Posts with tag: mortgage lenders

UK lenders urged to take rental payments into consideration

Published On: November 8, 2016 at 9:57 am

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Home lenders in Britain should take rental payments into account when making lending decisions, according to Experian.

Research from the firm has revealed that rental rates are rising significantly, whereas monthly mortgage payments are dropping.

Rental increases

During the third quarter of 2015, private tenants in Britain paid more for their rental accommodation in 57% of districts, in comparison to the same period in 2015.

At the same time, monthly mortgage payments expected to be paid by first time buyers has fallen in almost two-thirds of districts. This is on the assumption that their loan was for 90% of the property on a two-year fixed-rate mortgage deal over 25 years.

The amount of money tenants pay for their accommodation is either above or within 10% of the monthly payments that they could expect to pay for a mortgage in 27% of UK districts. Experian’s research suggests that if these renters were able to raise a deposit, a large percentage of the 4.3m private rental tenants in Britain would fine mortgage payments manageable in line with their current rental outgoings.

Exceeding

Data from the investigation shows that Scotland is home to six of the ten districts where rental rates are higher than mortgage payments by the biggest margin. In addition, Manchester, Salford and Hull also offer the most favourable conditions for tenants to get onto the property ladder.

Jonathan Westley of Experian, said: ‘What our research shows is that while a mortgage is a major ongoing commitment, renters often have a track record of making monthly payments which are often similar to what they might pay on a mortgage.’[1]

The Mortgage Market Review has already seen lenders subject to stringent checks assessing the suitability of candidates to keep up with their mortgage payments. However, Experian argues that by taking rental payments into consideration, lenders can get a better overall view of a borrower’s track record.

UK lenders urged to take rental payments into consideration

UK lenders urged to take rental payments into consideration

Responsibility

Mr Westley continued by saying: ‘Lenders take more into account than simply the amount you have raised for a deposit and what multiple of your earnings you are looking to borrow. The responsibility of ensuring mortgage payments are affordable for borrowers in the long term is one lenders take seriously.’[1]

‘They want to get a complete picture of a would be home owner’s financial commitments and see a strong track record of making regular payments. This helps lenders to understand how a borrower would manage mortgage payments now and in the future,’ he concluded.[1]

[1] http://www.propertywire.com/news/europe/home-lenders-urged-take-rental-payments-account/

Investec cuts buy-to-let mortgage rates by 1%

Published On: September 8, 2016 at 10:02 am

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Investec Private Bank has moved to introduce a new range of loan-to-value (LTV) bands across its buy-to-let mortgage product range. Borrowing rates have been slashed by up to 1%.

The lenders says its new buy-to-let mortgage rates will begin at 2.5%, plus three-month Libor at 50% LTV. In addition, Investec is also launching a 60% LTV from 2.75% and a 70% LTV at 3.10%.

Services

Investec provides both buy-to-let and residential mortgages to people looking to borrow between £250,000 and £10m, with a minimum annual income of £300,000 and assets totalling at least £3m.

Peter Izard, business development manager at Investec Private Banking, noted, ‘despite recent tax changes, the buy-to-let market remains an attractive proposition for investors. We’re delighted to be announcing these significant rate cuts today, which will be a real boost for landlords seeking larger loans.’[1]

Investec cuts buy-to-let mortgage rates by 1%

Investec cuts buy-to-let mortgage rates by 1%

Alterations

The Bank is one in a number of lenders to cut buy-to-let mortgage rates in recent days, with competition fierce in the market.

Santander cut rates by up to 0.25% on some fixed products, while Virgin Money’s reductions have seen buy-to-let rates at 75% start from 2.19%. Natwest has reduced its standard buy-to-let two year fixed range for both purchase and remortgage by between 19-23 bps. Accord Buy-to-Let also announced plans to expand into the consumer buy-to-let market in the coming months.

Chris Maggs, Accord Buy-to-Let’s commercial manager, noted, ‘despite the uncertainty in the buy-to-let arena we believe that it will remain a robust market.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/9/investec-slash-buy-to-let-mortgage-rates-by-up-to-1

Deputy BoE governor concerned over BTL lending

Published On: May 5, 2016 at 9:16 am

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With buy-to-let investment continuing to move at a steady pace, despite the Government’s moves to cool interest, the Bank of England’s deputy governor has moved to express his concerns.

Low-cost, interest only mortgages and substantial rental yields continue to drive momentum for investors. However, Sir Jon Cunliffe is worried about the pace at which the sector is growing.

