Tag Archives: London

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.”

Two months to buy-to-let regulatory deadline

 

Landlords brace themselves for more regulation and mortgage brokers expect an influx of new buy-to-let mortgage applications before the deadline.

Some time ago, the Prudential Regulation Authority (PRA), part of the Bank of England, announced that it will start to enforce stricter rules for lenders who are assessing a new buy-to-let mortgage for a landlord who already has four of more properties. The PRA gave a deadline of 30th September 2017, which is now approaching.

An ideal time to review your buy-to-let mortgages

The CML reported that there has been a slight increase in loans taken out on fixed terms of 5 years or longer, which are exempt from PRA stress testing requirements coupled with more bespoke underwriting criteria based on a variety of factors which may include property characteristics, the landlord’s existing portfolio, and the landlord’s tax bracket, in addition to standard interest cover ratio thresholds. CML expect to see £35 billion in buy-to-let mortgages in 2017 and £33 billion in 2018.

Henry Knight, Managing Director, Springtide Capital said: “It’s an ideal time to review the mortgage terms on a buy-to-let portfolio and secure a rate, where circumstances fit, that enables the landlord to maximise security whilst not compromising too much on the yield. As one of London’s leading buy-to-let specialists, we have the knowledge, expertise and lender relationships to help landlords through this regulatory change.”

The facts

The PRA’s supervisory statement outlines minimum expectations that firms should meet in underwriting buy-to-let mortgages, specifically:

 

  • Affordability assessments should take into account: borrower’s costs including tax liabilities verified personal income (where used by the lender) and possible future interest rate increases. When setting the expectations for future interest rate increases, the PRA reviewed the prevailing standards in the industry and considered the impact of changes in interest rates, and calibrated the stressed rate accordingly.
  • Lending to portfolio landlords (defined by the PRA as being those with four or more mortgaged buy-to-let properties) should be assessed using a specialist underwriting process.
  • The PRA wishes to clarify that the provision in Capital Requirements Regulation (CRR) which reduces the capital requirements on loans to small and medium-sized enterprises by around 25% should not be applied where the purpose of the borrowing is to support buy-to-let business.
  • An implementation timeline of 1 January 2017 for the more straightforward changes, and 30 September 2017 for the remainder.
  • Allowing firms to assume reasonable rental increases when assessing affordability in the context of possible future mortgage interest rate increases.
  • Excluding those re-mortgaging (and not increasing borrowing) from the supervisory statement, in a similar way to residential lending.
  • Reflecting the change to mortgage interest tax relief announced by HM Government in 2015, which has already led to several firms increasing their interest cover ratio affordability thresholds. The PRA has reaffirmed its expectation that firms should also take these new costs into account when assessing affordability.

A buy-to-let market update

According to the Council of Mortgage Lenders (CML), the buy-to-let market had a weak start in 2017, contributing to an overall fall in lending of this type in the last 12 months. Although competitive mortgage rates are available, the tax and prudential measures have placed considerable pressure on the market.

CML added: “From April 2017, landlords who are higher rate taxpayers will see a progressive reduction in the tax deduction they can claim from mortgage interest each year, the first stage of a four-year transition. We have not yet seen any sudden contraction in lending as a consequence, but it will make landlords more cautious and is likely to restrict their ability to re-leverage their portfolios. Signs of this have been evident for some months, with fewer landlords releasing equity when they refinance.

“Since January, the Prudential Regulation Authority (PRA) has required lenders to stress test new lending by either 5.5%, or 2% above the pay rate, whichever is higher. Lenders had already prepared for this, and in some cases applied the stress tests in advance of the deadline. This makes it more difficult to sustain a highly-leveraged buy-to-let business model, with negative repercussions in regional markets with low rental yields such as London.”

Housing market reaches a plateau

 

According to the Council of Mortgage Lender’s (CML’s) latest market commentary report, gross lending increased to £22.1 billion in June, up 9% on May and 3% on June last year.

