Blog Archives

What next for mortgages in 2017?

20.12.2016

As 2016 comes to a close, it is natural for thoughts to turn to next year and what might happen with the housing market. As far as mortgage rates are concerned, it is hard to see much at all happening. With interest rates unlikely to rise anytime soon, I wouldn’t be surprised if they stayed pretty much where they are, give or take the odd fluctuation along the way.

Swap rates, the rate lenders pay to borrow from each other, have risen in the past couple of months but despite this mortgage rates have remained fairly consistent, with some lenders even reducing their five-year fixed rates in particular. This suggests that some lenders are prepared to suffer reduced margins in an effort to attract business. It is likely that this will continue into next year as lenders compete for borrowers so even if Swap rates do fluctuate on the back of bad economic news, lenders will be prepared to make less profit.

With mortgage rates already so low, we don’t expect them to become much cheaper but lenders are likely to continue to offer incentives and other freebies such as no arrangement fee or cash back in order to attract borrowers rather than compete on rate. As always with your mortgage it is vital that you seek independent advice from a mortgage broker to ensure you don’t pay more than absolutely necessary as it is likely to be your biggest outgoing.

Jonathan Harris
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Jonathan Harris

More mortgages taken out in November, says CML

15.12.2016

Mortgage lending rose by 3 per cent in November compared with the previous month, with gross lending of £21 billion, according to the Council of Mortgage Lenders (CML). But while this is encouraging, at the same time the CML revised downwards its forecast for lending for 2017. This isn’t surprising as as 2016 has been a tricky year with challenges presented by high stamp duty costs and the referendum outcome, and uncertainty will continue into next year, coupled with the impending changes to mortgage interest tax relief for landlords which will have a negative impact on buy-to-let.

It is hard to see any movement in interest rates and mortgage rates are likely to be fairly settled as well. We do not expect them to rise significantly next year – while economic news will impact Swap rate movements from time to time pushing up the cost of borrowing, overall we expect the mortgage market to tick along much as it has.

Borrowers will continue to need good independent advice from a mortgage broker, particularly landlords as tax changes come in from April. The challenger banks will provide a vital role, supplying the most innovative products, assisting those who are particularly struggling to get funding, such as the self-employed, older borrowers and first-time buyers.

Jonathan Harris
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Jonathan Harris

Lenders tighten buy-to-let mortgage criteria

09.12.2016

With changes to mortgage interest tax relief set to be introduced from April making it less generous for landlords, it is no surprise that lenders are tightening their buy-to-let criteria.

Virgin Money is increasing its interest coverage ratio (ICR) from 125 to 145 per cent and will no longer accept applications from customers with more than 11 mortgaged properties in their portfolio. Meanwhile, Coventry building society is increasing its buy-to-let reference rate to 5.5 per cent on loans with benefit periods of less than 5 years. Coventry’s ICR remains unchanged at 140 per cent.

With other lenders increasing their ICR in recent weeks and making other tweaks to criteria, some people have been wondering whether this is the end of buy-to-let, making it unattractive for the smaller investor. However, while buy-to-let has endured a series of knocks recently, including an extra 3 per cent stamp duty payable on purchases from April this year, it is likely to prove resilient. Some investors may be put off, while those who do take the plunge may think harder before doing so but that is no bad thing.

Landlords must do their research carefully. Ensure the numbers add up – will the property generate enough rental income plus a buffer to meet lenders’ criteria? Will you be able to find a steady flow of tenants and how will you cover void periods? It is worth speaking to an independent mortgage broker such as Anderson Harris who will know the ins and outs of all the requirements from buy-to-let lenders and will be guide you in the right direction.

Adrian Anderson
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Adrian Anderson