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The rise of the green mortgage

06.04.2018

Barclays has launched a Green Home Mortgage, offering lower rates of interest for borrowers purchasing an energy efficient new-build home. Customers will get 10 basis points off Barclays’ standard mortgage range.

This comes off the back of the Government’s Green Finance Taskforce recommending that lenders should work towards promoting awareness and mainstreaming a consideration of green factors into their mortgage lending decisions.

With such a large lender offering a discount to encourage borrowers to choose an energy efficient house, this is a real boost for environmental campaigners. However, there are some limitations – it is only available on new-build properties as they have to be A or B EPC Energy Efficiency Rated – and initially only a handful of house builders will partner with Barclays on the scheme. On it’s own, it is certainly not a reason to choose a new-build home over an older property but if you are buying one anyway and the 10bp difference makes Barclays the cheapest lender available to you, then  borrowers may be tempted to opt for it.

If a lender as mainstream as Barclays is jumping on the green bandwagon, it will only be a matter of time before other lenders follow suit, which will focus buyers’ minds on a property’s Energy Efficiency Rating like nothing else.

Adrian Anderson
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Adrian Anderson

Getting a mortgage on an unusual property

28.02.2018

Many borrowers have fairly straightforward mortgage requirements – they are employed and can easily prove income, while the property is of a standard type and construction. Lenders are usually happy to lend to these borrowers so obtaining a mortgage is not too difficult.

However, not everyone is in this position, which is where mortgage brokers such as Anderson Harris come in. If you have a mortgage application that is even slightly out of the ordinary – you are buying a studio flat, for example, or a flat above a shop, then we can identify the lender most likely to lend.

As far as lenders are concerned, the main issue is resale value. You may be prepared to buy a studio flat or one above commercial premises, but would someone else feel the same if the lender had to repossess your property and sell it on? Anything with a limited resale market, such as properties with short leases or those with shared access, ring alarm bells for lenders.

If you are buying a property of unusual construction, such as a thatched cottage or converted barn, smaller building societies, who consider applications on a case-by-case basis, will be a better bet than high-street lenders. It often comes down to the individual case. A flat above a pub in Chelsea or another prime location may be acceptable to a lender due to high demand for the area and potential ease of reselling the property. The same cannot be said of ex-local authority properties and those with unusual characteristics.

Lenders often make clear stipulations regarding what they will and won’t lend on but increasingly they will rely on the mortgage valuer’s comments regarding value, desirability and resale. Borrowers will require a specialist lender in many of these instances and should use a broker to identify the one most likely to be sympathetic to their particular situation.

Adrian Anderson
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Adrian Anderson

Joint borrower sole proprietor mortgages set for take-off in 2018

26.01.2018

It may not be the catchiest of names but if you haven’t yet heard of a joint borrower, sole proprietor (JBSP) mortgage, chances are this year you will. The JBSP mortgage has been around ever since first-time buyers struggled to purchase property on their own and had to turn to their parents to help, combining two deposits and incomes.

But they really started to grow in popularity from April 2016 when a 3 per cent stamp duty surcharge on second homes was introduced. Suddenly, parents buying homes with their children found they had to pay an extra 3 per cent stamp duty on top because they owned another property, even though their child was a first-time buyer. The JBSP mortgage got round this by allowing two incomes to be taken into account for mortgage purposes but with only the child’s name going on the property deeds so there was no extra stamp duty to pay.

However, demand for JBSP mortgages has really taken off since last November when the Chancellor announced in his Budget that first-time buyers would not pay any stamp duty on properties costing up to £300,000 (or the first £300,000 of a £500,000 property in more expensive locations such as London). Once again, a first-time buyer purchasing with someone who is not a first-time buyer, such as a parent, would otherwise miss out on this tax break but the JBSP mortgage gets round this in a completely legitimate way.

Since the beginning of this month we’ve noticed a steady increase in enquiries from people looking for the solution of a JBSP mortgage. This increased demand is resulting in more lenders coming into this market, so rates are increasingly competitive, which is great news for borrowers. We expect this situation to only improve so do get in touch for more information.

Adrian Anderson
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Lenders herald new year with rate cuts

08.01.2018

The January sales haven’t just hit the high street as a number of lenders have reduced their mortgage pricing in the past few days. Barclays launched a two-year fix pegged at 1.28 per cent with £999 fee for borrowers requiring a maximum loan-to-value (LTV) of 50 per cent, while the lender also reduced a number of other fixed-rate deals, including a two-year fix pegged at 1.65 per cent for those borrowing 85 per cent LTV.

