Tag Archives: mortgage adviser London

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.”

Housing transactions above the 100k mark for second month

 

According to the latest Council of Mortgage Lender’s (CML) report, momentum continues to build on housing activity levels, as transactions have now been above the 100,000 mark for the second month in a row.

Other report highlights included:

  • Gross mortgage lending for February is £18.2 billion.
  • Lending is increasingly being driven by remortgage activity
  • The number of first-time buyers rose to over 340,000 in the 12 months to January, unmatched over any 12-month period since early 2008

THE ECONOMY

Economic growth in the last quarter of 2016 was bumped up slightly to 0.7% and the economy unemployment rate fell to its lowest rate since early 2005.

However, average weekly earnings growth remains weak, with growth in wages falling to 2.2% in January.

Consumer price inflation reached 2.3% in February, exceeding the Bank’s target for the first time in over three years.

The CML reported: “With wage growth likely to remain weak, real wages will stagnate for much of this year, bearing down on spending. An early sign of this is that retail sales have now contracted for the third month in a row.

“The Bank expects inflation to reach 2.7% by 2018, but signalled it is willing to look past this, as it believes raising interest rates to counter inflation would come at the expense of higher unemployment and weaker income growth.”

HOUSING

The market is getting back to the levels seen at the start of 2016, with house purchase approvals reaching 70,000 in January. This recent acceleration in approvals has seen transactions topping the 100,000 mark for the second month in a row.

Housing transactions are predominantly led by first-time buyers, with home-movers and buy-to-let house purchases both down annually.

CML reported: “Our estimate of lending in February comes in at £21.5 billion, on a seasonally adjusted basis, which marks a second breakout from the narrow tramlines it has been on for the past nine months. On an unadjusted basis, lending was £18.2 billion.”

COMPETITION

Competition between lenders continues to keep rates low, with an average of 1.42% at 75% loan-to-value. This is bolstering a recovery in remortgage activity, with growth at 20%, year-on-year.

Government housing schemes have predominantly been aimed at first-time buyers, which has led to momentum building slowly. In the 12 months to January, there were 340,200 first-time buyers, the highest level of any 12-month period since early 2008.

However, the home-mover market is still subdued at around 360,000 on a 12-month rolling basis.

Finally, buy-to-let house purchases remain sharply down according to CML, stating that their forecast was an average of just over 7,000 house purchases a month, in 2017 – the year started with just 5,900.

Henry Knight, Managing Director, Springtide Capital commented: “We anticipated the downturn in buy-to-let purchases, with the new stamp duty dampening the attractiveness of becoming a landlord. However, there will always be a place for properties to let, whether it’s due to poor credit stopping a person from purchasing a house, work re-location, availability or affordability. It’s positive to see that housing transactions are increasing; however, the imbalance of supply and demand remains.”

For more information and advice on buy-to-let mortgages, please call 020 3040 4400 or visit our website.

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.”

 

The mortgage process – what’s involved

Mortgage process

Sarah Logeswaran, a first-time buyer from London, recently sent Springtide Capital some positive feedback as follows:

“Springtide Capital’s extensive knowledge and experience, coupled with their approachable and friendly nature, really eased me through the process of purchasing my first home.”

We thrive on feedback at Springtide Capital, as it helps us to continually improve the service we offer.  We’re thrilled that Sarah was happy with the high level of service she received and it’s something we strive for with all our clients, as we know that getting a mortgage is one of the most stressful things you can go through. We’re proud of the service we give and that’s why we’d like to help new clients to understand what they can expect from us when purchasing their first property.

Henry Knight, Director of Springtide Capital has also provided his tips on key broker qualities.

  1. The initial meeting

A client’s perspective: The client initially approaches Springtide Capital to obtain a mortgage for a property they have set their sights on. Although the majority of clients are savvy with their finances, the mortgage market is baffling and clients often require guidance on what they can afford and the types of mortgages available. Non-advised sales of mortgages are now not available so a client must seek financial advice.

Moreover, clients usually prefer face-to-face meetings with a broker, rather than a call centre adviser, due to the private nature of the questions, which must be answered. It also provides the client with more options, as the broker isn’t tied to a specific lender, and gives them a point of contact to guide them through the mortgage process.

A face-to-face meeting is then arranged and our Mortgage Consultant will go through their client’s requirements, financial situation and explains the application process and the types of mortgages available.

Springtide Capital’s perspective: The mortgage industry is heavily regulated, and it’s vital that the Mortgage Consultant can demonstrate (document) that any recommended mortgage fits his/her client’s personal circumstances and is affordable in the event of rate rises – protecting the client.

Henry’s tip: “A mortgage consultant should take the time to understand a client’s circumstances on the first meeting. They must then clearly explain the process and then make sure the client understands the financial commitment they’re undertaking.”

