Blog Archives

Are buy-to-let’s days numbered?

26.01.2017

Buy-to-let is under siege with the phasing out of mortgage interest tax relief from April, a 3 percentage point surcharge on stamp duty for landlords and changes to affordability requirements.

Even so, it is not all doom and gloom as there are still many lenders keen to lend. While affordability criteria are tougher, mortgage rates are extremely low, helping landlords keep costs down. Some lenders are proving more flexible than others and will allow personal income to support rental income shortfalls, which can be useful for landlords.

While most lenders are adopting a rental stress test based on 145 per cent at a notional rate of 5.5 per cent, there are more bespoke solutions available. For example, one lender will assess rental cover starting at 125 per cent at 4 per cent for those borrowers opting for a five-year fix. Other lenders will allow 125 per cent for basic-rate taxpayers.

It makes a big difference to the amount a landlord can borrow: with a rental stress test of 5 per cent at 125 per cent, you could get a mortgage of £192,000 on a property with a rental income of £12,000 per annum but this would fall to £150,470 if the calculation increases to 5.5 per cent at 145 per cent. It means most landlords will be able to borrow far less than they have been used to, which means they may find it harder to remortgage, particularly if they need to capital raise.

There are options out there if you seek independent advice. With many people still keen to invest in buy-to-let, whether it is in your own name or within a limited company, that advice is more crucial than ever.

Adrian Anderson
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Adrian Anderson

Should you fix your mortgage for ten years?

18.01.2017

There is so much uncertainty at the moment – what is going to happen with Brexit? What will President Trump mean for the UK? – that ensuring your mortgage payments are fixed for the foreseeable future is an attractive prospect. Subsequently, more lenders are offering ten-year fixed-rate mortgages as borrowers increasingly seek longer-term security.

However, when taking out any fixed-rate mortgage it is essential that you don’t fix for longer than you are absolutely sure about. Lenders impose early repayment charges (ERCs) if you need to get out of the mortgage before the end of the fixed rate so it could cost you thousands of pounds to exit early. In theory you should be able to port the mortgage or take it with you if you move to a new home but this is not guaranteed so you should not assume this would be the case.

The pricing of ten-year fixes is also on the rise as longer-term Swap rates rise in response to economic uncertainty. The good news is that there are still plenty of competitive shorter fixed rates available as lenders vie for business. Indeed, most borrowers prefer shorter fixed rates as they still give certainty but the ERCs are less onerous if you need to get out of the mortgage before the fixed rate comes to an end.

The important thing for borrowers is not to panic and opt for the wrong deal as it could turn out to be an expensive mistake. Seek independent advice and shop around for the right product for your circumstances. It is also important not to be guided too much by the rate – while it is important the overall pricing is more so with fees also taken into consideration.

Jonathan Harris
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Jonathan Harris

Mortgages at eight-month high

04.01.2017

The number of mortgage approvals made to homebuyers jumped to an eight-month high in November, according to the Bank of England.

While confidence is a little uncertain given potential economic headwinds such as the forthcoming Brexit negotiations, cheap mortgage rates are proving attractive and those who have to get on with the job of moving are continuing to do so.

Lenders are keen to get off on the right foot this year with a number offering incentives such as cash back to entice borrowers, rather than cutting rates yet again and squeezing wafer-thin margins further. There are some great deals out there and anyone due to remortgage this year, or who is buying a property, should seek independent mortgage advice as to the best options available to them.

Jonathan Harris
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Jonathan Harris