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    Mortgage News

    The following article has appeared in one of the Mortgage Trade journals reporting on views expressed by the Association of Mortgage Intermediaries an influential trade body within the mortgage industry.

    "Mortgage rates are likely to rise in the first quarter of 2016 as lenders look to rein in their lending before the Mortgage Credit Directive comes into force in March, the Association of Mortgage Intermediaries has predicted.
    The trade body’s Quarterly Economic Bulletin also forecasted the first Bank of England base rate to take place in 2017 unless wage growth accelerates in the New Year.
    AMI predicted gross lending of £212bn in 2015, which would represent a £9bn increase from the 2014 total of £203bn.
    The bulletin read: “Ahead of the Mortgage Credit Directive… in order to manage pipeline some lenders may increase rates to slow application flows.
    “If this were to coincide with strong wage growth, it could bring forward the need for a wider rise in interest rates, meaning a rise in Bank of England base rate.”
    AMI raised concerns on lenders failing to make use of transitional rules, adding that the Financial Conduct Authority needs to intervene for the good of customers.
    The trade body wrote cautiously on the so-called buy-to-let crackdown, as landlords will have to pay a 3% stamp duty surcharge from March 2016 in measures announced by Chancellor George Osborne in the Autumn Statement.
    The bulletin added: “Just a third of all transactions involving a landlord purchasing a property to rent privately are funded using a mortgage. The remainder are cash purchases.
    “We would question whether caps on buy-to-let lending will therefore have the desired effect of cooling investment into the UK’s private rented sector.”

    #2
    Aldermore makes announcements in advance of the European Credit Directive.

    Aldermore has today published a new leaflet outlining its preparations ahead of the implementation of the European Mortgage Credit Directive on the 21st March 2016.

    Aldermore will offer consumer buy-to-let to all customers who meet their lending requirements and will be adopting the KFI+, transferring to the ESIS in time for the regulatory deadline in March 2019, and a seven day reflection period, which commences from the date of mortgage offer, will also be implemented.

    Aldermore will fully implement MCD in March 2016 ahead of the regulatory deadline and will provide further updates to their intermediary partners in early 2016.

    Comment


      #3
      Good articles - I would like to think someone could predict interest rate rises but if Mark Carney can not even give us the correct year then what hope does anyone else have!

      Comment


        #4
        I cannot disagree with your comments, it was only a few months ago that market indicators suggested a possible hike in rates as early as Spring 2016 so he advice to clients was to give consideration to 3/5 year fixes , now that sentiment is erring against any increases until 2017 it really is a question of considering say 2 year tracker discounts ideally with no Early redemption costs thereby enabling a borrow o switch to say a fix rate should the BofE get their forecasts wrong.
        I spend one day a week updating my lender analysis just to try and keep abreast of the changing sentiment that exists with lenders and the underlying changes in money market rates, these to my mind are a better indicator of which way the wind is blowing so far as interest rates are going say 6/12 months ahead.
        2016 will be an interesting year with all the changes which are about to happen hence why I feel that posting market changes and news articles might to some degree help both established and novice landlords on the Forum.

        Comment


          #5
          Do any lenders offers loans to assist groups of leaseholders to buy the freehold of their block ?

          The rules require a majority of leaseholders in the block to exercise the right to buy the freehold but often a large minority are unwilling or don't care or too ill ( like those in retirement homes ) to participate and this makes raising funds is a big problem.

          Comment


            #6
            Gordon999
            I do not know the answer to this apart from individuals raising capital individually for the purchase either on their own account or collectively to acquire the freehold but when I am back at base I will make enquiries and respond hopefully with a better solution.

            Comment


              #7
              Freehold finance is very difficult indeed unless anything has changed. Perhaps a high street lender would look at it on a commercial basis but not many lenders deal with it

              Comment


                #8
                Chestertons view on impact of Stamp Duty and its potential effect on Pensioners entering into BtL


                Will the stamp duty hike deter pensioners from BTL?

                According to London based estate agents, Chestertons, the decision to add 3% to the rate of Stamp Duty for BTL investors from April next year means it may no longer be a financially viable option for pensioners looking to generate revenue in retirement.