Meanwhile, Yorkshire Building Society has launched a market-leading five-year fix pegged at 2.03 per cent for those borrowing 85 per cent LTV, with a £995 fee. Accord has launched some discounted standard variable rates while Leeds Building Society has added some new mortgages with £1,000 cutback to its Help to Buy range.

Despite a quarter-point increase in Bank of England base rate in November, mortgage deals show no sign of getting more expensive, which is great news for borrowers. With £28 billion of mortgages expected to mature in the first half of this year, according to Virgin Money, lenders are keen to lend and attract some of that business with some tempting deals. This is great news for borrowers, who should seek advice from an independent mortgage broker to ensure they get the right deal for their circumstances.

Adrian Anderson
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Why an agreement in principle gives buyers the advantage

20.11.2017

Being prepared is one of the most important things a property purchaser can be. An agreement in principle is a good place to start, indicating to you, the vendor and estate agent, how much you are likely to be able to borrow from a lender. The mortgage application is still subject to full underwriting but in this competitive market where very little stock is available, it could just put you ahead of the competition.

Of course, you may expect a mortgage broker to say that but don’t just take our word for it – buying agent Henry Pryor stresses the importance of an agreement in principle for his clients and how it gives them the advantage.

‘Like the best boy scouts, it pays to be prepared,’ he advises. ‘If a buyer takes the time and trouble to get organised it can make a huge difference to the outcome. If a vendor wants £1m for a property but needs to sell because of divorce or death, and you are offering £800,000 with an agreement in principle in place, in my experience they may well accept your offer.’

Crucially, an agreement in principle seems to give buyers more bargaining power. Having a mortgage broker also strengthens your position because you have taken advice as to how much you can borrow and which lender is likely to lend it to you. We are often asked to give vendors and estate agents an indication of whether a purchaser can afford to transact based on their level of deposit and mortgage capacity.

With mortgage rates continuing to remain low – despite the rise in interest rates, some big lenders have been cutting their fixed-rate mortgages – it remains a good time to get a mortgage. Two-year fixes are available from 1.24 per cent, while five-year fixes start at 1.74 per cent.

Please get in touch for more information.

Adrian Anderson
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Adrian Anderson

With a potential rate rise on the horizon, what next for borrowers?

27.10.2017

With Britain’s economy growing faster than expected in the third quarter of the year, according to the Office for National Statistics, the likelihood of an interest rate rise at the Bank of England’s meeting next week has increased. But what does this mean for borrowers?

Whether the base rate rises or not is largely academic, as the expectations of higher interest rates have already filtered through to mortgage pricing. Many fixed-rate mortgages have already become more expensive with most lenders increasing the pricing on some, or all, of their product ranges.

However, it is not necessarily as straightforward as that. Challenger lender Metro Bank this week reduced its five-year fixed rate for up to 90 per cent loan-to-value deals by 10 basis points to 2.54 per cent. At the same time, the lender marginally increased pricing on two- and three-year fixes, while five-year fixes at 65 and 70 per cent LTV were withdrawn. It is clear which areas of business the bank is keen to promote.

Another lender, TSB, increased rates by up to 0.2 per cent on seven of its fixed-rate remortgage deals and removed its three-year fixed-rate deal at 90 per cent LTV.

As lenders jockey for position, independent advice is more important than ever. There is no need to panic as the rate increases we have seen so far have been relatively  modest but equally borrowers should not hang around, particularly if they need the security of a fixed rate to help with budgeting.

Adrian Anderson
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A mortgage for life – Daily Telegraph podcast

02.10.2017

Anderson Harris director Adrian Anderson was asked to talk to the Daily Telegraph about the various options for older borrowers and whether plans to introduce a mortgage for life, rather than insisting that all lending is paid off by retirement, is a good idea.

Click here to listen to Adrian (from 19.45 minutes in)

 

Adrian Anderson
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Adrian Anderson

Remortgaging frenzy as lenders cut rates

19.09.2017

Record low mortgage rates have led to a surge in the number of borrowers remortgaging. Figures from UK Finance reveal that the number of people remortgaging in July was up 10 per cent on the same month last year as lenders slashed their pricing and borrowers took advantage of these cheap deals.