Concern

The deputy governor also said he was concerned about mortgage lenders over-exposing themselves to buy-to-let, lending money more freely as a result.

Since 2008, buy-to-let lending has increased by an average of 6%. Cunliffe pointed out that buy-to-let lending to landlords now makes up more than 15% of all mortgages, up from 8.5% in 2007.

As mortgage lending in the sector grows, Cunliffe feels it is important to look carefully at whether lenders’ underwriting procedures are falling.

He observed, ‘at around the start of 2016, lenders were planning to grow their gross buy-to-let lending by, on average, almost 20% per annum over the next two years, with some challenging banks and smaller building societies planning to grow their buy-to-let books at a much faster rate.’[1]

‘When some form of credit is growing fast one needs to look very carefully at whether lenders’ underwriting standards are slipping,’ he added.[1]

Deputy BoE governor concerned over BTL lending

Deputy BoE governor concerned over BTL lending

Tighter

In March, the Bank of England announced plans to introduce more tighter checks on buy-to-let lenders. The Bank’s Prudential Regulation Authority (PRA) said that it was announcing the moves to stop banks from making risky loans. It warned that 20% of lenders were guilty of not making sufficient credit checks.

Its main concern was that a housing bubble could be created, which in turn would cause a wider housing market slowdown. Over 1.7million properties now have buy-to-let mortgages, representing 17% of loans used to purchase property in the last year.

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/major-concern-over-surge-in-buy-to-let-mortgages

Barclays offers 100% mortgage

Published On: May 4, 2016 at 1:38 pm

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Barclays has today announced that it is to offer a  100% mortgage-a three-year fixed rate deal for buyers with no deposit

However, there is a catch!

The lender is offering the deal at 2.99% for buyers who earn more than £50,000 per year.

Celebration

Barclays has made changes to its Family Springboard Mortgage, on the third anniversary of its launch. Previously however, borrowers were required to put down a deposit of at least 5%.

As part of the deal, family or friends of the borrower will be required to deposit the equivalent of 10% of the property’s purchase price into a savings account. This must then be kept there for at least three years.

At the end of this period, the family member or friend will receive this money back, with interest, equivalent to the base rate plus 1.5%.

Barclays offers 100% mortgage

Barclays offers 100% mortgage

Affordability

Jody Baker, Head of Money at comparethemarket.com, noted, ‘the government’s commitment to building new starter homes, the introduction of the Help to Buy ISA and changes to stamp duty, has shown its efforts to make housing more affordable to first time buyers and its encouraging to see the industry getting in on the act too.’ [1]

‘Whilst Barclays’ move adds a viable option for those looking to buy a home, there is, of course, a note of caution. Loans of this sort require prudence on the part of the borrower, ensuring that they have not over-extended themselves. We would always recommend to anyone that is taking a mortgage works out a detailed budget of their monthly household expenses and assesses in some depth their incomings and outgoings. Equally, we would expect these products to remain few and far between at the fringes of the mortgage lending universe by necessity – after all, it was riskier lending which caused the financial crisis in the first place.’[1]

However, buying agent and housing market commentator Henry Pryor, was less complimentary, describing the move as, ‘a financial grenade.’[1]

[1] http://www.propertyreporter.co.uk/hero/the-100-mortgage-returns.html

Buy-to-let lenders facing stricter criteria

Published On: May 3, 2016 at 9:27 am

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Mortgage lenders in Britain are widely expected to limit lending to buy-to-let borrowers, after a decision from the Mortgage Works that moved to restrict the amount landlords can borrow.

The Mortgage Works, a buy-to-let division of Nationwide, said last week that from 11th May, residential landlords will require to have substantially more rental income relative to the cost of their mortgage than is presently the case.

Stricter

The division has tightened its rental cover requirement, which is the amount a landlord is required to take in rent in comparison to the cost of their mortgage repayments. This figure has now risen to 145%, from 125% previously.

This alteration means that Nationwide will not lend to landlords with a 20% deposit and instead will only lend to those with a minimum 25%. The changes come in response to the Bank of England’s announcement in March that mortgage lenders could face stricter lending criteria when offering mortgages to buy-to-let landlords.

Experts have forecast that property investors will need to have a 40% deposit when looking to purchase property, as a result of the alterations.

