Mortgage News

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    Have replied, I hadn't appreciated my PM box was completely full, now sorted.
    Apologies for the inconvenience.


      You are too popular lol.


        Transactions plummet by a fifth since SDLT reforms

        I thought the following trade article might be of interest.

        The property market in England and Wales has been "shattered" since the government introduced its stamp duty reforms, according to Nested analysis.
        The research, which used data from Land Registry and Zoopla, found that transactions across the country fell annually by almost a fifth - 19% - across England and Wales and by as much as 33% in London, as the government’s 3% stamp duty surcharge on second homes saw investors exit the property market. *

        The year also saw a significant slowdown in activity at the top end of the market, with the vast majority of listed properties valued at over £500,000 remaining unsold. Just 9% of properties above £2 million are under offer, while only 18% of properties between £1 million and £2 million are currently under offer.

        This compares to properties priced less than £500,000, of which 41% are currently under offer across the country.
        London’s property market is split between East and West. London’s higher valued properties in the West of London have slowed down the entire market in this area’s postcodes, with just 15.4% of properties under offer. Meanwhile the more affordable East of the capital remains a hotspot for first time buyers and second steppers who are continuing to put down offers, lifting the number of under offer properties to 28% in those postcodes.

        Nested’s analysis also reveals that 90% of sellers in London fail to secure an acceptable offer on their home in the first 30 days of marketing. Of the properties in the UK placed on the market in the last 30 days, only 15% have received an accepted offer, and in London however the situation is far worse, with only 10% of properties going under offer within 30 days.

        The problem becomes more severe the higher the value of homes. Just 4% of UK properties valued above £2 million have received an accepted offer in 30 days. These high value properties fare even worse in London where only 3% are under offer within the first 30 days.
        Matt Robinson, CEO of Nested, commented: “The evidence is now crystal clear – the government’s SDLT reforms shattered the property market. In the twelve months since the 3% surcharge was introduced, national property transactions fell 19% across the country and a massive 35% in London. Anything above £500,000 outside of the capital just isn’t selling.

        “Brexit hasn’t helped the situation but the data shows that the government’s stamp duty tinkering has stalled the market. This may have slowed rising house prices, but it has also stopped sales going through and has left many people stuck in their current property, unable to move up the ladder.

        “Policy-makers need to look at how the market functions and find ways to increase fluidity in the system. Everyone will gain if we can open the floodgates on the supply of properties and loosen up the market so it is easier and more cost effective for people to buy and sell.”*


          I know I have commented previously on the additional changes which will come into effect later this year but I have read an interesting Internet blog on the same and which I believe warrants re-telling to forum readers , the only point which perhaps needs clarification is the minimum number of properties which take an "amateur Landlord " to Portfolio Status. If someone currently holds three BtL properties and is seeking a fourth property ( all props not being owned by an SPV company) then this new transaction will so far as current interpretations are concerned will take a orrower into Portfolio Status.

          New mortgage underwriting rules to affect portfolio landlords
          From October 2017, rules laid out by the Prudential Regulation Authority (a division of the Bank of England, headed by the chief executive of the Financial Services Authority (FSA)) mean that portfolio landlords (borrowers with four or more mortgaged buy-to-let properties) will have to provide detailed income and mortgage information on each of their properties every time they refinance or purchase a new property.

          Whilst currently it is the rental income and value of the property they are lending against that most lenders use to assess a buy-to-let mortgage application, the PRA rules have been put in place to make sure that going forward a landlord’s complete financial exposure is laid bare to avoid any risky lending that can undermine the UK’s financial system.

          As a portfolio landlord, one should expect to be asked for the following when refinancing/taking out a new mortgage:

          Bank statements
          Tax returns
          Rental accounts
          Income and expenditure statements
          Historical and forecasted cash flows across the portfolio
          The borrower’s experience in the buy-to-let market will also be taken into consideration.

          A side effect of these new rules is that it will increase costs for the lenders, who then pass the costs onto the borrows. Landlords should expect to see mortgages become more expensive in the near future, with fewer options available.

          With various other tax changes that have already come into play in 2017 (for example, mortgage interest relief restriction) there is much talk of moving properties into limited companies but, unfortunately, the new mortgage rules apply to landlords who own properties in both their own name and through a limited company.

          It is already good practice to keep a record of all portfolio income and expenditure, but going forward it will be even more important!

          So, if you are planning to take on another mortgaged property from October 2017, make sure that you are confident in the financial strength of your portfolio by using a property management software to collate all vital information in one place, making it readily available for your lender when the time comes.


            An interesting note on the mortgage market , this bears out comments made by numerous Business Managers for certain lenders. For the first time since the credit crunch I personally regularly receive calls notably from Buy to Let lenders seeking to help on any new enquiries I might have; this when linked to this article suggests a cooling of the general mortgage market. It could be a blip so before anyone shouts Sell Sell , to my mind there could be buying opportunities

            Lenders have also seen a 5.1 percentage point fall in the value of new loans for house purchases from 66.0% to 60.9%, driven by a decrease in the first-time-buyer category.

            The latest MLAR data from the Bank of England - provided by around 340 regulated mortgage lenders and administrators - shows a fall in new residential mortgage lending activity in Q1 2017.

            £60.4bn of new residential loans was advanced to individuals during Q1 - a 3.8% decrease compared to the previous quarter and a decrease of 5.6% from Q1 2016.

            It shows that at least some of the decline in new residential mortgage lending activity was due to a fall in new commitments which fell by 0.7% from £61.8bn in Q4 2016 to £61.4bn in Q1 2017.

            From the previous quarter, lenders have also seen a 5.1 percentage point fall in the value of new loans for house purchases from 66.0% to 60.9%, driven by a decrease in the first-time-buyer category.

