Blog Archives

Options increase for older borrowers


Lenders are finally waking up to the fact that there are a growing number of older borrowers who need a mortgage well beyond their fifties. Shawbrook Bank is the latest lender to address this market, launching a 55 Plus Interest Only product for borrowers nearing the end of the mortgage term with an outstanding balance. Variable rates are available from 5.25 per cent from five years up to 15 years, while fixed rates are available over three or five years at 5.5 per cent.

There will always be someone who needs this sort of product and increasingly so as people work and live longer. It shows that banks realise that they need to be more innovative with products for older borrowers. There is a gap in product provision for those who have passed 60 but aren’t yet old enough for a significant equity release loan.

The pricing is not the cheapest so it is worth considering what else is on the market for older borrowers. If you have unquestionable long-term ability to service and repay the loan (rental income/trust income/investment income/royalty income/pension income) then Metro Bank does not have a maximum age that the mortgage needs to be paid back by. Other good options are Family Building Society, which lends up to age 90 and has a flexible interest-only policy (sale of property/downsizing). The issue does come, however, when borrowers try to use their earned income in the calculations as underwriters won`t accept that people working at say 70, will be doing the same thing at age 90. Santander will lend up until age 75 on earned income alone. However, the deal has to fit on affordability on a repayment basis over the term so this can be good for borrowers in their 50s but perhaps not beyond.

There has also been a significant improvement in the equity release markets that will benefit this next generation as they advance in years and at pricing not dissimilar  to that being offered by Shawbrook.

Please get in touch to discuss your options with an independent mortgage broker.

Jonathan Harris
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Jonathan Harris

Offset mortgages make sense in low interest rate environment


With savings rates pitifully low – a situation unlikely to change anytime soon – an offset mortgage makes a lot of sense. An offset allows borrowers to link their savings and sometimes their current account to their mortgage so that instead of earning a negligible rate of interest on their savings, they pay a lower mortgage rate.

Offset mortgages make up a small proportion of all loans because many people haven’t heard of them or don’t understand them. But if you are self-employed or a contractor they are particularly useful because of the flexibility and tax advantages on offer, while any borrower with a sizeable amount of savings on deposit should be able to reduce the interest they pay on their mortgage.

The big advantage of an offset is that they enable borrowers to retain access to savings while also reducing their mortgage term or monthly repayments. So if you have a £500,000 mortgage and £100,000 in savings, you pay interest on the difference – in this case, £400,000.

The benefits of overpaying on your mortgage – paying less interest in the long run and clearing the balance early – are well documented. But an offset is a more flexible way of doing this because you can access your savings at any time whereas money overpaid is often tricky, if not impossible, to access again.

Rates can be higher on offsets than on conventional mortgages but if you have significant savings or will benefit from the added flexibility, it could still be worth it. Offset mortgage rates start from 1.49 per cent fixed for two years, compared with the non-offset equivalent of 1.17 per cent from the same lender, so there is not much in it.

Please get in touch for more information.

Adrian Anderson
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Adrian Anderson

Property prices rise in February, says Nationwide


The pace of house-price growth picked up in February, according to Nationwide, with property values rising by 4.5 per cent in a year. But while monthly and annual rises were greater than in January, Nationwide believes that prices will not soar this year.

February was a busy month for the mortgage market as we saw an uptick in new enquiries from buyers keen to get on with the business of moving. Article 50 will come whether we like it or not and buyers and sellers who need to move are mostly carrying on regardless, assuming they can find a property to move to.

While Nationwide reported that the proportion of cash buyers is higher than it was a decade ago, the vast majority of people still need a mortgage and are taking advantage of the fact that rates are so low. What’s more, lenders seem keen to lend and that competition should lead to the continuation of cheap rates through the spring.

Jonathan Harris
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Jonathan Harris