                The announcement of the additional levy on second homes and buy-to-let purchases came as a surprise announcement in the Chancellor's Autumn Statement, and initially caused some confusion across the industry as pundits disagreed on how the additional 3% would be applied.

                Chestertons has now calculated that the extra duty will hit the lower end of the market more heavily in terms of a percentage increase than it will the higher end. A buy-to-let property acquired for £150,000 attracts Stamp Duty of £500, but under the new regime the Stamp Duty rises to £5,000 – a ten-fold increase. By comparison, an investor buying a property for £1m currently pays £43,750 in Stamp Duty, compared to a new rate of £73,750 from next April – less than double the original duty – though of course a larger amount in cash terms.

                Nick Barnes, Head of Research at Chestertons, says: “The Chancellor claimed that this change to Stamp Duty would prevent wealthy investors and overseas buyers from pricing first-time buyers out of the market, but as usual the devil's in the detail. What we can now see is that this change is likely to completely deter many 'first-time' landlords from getting into the private rental market in the first place, including pensioners looking to wisely reinvest their precious pension pot.

                The obvious effect of this will be that there may well be a significant number of smaller landlords deterred from entering the sector altogether. Those who remain will have their margins slashed and, on top of the increasing regulatory burden and the planned reduction in mortgage interest relief, they may have to raise the rent in order to make the numbers stack up. Either way, the already highly competitive private rental market is about to get a whole lot more so.”

                Robert Bartlett, CEO of Chestertons, adds: “We had asked the Chancellor to review the Stamp Duty changes he introduced last year, as they are having such a negative impact right across the house sales market, but particularly on transactions above £1m, a majority of which are here in London. We'd hoped he might consider capping rates, or reducing them by 3%, so you can imagine the dismay when this extra surcharge was announced. The buy-to-let sector has become an essential part of the UK housing landscape and we urge the Chancellor to think clearly around the rules for when this is being introduced. Does, for example, an investor who has contracted to buy a new home today have to pay the extra 3% SDLT if the building actually completes post 1st April.

                While we welcome anything to discourage property owners from sitting on empty property, given our chronic housing shortage, we are concerned that as well as landlords and tenants suffering from this new policy, sellers will also be hit, as investors seeking to mitigate this additional cost on top of their property purchase will doubtless try to negotiate a reduction in the asking price as we are already seeing post the massive hick in SDLT rates last year.”

                Comment


                  #9
                  [B] Sould one transfer BTL property into a Limited Company

                  I am detailing extracts from a very good blog from another fellow broker and which over two postings encapsulates a number of questions and answers being raised over the question of transferring BtL to a SPV .

                  landlords looking to transfer their property portfolios from their personal names into a Special Purpose Vehicle limited company but question can it be done?

                  In real terms, property cannot be “transferred”, rather the transaction is treated as a sale by you to the company.

                  The sale is a taxable event which means that stamp duty and capital gains will be due but do check with your accountant/solicitor to confirm.

                  Associated transactions

                  Currently there are nine buy to let lenders which have products for SPV limited companies; however, two of them will not lend to individuals who are selling to their SPV limited company.

                  The remaining seven will consider an application as long as the sale is at full market value, and subject to other lending criteria being met particularly:

                  Deposit

                  From January 2015, all seven lenders which accept this type of associated transaction, will accept a director’s loan as a deposit which means that you will not be required to provide evidence of the cash.

                  Property ownership

                  Generally speaking, the directors of the new SPV will need to be the same as the current owners on the deeds of the property.

                  Of course transferring from a personal name to a limited company name doesn’t come without costs, so you will need to consider the following:

                  Stamp Duty Land Tax on the sale to the limited company

                  Capital Gains Tax

                  Early Redemption Charges on existing mortgages and re-mortgage costs (see my note below)

                  The long term advantages of holding property in a company name appear to be beneficial to most people. In my opinion if you are looking to hold onto your property as a buy to let for a long period of time I would strongly advise you consider transferring ownership from a personal name to that of a limited company – especially if you are a higher tax rate payer.

                  I believe that the benefits over time will outweigh any costs involved. However, each case needs to be reviewed on its own merits, so I would advise you talk to your accountant before making any decisions.

                  My Comment
                  This matter remains mired in the Consultation Document and clearly the final rules may be at variance when it affects private individuals but it is evident from the number of enquiries I am receiving from established investors that they have justifiable concerns going forward from April this year.

