Posts with tag: buy to let mortgages

Stamp Duty Deadline Causes Huge Drop in Buy-to-Let Borrowing

Published On: June 16, 2016 at 8:31 am

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The 1st April Stamp Duty deadline has caused a huge monthly drop in buy-to-let lending, according to the latest Council of Mortgage Lenders (CML) report.

Landlords borrowed £2.5 billion in April, down by a huge 65% on March and 7% on the previous year. A total of 16,100 loans were approved, down by 64% compared to the previous month and 10% on April 2015.

Stamp Duty Deadline Causes Huge Drop in Buy-to-Let Borrowing

Stamp Duty Deadline Causes Huge Drop in Buy-to-Let Borrowing

As of 1st April, buy-to-let landlords and second homebuyers are charged an extra 3% in Stamp Duty on property purchases. This caused a rush of investors to flood the market in the first three months of the year.

Homeowners borrowed £8.1 billion for house purchase in April, down by 40% on the month and 4% annually. They took out 47,300 loans, down by 31% on March and 5% on April last year.

The report also found that first time buyers borrowed £3.9 billion, marking a decline of 11% month-on-month, but up by 15% on the year. This equated to 25,100 loans, down by 9% on March, but up by 7% yearly.

Those moving home borrowed £4.3 billion, down by a significant 53% on March and 14% compared to the previous year. This represented 22,200 loans, down by 46% monthly and 15% year-on-year.

Remortgage borrowing totalled £6 billion in April, up by 25% on March and 40% on April 2015. This came to 34,800 loans, up by 23% on the month and 30% on last year.

The Director of e.surv chartered surveyors, Richard Sexton, comments on the figures: “Concerns about a potential Brexit could account for a slight lending market slowdown, with May seeing house purchase loans total 65,113 – down 1.7% from April. Alongside this, lenders are adapting to much calmer market conditions after the rush of buy-to-let activity at the start of the year.

“Lending to first time buyers in particular has eased off slightly on a monthly basis, as a temporary caution enters the market. But lenders are committed to helping first timers get a foot on the property ladder in the long run. Since last year, significant effort has been made to support first timers through a variety of flexible mortgage deals offering low rates and even enabling family support.”

Sexton adds: “Buy-to-let borrowing may also be taking a breather, but the lending market remains buoyant. A remortgaging rush shows no sign of slowing as we approach summer, with homeowners taking advantage of more mortgage options, rising wages and a static interest rate. All this activity suggests that the next couple of months will see an increasingly resilient and balanced lending environment.”

Buy-to-Let Landlords to Pay Extra £10,000 in Mortgage Crackdown

Published On: June 14, 2016 at 11:21 am

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Buy-to-let landlords could be forced to pay an extra £10,000 to get a mortgage after a crackdown on dangerous debts by UK lenders.

The new clampdown on dangerous debts by lenders is driving up mortgage costs for investors to around £10,000. It is expected that banks and building societies will start implementing new hefty charges from September this year.

Buy-to-Let Landlords to Pay Extra £10,000 in Mortgage Crackdown

Buy-to-Let Landlords to Pay Extra £10,000 in Mortgage Crackdown

The Prudential Regulation Authority, the financial services watchdog, is concerned that some landlords are overstretching themselves and will face difficulties when interest rates finally rise. As a result, it is forcing mortgage lenders to introduce stricter tests to determine whether an investor can afford the loan.

At present, buy-to-let landlords must prove that they will earn enough from rental income to cover their mortgage repayments. However, the new plan will demand proof that they would still be covered if interest rates rose by at least 2%.

Under the crackdown, banks and building societies will require evidence of a yield of at least 5.2% to qualify for a 25% deposit loan. This would mean that landlords must earn £7,800 per year from rent on a £150,000 property before paying the mortgage.

To pass the tests, investors will have to either raise rents to ensure they would be covered if interest rates soared, or reduce borrowing.

Armistead Property’s Peter Armistead believes that savvy landlords can absorb the new charges by buying cheaper properties with higher yields.

He explains: “Clearly the investors most at risk are those with smaller deposits who buy property in parts of the UK where rents are low compared with house prices. This is a particular problem in places such as London and the South East, where the average annual returns between 2010-15 were just 4.86% in outer London and 4.71% in the city, according to LendInvest. House prices in London are about five times what they are in parts of the North West, but salaries are only 30% higher.