While summer was busy on the remortgaging front, the autumn is set to see even more activity. Some £35bn worth of mortgages are due to mature by the end of October, meaning thousands of borrowers will be coming to the end of their fixed rate or discounted tracker period. If these borrowers don’t remortgage onto another fixed rate or base-rate tracker, they will automatically move onto their lender’s often much higher standard variable rate, meaning a significant jump in mortgage payments.

With the cost of living continuing to rise, making savings where you can makes a lot of sense and nobody wants to pay more than they need to on their mortgage. The good news for borrowers is that lenders competing for business have the remortgage market in their sights, as the house purchase market remains subdued. One lender cut its two- and five-year fixed rates to 1.39 per cent and 1.79 per cent respectively this week for those with a 40 per cent deposit – and that’s without a fee as well. Other lenders are offering even cheaper rates with two-year fixes available from 1.03 per cent and five-year fixes from 1.59 per cent.

It is also worth self-employed applicants noting that from October lenders will require a 2017 SA302 (issued to those who file a paper tax return) to support new lending, whereas they are currently accepting 2016 figures. Borrowers may wish to seek advice as to whether they are better off applying for funding now or waiting until October.

While affordability criteria are tougher than in the past, thanks to the fallout from the credit crunch and subsequent introduction of the Mortgage Market Review, it would be wrong for borrowers to assume that it will be impossible to remortgage. There are options available for most and we can point you in the right direction.

Adrian Anderson
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Adrian Anderson

Equity release for landlords

21.08.2017

A lender has launched an equity release product which can be taken out on a buy-to-let property or second home, rather than your main residence.

Landlords will receive a lump sum upfront with interest rolling up for the duration of the loan, enabling them to release money from a buy-to-let and not pay the mortgage interest each month. There are no affordability checks so it may appeal to the owner of a buy-to-let property who does not qualify for a standard buy-to-let mortgage. However, borrowers should be warned that the rate of interest is higher – from circa 6.24 per cent AER – than on a regular buy-to-let.

The minimum age for applicants is 55-years-old, which is low, but the lender will only lend circa 9 per cent loan-to-value to someone that age; otherwise, interest would potentially compound over a very long period. Older borrowers can borrow higher LTVs so a 70-year-old can borrow circa 24 per cent, while an 80-year-old can borrow circa 34 per cent. We believe this product will be targeted at those in their seventies and beyond as this is where conventional buy-to-let lenders do not tend to accept new applicants. The maximum age of a borrower is 90 – again, most buy-to-let lenders would not contemplate lending to someone this old.

The maximum property value against which the product can be taken out is £6m, which is encouraging, as many equity release providers will not lend against such an expensive property.

Borrowers should be aware that there are early repayment charges for the first eight years of the loan so it is not a short-term solution and the mortgage can’t be ported to another property. Independent advice from a broker who specialises in equity release such as Anderson Harris, is vital before taking out such a product to ensure it really is the most suitable solution.

While the product is expensive, it is innovative and could lead to other lenders following suit, which would bring the pricing down. There is an option to service the interest will also appeal to some borrowers.

Adrian Anderson
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Interest-only mortgages: a ticking time bomb?

31.07.2017

Around a fifth of outstanding residential mortgages are interest only, according to the Council of Mortgage Lenders, with many borrowers having no plans to repay them. The problem is that many borrowers took out interest-only mortgages at much higher loan-to-value ratios than would now be granted, and without thinking as to how they would pay them off.

But while there has been talk of a ticking time bomb, there is action borrowers can take if they are on an interest-only mortgage and are worried:

  • If there is a repayment strategy, check it is on target to pay off the capital at the end of the mortgage term.
  • If there is no repayment strategy, you need to start thinking about how you can pay the capital back. Seek independent advice.
  • Most lenders will let you overpay by up to 10 per cent of the mortgage balance per month without penalty so consider setting up a direct debit to do this and chip away at the balance.
  • Speak to your lender to see whether it will consider extending the term of the mortgage, giving you longer to pay it back. However, you will need to evidence that you can afford to pay the mortgage in retirement.
  • If your lender won’t let you extend the mortgage term, seek independent advice to see whether another lender will do so. However, another lender will only do this if the mortgage is affordable and you have a repayment strategy that it is comfortable with.
  • If you do not have the ability to pay back the mortgage and would prefer to stay in the property rather than selling up and downsizing, equity release may be an option. Again, independent advice is crucial.
Adrian Anderson
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Adrian Anderson