Blog Archives

The Mortgage Credit Directive – should borrowers be worried?

12.02.2016

The Mortgage Credit Directive will be implemented in the UK on 21 March but is it something consumers need to be worried about? Not necessarily but it is something consumers need to be aware of as there are some quirks that could catch people out when they are applying for a mortgage.

Borrowers are only just coming to grips with more stringent criteria as a result of the Mortgage Market Review so further hoops to jump through will be unwelcome. Getting a mortgage may become more tricky but will not necessarily be impossible and it’s more important than ever to seek independent advice from an independent mortgage broker such as Anderson Harris.

Under the new rules, accidental landlords, who rent out a property they used to live in, will be classed as a consumer buy-to-let customer and will have to go through similar application and affordability tests as with a residential mortgage. Unlike professional landlords who operate a buy-to-let portfolio as a business, accidental landlords are considered to need consumer protection. There has been a surge in people taking out let-to-buy mortgages ahead of the implementation of the MCD to avoid this tougher criteria. This coming on the back of the hike in stamp duty for landlords from April, the reduction in mortgage interest tax relief and the abolition of wear and tear allowance, is a further blow to the sector.

A significant number of lenders have said they will not offer foreign currency mortgages after the introduction of the MCD because it is a niche area and the cost of changing their systems and procedures to deal with the new regulations would not be cost-effective. There will be less choice for those requiring foreign currency mortgages but several lenders will continue to offer them so there will still be some options.

The second charge market is also being brought into line with residential mainstream mortgages, which is good news as it may be a better choice for the borrower than remortgaging.

Most lenders are already MCD-compliant so borrowers shouldn’t notice a considerable change post-March. However, anyone seeking a mortgage should take independent advice to guide them through the new rules and regulations.

Adrian Anderson
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Adrian Anderson

Don’t be an April fool and pay an extra 3% stamp duty

04.02.2016

With less than two months for investors and second homeowners to complete their property purchase before higher stamp duty rates are introduced, there may be a temptation to panic. The Chancellor announced in December’s Autumn Statement that anyone buying a home that is not their main residence will pay an extra 3 percentage points in stamp duty from 1 April.

However, it is still possible to secure a property and mortgage before that deadline as long as you bear the following tips from Anderson Harris in mind:

Avoid a chain.
You might be on a tight deadline but that is unlikely to be true of everyone in a chain. If you are stuck in a chain, bridging finance (see below) may enable you to minimise the potential negative impact.

Be realistic about mortgage rates.
If you are opting for a regular mortgage, and making an application towards the end of February, you will need a lender who can perform quickly. This may not necessarily mean getting a market-leading rate.

Consider bridging finance.
Bridging is recognised as a much quicker way of completing a transaction with lenders geared up for rapid delivery and response. You pay a premium on the rate but as with standard residential mortgages, these are much cheaper than in the past, with rates available from 0.69 per cent a month. Many people regard bridging finance with suspicion but it is becoming a mainstream product for those with a clear and viable strategy for repaying the debt. The usefulness of bridging is underrated as it enables second homebuyers to potentially reclaim the 3 per cent extra stamp duty provided they sell their existing home within 18 months.

Take legal timescales into consideration.
Even if you get that mortgage offer towards the end of March, the solicitor still has to request the monies from the bank, draw the mortgage down and complete by 1 April. Choosing a good lawyer who can meet the tight timeframe is essential.

Don’t pay over the odds.
There have been reports of vendors taking advantage of desperate buyers by pushing up asking prices. Some agents believe prices could soften after 1 April once the pressure is off so if you pay over the odds, you may find that the ‘value’ of your property drops off. Make sure you do your due diligence, go into it with your eyes open and consider owning the property for a few years at least.

Seek independent advice.
Who knows which lenders have service issues and are taking ages to process mortgage applications? Where do you go for bridging and is it the right option for you? Anderson Harris are independent mortgage brokers who will be able to identify the best lender for the job and ensure that your application is processed in a timely fashion.

Please contact us for more information.

Adrian Anderson
Posted by
Adrian Anderson