitted your tax return each year. You can also find out how to access it by visiting the HMRC’s website.

It’s common for lenders to request SA302 forms dating back three years in some cases. The good news is, if you submit your return online, you can usually print off what you need quickly. If you still submit via post, you may need to wait a few weeks for it to arrive after requesting it.

  1. Get your income figures ready

You’ll no doubt be asked to go through a mortgage interview: a process of discussing your income and personal outgoings and talking through the details of the mortgage. Our biggest tip is to get your figures ready before the call, it will save both you and the interviewer a great deal of time, do the work before hand to make it painless.

Ensure you have your accounts to hand, with profit and tax for the last three years. You’ll also need details of any other income such as a partner freely available. The majority of lenders will require accounts and personal tax returns to be within the last 18 months, so do not delay if you are thinking of arranging a mortgage.

  1. Stress test yourself

Don’t just base all your calculations on the here and now. The drum beat for interest rate rises at the Bank of England grows louder by the day and most of the indicators point to a gradual increase in rates which takes place over a number of years.

Which means you could be facing higher base rates when you come to the end of any fixed rate period.

Use a mortgage repayment calculator to model such a scenario based on your projected income and check that you’ll be able to handle the extra interest burden.

  1. Gather your documents

Lenders will want to see proof not only of your recent income but might also want to see evidence of your future income, so be prepared to present formal offers or signed contracts for future work. And remember your SA302!

  1. Survey your outgoings

The new guidelines require that mortgage advisers assess the affordability of a particular product based not only on your income but on your outgoings too.

While this is a much more thorough method for checking affordability than the old income multiple calculation, this financial probing can get down to quite a granular level.

The questions can vary depending on lender, you’ll definitely need details of household bills, savings, personal expenditure, existing loans, pensions – basically any money that goes in or out of your bank account/s.

This is no time for back of the envelope scribbling – this kind of financial planning calls for a spreadsheet. Our advice then is to note down all your expenditure in great detail in advance, the better prepared you are, the quicker it’ll be over.

    6. Talk to a mortgage broker

With the introduction of the new rules, banks are scrambling around to recruit sufficient mortgage advisers to handle the demand. This has lead to long waiting times for appointments with banks and the length of the application process itself.

Fortunately, mortgage advisers at banks aren’t the only ones who can perform these new checks: FCA authorised mortgage brokers can do it too. So, by making use of a broker you’ll not only receive help on gathering the figures together, you’re also maximising your chances of a successful application and cutting down the amount of time it takes to apply.

To speak to a specialist mortgage broker at Springtide Capital, get in touch today.