“Manchester and Liverpool deliver some of the best rental yields, with Manchester recording average annual rental yields of 6.02% over five years, followed by Liverpool, with 5.15% yields. An average residential property in Manchester is just £155,000, while a flat in a good area costs as little as £120,000. A property in Manchester can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper.”

He adds: “Landlords will find the best returns in urban areas with a concentration of students and young professionals. If investors can purchase cheaper properties with better yields, they will have the opportunity to protect and boost their profits in the longer term.”

Mortgage Lenders Forced to Refund £27.5m to Buy-to-Let Landlords

Published On: June 9, 2016 at 9:29 am

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The West Bromwich Mortgage Company has been forced to refund £27.5m to thousands of buy-to-let landlords who had taken out tracker mortgages.

The Court of Appeal has ruled that the mortgage lender – an arm of the West Bromwich Building Society – was wrong to increase its charges for lifetime buy-to-let tracker mortgages.

In September 2013, the mortgage lender announced in a letter to borrowers that its tracker rate would rise by 1.9%, despite the Bank of England (BoE) base rate staying the same.

Mortgage Lenders Forced to Refund £27.5m to Buy-to-Let Landlords

Mortgage Lenders Forced to Refund £27.5m to Buy-to-Let Landlords

The same letter also suggested that the lender would call in mortgages with just 30 days’ notice if the firm decided they were unprofitable businesses.

Around 6,500 landlords could now receive refunds.

Action against the lender was taken by Mark Alexander, a former mortgage broker who was backed by 350 landlords, who believes that they had been sold tracker mortgages on the basis that the interest rate would be fixed to the BoE’s base rate, which has remained at 0.5% since March 2009.

The lender argued that its small print allowed it discretion to change the rate.

Alexander lost his case at the High Court. However, he won the right to appeal, raising more than £500,000 in backing.

Yesterday, he won at the Court of Appeal, with the result automatically applying to other landlords in the same position.

The West Bromwich Building Society said that it would record a loss in the current financial year as a result, but insisted that its overall financial position remains strong.

The Chief Executive of the firm, Jonathan Westhoff, stated: “At all times, we acted to ensure we were treating customers fairly and that our approach was in the best interests of the society and its members as a whole.

“We will now contact all affected borrowers and ensure we process promptly any reimbursement they are due.”1

Alexander said the ruling sent a clear message to other lenders who have acted in a similar manner.

As well as ruling that the West Bromwich Mortgage Company was not entitled to vary interest rates in the absence of a change in the BoE base rate – which the mortgages were designed to track – the Court of Appeal also said that the lender was not entitled to call in mortgages unless they were in arrears.

1 http://www.westbrom.co.uk/your-society/news/2016/6/8/statement-regarding-court-of-appeal-judgement

Paragon Updates Buy-to-Let Mortgage Range

Published On: June 1, 2016 at 9:28 am

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Today, Paragon Mortgages updates its buy-to-let product range for professional landlords, introducing six new products.

Paragon Updates Buy-to-Let Mortgage Range

Paragon Updates Buy-to-Let Mortgage Range

From today, 1st June, there are new two-year fixed rate products for buy-to-let landlords at Paragon, starting at a rate of 3.40% with a 1.50% product fee at 65% loan-to-value (LTV) for single self-contained units. A two-year fixed rate mortgage of 3.75% with a 1.50% product fee at 65% LTV is also available for Houses in Multiple Occupation (HMOs) and multi-unit blocks.

Alongside the two-year fixes, three new five-year fixed rate products are also available for those landlords looking to plan their finances for the long-term. Rates start at 4.20% with a 1.50% product fee at 65% LTV for single self-contained properties – for both individual and limited company investors.

Paragon Mortgages also offers a range of stepped fixed rate products, created for landlords that want an extra degree of financial planning. These five-year fixed rate products can either increase in rate each year until the end of the product term, or decrease, depending on the landlord’s preference.

The Managing Director of Paragon Mortgages, John Heron, says: “We have re-dated our existing product range and then added six new fixed rate products. The product range caters for different types of landlord, whether they be limited companies or individuals.

“The stepped rate products have been created to allow landlords that extra flexibility with their financial planning. With tax liabilities increasing from April 2017, a stepped rate product which moves from a higher rate to a lower rate could help landlords plan for a rise in their tax bill.