Buy-to-let lenders facing stricter criteria

Buy-to-let lenders facing stricter criteria

Unsurprising

David Whittaker, managing director at broker Mortgages for Business, noted that he was not surprised to see lenders starting to increase cover ratios for borrowers. He said, ‘as one of the biggest mainstream buy-to-let providers, The Mortgage Works is taking the lead and demonstrating to the market and the regulators that it truly understands the forthcoming tax relief changes. It will be interesting to see how other providers react.’[1]

‘I anticipate a few will be making similar preparation, some will wait until the outcomes of CP11/16 (Recovery and Resolution Plans) are known and others will bury their heads in the sand. ICRs on products for limited companies will remain generally the same as they are now because these borrowing vehicles will not be subject to the new tax relief restrictions. Indeed, it will be the lenders with products in this category who will be the likely winners out of this in the long term,’ Whittaker continued.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/buy-to-let-lenders-to-face-tougher-checks

UK first-time buyer sales at post-recession high

Published On: September 2, 2015 at 9:15 am

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First-time buyer levels in Britain hit their highest number since the recession in July, according to a new report.

Data from research conducted by Your Move and Reeds Rains shows that the average first-time buyer paid £161,985 for their home last month, 8.9% more than one year ago.[1]

Buyer boost

During July, there were 29,700 purchases of property by first-time buyers, 4.9% more than in June. The average deposit required by a first-time buyer looking to secure a home was £27,975.[1]

In addition, the sales figures in July represented a 28% rise from April 2015, meaning there has been an increase of £6,5000 rise during the last three months alone. Average deposits have risen by 10% in comparison to June 2014, where a figure of £25,429 was recorded, meaning there has been a rise of £2,546.[1]

The cost of a deposit as a proportion of a first-time buyer’s typical income hit 71.6%, up by 3.1% in one month and by 5.4% annually. Moreover, the average first-time buyer’s LTV is slowly dropping, meaning initial buyers are having to stump up more cash up front with larger deposits.[1]

July’s rate of 82.7% showed a 0.5% decrease in LTV from June and a 0.2% year-on-year decrease.[1]

Optimism

Adrian Gill, director of estate agents Your Move and Reeds Rains, believes that the post-election surge in activity has receded, giving way to more consistent optimism. He feels that first-time buyers are beginning to realise that there is no immediate risk to the property market from the Government.

‘Incentives attractive to first time buyers such as the Help to Buy schemes are running along steadily, while further low cost housing development is being encouraged to entice more people onto the ladder,’ Gill noted. ‘This month’s particularly high transaction rate is also partially due to expectations that the Bank of England may announce a rate rise sooner rather than later. The thought of months of rock-bottom mortgage rates being brought to an end is encouraging many wavering first time buyers to jump on the property ladder before repayment costs shoot up,’ he added.[1]

UK first-time buyer sales at post-recession high

UK first-time buyer sales at post-recession high

Mr Gill went on to say that some first-time purchasers, ‘may have held back briefly when considering the rising deposit costs.’ He notes however that, ‘real wages have been growing too and first-time buyers are able to shoulder the short term burden of a slightly higher deposit to spare the risk of losing out on a good mortgage deal.’[1]

Mortgage rate falls

In spite of some lenders beginning to take away their cheapest deals, the average first-time buyer mortgage rates continue to fall, albeit at a slow pace. The typical rate fell by 0.75% in the year to July 2015. Moreover, the rate fell by 0.12% during the last three months and by just 0.02% between June and July.

‘So long as the economy continues on its upward trajectory and the aspiration for home ownership remains strong, property prices can only increase,’ observed Gill. ‘While the higher deposit and mortgage costs this brings may be a bother for some, taking a longer view, it’s a sign of a vibrant and dynamic property market,’ he continued.[1]

Gill also said that, ‘What may be more concerning for first time buyers is that average mortgage rates may be on the verge of climbing back up. But first time buyers shouldn’t worry. When a rate rise does come it is likely to be slight and gradual so home ownership will by no means suddenly become a costly dream. Instead, it will remain an affordable reality for those first time buyers with the drive and determination to make it so.’[1]

Regional divides

Unsurprisingly, London was the most expensive place for first-time buyers, with the average property for initial purchasers here costing £274,868 in the three months to July. Second on the list was the South East, where prices cost £201,652 on average. Nationally, the average cost of a first-time buyer property was £149,713 during the same three-month period.[1]

The least expensive places in which first-time buyers can purchase a property were found to be the North East and Northern Ireland, where prices stand at £109,240 and £106,176 respectively.[1]

[1] http://www.propertywire.com/news/europe/uk-first-time-buyers-2015083110923.html