If you’re new to the world of commercial mortgages you might be surprised by just how much they differ from their residential cousins.
Property ownership isn’t only something that’s available to residential buyers. Although renting your store, warehouse or business unit is perhaps the more common way to do things, owning your business premises could give you a much greater degree of trading certainty (i.e. no fluctuating rents) and a valuable capital asset once everything’s paid off.
Like the home you own, the way to buy a commercial space if you don’t have the full purchase amount sitting in your bank account is with a mortgage. If this is your first venture into commercial mortgages, however, you’re about to find they’re a very different animal to their residential counterparts. Here’s why.
1. You can borrow more
Commercial mortgages are typically available for amounts above £25,000. Some banks place the upper limit at £1 million. Several don’t have any upper limit. The lending criteria are more demanding than for residential mortgages (as we explore below) but if you can meet those criteria, you can access significant sums of money.
2. More types of commercial mortgage
You run a bakery. Or a garage. Or an office. The premises you buy will be the premises you operate from, and there are commercial mortgages available for these owner/occupiers.
Alternatively, your business might be built on property investment. You might be buying to develop a site. You might be planning to open franchise. There are specific types of commercial investment mortgage available for these purposes too.
3. Deposits are usually higher
You’ll get a better rate on a residential mortgage if you can put down a big deposit, but there are plenty of mortgage products available to you if you can only stretch to 5%. That’s not the case with commercial mortgages. Here, loan to value (LTV) ratios are more demanding.
If you’re going to be occupying your premises, you’ll probably (although not always) need at least a 20% deposit. If you’re buying as an investment, that will be higher still – probably 25% as a minimum.
Deposits often vary depending on sector and the form of business. So, for example, a professional practice might get a mortgage offer with a maximum LTV of 90%. For retail, that might drop to 70%, because opening a shop right now is seen by lenders as a riskier proposition than, for example, running an accountancy service.
You’ll find LTV and deposit requirements also vary depending on whether you’re buying a property from which to operate immediately, developing the site, or opening a franchise.
4. Commercial mortgages are more bespoke
The needs and circumstances of businesses are far more varied than your typical pool of prospective homeowners. There may be hundreds of residential mortgage products available, but for commercial purposes a traditional ‘product’ doesn’t really work. Things are much more bespoke, with mortgages offered on a case-by-case basis.
5. There’s a broader range of interest rates…
You may have heard that the interest rates on commercial mortgages are higher than for residential mortgages. This very much depends on the industry in which you operate, the nature of the mortgage (i.e. investment, development, franchise etc) and the degree to which you meet the lending criteria (see below).
Commercial mortgage rates are often higher than for residential, but not always. With such a large range of mortgages in play, it’s even more important to operate through a broker who can help thin out the field and help you zero in on the products that will really work for you.
6.…But you can offset interest against tax
Happily, you can offset the interest on your commercial mortgage against tax – something you can’t usually do as a homeowner. For our clients, that often helps to make things much more affordable.
7. Lending criteria are different
Just as with residential mortgages, affordability is the big issue for lenders eager to ensure that they’ll get their money back. Unlike residential, however, the way lenders determine who to lend to, how much and at what rate is very different.
Effectively, it all comes down to four pieces of information:
You can find much more about these criteria in our Commercial Mortgage Guide.
Make buying commercial property easier
With our Mortgage Plus service, you don’t just get all our expertise applied to securing your next commercial mortgage. We also negotiate the purchase price and deal with estate agents, lenders and solicitors on your behalf.
It’s the simplest, most stress-free way to buy – and the simplest, most stress-free way to find the right mortgage for you. If you’re new to buying commercial property, you might just find it essential.
Find out more about our commercial mortgage services.
Has the cost-of-living crisis tipped the balance in favour of equity release for over-55s?
What is equity release?
Equity release is a way of releasing money tied up in your home that you can use now rather than leaving for others to inherit. There are a couple of types of equity release and by far the most popular is the lifetime mortgage. That’s a long-term loan secured against your home that releases (usually) up to 60% of the value of your property’s value.
Interest is charged on the loan, but you don’t usually pay anything back until you die. The amount you owe is then taken from the proceeds of sale of the home.
What are the pros and cons of equity release?
Advantages of a lifetime mortgage:
Disadvantages of a lifetime mortgage
Is equity release a good idea?
Let’s be completely honest about this: you wouldn’t usually consider equity release unless a) you really needed money now or b) the idea of leaving a larger inheritance didn’t matter to you.
If, for example, your home was worth £250,000 and you didn’t plan to leave it to anyone when you die, why leave the money tied up in bricks and mortar when you could release up to £150,000 to enjoy now?
Recently, however, the cost-of-living crisis has made equity release a serious consideration for many more people, including:
Income boosters: Have you just retired but found the current crisis is placing too great a strain on your finances? Equity release could help you continue to enjoy retirement and not have to worry about returning to work. The ability to draw down lump sums as you need helps too, so you release only the equity you really need (and only pay interest on the amounts you draw).
Home improvers: You’d factored in the cost of home improvements, but then the world went haywire, costs went through the roof and the plans you had now cost twice the amount. Or, perhaps you hadn’t anticipated needing to make any significant alterations but a health issue changed all that. Equity release could help you complete the work without having to worry about repayments.
Mortgage repayers: You’re nearing the end of your mortgage but the recent increase in interest rates has left you worrying that you’ll struggle to finish the job (in which case, you’re not alone, as recent reports show[1]). Or perhaps you are seeing out an interest-only mortgage and rising costs mean you’ll struggle to pay off the outstanding amount as planned. Equity release could come to the rescue here too.
Lifetime mortgages have long been the financial equivalent of the cavalry arriving to help you when the retirement finances don’t quite stack up. It looks as though many more people may need the cavalry before the current crisis is over.
If you’d like to explore your equity release options, talk to us now.
[1] https://www.whatmortgage.co.uk/equity-release-2/news-equity-release-2/cost-of-living-crisis-a-third-of-over-55s-face-mortgage-repayment-struggles/
It’s been a year of startling interest rate rises that have made life tough if you’ve been looking for a mortgage or remortgage. But there are signs that (thankfully) 2023 might bring slightly lower rates.
Last week (at time of writing) something important happened. At least, it’s important if you’re wanting a mortgage or remortgage anytime soon. Interest rates crept under 6% for the first time since October.
Better still, Zoopla expects them to fall further, saying: “Mortgage rates are expected to fall to 4-5% next year.”
Will mortgage rates definitely fall?
Not definitely. At the start of 2022 mortgage rates were hovering around 2%. Back then we couldn’t have predicted an invasion of Ukraine and the havoc Russia wreaked, nor could we have anticipated the events closer to home in the autumn which sent global markets into a state of shock.
So there’s no guarantee rates will fall. There’s always the potential for domestic or global events to send things into a tailspin, and while the world continues to try and put a lid on inflation there’s always the risk of further increases.
But assuming none of that happens, a growing number of commentators (although not all) are predicting a rate drop.
Will mortgage interest rates keep falling?
This is far less likely. If we see rates reach somewhere around the 4.5% mark, the chances are they won’t drop much lower. As Zoopla puts it, “the days of ultra-cheap money are now behind us.”
What difference will a rate drop mean to me?
Let’s assume that you’re taking a new, £180,000 mortgage over 30 years at an interest rate of 5.95%. Today, your monthly repayments would be £1083.91.
Now, let’s suppose that over the first few months of 2023, interest rates drop by a total of 1.45% taking them down to 4.5%. Your monthly mortgage payment would be a more manageable £920.87.