                  Everything is about maximising yield on the rental properties but if like many investors they continue to enjoy reversionary rates which are linked to Bank Base or even 3 Month Libor when the premiums over the bank base or libor were set at between 0.5% and 1.5% then to remortgage into a limited company could come at a significant additional cost over and above what is detailed above.

                  Comment


                    #10
                    Consumer Buy to Let's under the EUCredit Directive

                    TMW have created a specific page on their web site setting out what constitutes a Consumer Buy to Let mortgage in accord with the above directive which comes into play in March.
                    In short TMW state
                    We'll accept Consumer Buy to Let applications across our standard product range from intermediaries who hold the appropriate FCA registration.applications , in short anyone who is qualified to advise on regulated home owner mortgages.

                    Having read the relevant page it removes any uncertainty over what constitutes a Consumer BtL.

                    Hope this helps those who might feel that this is sector within which they might fall within.

                    Comment


                      #11
                      Disappointing News for Generation Renter

                      There is an excellent article published by Tony Ward of Clayton Euro Risk which to my mind encapsulates the risks created by an ill thoughtout move on the Buy to Let Investor.

                      Tony Ward is chief executive of Clayton Euro Risk.

                      The Royal Institution of Chartered Surveyors (RICS) has warned that the cost of renting in the UK could rise faster than house prices over the coming five years.
                      The surveyors suggest that by the end of that period, tenants could find themselves paying at least 25% more than now.
                      Unsurprisingly Simon Rubinsohn, RICS’s chief economist, has blamed government moves for discouraging would-be buy-to-let landlords: “In the long run I’m concerned that rents might increase rapidly,” he said.
                      Mr Rubinsohn is, of course, referring to the government’s attempt to stem the flow of money invested in property, cutting tax breaks from 2017 and raising stamp duty from April 2016. “Critically, our principal concern with the measures announced by the government is that they are overly focused on promoting home ownership at the expense of other tenures,” he said. “Discouraging buy-to-let could see private rents take even more of the strain.”
                      Research from the Residential Landlords Association out this week showed that more than 200,000 landlords – the equivalent of one-in-ten – plans to leave the market. Supposing each landlord owns an average 2.5 homes that would bring some half a million properties onto the market over the next five years, which will certainly skew the market somewhat.
                      Separate research by the National Landlords Association suggests that the chancellor’s changes to tax relief will increase rents by up to £113 a month. The impact is likely to be greater in the capital, where average rents are now £1,134 a month and would need to rise some 10% to cover the cost of the tax change.
                      If all these figures are proved correct, this is worrying. Surely we need balanced housing and rental markets which cater to individuals and their needs. It is dangerous if rental costs rise out of proportion with house prices. How can we expect would-be home owners to save for that increasingly high deposit if a growing chunk of their salary has to be spent on rent? As noted in my blog in June,
                      Britons already spend much of their disposable income on rent, typically around 40% compared with the European average of 28%.
                      Of course, there will always be those who prefer to rent rather than buy, but by discouraging would-be landlords of the future, are we not limiting choice?

                      Comment


                        #12
                        NEW SELF CERT LENDER ANNOUNCES INTENTION TO LEND ON SELF CERT BASIS

                        Whilst off topic given that this is for Home Ownership please read this and note that no Qualified Advisor will be authorised to advise on this lender. Caveat emptor

                        Self-certification mortgage lender selfcert.co.uk is preparing to open for business today.

                        Self-cert mortgages were effectively banned with the introduction of MMR, however The Times reports that the lender will sidestep regulation by selling products from the Czech Republic.

                        Selfcert.co.uk will lend up to £500,000 at 85% LTV, with tracker rates starting from 2% above base rate.

                        The FCA says that there is a "clear and non-controversial case for product regulation of non-income verified (self-certified or ‘self-cert’ and fast track) mortgages".


                        The regulator added that self-cert mortgages were designed by the market to meet the needs of self-employed borrowers but "grew way beyond the consumer groups for which they were originally intended". Its analysis shows that self-cert borrowers take out larger loan amounts than borrowers with standard products and fall into arrears much more frequently.

                        To address these issues, the FCA introduced regulation requiring verification of income for all mortgage applications.

