04-03-2015

Mortgage Market

2015 has started off very well indeed with next record low interest rates continuing and new lenders coming to market in both the Buy to Let, commercial and residential mortgage lending arena.

We have seen some innovation from new lender TSB offering 10 year fixed rates with only a 5 year tie in. This is a smart move and is probably the reason why most borrowers won’t fix for so long because the thought of not being able to change your mortgage without penalty should your circumstances change must put quite a few people off.

On the downside we are seeing more and more lenders restrict lending to 4.5 x income. The whole point of the Mortgage Market Review was to do away with ‘draconian’ income multiples and to base lending on the affordability of a client. To now see lenders using affordability but not lending over 4.5 x income is most disappointing, especially where clients can demonstrate a clear ability to meet the mortgage payments. There are still lenders who don’t adhere to these rules so speak to a broker in the first instance.

Buy to Let Mortgage lending will be the hot topic as we go into April as the new pension reforms will allow you to take out your entire fund (taxed) and spend it on what you wish. An interesting article in the Guardian mentioned the fact that not all pension providers will offer this service as there is no commitment offer all of your cash to you, you may need to move pension providers to access all of your cash.

You can read the article here http://www.theguardian.com/money/2015/mar/02/ten-things-you-will-or-will-not-be-able-to-do-under-the-new-pension-rules

Speak to us and we can put you in touch with a trusted financial advisor who can give you the right advice.

Housing

The latest NationWide housing report shows that house prices fell by 0.1% in February 2015. There is still an increase year on year of 5.7%.

It also looked at the % of the population in the UK that are homeowners and commented on the fact that the % had fallen every year since 2003 and continues to do so. The report comments:

“The downward trend was maintained in 2013/14, with a further drop in the home ownership rate to 63.3% down from 65.2% the previous year. Home ownership is now at its lowest rate for almost thirty years and is eight percentage points below the all-time high of 70.9% in 2003. Moreover, among owner occupiers, the proportion of people owning their home outright also overtook the proportion owning with a mortgage in 2013/14.”

With the Mortgage Market Review now making it harder to secure finance unless you can, well, afford it then there will be less people owning a home. To show affordability you need to be evidencing payslips or if self-employed your net profits need to support the loan – I wonder if as a result of net profits having to be sufficient for mortgage lending if the amount of tax paid has gone up in certain industries, especially those that previously relied on self-cert to get a mortgage loan such as the self-employed taxi- driver?

Lloyds housing report focused heavily on the shortage of homes. We know this is a key factor at present with some agents reporting record lows for the amount of stock they have to sale. You only need to search on rightmove or the new site on the market to see that there is not a huge amount of stock in your area.

Lloyds comments that at least 2 – 2.5 Million new homes are needed to be built by 2025 and that the current principal lenders are not sufficient enough to build the 150,000 houses needed each year.

We have been securing funding for small property developers and builders using the new challenger banks who are lending but clearly house building needs to be increased on a much larger scale. The proposed urban schemes to utilise brownfield sites will help.

We focus more on these stories in our quarterly report at the end of March.

For more information on any of these topics or to discuss a residential, Buy to Let or commercial mortgage speak to a broker by calling Fox Davidson on 01179 897 950.