Blog Archives

The Greek crisis and UK mortgage funding

31.05.2012

While there is much uncertainty as to what would happen if Greece were to leave the Eurozone, there is bound to be a knock-on effect on mortgage pricing and availability in the UK. Some lenders will be more affected than others, particularly those with close links to, or particular exposure in, Greece.

The new capital requirements under Basel III also mean some lenders have been reining back on the amount of lending they are doing. But while some have been raising their variable-rate mortgages, including a number of lenders increasing their standard variable rates, several have announced a reduction in fixed-rate mortgages.

It’s a confusing picture. Falling inflation is taking the pressure off the Bank of England to raise interest rates, while Christine Lagarde, the head of the International Monetary Fund, suggests that a further reduction may actually be necessary to stimulate the weak UK economy. Borrowers may well be asking what happens next and how they should best protect themselves.

Wealthy borrowers from Greece, Italy and France, who are looking to escape the problems or political upheaval in their own countries, are regarding London as a suitable safe haven. Increases to stamp duty announced in the Budget mean many are now buying in their own name and gearing up for tax purposes – something the private banks are keen to help with.

The good news is that there are still lenders who are lending to the right sort of client, particularly the private banks who aren’t over-exposed to the Eurozone. Borrowers with complicated income streams, who rely on bonuses and require interest only, should seek independent mortgage advice. Contact us for further details.

Adrian Anderson
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Adrian Anderson

Caveat emptor? No, caveat seller

22.05.2012

In our latest guest Blog, buying agent Henry Pryor warns sellers against overpricing their homes.

With any competition, for there to be winners there must be losers, and so it is with the housing market. That’s fine if you’re only interested in winners but if you ask about the losers, this can make you unpopular.

I haven’t always been a buying agent. For 22 years I sold homes, working for some of the smartest estate agents. During these years I talked the market up, suggesting that house prices and demand only ever increased.

Ever since I started buying houses for people in 2006 I have been aware that this is a one-sided view. For every seller there has to be a buyer and it isn’t in the buyer’s interests if property is getting more expensive. I discovered early on that people don’t like to hear that prices might be over-cooked. Estate agents did not want to imagine that the bull market might come to an end.

Yet it was clear that the market was overheating. Who thought that 110 per cent mortgages such as those given out by Northern Rock were sensible? Yet it was considered blasphemy to question it.

Since the credit crunch first hit in October 2007, asking prices have bounced back and are 44 per cent higher in London. However, average sale prices are only 14 per cent higher, even in Kensington and Chelsea, according to the Land Registry. In other parts of the UK prices have fallen considerably: in Wales, they are 30 per cent lower since the credit crunch. More than a million people have seen the typical 5 per cent equity that they put down when they bought their home wiped out. Lenders now prefer 25 per cent deposits, leaving these borrowers trapped.

Lately, I have been exposing sellers and agents who think they can ask too much for a house and that it won’t matter. Well, I have news for them. When looking on behalf of a buying client I sniff out homes that have got stuck and reduced in price. The problem is buyers often assume there is an issue if a property doesn’t sell quickly and give it a wide berth. Recently, this has enabled me to buy two properties at serious discounts to the original asking prices. I know about these properties because Google tracks your every move.

So, if you are planning to sell, don’t listen to the agent who thinks a high valuation will tempt you to list with him. Don’t think your house is worth what it might once have been. These days you leave a digital footprint when you market your home and there are folk like me who love buying properties at a discount. Caveat emptor? No, caveat seller.

www.housingexpert.net

The views expressed in this article are those of the author and not necessarily those of Anderson Harris

Adrian Anderson
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Adrian Anderson

Rising mortgage rates and service issues: why you need a broker

14.05.2012

The Bank of England has voted to keep interest rates at 0.5 per cent for another month. This is not surprising; indeed, it is widely expected that Base Rate – which has been static for more than three years – won’t rise for another couple of years at least.

Yet while interest rates haven’t moved, mortgage rates are on the rise. A handful of lenders, including Halifax, have raised their mortgage rates in the past week, following lenders such as Clydesdale and Yorkshire Banks increasing their standard variable rates earlier this month. Interest-only criteria continues to tighten, making it increasingly difficult for those with bonus-driven incomes to secure funding.