That’s a saving of more than £163 each month or almost £2,000 each year.
How can I get the best mortgage deal?
Talk to us. It’s never been more important that you do, because every 0.1% you save on your mortgage rate is money you don’t have to find each month.
Unlike regular lenders, we’re not limited to a small range of products, so we can find the very best deals from across the market, based on your circumstances.
Keep your fingers crossed that rates keep falling, and talk to us now.
Remember: Your home may be repossessed if you do not keep up repayments on your mortgage.
What is a tracker mortgage? How does it differ from a fixed rate mortgage? And why might it be your best bet if you’re looking for a mortgage or remortgage right now?
Back when mortgage interest rates were tiny (remember that?) a fixed rate mortgage was a rather wonderful thing. It meant that you could fix your mortgage at a low rate for up to 15 years—although usually two to five—safe in the knowledge that if went up you’d be protected and if it went down you wouldn’t lose out too badly because there wasn’t much further for rates to fall. Most importantly, a fixed rate gave you certainty and when the mortgage is your biggest outgoing every month, certainty is a good thing.
Of course, mortgages are no longer at their rock-bottom lowest. Only a year ago you could have found 5-year fixed rates well below 2% (and some 2-year deals at under 1%). Today, the best you’ll find is around 5.25% (depending on the loan to value).
Historically, that remains low but we’ve all got used to very low rates and the rapid increase has come as a bit of a shock to the system. So is a fixed rate mortgage still the way to go?
Why a fixed rate mortgage may not be your best option right now
In March 2009 you may have felt pretty good about life if you’d locked yourself into a fixed rate mortgage for just under 6%. The world had just suffered a financial meltdown. Some banks and building societies had gone to the wall; others had needed a government rescue to save them. Things looked rather bleak and no one really knew what was going to happen next.
The financial certainty of a fixed rate mortgage looked like a very good bet. But then something strange happened. Mortgage rates fell off a cliff. Most fixed rates fell 2-3% in a year.
If you’d managed to nab a 10-year fixed rate in early 2009, you’d have still been paying that fixed rate through to 2019 and missed an entire decade of the lowest interest rates we’ve ever seen.
We don’t know where mortgage rates will go next, but there’s a risk that fixing now at a high rate could give you financial security (good) at a high cost (not so good). Already, we’ve seen fixed rates just starting to retreat from highs last month. It’s only 0.1-0.2% of a difference, but that’s money that’s better in your pocket than a lender’s.
So what’s the alternative?
What’s the difference between a fixed rate mortgage and a tracker?
Fixing your mortgage, as the name suggests, locks it for the duration of the fix. Fix at 5.5% and whether mortgage rates shoot up to 10% or plummet to 1%, you’ll pay 5.5%. That’s great news if rates go up but you may be kicking yourself if rates go down.
A tracker mortgage takes the base lending rate set by the Bank of England as its starting point. At time of writing, that’s 3%. It will add an amount to that rate and then track the base rate is it rises and falls.
For example, you choose a tracker mortgage of 4% (3% set by the BoE plus an extra 1%). Over the next few months, the Bank of England continues to raise interest rates. They peak at 0.5% higher than today, so your tracker mortgage follows suit – it peaks at 4.5%.
Then rates start to fall, and your tracker mortgage falls too.
Benefits and disadvantages of a tracker mortgage
Why choose a tracker over a fixed rate mortgage? The big advantage is that your mortgage will go down if interest rates do. Also, because the tracker is linked to the base rate, your mortgage will change based on what the Bank of England does, not what your lender decides.
The downside is that your mortgage isn’t fixed. If interest rates go up, your mortgage will too, although a tracker is typically cheaper than a fixed rate mortgage and cheaper than simply staying on the standard variable rate.
How much cheaper is a tracker mortgage compared to a fixed rate?
Here’s a comparison:
You want to remortgage a property valued at £150,000. You still owe £100,000 on it and you want a remortgage for the amount you owe over 25 years. On rates at time of writing, and purely as an example, you could expect to get a 2-year tracker rate at 3.19% which would leave your mortgage at £483.75 per month. The most competitive 2-year fixed rate remortgage would be in the region of 5.35% and cost you £605.16 per month.
That’s £121.41 more per month.
Is a tracker mortgage right for you?
It might be, but to be sure we need to talk. If you’re looking for a new mortgage or remortgage, talk to us now.
Remember: Your home may be repossessed if you do not keep up repayments on your mortgage.
Chat to us about your options. Book a free appointment
You’re planning to move home, and anywhere in Lancashire is fair game. So why is Garstang a great option?
We’ll overlook the fact that we have an office here (although that is surely reason enough). There are lots of other factors that make Garstang a great option for your next move.
1. Why choose a home and mortgage in Garstang? It’s great for commuters
You work in Preston, Lancaster or Blackpool, but you don’t want to live in any of those places. Garstang sits snugly between all three, yet even the furthest of those towns (Blackpool) is just a 30-minute drive away.
Living in Garstang lets you feel part of a small community with nature on your doorstep, yet the biggest towns and cities in the area are just a short hop away by car, and all are well connected by bus.
2. Why remortgage in Garstang? It’s small, but not too small
Escaping to the country sounds idyllic until you realise your nearest supermarket is an hour’s drive away and the kids have to go to school in the next county. Yet despite its relatively compact proportions, buy a house in Garstang and you’ll have three major supermarkets on your doorstep, together with plenty of primary schools, a high school, health services, a bustling high street and a range of great pubs, restaurants and eateries.
3. Why a Garstang remortgage? It’s (increasingly) well connected
To the north and south there’s access to the M6 in little more than 10 minutes. Even more importantly, the recent Broughton bypass saw an end to the traffic tailbacks that plagued access along the A6 into Preston.
So not only do you get to enjoy a relatively rural location with glorious views over the hills of the Forest of Bowland; you can get into your nearest city fast.
4. Why remortgage in Garstang? It’s big on bungalows
Something strange happened in Garstang in the 1960s. Numerous housing estates expanded the size of the town, but virtually all the new developments were of bungalows. Lots more developments in the decades since have ensured there’s plenty of housing stock of all shapes and sizes, but the relatively high number of bungalows means that, if you have problems getting upstairs, Garstang could offer more than its fair share of options.
5. Why choose a home and mortgage in Garstang? It's got a strong local heritage
There’s a real feel of community in Garstang. Staying local matters. That was highlighted by the recent development of former council offices on Garstang High Street. There was a feeling in the town that the new offices should support local businesses, and so there was a collective sigh of relief when the new tenants were announced as local accountancy firm Towers Gornall. You’ll see more evidence of the local feel in the town’s market, at the annual Garstang Show and at the Victorian Christmas Festival.
6. Why choose a home and mortgage in Garstang? A brilliant base
You’re never more than 30 minutes from somewhere wonderful in Garstang. Some of the finest restaurants in the whole UK. Gorgeous scenery that’s almost always overlooked by tourists heading further north to the Lake District. Great beaches. Giant rollercoasters. River estuaries. Rich history. Glorious parkland. It’s all close by.
Arrange your mortgage or remortgage in Garstang now
It’s a great place to live but finding the right mortgage—one that still leaves you money each month to enjoy all that Garstang has to offer—has never been more important. To find the best mortgage deal on your Garstang home, talk to us.
You don’t need us to tell you that finances have become much more challenging over the past few months. So how can a mortgage advisor make life easier?