Other report highlights included:

  • Activity and lending flat since the start of the year
  • Reduced consumer expenditure, which may become more acute against a challenging economic outlook
  • Home-owner remortgage activity and first-time buyers supporting lending

THE ECONOMY

CML’s report states that the economy has slowed in the first half of 2017, with growth expected to track at half the rate of recent quarters. In the first three months of 2017 growth was 0.2%, and the three months to June is expected to be 0.3%.

Unemployment continues to remain low at 4.5%. Due to weak growth in wages at 1.8%, workers spending power is being eroded by inflation, with the Consumer Price Index at 2.6% in June.

The CML report continued to add that “A number of Bank of England monetary policy committee (MPC) members have recently voiced their opinions on raising interest rates. Despite this, a rate increase when they next meet in August seems unlikely as inflation is currently in line with the MPC’s expectations as set out in May’s Inflation Report.”

HOUSING

The economic backdrop has meant that the housing market has reached a plateau, with activity and lending flat since the start of the year.

Property transactions averaged 100,000 during recent months, however the recent weakening in house purchase approvals – a leading indicator of activity – could mean fewer transactions in the months ahead.

Henry Knight, Managing Director, Springtide Capital added: “The mortgage market has had a variable 2017 so far. Compared to late 2015 and early 2016 when all areas of transactions were growing, it’s clear that first-time buyers continue to drive house purchase activity. This is a trend that is likely to continue over the coming months and is the first time since 1996 that first-time buyers have exceeded movers. Although the under­lying market is healthy, uncertain economic and political conditions have resulted in an increasing number of borrowers tightening their budgets. Generally speaking, the latest data suggesting a lacklustre housing market and predictions that the Bank base rate could rise from its historic low of 0.25 per cent, gives us a good indication of how future transactions may develop in the second half of 2017.”

If you’d like advice on obtaining a mortgage, simply call Springtide Capital on 020 3040 4400 to book an appointment with an adviser.

Not your average mortgage applicant

 

If you’re one of the many mortgage applicants that do not fit the ‘standard’ tag and are unsure whether you can obtain a mortgage, you’re not on your own, and you probably can.

Are you looking at the wrong lenders?

It’s easy to be attracted to advertising and the lowest rates from lenders, however, if they don’t say yes, then all you have achieved is a ‘no’ on your records. That’s why a mortgage consultant will get to know your circumstances, and won’t always offer you mortgages from a mainstream lender if they think you’ll be refused.

In fact, there are lenders who are actively looking for business from clients who don’t fit the mainstream profile, which make them more likely to say yes.

So, a mortgage consultant will look at a variety of lenders to suit your circumstances but they also go a step further to reduce the chance of refusal – they get to know the lender’s key decision makers, criteria and systems.

Access to underwriters

Something that most people are unaware of is the role of the mortgage underwriter. They work for the lenders and have the final say on whether you’ll receive your funding, basing their decision on you meeting their lending criteria. They also review the accuracy of a mortgage application and whether your home is worth the purchase price and loan amount.

So, it’s good for the mortgage consultant to know the underwriter before the application is submitted electronically. These online forms are designed to ensure that the mortgage consultant answers all the questions needed for the underwriter to make a decision on behalf of the lender.  Unfortunately, they aren’t much help in telling you the type of customer they are looking for and what the wrong answers might be. That’s why mortgage consultants get to know the client they’re looking for (through experience) and potential pitfalls that are likely to trigger a ‘no’ within the application before they even try submitting it.

Mortgage consultants build relationships with the underwriters, so they can call them in advance and ask whether the application is likely to be accepted. In most cases, the mortgage consultant will have passed another client through the lender with similar circumstances, so know the level of risk the underwriter, and ultimately the lender, are willing to take.

A changing market

In addition, mortgage consultants are adapting to a change in where income is derived and the extension in working age. In fact, the Office of National Statistics, recently reported that 4.8 million people are self-employed, which is 15% of all workers.

This change in the market has meant two things, the change of some lender’s policy and the emergence of specialist lenders who are looking to capitalise on the opportunity.

