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The mortgage industry believes the bank of england base rate will remain low for the next few years. Although their has been inflationary pressure on the bank of england the economy appears to have taken precedent. With inflation decreasing this year there will be less pressure on the bank of england and therefore the base rate should remain at its current rate of 0.5% for the forseeable future. The industry expects only a very small growth in the bank base rate once it starts moving probably sometime in 2014.

Equity Release Mortgages

If you are interested in releasing money from your home then contact us. Lifetime Mortgages are a very flexible way of helping you to a more comfortable retirement or helping with those later life expenses.

Buy-to-Let changes

As you are no doubt aware the buy-to-let market has endured many changes over the last few years and some of these are still being implemented. If you have forgotten or just want a reminder here are the main points.

  • Stamp duty – additional stamp duty on second property purchases which of course includes BTL.
  • Tax relief – change to the way it is applied and therefore affecting higher rate tax payers.
  • Rental income – change to the way it is added to your overall income therefore possibly putting you in a higher rate of tax band.
  • Wear & tear allowance – removed and replaced with an actual cost basis for certain allowable items.
  • Changes to rental criteria – Prudential Regulatory Authority (PRA) implements minimum rental criteria.
  • Portfolio Landlords – Criteria changes affecting landlords with 4 or more mortgaged BTL properties.
  • Energy Performance Certificate (EPC) – change to minimum E rating.
  • House in Multiple Occupancy (HMO) – change to licensing laws.

Gone are the casual days of purchasing a BTL property to gain income or capital. You now have to really consider if and how you intend to purchase a property and how the new tax system may affect you before you do anything. If you already own a BTL property or considering buying one, then it is even more important for you to seek all the guidance you can from both mortgage advisers and tax specialists/advisers or an accountant.

If you wish to discuss any of these points then do hesitate to contact me.

Buy to Let Portfolio Landlords

Well the buy-to-let market is being squeezed again with the new landlord portfolio rules which have now taken effect. Any landlord with 4 or more rented properties will be classed as a portfolio landlord and therefore where any additional property purchase is being done will have to show affordability across the whole portfolio.

Not only this but an increased amount of information and documentation will be requested by most lenders to support any mortgage application. Minimum income levels have been introduced by many lenders for portfolio customers and therefore together with the tax changes already introduced make it even tougher for customers to purchase a property or swap and change lenders by remortgaging.

Mortgage Brokers are therefore paramount in helping you find the right lender and obtain the right mortgage, whatever your circumstances.

Brexit Referendum

So the outcome was to leave the European Union. So where does this leave us on the mortgage and protection front. Well, business as usual I think. The housing market in reference to new properties being built is still considerably below what it needs to keep up with demand. Therefore supply and demand is driving the housing market and the financial markets circumstances today are very different to 2007/8. The only negative thing I can see is the London property high end value properties maybe having a correction as some investors either hold off or withdraw from the London market. Due to a stagnant 2 months many lenders have reduced their rates over the last week to stimulate activity and encourage people to borrow. The Bank of England is likely to keep the base rate at its current level for some time now to help the economy, lenders and investors alike. With the possibility of higher inflation I cannot see them reducing the base rate as although the market is pretty stagnant the economy is not doing too badly and before long I think some confidence and optimism will return.

Mortgage amounts

At the start of this year I predicted a very similar total net borrowing amount for this year compared to last of £205 billion. Well with just over month to go that is exactly what we’re heading for despite the higher predictions made by lenders, the CML and other people seemingly in the know.
There is a massive difference between being at the coal face and talking to people everyday and just sitting behind your desk making numbers up on what you think will happen. Mortgage brokers are the driving force behind some 75% of all mortgage loans placed in the country and therefore the industry would do well to listen to them.
If you are looking for a mortgage then deal with an independent mortgage adviser who will be able to steer you in the right direction.

Mortgage broker

Mortgage rates across the lender spectrum are still varied and continue to go up and down like a yoyo! While some lenders increase their rates across a loan-to-value sector another lender will bring them down. This is typical of the market as lenders either increase or decrease their products to attract or deter customers. Why, service levels! Service levels are paramount to lenders and therefore depending on their current activity levels they will manipulate not only their rates but their credit score card. By either tightening or relaxing their score card it will again let more or less customers through their underwriting and affordability model.
This is where mortgage brokers come into their own. A good mortgage broker will scan the market to see who is doing what and therefore which lender should help you in achieving a mortgage.

The Market

2015 has seen a sluggish start both in the property purchase sector and new mortgage approvals. Over the last several weeks we have seen much competition with lenders reducing their new product rates. I can see these fantastic rates continuing for the rest of the year as the market continues to stagnate and competition escalates.

Stamp Duty

Well its finally happened. The Government has finally listened to the industry and tapered stamp duty. For most people, which are typically the buyers of properties worth less than £1 million pounds, you are likely to save hundreds and in some cases thousands of pounds.
Whereas previously you paid stamp duty on the whole purchase price of the property at whatever percentage it was for your banding, you now only pay the percentage for the amount in that banding. Also you no longer pay stamp duty on the first £125,000 whereas again previously once you went past £125,000 the whole amount was included in your banding.
For example; If you buy a house now for say £300,000, the breakdown is nothing on the first £125,000, then 2% on the next £125,000 (banding £125,001 to £250k) and 5% on £50,000 (banding £250,001 to £925,000), therefore £5,000 in stamp duty. Compare to the previous regime whereby it would be 3% on the whole amount, therefore £9,000.
One caveat to this, if you had already exchanged contracts before the 5th December then you could actually choose which regime you wanted pay stamp duty on.

Interest rates

The Bank of England certainly confused the industry over the last few months with rumours that interest rates may have to increase sooner rather than later. This reckless statement stagnated the industry which basically resulted in the whole industry coming to a stand still. All of sudden nobody was moving or re-mortgage due to the threat of higher interest rates.
As you may already know this caused a halt in property price increases and a dramatic slow down in mortgage approvals. The knock on effect to this is that many lenders are going to fall short of their annual targets which has resulted in interest rates coming down significantly on many mortgage product across the board. So now might be a good time to lock into that 2 or 5 year fixed rate.

The good side effect of this is that inflation is down and the economy slightly stalled which has resulted in the threat of interest rate increases diminishing. Many economists now believe interest rates may not increase until the back end of 2015 or even early 2016.

Mortgage Market Review

The Mortgage Market Review (MMR) comes into effect on the 26th April and will distinctly tighten up lending. Due to new MMR rules lenders have become stricter on their affordability calculators and we will find that a customer may not get offered the mortgage loan amount they require or in worst case scenarios not even be offered a mortgage.

The big difference to the past is lenders will look a lot closer at a customers expenditure and how they spend their money. Stress testing will also be much more vigorous whereby lenders will ascertain whether you can afford the mortgage payments assuming a higher interest rate.

Although there are many negatives of the MMR one advantage is that affordability can now be extended past a 25 year term. This means that is some cases a customer may need to opt for a longer term than 25 years to meet the lenders affordability calculator, but in doing so may obtain the mortgage loan amount they require.