Saving money has never been more important than it is right now. You might think that one way of cutting costs would be to cut out the mortgage advisor when you’re arranging your next mortgage deal. In reality, though, that’s the last thing you want to do. Here’s why.
1. A mortgage advisor can save you money, not cost you money
There are lots of ways a mortgage advisor can save you money. Stick with the lender you’ve got (or stick with your existing bank) and it’s extremely likely you’ll end up with a mortgage that’s not only far from the cheapest on the market, but also one that isn’t particularly suited to your needs.
2. A mortgage adviser can access the right mortgage for you
The right mortgage for you probably isn’t the right mortgage for the next person we’ll talk to. You might want to fix your rate lower or for longer. Being able to pay off more without penalty might be important to you. So might being able to take a payment holiday.
You might need a mortgage with a lower deposit or which lasts longer than the ‘standard’ 25 years. You might be self-employed. You might be living off a pension. Your credit rating may be exceptional. Then again, it might not be.
Your circumstances determine which is the best mortgage for you. Of the (roughly) 12,000 UK mortgage deals available right now, only a fraction will suit your specific needs. A mortgage adviser can find all those needles in the haystack because, unlike most banks, they’re not tied to a single lender’s products, which drastically limits their view.
3. A mortgage adviser can access a cheaper deal
Cheapest may not always be best, but once they’ve helped you narrow your search to the best products on the market, they can then help you find the cheapest ones.
As we’ve explored previously, mortgage advisors can access deals the general public can’t. Often, they can even access deals from your own bank or mortgage lender that are better the ones you’re being offered.
That doesn’t prevent you from doing your own research (if you have the time) to find the cheapest, most suitable deal. But once you have, give us a call. We’ll usually be able to better it with a deal you simply won’t be able to access.
4. A mortgage advisor saves you time
Of course we’ll save you time if we’re doing the job instead of you. But it’s worth taking a moment to consider just how much your time is worth. With conditions challenging for so many people right now, we’d argue it’s never been more important to be able to delegate the job of finding your next mortgage to someone else.
5. A mortgage advisor can protect your credit rating
Mortgage advisors have the expertise to be able to target the lenders most likely to lend to you. That saves you wasting time, of course, but the effect is actually much bigger than that.
The more credit searches you make, the more likely you are to be refused credit, or refused the best offers. So having someone to help you target a lender who’ll say ‘yes’ first time could be crucial.
6. A mortgage advisor may not charge you a fee
Some mortgages available through mortgage advisors are fee-free for homeowners, meaning the lender pays our fee, not you. But even where there is a fee, you could find the amount you save – in terms of time, stress and long-term costs of the mortgage – makes any fee a drop in the ocean.
That’s why it’s so important to talk to an expert. So to find the right mortgage or remortgage for you, talk to us.
The cost-of-living crisis has given homeowners one gigantic reason to consider remortgaging – so how could it help you?
You don’t need us to tell you these are challenging times. Prices are going up everywhere and wages aren’t going up at anything like the same rate. So could your home help you out of a hole? Here’s why remortgaging now could be a very, very smart move.
1. Because prices are going up
We’re all seeing the same scary predictions about energy costs this winter, but it’s not just energy. Fuel prices may be off their recent peaks but they’re still close to 50% higher than what they were this time last year. Everything from food to clothes to your Amazon Prime subscription have increased in price recently too.
Remortgaging won’t lower those prices, but it could ensure you have more available cash to cover them. If your mortgage is on the current standard variable rate (SVR - that is, the rate you get if you’re not on a discounted deal), we’ll almost certainly be able to save you money. But even if you’re locked into a deal, you may find that paying the penalty to escape it in favour of a better deal could still be worthwhile. It’s worth having a chat with us to see what your options are.
2. Because interest rates are going up
The Guardian recently reported that around one million homeowners are on the SVR. As long as interest rates are low, that probably doesn’t present too much of a problem (although you’d still usually be better off fixing). But interest rates aren’t as low as they were. In recent months the Bank of England has increased the base rate five times, taking us from 0.1% to 1.75%. Some are predicting it will be at 2.6% by the end of 2023. As a result, the SVR has increased too. At time of writing (August 2022) it’s at 4.65%. it could be closing in on 6% by the end of next year.
Remortgaging now could not only save you money now but protect you against further increases and help you ride out the current situation with a relatively attractive deal until (hopefully) things look a little brighter in a few years.
Remortgaging now could not only save you money now but protect you against further increases and help you ride out the current situation with a relatively attractive deal until (hopefully) things look a little brighter in a few years.
3. Because you could use your remortgage to consolidate debts
What if the current price rises have already exhausted any savings you had and you’ve been using credit cards to make ends meet? Remortgaging could help you press reset. By rolling up credit card and other debts with your mortgage, you’ll get the chance to start afresh, with just one payment to cover everything.
It’s important to realise that this isn’t the cheapest way of doing it, but you will be able to spread the repayments over a longer period.
4. Because you could use your remortgage to release equity
Equity is the difference between the value of your home and the amount you still owe on it. If you’re a good few years into your mortgage, the combination of rising house prices and repayments will mean you’ve probably built up a significant pot of equity in your home.
Remortgaging could help you access that pot, and you can then use the money to fund home improvements, buy a car, take a holiday or simply act as a rainy day fund to ensure you can manage over the next few years.
5. Because you could reduce your term
When most homeowners become homeowners for the first time, their circumstances are very different to those a few years down the line. As the years progress and their income increases, there should be a little more money available to pay down the mortgage faster. The faster you can pay off your mortgage the less interest you’ll pay and the quicker you’ll be able to enjoy more of your disposable income.
That’s not all. If you’re one of the many people who’s never remortgaged, you could find that switching to a lower rate could help you pay off your mortgage faster without paying any extra each month, because more of your money is being used to pay off the mortgage rather than pay interest.
So even if you can’t afford to pay more, you could find paying the same with a better deal could help you save thousands in the long run.
6. Because you may be able to lock in a deal now even before your deal has finished
You’ve always remortgaged when your existing deal ends. You’d remortgage now, but your existing deal still has a few months to run.
What you may not realise is that you may be able to lock in your next deal now at lower rates and start paying once the existing deal expires. We can help you find deals you can take advantage of now.
Any deal will do?
Not all remortgage deals are the same. In addition to the monthly payment, you may have an arrangement or product fee, and if you’re currently locked into a deal there’ll probably be an early termination fee to pay too. You may not have to pay all those fees up front – you could add at least some of them to the mortgage, but they can be the difference between a remortgage that seems like a good choice and a remortgage that really saves you money.
That’s why it’s so important to talk to an expert. So to find the right remortgage for you, talk to us.
There’s an alternative to buy-to-let. Investing in a holiday letting could earn you just as much (if not more) money and give you a holiday home for you and your family to use throughout the year too. Let’s explore the pros and cons.
The pros
Yield: Invest in a buy to let family property in Blackpool (for example) and you’ll be able to charge an average of around £700 per month. Invest in a holiday let instead and you’ll make at least that (and possibly double that) each week during peak season. No, you won’t make that sort of money throughout the year, but as long as you can make peak season count, you won’t need to.
Since 2020, holiday let owners earned a 30% higher yield than their buy-to-let counterparts. There is a caveat to that (which we’ll examine below) but there’s no escaping the fact that holiday lets have proved especially lucrative over the past few years.
Additionally, choose the right property in the right location and your yield will be underpinned by the growing capital value.