Although mainstream lenders have begun to accept self-employment more readily, they still require three years’ accounts and approach with caution. They are also adapting their models for those applicants who will be working past 65.   However, there are a number of more specialist lenders geared up specifically to deal with those clients that have with more complex circumstances, helping to ensure there are both options and lenders that can understand.

It’s all about affordability and credit

The self-certified mortgage (for those who were self-employed), is no more, as every mortgage has to be affordable, no matter how you earn your money or how long you’ll be working.

This means that as a mortgage applicant, you have to be able to prove that you can pay the mortgage now and in the occurrence of any unexpected interest rate rises of up to 3%. On top of this, you need to show that you’ve managed to pay your mortgage or rent successfully in the past, can manage your finances (minimal overdraft usage), don’t have too many red flags on your credit history and can evidence your income. The application also takes any future changes, such as income or future events into consideration, along with your monthly expenditure.

So, all-in-all, it’s good to have a mortgage consultant who knows how to pass the ‘test’.

Henry Knight, Managing Director, Springtide Capital added: “There are many reasons why a mortgage applicant might find it difficult to obtain a mortgage. We regularly help those who are rebuilding their credit due to death of a loved one, divorce or redundancy. On the other scale, we have very successful entrepreneurs who are self-employed and Barristers with complex incomes. We pride ourselves on helping the client to realise their ambitions by taking the time to understand their circumstances and pairing them with a lender that we feel gives them the best chance of acceptance. This comes from having both experience and excellent relationships with a variety of lenders. We also do this in addition to all of the expected compliance concerning affordability and rate comparison.”

If you’d like advice on obtaining a mortgage, simply call Springtide Capital on 020 3040 4400 to book an appointment with a mortgage consultant.

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.”

 

Register and prepare for a government-backed starter home

 

As the Government gives the green light to construct thousands of new starter homes, many 23-40-year-olds will want to know how to register interest and how the scheme will work.

As an established mortgage broker, Springtide Capital has provided an overview of the new scheme and how to pre-register interest.

What is the new construction plan?

The housing minister, Gavin Barwell, confirmed on 3rd January 2017 that this year will see the first starter homes being built on brownfield sites across the country.

Created to address severe housing shortages in the UK, the new scheme will be for those aged 23-40 and will provide affordable housing at a minimum of 20% less than market value.

The Government has said: “The £1.2 billion Starter Home Land Fund was established in April 2016 to support the acquisition, remediation and de-risking of further suitable land for starter home developments. Some 71 sites across the country have already received investments, including land at: Plymouth, Bury, Basildon, Stockport, Bridgwater, Cinderford, Minehead, Bristol, Trafford, Isle of Wight, South Ribble and Swindon.”

Aimed at helping first-time buyers to get on the housing ladder, this scheme has attracted strong interest from both builders and local councils. The Starter Homes Land Fund has been created to prepare suitable land for building developments, helping to accelerate construction by 2020.

How to register your interest

Based on the new houses being built in 2018, you’ll have a least one year to save and plan your finances.

However, the new homes will be in demand, so it’s advisable to pre-register your interest with New-Homes.co.uk (set-up via the Home Builders Federation) in addition to speaking to several local estate agents to ensure you’re made aware when they become available.

Working with professionals

If you’re considering purchasing your first home, it’s advisable to enlist the help of an experienced mortgage broker.

They will help you to understand whether you can afford the bills, the mortgage required to purchase a property, explain the process and help you to plan financially.

When the time comes, the mortgage broker will match your circumstances to a suitable mortgage lender, complete affordability checks, explain what you’re agreeing to and complete the necessary paperwork with you.

You’ll also need a solicitor, which your estate agent or broker can recommend. Choose carefully, as a good solicitor and mortgage broker will be the key to a stress-free experience.