Service issues at certain banks are also causing problems for borrowers. We have seen a significant increase in buyers coming to us in desperation because their mortgage offer is taking so long to process that they are in danger of losing the property they are trying to purchase. When there is a dearth of desirable properties on the market, this is a disastrous situation for a buyer to find themselves in. Some lenders are taking several weeks just to get an offer out because they have been inundated with demand for their ‘best buy’ deals or have restricted their conveyancing panel. But this is too slow for many.

However, Anderson Harris can help steer clients in the direction of lenders who aren’t experiencing service issues. We can assist with getting funding arranged at relatively short notice and we know the private banks to approach for the right sort of client who needs interest-only.

These are difficult times when it comes to borrowing but there are often solutions if you know where to look. Advice is more crucial than ever.

Jonathan Harris
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Jonathan Harris

London will thrive, whatever the Chancellor throws at it

04.05.2012

In our guest blog, Joanna Symes of property search company Alabaster Property writes about the implications of the Budget for the top-end of the property market

George Osborne may not be the developer’s best friend. In the Budget, the Chancellor launched an attack on high-value residential properties and perceived tax avoidance. The changes announced in the Budget may have been popular with the electorate outside of ‘Planet London’, as it is often perceived as tax-dodging central for super rich non-doms and industry tycoons. Yet the Treasury may have shot and blinded itself in the process, potentially creating a funding hole because the property development industry in Central London generates significant tax revenues for the coffers.

For residential property costing more than £2m, a new 7 per cent rate of Stamp Duty Land Tax (SDLT) was announced. This shock announcement, as everyone in the industry waited for an announcement on mansion tax, resulted in solicitors, property advisers, buyers and vendors working until midnight on Budget day (21 March) to complete their transactions in record time.

There is an exemption from the new 15 per cent SDLT charge for ‘property developers’, provided certain conditions are met. One of these is that the purchasing entity has been carrying on a property development business for at least two years before the effective date of the transaction, which could cause problems for a number of developers. Profits on development projects are taxable and VAT is now payable on alterations to listed buildings. Development projects generate SDLT revenues by buying and reselling redeveloped properties which means that a proposed development on a fine white-stuccoed Grade-II listed Victorian square is a rather less attractive proposition than before, in the short-term at least.

This will raise barriers against new property businesses, who will find that they are unable to compete owing to their margins being slashed considerably with their acquisition costs being 8 per cent higher than their established competitors. The 15 per cent charge is problematic for those developers with more than two years in the business as well, as their financing is often from equity investors due to the lack of bank finance available for development projects.

Time will tell whether the legislation can be drafted in such a way to avoid catching innocent transactions. However, if this year’s fascinating Sunday Times Rich List is anything to go by, acquiring property in Prime Central London is a sound long-term investment for the shrewd and confident investor. Whatever the Budget did or didn’t do, there is only a finite amount of attractive London property to purchase. Meanwhile, London continues to be one of the most exciting cities in the world to live in. I have yet to meet someone who has said: ‘I wish I never bought that’. They are more likely to whisper: ‘I wish I had never sold that!’

alabasterproperty@gmail.com

The views expressed in this article are those of the author and not necessarily those of Anderson Harris

Adrian Anderson
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Adrian Anderson

Interest-only mortgage? Try a private bank

01.05.2012

With more mortgage providers cutting back on interest-only lending, the estimated 1.5m borrowers on an interest-only mortgage may be wondering what will happen to them. Switching to a repayment mortgage may be your lender’s preferred option but this will mean a significant jump in your monthly mortgage payments, and may not be compatible with your income streams.

Lenders have followed each other like sheep, reducing maximum loan-to-values on interest-only to around 50 per cent, insisting on a restricted number of repayment vehicles or a minimum income of £50,000 per annum, or in some cases, refusing to offer interest-only at all. They blame the Financial Services Authority for proposals in its Mortgage Market Review (MMR) that mean lenders will have to regularly check borrowers’ repayment vehicles to ensure they are on track to pay off the loan. This will increase the burden on lenders, with some deciding that they are better off not offering interest-only at all or on a much-reduced basis.

The end of interest-only was not what the MMR intended to achieve but this seems to be the sad result. Subsequently, borrowers have become ‘mortgage prisoners’ stuck on their existing deals, unable to remortgage or move to another property.

Yet interest-only may still be the correct solution for certain borrowers, those who have a repayment strategy in place and review it on a regular basis. Interest-only borrowing is still available for the right sort of client via the private banks. Brokers such as Anderson Harris can access such deals, and are happy to review your funding arrangements to see whether you would meet criteria. Please get in touch if you wish to discuss this further.

Adrian Anderson
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Adrian Anderson