Occupancy: You’ll only make a profit if you achieve the levels of occupancy you need, but it’s never been easier to connect with a holiday-home-hunting audience. Yes, you’ll have to pay Airbnb and other booking agents a significant chunk of every let, but choose the right property in the right location and the agents can help make filling it a relatively simple process.
Tax breaks: As long as your holiday let is available for 210 days during the year and is actually let for at least 105 of those days you’ll be able to claim Small Business Rate Relief which will exempt you from council tax or business rates. Add in the tax offsets for cleaning and maintenance, energy and other costs and it could increase the viability of your project.
Your holiday home: We used Blackpool as an example above but draw a 30-mile radius around KMA’s Bamber Bridge HQ and you’ll have South Ribble, Southport, the Fylde Coast and the Forest of Bowland all within easy reach. While some areas of the country are likely to see legislation to limit the number of holiday lets (see below), locally things are likely to remain far less restrictive. Which means you get a viable and potentially lucrative holiday let and a wide variety of weekend retreats for you and the family when the property’s not occupied.
The cons
The staycation boom busts? Realistically, it was never going to last. Once the travelling public had ‘learned to live with COVID’ and rediscovered their overseas travel bug, the heat was always going to come out of the staycation boom. Yet that doesn’t mean UK holidaymakers are about to desert the UK. The cost-of-living crisis and ongoing airport chaos are combining to ensure there will still be plenty of staycationers for a good few years yet.
Legislation/regulation: There are some parts of the UK where new holiday lets aren’t welcomed by locals. Soon, they’re likely not to be welcomed by the government either as the likelihood of new regulations to limit holiday lettings increases.
That makes a holiday let in Cornwall, the Lake District, North Wales, the Norfolk Broads or on Skye a costly and potentially risky strategy although the potential rewards remain high. The key, therefore, is finding the places which don’t attract negative holiday let publicity, and which are likely to remain popular as the staycation habit goes off the boil.
Locally, we do seem unusually well positioned to benefit from that.
Running costs: if you’re used to the traditional round of cleaning and repairs when a tenant exits every few months or years, the pace of work required for a holiday let may come as something of a shock. Cleaning will need to take place after every visit. If you’re paying a management company to do that you’ll inevitably pay them more than you would for a typical buy-to-let.
Finance: Getting a mortgage for a holiday let property isn’t simple. As ever, the watchword for lenders is affordability. They want to know their money is secure, and they’re more likely to feel confident about that if you’re not relying on your holiday let as your sole source of income.
Targeting your search to the lenders most likely to look favourably on your application is important, and that’s where we come in.
Investing in a holiday let isn’t quite the automatic ticket to high occupancy and high yields it once was—but it still can be with the right strategy, the right planning and the right people on your team.
To find a better holiday let opportunity, talk to us.
According to the Office for National Statistics (ONS), the average cost of a house in 1980 was £24,000. In February this year, the average was £277,000. Yes, that includes London and the South East, but even the North West average is now over £200,000.
If you bought your home in the early 80s and 40-ish years later have never moved, your home’s value has therefore increased by around £176,000. Even if you bought your current home at the turn of the millennium, it’s roughly doubled in value. Which sounds like a good reason to celebrate, but for one small problem – all that money is tied up in your house.
That may not be a problem for you. Then again, it might be.
Why might you want to release the money tied up in your home?
A lifetime mortgage is one way of releasing the value of your home and it could be an effective way of achieving any of the above. Like any financial arrangement, though, it’s not right for everyone and you need to be aware of the risks.
Lifetime mortgages explained
A lifetime mortgage effectively gives you a tax-free lump sum (or several lump sums) to use as you wish. You stay in your home for as long as you like and, unless you decide otherwise, there’s nothing to repay unless you die or your home is sold to pay for your care.
Interest is charged on any money you receive, and here’s where it becomes important to choose the right product for you.
What are the risks of a lifetime mortgage?
As you might expect, releasing equity means there’s less for your loved ones to inherit, and gifting large sums to them now could expose them to Inheritance Tax. If you intend to pay off your mortgage, you may also face an early repayment charge for doing so. If you receive means-tested benefits, the cash injection of a lifetime mortgage could put these at risk.
Other risks can be mitigated by choosing the right product. You don’t want to be locked into a lifetime mortgage that leaves you in negative equity, for example.
Finding the right lifetime mortgage
If a lifetime mortgage sounds like it could be an option worth investigating, it really is important to talk to an expert to find out if it’s right for you, to find the right product and to explore what your next steps should be.
Find out more about lifetime mortgages, and if you’d like to explore more options, talk to us.
Last year, Habito’s research discovered that one in four homeowners were on their lender’s standard variable rate (SVR), that is, the rate that you automatically get bumped to once your existing mortgage deal comes to an end. Many surveyed didn’t know what rate they were on. Many thought a remortgage was a second mortgage – and that it meant taking on more debt. Perhaps most worryingly, 1 in 10 believed staying on the SVR was a good move, because it would help them pay off their mortgage faster, because they were paying more money each month.
Anyone who believes any of those things is losing money. So in this post, we’re going to take a quick look at why remortgaging is usually a much, much better choice than staying on your lender’s SVR.
Will staying on the SVR help me pay off my mortgage faster?
No! We can’t stress this enough. When your existing mortgage deal comes to an end, you’ll get moved to the standard variable rate. By definition, that’s ‘standard’ (i.e. rubbish) and ‘variable’ (i.e. it will probably go up in line with interest rates).
Being on the SVR will almost inevitably mean you’re paying a higher interest rate than the one you were on. In many cases, the SVR can be at least twice as high as the preferential rate you get when you remortgage. And none of that extra money goes towards paying off your property. It all disappears in interest.
So no, staying on the SVR won’t help you pay your mortgage off quicker. In fact, it will do exactly the opposite, because as you spend more in interest, you’ll have less to put towards paying down the mortgage.
Is a remortgage a second mortgage?
No. A remortgage takes the mortgage(s) you already have and makes them more affordable. It isn’t an additional mortgage. When you agree a remortgage, your existing mortgage switches to a new product either with your existing lender or someone new. So if you had one mortgage before, you still will after your remortgage.
How does remortgaging save money?
Assuming you’re on a repayment mortgage, each month when you make your mortgage payment, the amount you pay is split into two by the lender. One portion goes towards paying off what you owe on your home. The other portion goes to the lender in interest.
Remortgage rather than sticking with the SVR and the amount you pay off your home each month won’t change, but the interest you pay should drop. Often, it could drop by a lot.
How much could remortgaging save you?
As you might expect. It’s different for everyone, because it depends on the size of your mortgage, the value of your home, your personal circumstances and the value of the remortgaging deal you get compared to staying on the SVR.
That said, the Habito survey did crunch some numbers and found that if you’re on the SVR with one of the big six lenders, you’ll pay an average of £4,080 more each year than if you’re on their cheapest deals.
At a time when we’re all facing rising bills, why wouldn’t you take the opportunity to reduce your mortgage?
Will I be able to remortgage?
The survey also revealed that one of the reasons people weren’t remortgaging was because of the fear that their application would be unsuccessful. We know this is something a lot of people worry about, particularly post-pandemic when many were furloughed or relied on bounce back loans and similar for a period. For many, there’s a concern that their recent bank statements don’t look quite as healthy as they otherwise might.
It’s true that lenders will want to ensure you can afford the mortgage, and the more affordable your bank feels the mortgage is, the better the rate they’re likely offer you. But it’s also true that property prices have risen a lot over the past year – by an UK average of 11% to March this year. That’s good news for your loan to value.