  1. The key facts documents

A client’s perspective: The client will then receive a Key Facts Illustration (KFI) document, explaining, in detail, the type of mortgage recommended (including interest rate, the overall Annual Percentage Rate of Charge (APRC), the monthly payment and any fees), the total amount payable over the term of the mortgage and next steps they’ll go through if they wish to proceed.

Springtide Capital’s perspective: This is where our Mortgage Consultant’s experience really comes into play. Using all of their knowledge of the market, regulation and lender relationships they will have researched the deals available that best fits the client’s needs before issuing a KFI. They will also take into account any additional challenges that the client may face when applying for the mortgage e.g. any restrictions they might have that could make getting a mortgage difficult and place the business with lenders who specialise in such cases.

Henry’s tip:“A mortgage consultant should have an in-depth understanding of the mortgage market in order to find a mortgage which best fits the client’s circumstances. They also need to know how to structure a proposal to a mortgage lender especially where the client’s circumstances are outside of the standard criteria.“

  1. The Agreement In Principle (AIP)

A client’s perspective: The client is given an AIP by the lender and details are sent out to read and discuss with the Mortgage Consultant. The client can then place an offer on the property. Once the offer on the property is agreed, our Mortgage Consultant will then submit a formal application with full information to the lender.

Springtide Capital’s perspective: This is a crucial part of the process as an AIP is only based on information provided by the client. To obtain a mortgage the Mortgage Consultant must then evidence the facts provided by his/her client e.g. proof of income, bank statements etc. It’s then vital that everyone in the process is kept up to date with progress until exchange of contracts and money is transferred from the lender. This is often the most stressful part of the mortgage process and that’s where our Mortgage Consultants really come into their own. They will liaise with their client, the lender, solicitor and estate agent to ensure that all the documentation is received and will often be the first point of contact if things don’t go as smoothly as planned. They will work hard with all parties to make sure their client gets the resolution they need, with as little hassle as possible.

Henry’s tip:“A mortgage consultant should keep all parties updated with progress, whether they are the client, lender, estate agent or solicitor. They should be available throughout the process and proactively resolve any problems that crop up.”

 

If you would like to speak to a Springtide Capital mortgage broker please call

020 3040 4400.

Gross lending hits £20.7 billion in June

 

Following the EU referendum, the Council of Mortgage Lenders (CML) issued their market commentary, estimating that gross mortgage lending reached £20.7 billion in June. This is 16% higher than May’s lending total of £17.8 billion, and 3% higher than the £20.1 billion lent in June last year. This is the highest June figure in eight years when gross lending reached £22.6 billion in 2008.

It is expected that the result of the EU referendum will have an impact on the housing market, however, the extent is yet unknown. The general view is that uncertainty will create a wait-and-see attitude and dampen housing price growth. You can read Henry Knight’s view here.

Not surprisingly, it is expected that lending over the coming months will be dominated by remortgage activity as opposed to house purchases.

The economy

The new Prime Minister, Theresa May, will be tasked with triggering Article 50 of the Lisbon Treaty, although she has stated that it will not be this year. The Prime Minister has already appointed new members of her cabinet, built to deliver her vision of leadership for the UK.

Despite speculation, the Bank of England has held interest rates at 0.5%.

The Bank of England has said: “Most members of the committee expect monetary policy to be loosened in August. The precise size and nature of any stimulatory measures will be determined during the August forecast and Inflation Report round.”

According to CML, “Economic growth in the first quarter of 2016 was unrevised at 0.4%, according to the Office for National Statistics’ second estimate. Survey data indicates that this subdued rate of growth is set to continue into the second quarter of 2016, partly as businesses postponed investment decisions until after the vote.

“Forecasters had already revised down growth expectations for the UK economy to around 2% for 2016, but even this figure is likely to be revised down further as the period of economic uncertainty extends.”

The inflation rate remained at 0.3% for the second month in a row in May, driven by a fall in the price of clothing and food, but is expected to rise in the second half of the year.

Housing

Lending figures are still distorted by the stamp duty change on second properties, this together with the uncertainty caused by the EU referendum, may show a lengthened downside to transactions as opposed to a dramatic one.

CML added: “And while this uncertainty will linger for some time, house prices remain underpinned by sound fundamentals.

“…the characteristics of the UK housing market are unlikely to change dramatically in the near term, as there will continue to be a mismatch of supply and demand, stretched affordability and a relatively low number of home movers.”

Henry Knight, Director, Springtide Capital commented: “We won’t be able to see the full extent of the impact of the EU referendum result for some months. Those who were in the middle of buying or selling a property would have no doubt continued progressing their sale or purchase following the referendum. Properties continue to go on the market and there is a strong demand for them – who knows, it may even result in people wishing to sell their property prior to any exit from the EU.

“Dampening housing price growth against what was an unsustainable rate of increase will help first-time buyers to afford properties. I’m sure that the housing market has challenging times ahead, but this may not be felt as soon as people may have thought. For Springtide Capital, it is very much business as usual.”

Please call one of our advisers on 020 3040 4400 if you would like any further information.