“However, intermediaries will need to talk to their landlord customers to ensure they fully understand how these products work and whether they would be suited to their circumstances.”

Although landlords face changes in the buy-to-let sector, this advice from Nova Financial’s Paul Mahoney will help you factor in any financial difficulties you may face: /preparing-future-economic-changes-buy-let-sector/

Landlords to Favour Limited Company Buy-to-Let in Future, Says FHL

Published On: May 16, 2016 at 8:33 am

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Private landlords are likely to favour limited company buy-to-let in the future, believes Foundation Home Loans (FHL).

Landlords to Favour Limited Company Buy-to-Let in Future, Says FHL

Landlords to Favour Limited Company Buy-to-Let in Future, Says FHL

The mortgage lender has made the forecast as it signals a change to its rental calculation for individual buy-to-let applications. The company has joined other lenders in tightening its lending criteria in the buy-to-let sector.

Simon Bayley, the Commercial Director at FHL, claims that the advantages of limited company products will become clearer as the reduction in mortgage interest tax relief begins to bite.

As of April 2017, the amount of mortgage interest that landlords can claim against tax will be cut to the basic rate. However, those operating as a limited company will not be hit by the change.

“There is no doubt that with the new restrictions on tax relief which landlords can claim back, and now the hardening of the rental cover calculation, the limited company option is really gaining ground for a greater percentage of landlords, particularly those who are coming to buy-to-let at this point,” says Bayley.

“We have been delighted by the response to our limited company offering, which is priced at the same rate as our individual buy-to-let products. Intermediaries and their landlord clients are recognising the efficacy of a limited company option, and as long as there is a recognition of the pros and cons, the scales are coming down more heavily in favour of this approach.”

He continues: “As a responsible lender, we have heeded the regulator’s calls on affordability and stress testing, and are planning to change the basis of our rental calculation for individual applications from 125% to 145%, although it will not be implemented until mid-June when we make other LIBOR based changes. Limited company buy-to-let products remain unchanged at 125%.

“FHL supports the regulator’s intervention to enhance the way that individual landlords are protected by a more rigorous affordability system, but also recognise that experienced landlords are more than capable of assessing risks surrounding exposure to repayment of a loan in the event of rental shortfall.”

Are you thinking of forming a limited company?

Buy-to-let valuations slide in April

Published On: May 13, 2016 at 11:47 am

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Latest data released by Landmark Quest suggests that there was a 40% fall in the number of buy-to-let mortgage valuations during April, in comparison to February.

Between March and April alone, numbers slipped by a substantial figure of 30.6%.

Instructions

Landmark Quest’s technology enables instructions to be handled between lenders and valuation surveyors. In turn, the firm is able to study instruction volumes across the majority of the mortgage market.

Peter Stimson, Managing Director of Landmark Quest, noted, ‘overall market instructions were down slightly by 6.6% compared to March, however we saw a sharp decrease in the number of buy-to-let instructions-over 30%, in the same period. It’s clear that the race was on for transactions to go through before the new rules came into force on 1st April. It will be interesting to see what happens in May but I am anticipating that volumes will remain low.’[1]

Buy-to-let valuations slide in April

Buy-to-let valuations slide in April

Fraud

Included in its screening services, Landmark Quest looks at the market for fraudulent threats. Following the recent Stamp Duty surcharge increase, the firm has reported a sharp rise in the number of investment properties listed under ‘property club’ and ‘sale under value’ websites.

There has been a number of new build properties appearing online offering buyer incentives.

Mr Stimson continued by saying, ‘with any significant changes like we have seen with the stamp duty rules, we do typically see a change in behaviours. Currently, we are seeing a sharp rise in the number of new-build developments either offering stamp duty paid deals or appearing in Property Clubs offered at discounted rates.’[1]

Concluding, Stimson noted that, ‘particularly worrying is that rather than just one or two properties at the end of development phase in some instances we are now seeing entire developments appearing for sale under value. Lenders and surveyors really need to do their due diligence and be fully aware of such incentives and schemes to manage and control the risks associated with these.’[1]

[1] http://www.propertyreporter.co.uk/landlords/btl-valuations-slump-40-in-wake-of-stamp-duty-changes.html