‘Loan to value’ (LTV) compares the size of the mortgage to the value of the property. A property worth £200,000 with a mortgage of £20,000 has an LTV of 10%, a small LTV that lenders love. In contrast, the same property with a £150,000 mortgage has an LTV of 75%. That’s more of a risk for lenders and the mortgage deal they offer will reflect that.
But when house prices rise, LTV’s shrink. Let’s assume that, in the past year, your home increased in value by 10%. It’s now worth £220,000. All of a sudden, £150,000 represents an LTV of 68%. Without doing anything your LTV has improved, and that makes your remortgage a more attractive option for lenders.
So although there may be some factors that make remortgaging a bit more of a challenge, you may find that other factors balance out the negatives.
Can remortgaging help me pay off my mortgage faster?
Yes. Earlier in this post we mentioned that sticking with the SVR wouldn’t help you pay off your mortgage faster. But remortgaging could. Here’s how.
Suppose you remortgage and find yourself saving £200 each month compared to what you’d pay if you stayed on the SVR. Given the rising cost of everything, you may need to use that £200 to pay for food, energy etc. But if you can, try and ringfence the saving and use it to overpay your mortgage.
Over the life of your mortgage, it could save you thousands of pounds and help you pay off your mortgage years earlier than if you just paid the basic amount.
Remortgage with us
Remortgaging can save you money now. And if you’re able to invest the savings in paying down the balance, it could save you a huge amount in the future too. If you’re on the SVR or if your existing deal is ending in the next few months, find out how much you could save.
Before I press on with this post, I’d best preface it with an important note. The mortgage market in the UK is being indirectly affected by the Russia/Ukraine conflict. Clearly, that’s a very, very long way from the most important consequence of the war, and nothing in what follows should detract from what’s unfolding in Ukraine. However, if you’re looking for a mortgage right now, you’ll probably be scratching your head as to how a decision by Vladimir Putin could possibly have affected your plans.
So here’s the story so far.
How can the Ukraine war affect your mortgage?
It all comes down to uncertainty. Financial markets hate it. And right now, there’s a lot to be uncertain about. As the war has progressed, you’ll have seen energy, fuel and food costs going up. That’s inflation in action, and the way the Bank of England (BoE) has tended to deal with that is by raising interest rates.
If the BoE raises the base rate, mortgage lenders will raise their rates too.
Usually, lenders have a reasonably clear view of what’s coming down the track over the next few months. If they introduce a new mortgage product today, they’ll feel pretty confident that they won’t regret offering it. But the war, and its effect on inflation, have made that more difficult. They don’t want to offer lots of new fixed rate mortgages at a time when interest rates are likely to increase further, because they don’t want to suddenly find themselves on the wrong end of a bad deal.
That’s why, according to inews, the average mortgage shelf life has dropped from 42 days to just 28. That just goes to show how uncertain things are right now. And as you might expect, it has meant that, rather than offering lots of mortgage products they’ll probably have to withdraw within a month, they’re sitting tight, cutting back on the mortgages they’re offering, and waiting for brighter days. About 500 mortgage products disappeared in February alone. That’s about 10% of the total. If Tesco got rid of 10% of its stock overnight, you’d notice it.
Why a mortgage broker matters more than ever
So, how are the above issues affecting your chances of getting a mortgage, and what can you do about it?
To take the second point first, talk to a mortgage broker. That really has never mattered more than ever, and it’s the best way to boost your chances of success. Here’s why:
1. Get a clear view of a fast-changing market
You probably don’t have time to keep an eye on what mortgage products are being introduced and removed, especially in a market moving so quickly. We do, and we can filter products to search for the cheapest options for you.
2. Lock in the mortgage you want
The last thing you want is to have found your perfect mortgage only for it to be withdrawn before you can complete the application process. But that’s what’s happening to lots of people right now because some mortgage products are hanging around for just days.
· Using a broker means you’ll get an appointment quicker. We could talk to you today or tomorrow. Your bank could take weeks, by which time the product may well have disappeared.
· We can progress applications faster, so you can secure the product you want more easily. That’s because many lenders have departments dedicated to broker business because we put so much work their way – so it will be a faster process than doing it yourself.
· We get notifications of product withdrawals, so we can tell you whether an application is worth pursing and, if so, get it done fast and ahead of deadline.
3. Increase the chances of your application being accepted
We’ve spoken about this before but it’s particularly relevant now. Before any lender will lend, they’ll want to do a credit check. Each check on your record (over a short period of time) will reduce the chances of success for the next one.
Ideally, you only want to have one credit check but the more volatile the market, the less chance there is of that happening. Use a mortgage broker and we can steer your application to the lender with whom you’ll have the greatest chance of success.
4. Access cheaper mortgages
Even though the products available are not as cheap as they have been in the recent past, you’ll still find a cheaper deal with a broker than without. That’s because most lenders offer brokers exclusives, and we can pass those discounts on to you.
It’s not easy to get a mortgage right now. But you’ll do your chances a world of good when you talk to a broker. Let’s prove it. Give us a call now.
Often, a mortgage advisor will be able to get you a cheaper rate on your mortgage than a bank is willing to offer. But that’s not all. Often, a mortgage advisor will be able to get you a cheaper rate on a mortgage rate from your own bank than they’re willing to offer you.
I know. That sounds odd. Why would they do that? The answer is a little like why wholesalers are willing to offer Tesco or Aldi much lower rates on a lorry load of fruit and veg than if you or I were to attempt it. They’re buying lots. You’re not.
The intermediary channels we and other mortgage advisors use deal with huge volumes of mortgages and banks are willing to offer preferential rates as a result – rates that individual homeowners couldn’t access even though they may have been a customer of that bank for the past 20 years.
It is, perhaps, the single most important reason to speak to a mortgage advisor before (or instead of) speaking to your bank. But it’s far from the only one:
2. Mortgages from the whole market: Banks want you to take their mortgages, so they’re not about to offer you competitor products. With an independent mortgage advisor, you get access to a much bigger range of products from a much bigger range of lenders.
3. Customer exclusive deals: Ah, you say, everything we mention above may be true, but your bank has just offered you a rather attractive deal that’s exclusive to existing customers. Yes, we say in reply, we get to offer those too. We’ll be able to check whether it really is a good deal. And for the reasons noted above, we may even be able to beat it.
4. Lower fees: There’s a bit of a myth that using a mortgage advisor pushes up the fees you pay. It is true that some mortgage products do come with more fees attached. But lots don’t. In some cases, it can be cheaper to set up a mortgage with your existing bank through an advisor – and that’s before you consider the long term benefits of the lower mortgage rate.
5. Fast, free advice #1 Mortgages can be complicated. What you really need is someone who can take all that complexity away, show you the products best suited to your circumstances and say, “Based on what you’ve said, this is the one for you.”
That’s advice, and its what you get from a mortgage advisor (the clue’s in the name).
Often, banks don’t offer advice. They offer ‘information’. And that can make your decision harder and riskier.
6. Fast, free advice #2: Have you tried to see a mortgage expert at your local bank branch recently? If you have, you may well have found that:
• They’re not based at your branch
• You can see them in person, but you’ll have to wait weeks
• You may be able to arrange something via Zoom/phone etc, but the call will last a couple of hours (!)
With an independent mortgage adviser, you get advice fast, often the same day. And you can see us in person. We won’t take up your entire afternoon either.
7. Better chances of success: A mortgage adviser can qualify a client before sending their mortgage application to a lender, and give advice on presenting an application to ensure success.
