Posts with tag: Nationwide

Nationwide Updates Lending Criteria for Buy-to-Let Landlords

Published On: April 29, 2016 at 11:01 am

Author:

Categories: Finance News

Tags: ,,,,,

Nationwide building society is updating its criteria for lending to buy-to-let landlords, ahead of changes to taxes for property investors.

Landlords who take out new loans from the society’s specialist arm The Mortgage Works (TMW) will only be able to borrow up to 75% loan-to-value (LTV), instead of the current 80%. They must also prove that their rental income is at least 145% of their monthly mortgage payments, up from the present requirement of 125%.

These changes were announced as landlords face a reduction in the amount of mortgage interest they can claim against tax, which will come into effect from April 2017. If you are concerned about how current and future tax changes will affect you, we have advice from finance expert Paul Mahoney, of Nova Financial: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Nationwide Updates Lending Criteria for Buy-to-Let Landlords

Nationwide Updates Lending Criteria for Buy-to-Let Landlords

Under the change, landlords that currently receive tax relief of 40% on their mortgage interest payments will see the amount cut to 20% over five years. Lenders have also been advised to consider the borrower’s costs associated with letting the property, including tax costs, when assessing affordability for loans.

Nationwide’s updated rules on rental income, coming into effect on 11th May, will mean that a landlord that makes £10,000 per year in rent will only be able to borrow £138,000, rather than £160,000.

Alternatively, if they wish to borrow up to £160,000 at 65% LTV, they must find a property that makes an extra £130 per month in rent.

The Managing Director of TMW, Paul Wootton, says the move is designed to help landlords strengthen their cashflow position “and help them withstand the impact of increased costs from the new tax regime”.

He adds: “As a responsible lender, this change is a pro-active move that recognises the need to help safeguard rental cover for landlords over the coming years, and in advance of the forthcoming changes to mortgage interest tax relief.”1 

The Director of Coreco mortgage brokers, Andrew Montlake, believes the change shows that lenders are starting to worry about how recent tax changes will affect landlords’ income in the future.

He says: “I suspect they will not be the last to change their rental calculations with this in mind, and landlords should review their portfolio and financing requirements sooner rather than later, as well as making sure they are aware of the very real effects these tax changes will have on their future income.

“The worry is that this will hit not just landlords, but tenants too in the form of higher rental payments, at a time when many are already stretched.”1

Other lenders have also been making changes to their lending criteria.

It is now almost a month since buy-to-let landlords and second homebuyers began being charged an extra 3% in Stamp Duty. The Association of Residential Letting Agents has expressed concerns that this is causing the level of rental property supply to decline.

1 http://www.theguardian.com/money/2016/apr/29/nationwide-tightens-lending-criteria-for-buy-to-let-landlords

Fall in construction ‘will raise property prices’

Published On: January 27, 2016 at 11:33 am

Author:

Categories: Property News

Tags: ,,,,

A fall in construction activity will serve to increase house prices still further, according to Nationwide.

The building society noted that prices continue to increase during January, but that any rises will be modest.

Gradual

Prices are up 0.3% during this month, in comparison to a sharper increase of 0.8% recorded in December. Annual growth is more stable, standing at 4.4%, in comparison to 4.5% in the previous month.

In fact, the average property value is currently £196,829, slightly down on that recorded in December.

However, Nationwide warns that the demand for property is likely to increase over the coming months. The firm believes that a strong labour market, in conjunction with wages rising at a steady pace and interest rates remaining static, will drive the upturn.

Fall in construction 'will raise property prices'

Fall in construction ‘will raise property prices’

Concerns

‘As we look ahead, the risks are skewed towards a modest acceleration in house price growth, at least at the national level,’ said Robert Gardner, chief economist at Nationwide. ‘The labour market appears to have significant forward momentum. Employment has continued to rise at a robust rate in recent months and, while the pace of earnings growth has slowed somewhat, in inflation-adjusted terms regular wages continue to rise at a healthy pace.’[1]

‘The concern remains that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability,’ he continued. ‘Indeed, the market is already characterised by a shortage of stock, with the Royal Institute of Chartered Surveyors reporting that the number of properties on estate agents’ books remains close to all-time lows.’[1]

Adrian Whittaker, Sales Director at New Street Mortgages, also noted, ‘these figures show an unseasonal increase in house prices resulting from a market that is characterised by rising demand and limited supply. The mortgage industry has been slow to keep up with a new technology and if we are to satisfy the demand for faster mortgage applications and adapt to the rising competitiveness of the market, it is crucial that as an industry, we look to keep systems and processes up to date.’[1]

[1] http://www.propertyreporter.co.uk/property/nationwide-predicts-modest-acceleration-in-house-price-growth.html

 

Nationwide’s Save to Buy scheme 4 years old

Published On: May 7, 2015 at 9:39 am

Author:

Categories: Finance News

Tags: ,,

It is four years since Nationwide launched its Save to Buy scheme. During this period, the initiative has assisted in allowing 8,000 homes to be purchased.

Loans

During the previous four years, the Nationwide has loaned in excess of £1.1bn to both first-time buyers and home-movers. This money has been distributed to buyers who have saved to secure a mortgage deposit for at least six months using a Nationwide Save to Buy Savings Account or ISA. Qualified lenders can than apply for a mortgage with just a 5% deposit. [1]

Since its inception, over 90,000 Save to Buy accounts have been created. The current average savings in either a Save to Buy or ISA account is £5,714. The most popular mortgages that have been taken out are four-year fixed rate deals, with an average deposit of around 8%. Additionally, two-thirds of all loans under the scheme are between 90-95% LTV.[2]

Originally launched primarily for first-time buyers, Nationwide opened up the scheme to homeowners in January 2013. From its beginning, the average loan amount for Save to Buy mortgage applications is £145,00, with the average deposit £13,900.[3]

Interestingly, the average age of Save to Buy first-time buyers across the four years is 30. Home-movers using the scheme were found to be 32 on average. Unsurprisingly, three-quarters of Save to Buy mortgage applications were made under joint names.[4]

Nationwide's Save to Buy scheme 4 years old

Nationwide’s Save to Buy scheme 4 years old

 

Successful means

Nationwide’s Head of Policy for Mortgages and Savings, Andrew Baddeley-Chappell, believes that the policy has been a real success. He commented that, ‘at a time when the industry is developing plans to launch the Help to Buy ISA, Nationwide’s Save to Buy is providing a successful means for many customers to begin, or complete the journey towards a home of their own.’[5]

Continuing, Mr Baddeley-Chappell said that, ‘many people do not have the bank of mum and dad to depend upon. We have focused our support on those who prudently plan ahead, save regularly and think about what they might need to apply successfully for a mortgage before finding a home.’ Furthermore, Baddeley-Chappell believes that, ‘Save to Buy helps mortgage applicants demonstrate good saving habits, money management and planning.’[6]

As a result, he forms the opinion that, ‘Save to Buy helps Nationwide mortgage applicants to demonstrate how good saving habits and strong credit quality go hand in hand.’[7]

[1-7] http://www.financialreporter.co.uk/mortgages/nationwide-lends-over-1bn-to-save-to-buy-customers.html