Budgeting for the move

  • You’ll need to calculate the bills you can expect to pay at the property including food, council tax, utilities and buildings insurance etc.
  • Creating a spreadsheet with all expected bills, current commitments, savings and projected earnings will make it easier for both you and your mortgage broker to understand affordability.
  • You’ll also need to save a deposit for your new home (usually 5%) and allow for stamp duty tax for the purchase of the new property.
  • Finally, consider the cost of the move itself, including solicitor’s fees, mortgage fees (including surveys and valuations carried out) and removal costs. Your mortgage broker will discuss what you need to save for and the fees that can be added to your mortgage.

For more information or to book an appointment with a mortgage broker call 020 3040 4400.

 

 

Source: https://www.gov.uk/government/news/green-light-for-construction-of-thousands-of-new-starter-homes

 

Mortgage lending remains healthy

According to the Council of Mortgage Lenders’ (CML) latest report, gross mortgage lending for August is £22.5 billion, up 15% compared to a year ago.

Other CML report highlights included:

  • Possible economic recovery in August
  • House purchase activity subdued but remortgage activity set for growth
  • Bank of England may still cut rates again following significant monetary stimulus last month

The economy

It still appears to be difficult to obtain economic data after the referendum, but it’s looking more positive, with a continued fall in unemployment and the Monetary Policy Committee (MPC) conceding that the bounce back was stronger than predicted.

Although the Bank of England’s governor, Mark Carney, has said that rates would not fall below zero, it does look likely that they could reach 0.1%. And as far as inflation goes, it has slowly edged up to 0.6% recently and is expected to reach 2% in the first half of next year.

Mortgages

Housing and mortgage markets

According to the CML report, “the Royal Institution of Chartered Surveyors’ survey bounced back, predicting price and sales volumes to rise over the three and twelve month horizon.” However, we must remember that we still have a property supply shortage, which we would assume would hold back sales volumes.

It seems that buyer confidence has been knocked a little, as house purchase approvals dropped to around 61,000 according to CML, however it is felt that this will improve as confidence increases.

Remortgage activity is the largest contributor to August’s lending figures, which totalled £22.5 billion. Both buy-to-let and first-time buyer activity remained subdued, most likely due to a combination of confidence, tightened affordability and tax changes.

Henry Knight, Managing Director, Springtide Capital commented: “It’s positive that lending figures continue to look healthy, which is supported by remortgage activity – a low-risk area that lenders are happy to fund. In terms of a base rate drop, now really is the time to get on the property ladder or consider remortgaging, with a selection of low mortgage rates available. All we need now is more properties on the market!”

 

Five tips for applicants of £1m loans

Fast forward eight years and we find ourselves, if not in a financial crisis, certainly in times that are more cautious when it comes to lending people large amounts of money. In view of this, we’ve used our combined knowledge at Springtide Capital to put together five helpful tips to assist mortgage applicants.

A buoyant housing market

Home buyers are faced with a housing market which remains buoyant, despite Brexit, with only a marginal slowdown in housing price growth. That together with a lack of housing supply, means that an increasing number of mortgage applicants seek lending in excess of £1m.

Although banks still have the appetite to lend large amounts of money, they are understandably cautious, so it pays for applicants to be aware of the hoops they may be expected to jump through.

  1. Be prepared to prove your income

Those seeking large mortgages often derive their income from multiple sources, which is not as straightforward as those who only have a single income stream. This added complexity may mean that borrowers looking for larger loans will be required to provide additional paperwork to allow the lender to assess affordability.

Our mortgage consultants will help the applicant to find suitable mortgage lenders who are more likely to lend to those with complex income streams – saving time and disappointment.

Tip: allow extra time and have your paperwork in order.

  1. …and outgoings

Affordability is a key criteria for lenders irrespective of the size of loan. High outgoings or loan to value ratios can be concerning to some lenders and may result in a mortgage application being stopped in its tracks.

However, some lenders are more flexible and have specialist underwriting teams for larger mortgages. This means that they are in a better position to understand the complex situations of wealthy clients – and our team of mortgage consultants already have strong relationships with these lenders so know how to access the best solution for our clients.

Tip: carefully document all outgoings prior to making an application.