That’s important, because it means you don’t waste time (and damage your credit rating) applying to lenders who won’t accept you. Instead, you target your application at lenders most likely to say yes, and then present them with an application that you already know ticks their boxes. Your bank won’t do that.
8. Faster approval: Lenders have dedicated departments to deal with mortgage brokers like ourselves, so often you’ll get your offer faster than if you applied via your local branch.
It’s tempting to think that, because you already have a relationship with your bank, you’ll get a better, faster, cheaper mortgage deal by sticking with them. Yet while it’s true that your best mortgage option may be a product from your existing bank, it will almost always be a better, faster, cheaper deal when you arrange it through a mortgage advisor.
Let’s prove it. Give us a call now.
This is a weird time to be attempting to predict what’s going to happen next in the mortgage market. In my last post, for example, I was suggesting interest rates would rise because inflation was on the way up, and that mortgage rates would follow them.
Well inflation continues to rise, and mortgage rates did indeed head upwards too. But interest rates didn’t. Bizarrely, lenders were so convinced interest rates were going up that they priced the increase into their latest mortgage rates. Then omicron arrived and all of a sudden no one quite seems to know what happens next. It’s as though the world is holding its breath and waiting for data – and what that data tells us could have a big influence on how lenders react.
That’s why, if you go a quick Google of ‘will my mortgage go up?’ or similar, chances are you’ll find opinions of every flavour from ‘yes’ and ‘no’ to ‘maybe’.
So rather than trying to second guess the pandemic, let’s take a look at what’s likely to happen depending on what the growing volume of data tells us about the latest variant.
Outcome 1: Omicron spreads fast but doesn’t cause serious illness or hospitalisations
Perhaps the best case scenario for the virus is, frustratingly, less good news for mortgage holders. That’s because this would be a sort of ‘as you were’ situation, which would mean the Bank of England could take another look at interest rates and (probably) nudge them up a few points over the next few months in an attempt to tackle inflation (although the jury’s very much out on how effective that would be). Over time, your mortgage rate would inevitably follow.
Outcome 2: The data is unclear. We still don’t know how nasty Omicron is or how effective it is at evading vaccines
If ever there was an invitation for interest and mortgage rates to stay where they are, this would be it. If the data remains unclear, chances are rates will hover pretty much where they are pending a definitive answer one way or the other.
Outcome 3: Omicron spreads fast, evades vaccines and causes significant hospitalisation
Definitely the worst case scenario as far as the virus is concerned. There may, however, be a slight silver lining for mortgage holders in that, irrespective of the current state of inflation, the fear of further lockdowns and stagnation of the economy would be unlikely to drive interest rates up. It may actually see them temporarily lowered again. That would mean a mortgage rate hike would be unlikely in the short term and a reduction might be a possibility, although you should fully expect them to head upwards again once the immediate Omicron danger is over.
Make us your pandemic mortgage partner
Things are changing so fast right now that it really does pay to have an expert to help guide you. In fact, we expanded our team last year to ensure that we could help more people find the right mortgage for them.
2021 was a really challenging year for many. Furlough and some self-employment grants affected wages and impacted mortgage applications. Some clients who never anticipated needing to remortgage found the curious circumstances of the pandemic forced them to make changes. For others, there were real opportunities. The amount they managed to save through not holidaying abroad or not needing to travel to work meant they could now afford a bigger home (or at least, a bigger deposit and smaller mortgage).
It’s fair to say we have never known a couple of years when so many people faced so many financial surprises, good and bad. It’s been incredibly rewarding to help them and we’re very proud of the way we were able to adapt our services so that we could still help our clients.
In 2022 we celebrate our 21st anniversary and we look forward to continuing being your mortgage partner and helping our customers, whatever the pandemic or economy throws at us.
If you’re starting the new year in need of some friendly, expert support to find the right mortgage or remortgage for you, we’d love to help. Give us a call now.
For a long time now, interest rates and the mortgage rates that inevitably follow them have been at historic lows. If you’re able to remember the late 70s, when rates hit an eye-watering 17%, or even the early 90s when they touched 15%, the current Bank of England base rate of 0.1% seems tiny by comparison.
But the problem with low rates is we all get used to them. When they start to climb, every quarter percent on your monthly payment feels painful.
Are interest rates going up?
This week, for the first time in forever, the Bank of England looks set to increase the base rate to 0.25%. The reason this is likely to happen is that, thanks to recent gas prices and supply chain problems, inflation has zoomed to above 3%. Analysts are forecasting it to top out at somewhere between 4 and 5%. And when inflation shoots up, the standard lever the Bank of England has always pulled is the one with ‘increase interest rates’ written on it.
Will my mortgage go up?
An increase in the Bank of England base rate doesn’t have to mean that every lender will follow suit instantly – but it is likely that rates will go up, and it’s likely they’ll go up pretty quickly. Some lenders have already started pulling some of their more generous fixed deals in anticipation of an imminent rate rise.
Even if rates go up, if you’re on a fixed rate, you’ll be protected from the rise until your preferential rate comes to an end. For everyone else though, whether you’re on a standard variable rate, a capped rate or tracker, you’ll likely see a small increase in your monthly mortgage cost.
Will mortgage rates keep going up?
Here’s the big question. Many don’t expect inflation to stay at its current, relatively high levels for too long. Yet, when making their investment decisions, market analysts in the City have recently been factoring in a base rate rise to 1% by next May.
They may be wrong. Rate rises may not be anything like as aggressive as feared, although the likelihood is they will go up to some degree.
How much will my mortgage go up if rates increase?
This isn’t an easy question to answer as it all depends on your current rate, the new rate and the size of your mortgage, but here’s a broad example.
Suppose you have a 25 year, £200,000 repayment mortgage. Your current rate is 3.2%. Over the next few months, let’s assume the Bank of England puts up rates a few times and your lender follows suit. By next May, the interest rate is 1% higher than it is now and you’re not on a fixed rate to protect you from the rise.
By next May, you’ll be paying just over £100 more per month for your mortgage.
Why remortgaging now?
We don’t know what’s going to happen next with interest rates, but for the first time in a long time, all the pressure seems to be on rate rises. A quarter percent increase seems all but inevitable. How much things increase beyond that seems very much to depend on how quickly inflation can be dragged back under control.
It all makes for a rather uncertain picture, and uncertainty is the last thing you want when you’re getting ready to remortgage.
So if you want to protect yourself from what has been an increasingly volatile market and lock in the lowest rate, now is the time to talk remortgaging. To make a start and explore your options, give us a call now.
It’s never a great idea to get out the crystal ball in an attempt to time your house move. Anticipating the market when there are so many factors involved is like trying to herd cats. All you can really do is look at the current situation and ask, ‘is now the right time to move?’. Here’s how I’d weigh up the options:
PRO – The end of the stamp duty holiday
Hang on a minute. Until 1 October 2021, stamp duty wasn’t payable on homes costing less than £250,000. Now it’s returning to its former £125,000 limit. And that’s a good thing?
It could well be. Because the general consensus is that, while the stamp duty holiday was designed to keep the housing market bubbling at a precarious time, the actual effect was to send prices into overdrive.
It’s by no means a certainty, but some are suggesting the end of the holiday could lead to a correction in the market – and that could mean a window of falling prices (which could be enough to offset the stamp duty benefit). That would be extremely welcome because…
CON/PRO – Prices
There’s no getting away from it, house prices are high. The average UK home is now worth £255,535, which is around £19,000 more than a year ago. But then, up is pretty much what house prices always do. True, the market crash of 2008 saw prices plummet and it took a couple of years for things to stabilise, but since then UK house prices have increased (even if only by a small amount) every single year.