                        It said:

                        "We propose making the lender ultimately responsible in every sale for verifying affordability. We also propose that in each case, lenders assess consumers’ borrowing capacity based on free disposable income."

                        Comment


                          #13
                          Great articles again - When reading Fred Harrisons boom and bust he stated many years ago that it takes a number of years for lenders to circumnavigate the regulations and start to fuel the next boom cycle. This is already happening as we see in the article above, I also read of another similar lender using another jurisdiction to do exactly the same. The banks have went bust many times over the past 200 years and they have been regulated many times in this period. They then find new routes to over lend and start the process again.

                          We are in the mid cycle recession if you ask me and although we may not officially be in recession in any manner we are at the mid way point of the next 18 year cycle. I expect lending, prices, rents to rise over the next five years considerably. I could be wrong as could Fred Harrison

                          Comment


                            #14
                            Wasn't MMR an implementation of the EU MCD?
                            Doesn't that also apply to the Czech Republic?

                            Apparently it is private individuals providing the money, so
                            at least it should not cause a bank to collapse.

                            Comment


                              #15
                              I know it will prove a temptation to many denied loan facilities by main stream lenders , but my fear is that such lenders will not be obliged to treat customers fairly as and when loan accounts go into arrears.

                              Comment

                              Latest Activity

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                              • New tax rule question
                                craig2222
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                              • Reply to New tax rule question
                                Gordon999
                                Hi Loanarranger,

                                What does your UFML handbook say about UFML policy on offering mortgage loans for flat having leases below 70 years ?

                                and for leases with ground rent doubling up every 10 years ?
                                24-09-2018, 12:47 PM
                              • Reply to New tax rule question
                                loanarranger
                                A late Good evening Boletus
                                The CML no longer exists and has been branded including the handbook “UK Finance Mortgage Lenders' Handbook” Nothing however has changed in its contents apart from removing the previous name.
                                Have a great week.
                                23-09-2018, 21:54 PM
                              • Nobody is accepting my offers
                                platforminc
                                Hi All.


                                I am trying to be a newbie property developer, I operate mainly locally and what i am finding now is that despite the fact that i am offering the highest for properties, as soon as the dendors hear that i am a developer or simply put it this way (i am not interested in living...
                                20-09-2018, 09:55 AM
                              • Reply to Nobody is accepting my offers
                                boletus
                                Then you are wrong.

                                (Even though I think you are confusing this with repo sales.)

                                On that basis, any joker could put in worthless offers, chip on the survey, have a free punt on the market and waste everyone's time.

                                Question again to the OP-

                                Have you...
                                23-09-2018, 17:26 PM
                              • Reply to Nobody is accepting my offers
                                Gordon999
                                I am sure if there executor is not selling the asset for highest offer, he/she may be committing an offence under the Fraud Act 2006 .

                                If the property is really good, OP should up his offer to motivate the seller and tell the estate agent to do their job..
                                23-09-2018, 13:23 PM
                              • Reply to Nobody is accepting my offers
                                jpkeates
                                If it's a probate sale, they should definitely go for the highest bid (unless the time frame is enough to make that nonsensical).

                                The executor is acting for the estate, not what they think the deceased or potential beneficieries prefer, and an estate is unlikely to have a preference for...
                                23-09-2018, 10:02 AM
                              • Reply to Nobody is accepting my offers
                                boletus
                                I don't buy that. I've bought to live, let, flip or develop for years without it making any difference.

                                The latest one from the OP is a probate sale, IME they nearly always go for highest/quickest (serious) bid.
                                23-09-2018, 09:10 AM
                              • Reply to Nobody is accepting my offers
                                jpkeates
                                I suspect that the difference is that you're a landlord and proposing to let the property instead of developing it.
                                Lots of people would worry about the effect on their neighbours/friends when someone is planning to "develop" the property they plan to buy.

                                And some people...
                                23-09-2018, 08:55 AM
                              • Reply to Nobody is accepting my offers
                                tatemono
                                I was thinking the same thing from our experience.

                                In the last three years, we've bought four properties and viewed many many more in the area where we have our portfolio. We've never once had an offer rejected where there wasn't a counter offer. In every case, we arrived at an offer that...
                                23-09-2018, 03:33 AM
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