  1. Beware of arrangement fees

Some lenders charge much higher fees for arranging large loans. These fees can sometimes run into tens of thousands of pounds for arranging mortgages of £2million or more.

Tip: check the arrangement fees with our mortgage consultant.

  1. Consider private banks

Another option our mortgage consultants will consider is using private banks for large loans. They can sometimes offer the best interest rates for loans of £1m+ but they do often require the transfer of assets under management in order to secure those rates. (Sometimes this can be as much as 50 per cent of the loan value.)

Tip: increase chances of success by considering all lenders.

  1. Use a specialist mortgage broker

Using the services of a specialist mortgage broker can greatly ease the process of applying for a large mortgage. From the uncertainty of which lenders to consider, how to present income and outgoings, or eligibility for the best rates – a specialist mortgage broker can help.

A mortgage broker specialising in large loans will often have pre-existing relationships with both high street and private banks. This means that they know exactly what information lenders need when considering a mortgage application, but they can also negotiate on behalf of their clients to access deals that would otherwise be unavailable.

Tip: use the expert services of a mortgage broker.

If you’re looking for a mortgage of £1m plus get in touch with our mortgage consultants at Springtide Capital today to find out how we can help.

 

Achieve buy-to-let wealth in five steps

 

 

“If you build it, he will come.” In reality, building your buy-to-let portfolio isn’t quite a Field of Dreams our experts give you their top tips on bringing your game up and wealth on.

 

#1 Get it right first time

As with any business, it’s important to set some targets and focus on what you’d like to achieve. This could be a healthy yield, capital appreciation or entering the stock market.

Our top advice is to start (relatively) small, keep it simple, start local, and work with an experienced mortgage adviser to begin your journey to an extremely profitable portfolio.

It’s tough to get started, but it will get easier and you’ll become more astute at researching and making investment decisions with your mortgage adviser.

Don’t purchase a house you like; purchase a property that will increase your wealth.

 

#2 Maximise profit from each property purchase

Boost profits and decrease risk – buy low and sell high.

Buying at auction is a popular way to do this, but be mindful of the pitfalls, carefully research the area and ensure the property doesn’t have any structural problems.

Negotiate heavily on new purchases; you’re in a strong position with no chain behind you.

 

#3 The team

Develop a team and incentivise a job well done – a great team can translate into great profits.

Your team needs to consist of ‘those-in-the-know’ kind of people:

  • An experienced mortgage adviser with existing successful buy-to-let client portfolios.
  • An accountant to handle tax, company status, and much more.
  • An agent to let the property (possibly with a maintenance agreement) who will carry out thorough checks on tenants and will ensure your properties are never vacant.
  • A team of builders, plasterers, plumbers, and electricians.

Henry Knight, Director, Springtide Capital commented: “Surrounding yourself with the right team of experts is the key to portfolio success from day one. There have been a number of tax changes, which makes the services of an accountant invaluable!

“I’ve personally found University cities to be profitable; they have a strong demand for rental properties, not only for students but also for employees. Transport links also attract high-net-worth commuters – investors would be wise to look out for HS2 hotspots in the future.”

 

#4 Don’t be tempted

It is dangerous to take out a loan and secure it against more than one property, because your lender could force you to sell those properties to redeem the debt. Secure a loan against no more than one property if possible.

Don’t jump into a purchase without researching it properly and obtaining advice from a mortgage adviser. Properties are not always easy to move on and a bad decision could stem your success.

Keep going when times are tough. Offering low will most likely mean offering on a number of properties before you get a ‘yes’.

Keep your tenants happy to ensure a steady income stream.

 

#5 Money makes money

Your mortgage adviser will provide advice on how to make the most of your money, as will your accountant. The key to success is to make your money work hard for you.

This could be continual investment in new properties (expansion), making efficiencies by selling off some properties which yield less profit, or investing your money in a completely different opportunity.

 

We’ve been helping landlords to build their portfolios for many years, and we’d like to help you to achieve your wealth goals too. Call one of our experienced mortgage advisers on 020 3040 4400.