We can’t predict the market, but in general terms, the trend is generally upwards – which is why the cheapest time to buy a house is usually now. That will be especially true if the end of the stamp duty holiday (see above) leads to a short period of falling prices before things inevitably start to creep up again.
PRO – Take your time
The end of the stamp duty holiday has left lots of people rushing to meet it. I’m not suggesting that has led people to buy a house on impulse, but time limits inevitably mean you can’t look as widely or as deeply as you might otherwise. With the window closed, you can afford to take a little more time to find your perfect place. And the whole process should feel considerably less fraught.
Bonus PRO: Another minor but notable knock-on effect of that rush to meet the stamp duty deadline is that getting hold of removal firms, surveyors etc has been unusually difficult. It’s about to become considerably easier.
PRO – Your savings
In 2020, households saved almost three times more than they did the year before. Clearly, that’s not every household – but as life (sort of) returns to normal some people are sitting on savings they would never have dreamed possible just a couple of years ago.
That’s especially true of soon-to-be first time buyers, many of whom returned to their parents’ homes as the pandemic bit. It’s amazing what a year of rent-free living can do for your deposit-saving programme.
The trouble with a healthy savings pot, though, is that it doesn’t always stay healthy. So before the temptation of a holiday or two eats into all that hard work, now’s the time to move.
CON – Rising cost of living
From food to energy, prices have only been heading upwards recently. Even some government ministers have suggested this winter could be a tough one for many. So if buying a new home would see you financially stretched, you might want to press pause and see how the next quarter pans out before taking the plunge.
PRO/CON - Housing supply
You’ll no doubt have read reports that one of the reasons house prices have been shooting up is that demand has outstripped supply. That remains the case in many areas. But as furlough ends, some are suggesting we could see an increase in supply as families make the decision (or are forced) to move to a home that matches their new circumstances.
It’s difficult to get too excited about something which relies on others’ misfortune, but if you’re looking to buy, this could have the dual effect of bringing more properties onto the market and reducing prices.
PRO – Interest rates
It doesn’t apply to everyone (see our recent post on the self-employed) but there are some eye-catching interest rates available right now, especially for first time buyers. If you happen to be in the happy position of having saved more than a 5% deposit, you’ll find those rates are even better.
Now’s the time to take advantage.
Should you buy now?
It’s always a personal decision, and there are certainly some cost-of-living issues on the horizon that could causes you to think twice, but there are also a lot of factors that could play to your favour right now.
You don’t have to make the decision immediately. Why not test the water first? To explore what’s ‘out there’ and to discuss your situation, give us a call.
You could argue it’s always been a little more challenging for self-employed workers to get a mortgage or access the best deals. Lenders value security above all else, and there’s no getting away from the fact that, for most self-employed people, income tends to be more erratic than for the employed, with far fewer guarantees of a regular wage every month.
But the fallout from the pandemic has made things even more challenging recently. So if you’re self-employed and looking for a mortgage, here’s how the current situation could affect you:
SEISS applications affecting lending to the self-employed
If you took any of the SEISS grants on offer to the self-employed to help ride out lockdown, you may now be finding that lenders are factoring this into their responsible lending considerations. Some lenders – notably NatWest and Royal Bank of Scotland – have decided that a SEISS grant means a flat ‘no’ to a self-employed mortgage application.
Lenders requiring evidence of recovery
Other lenders (e.g. TSB and Yorkshire Building Society) haven’t taken quite such a draconian view of the SEISS grant. Rather than a flat ‘no’, they may lend, but will require evidence of your business’ recovery. Given that lenders typically require two to three years’ accounts, receiving a SEISS grant in 2021 may continue to affect your chances of mortgage success in 2024.
It’s not just SEISS that could put a spanner in the works either. If you’ve used the Coronavirus Business Interruption Loan Scheme (CBILS) or deferred your tax, lenders may take liabilities incurred as a result into account. Santander has even introduced a mortgage calculator which factors in such payments, specifically for mortgage brokers like us who are trying to help self-employed clients through this particular minefield.
Lenders requiring higher deposits
Not content with requiring a greater level of reassurance, lenders are also asking self-employed borrowers to find higher deposits, especially where they have taken a SEISS grant. While employed applicants can find an increasing number of 5% and 10% deposit mortgages after numbers were cut during the worst of the pandemic, a SEISS grant will leave you needing a 20% deposit with Metro Bank and a whopping 25% with Santander.
Some lenders looking at individual circumstances
The problem with a blanket approach a la NatWest and RBS is that self-employed people with SEISS grants who can afford a mortgage perfectly well will still be discounted. Fortunately, not every lender is looking at the situation in quite the same way. This Is Money notes that Saffron Building Society has expanded its underwriting team so every self-employed applicant has a chance to have their specific case looked at.
Saffron isn’t the only lender adopting a more individualised approach, while other niche lenders are taking the view that, providing your business has returned to pre-pandemic levels, they will ignore the pandemic-affected period in calculations, or use 2019/20 figures to assess affordability.
How do you find a mortgage if you’re self-employed?
Where does all of that leave you if you’re self-employed and looking for a mortgage right now? The fact is it’s probably never been more important to have a broker on your side because they can help you target the lenders most likely to lend to someone in your specific circumstances.
That’s massively important not just because it could save you an awful lot of time, but also because every application you make that gets turned down damages your credit rating, which in turn reduces your chances of being accepted for the next application.
So to find the best mortgage for you and increase your chances of a lender saying ‘yes’,
talk to us.
Choosing a mortgage is tough enough without ‘fake news’ getting in the way. So in this post, we gather together some of our (least) favourite mortgage broker misinformation and give it a quick fact check…
Myth 1: Independent mortgage brokers are more expensive (because of our fees)
Not true. Apply for your mortgage through your bank and your application could come attached to an arrangement fee, a booking fee, a valuation fee, a fee for setting up the account and (potentially) a higher lending charge if you only have a relatively small deposit.
Virtually every mortgage has some fees somewhere, but when you choose a mortgage with a bank, you’ll be tied to whatever fees come with that product. Choose an independent mortgage broker and we can search the whole market for products that either don’t come with so many fees attached, or that keep those fees low.
Ah, you’ll hear the banks say, but we don’t charge a broker’s fee. That’s true, but often, neither do we. Depending on the mortgage, you could find our fee is largely (or entirely) covered by the commission we receive on a mortgage product. And just to be clear, that doesn’t mean you pay more for your mortgage. In fact…
Myth 2: A bank will always offer the cheapest rates on its own mortgages
You’d think so, wouldn’t you? Frequently, though, it’s not true. So if, for example, your latest mortgage deal is about to expire and your bank offers you a ‘great deal’ to continue your relationship with them, speak to your independent mortgage adviser first. Chances are they’ll be able to find a better deal with the same bank for less.
Myth 3: Independent mortgage brokers are more expensive (because of the rate you end up paying)
Not true. In fact, the exact opposite is true.
Suppose you’re a bank. You have 50 mortgage products on offer, which creates a reasonably broad spectrum of cheapest to most expensive. But now, put yourself in the shoes of an independent mortgage broker, with a HUGE range of mortgage products to choose from. What are the chances that your bank’s cheapest mortgage (out of a choice of 50), is actually the best deal available out of the thousands available? Pretty slim.
In March 2021, even though the market has been subdued by the pandemic, there were still around 3,500 mortgage products available according to moneyfacts. And as money.co.uk noted, even a difference of 1.5% on a £100,000 mortgage over a 20-year term could be worth £1,030 a year.
So you stand a much better chance of finding a better deal with an independent mortgage advisor who has access to a much wider range of products.
Myth 4: You won’t be able to choose a product from your existing lender
Um, yes you will. And as we’ve already discussed, it could be a better deal than they’re offering you.
Myth 5: It’ll be cheaper if I do it myself
No it won’t. Not every mortgage is available to everybody. Some lenders keep some products to themselves. But many of the best rates are exclusively available to brokers. So while doing it yourself may mean you’re able to secure the best deal from the products you’re able to see, you won’t be able to see all of what’s available.
Myth 6: You don’t get the same financial protection going through an independent mortgage broker
Yes you do. In the UK, if you offer mortgage advice you have to be qualified to do it. That means holding a Financial Conduct Authority (FCA)-recognised qualification. It also means that you are regulated by the FCA. That gives you two pieces of reassurance:
i) You can expect a certain level of expertise; and
ii) You can use FCA approved complaints and compensation procedures if there’s
ever a problem
Banks have to be FCA regulated and their advisers qualified. So do we. There is no difference in the level of protection you can expect using an FCA regulated independent mortgage broker – but do check they are regulated. We are.
Let’s lay those myths to rest for good. Have a chat with us about your mortgage, and let’s find the best deal on the market for you.
Where did all the 95% mortgages go?
Around the middle of last year, mortgage lenders’ collective anxiety about the effects of the pandemic caused them to withdraw virtually all 5% deposit mortgages. They were worried about a fall in house prices and negative equity, so 95% loan to value (LTV) mortgages disappeared, and most 90% mortgages went with them.
You’d think, given the positive vaccination news and the feeling that the UK is moving in the right direction, that lenders might have started to be a little more optimistic in their offerings, but even as recently as last month, Moneyfacts reported there were just five 95% LTV mortgages available.
What’s the problem?
If you’ve been looking to buy a house over the past 12 months, you’ll know all too well the problem a lack of affordable mortgages causes. At a 95% LTV, your deposit on a home valued at 200,000 will be £10,000. When your best option is an 85% mortgage, you’ll need to find £30,000. For virtually everyone I’ve spoken to over the past few months, that’s not even close to being an option.
How did the Budget affect 95% mortgages?
Conscious that the longer the situation dragged on the more damaging it would be for the housing market, the Chancellor used the Budget to try and kickstart some movement. He announced that he would support lenders in offering 95% mortgages by enabling them to buy a guarantee on the portion of the mortgage between 80% (the amount many have been willing to offer) and 95% (the amount most first time homebuyers need).
The scheme opens in April, will run until the end of 2022, and many lenders are now offering 95% mortgages as a result.
Will 95% mortgages be affordable?
Yes. We haven’t seen all the details yet but it looks as though most rates will come in somewhere between 3.5-4%. A larger deposit may enable you to shave 0.5% off that, but that’s always been the case. The Government has also instructed lenders to offer 5 year fixed rate deals as a condition of getting the guarantee, so once you’ve been able to find the right deal, you should be able to keep it for a while and give yourself some security.
Will you be able to get a 95% mortgage?
The home you’re buying will need to be a first home valued at £600,000 or less. You’ll only be able to take advantage of the deal with a repayment mortgage (as opposed to interest only). Beyond that, there’ll just be the usual affordability hurdles to negotiate.
Is a 95% mortgage a good idea?
If you’re doing your research right now, you’ll probably come across plenty of online opinion that warns of negative equity and the long term cost of a 95% mortgage. That’s all true. Paying interest on 95% of the value of your home for 25 years is inevitably going to be more expensive than paying it on 80 or 85%. And yes, negative equity is a greater risk with a 95% mortgage – although if you’re planning to stay in your home for a good while, it’s not much of a risk at all.
But my position on this is a simple one. If you need a 95% mortgage to buy a home – and most first time buyers do – then telling you a mortgage for 80% of the value is a better option is purely academic because you can’t afford it.
The Chancellor said his move was about helping ‘generation rent’ become ‘generation buy’. A 95% LTV mortgage helps make that a reality for many more people, and I’m all for it.
If you’re looking for a 95% mortgage, we’d love to help. Talk to us now.
Your home may be repossessed if you do not keep up repayments on your mortgage
Changes in the way lenders underwrite cases for self-employed means they may now decline applications they might have accepted pre-pandemic. So how might Covid affect your next mortgage application - and what can you do about it? Sharon Duckworth explains.
You can’t blame mortgage lenders for getting jittery as the pandemic first bit in spring 2020. As a result, they changed their lending criteria again, and again and again. At one point, things were moving so fast it was virtually impossible to keep up. In one 48 hours period last spring, we saw 500 criteria changes spread across a dozen or so lenders in just 48 hours.
Fortunately, things calmed down for most mortgage applicants. Criteria are generally stricter than they were before the first lockdown, although not massively so. But there’s one category of mortgage seeker who can feel very much excluded from that improving picture: the self-employed.
Why were mortgage applications by the self-employed so severely affected?
Last April, self-employed workers’ earning dropped by 30%. But unlike other parts of the economy, many self-employed workers didn’t get the sort of furlough help offered to those in employment. SEISS, the Self-Employment Income Support Scheme had supported an impressive 2.6 million self-employed workers by last summer, but around 1.2 million did not receive help (and some counts put the figure at closer to double that). They fell between the cracks, perhaps because they were new startups who hadn’t yet filed a tax return or because they didn’t receive most of their income from formal self-employment (instead receiving dividends as company directors).
For mortgage lenders, self-employment suddenly presented a complex, muddy and almost certainly riskier proposition than it had before the pandemic, and that led lenders to make life harder for self-employed applicants.
How did mortgage applications for the self employed change?
All lenders took their own view on what criteria to tweak and tighten, but amongst the changes were:
SEISS: Some (although certainly not all) lenders took the simple and fairly draconian view that if you’d received money from SEISS then your application wouldn’t be accepted.
Investigation: Some lenders announced they would scrutinise the businesses of applicants to test their sustainability and profit. Precisely what that involved wasn’t always entirely clear, but it certainly meant more gathering of paperwork and more delay in having your application reviewed.
LTV: The maximum loan to value many lenders were willing to offer to the self-employed reduced dramatically. Even as recently as January, Santander announced its LTV would be 60% for self-employed applicants. On a £200,000 home, for example, that would mean a £120,000 loan at best.
How to improve your mortgage application chances if you’re self employed
Given this rather bleak picture, how on earth is a self-employed person supposed to find a mortgage right now?
Find the friends: Despite the generally tighter criteria, not every lender has pulled up the drawbridge. You may not find as many lenders wanting to lend right now, but there are still some out there who will look on your application more sympathetically than others.
Lower your LTV: Given the climate, there may not be too many mortgage seekers who can afford to boost their deposit, but the more you can lower your LTV the greater your chances of acceptance.
Do your prep: Expect considerably greater scrutiny than just the last three months’ statements. Pull your accounts together for at least the last couple of years. Make sure your invoices and/or contracts are available to view at short notice. It’ll help speed up your application.
Get help: In an extremely picky market it’s really important not to take a ‘hit and hope’ approach to mortgage applications. Each unsuccessful application you make will affect the next, making each successive application more of an uphill struggle. Take a more targeted approach by zeroing in on the lender most likely to lend to you.
To find out who that is, talk to us.