            This is the lowest figure for house purchase since Q1 2012. On the other hand, lending to existing borrowers in the form of remortgages increased by 3.7 percentage points from 27.7% to 31.4%.

            The release shows an increase in the proportion of low LTV loans which has also been attributed to an increased share of lending for remortgage purposes. New lending at below 75% LTV increased by 2.1 percentage points from the previous quarter to 67.2% in Q1 2017.

            Since the first quarter of 2016, the share of buy-to-let lending has stabilised at a lower level and accounted for 14.2% of residential home loans transactions in Q1 2017.

            The proportion of total loan balances in arrears decreased to 1.26% at the end of Q1 2017, the lowest level since the series began.


              For anyone interested in property statistics I am detailing a link to a TMW report published yesterday.

              Just cut and paste the lonk into your search tool bar



                Leave The Landlord Alone
                The Council of Mortgage Lenders (CML) estimates that gross mortgage lending reached £20.1 billion in May. This is a 12% increase on both April last month and on May last year, in which £17.9 billion was advanced. The CML’s buy-to-let forecast for 2017 and 2018 has been revised down from previous expectations at the end of last year, reflecting tax and prudential burdens in the housing and mortgage markets.
                The CML now expects buy-to-let lending of £35 billion in 2017 and £33 billion in 2018, a decrease from £38 billion in each year, forecast in December last year. Commenting on market conditions, CML director general Paul Smee highlighted the fact that remortgage activity and first-time buyers continue to drive lending this year and that he expects to see this trend continue, but not as strongly as in the past as the factors supporting lending are blunted by less favourable economic conditions.
                Buy-to-let had a weak start to 2017, and the sector’s contribution to overall net mortgage lending has fallen considerably over the last year. While falling mortgage interest rates have helped support borrowing, tax and prudential measures are exerting pressure on the buy-to-let market. Following the distortion of the stamp duty change on second properties last year, the CML expected a slight recovery in lending levels. However, this has not materialised, and they have therefore lowered their forecast for buy-to-let lending this year and next. The trade body has called for the need to avoid further changes to the tax and regulatory framework until the effect of those changes already in train have been properly assessed.


                  BoE raises lenders' capital requirements due to "pockets of risk"

                  An interesting article has appeared in the Trade news which i would like to share with forum members.

                  It is evident that the BoE are concerned at the increasing level of personal debt and the implications associated with any imminent increases in interest rates and therefore they are intending to make lenders make provisions to insure against the risk of deafults and any losses which might be incurred: whilst it may be perceived a shutting the stable door etc, it doesnt portent well for exisiting criteria to remain in place going forward.

                  " UK banks will have to raise an extra £11.4bn in capital requirements over the next 18 months after the Bank of England's Financial Policy Committee increased the countercyclical capital buffer rate to 0.5% with a further rise to 1% expected in November.
                  The capital requirements aim to make financial institutions more resilient to economic risks.
                  The FPC says current risks are at a standard level but warned of "pockets of risk that warrant vigilance" including a rapid increase in consumer credit and lending conditions in the mortgage market.

                  Due to the increase in consumer credit, the Bank announced that it would be bringing forward the assessment of stressed losses on consumer credit lending in its 2017 annual stress test from November to September. This, it says, will help inform its assessment of any "additional resilience required against this lending".

                  The Bank of England believes lending conditions in the mortgage market are becoming easier and that as a result, lenders may be placing "undue weight on the recent performance of loans in benign conditions".

                  It therefore plans to 'clarify its existing insurance measures in the mortgage market', designed to prevent excessive growth in the number of highly indebted households.

                  The FPC's Financial Stability Report also outlined 'possible financial stability implications' of the United Kingdom’s withdrawal from the European Union. It believes the scenario that would have the most impact on stability is one in which there is "no agreement in place at the point of exit".
                  Citing direct effects of Brexit on financial services, the Bank raised concerns about the amount of legal and regulatory framework derived from EU law and the right of financial companies within the EEA to provide services across borders.

                  The Financial Stability Report said the EEA agreement promotes "substantial cross-border provision of a wide range of financial services", noting that around £40bn of UK financial services revenues relate to EU clients and markets.

                  It warned that there is "no generally applicable institutional framework for cross-border provision of financial services outside the European Union" and raised concerns that UK firms would no longer be able to provide services to EEA clients (and vice versa) in the same way, "or in some cases not at all".


                    Spun slightly differently as good news here, building reserves whilst things are good as the economy has performed more strongly than the Bank predicted;



                      Hi boletus

                      Reading the White tops this morning and one could imagine armageddon is going to occur , I think that the only possible reaction to this from lenders will be a greater percentage of any credit card or personal debts being taken account of rather than the current 3%/5%. It will of course come out in the wash and I will in turn try and post any briefings from lenders relating to this matter.


                        I know I keep harping on about the imminent changes which are due to occur from October 1st following changes in underwriting rules by the Prudential Regulatory authority but I have prepared an edited version of an interesting article which has appeared in a Broker Trade Magazine this week as a wake up call to Brokers and Lenders in advance of the changes which will affect anyone , excepting Limited Companies, who hold more that three Buy to Let properties. I am posting this in order that conversations can be had by property investors with their brokers to get a heads up on what needs doing in preparation of these changes and importantly understand why delays may still occur.Gone are the days when any mortgage broker only needed to look at their mortgage sourcing system , find the best deal and do a quick application , they alone will need to fully understand the rationale behind the lending assessment process and be able to communicated authoritively with the client in order that business can be written , completed and importantly manage expectations on the time of delivery.

                        Buy-to-let brokers are being warned to brace for delays and a “logjam” in lender service when new underwriting rules for portfolio landlords are implemented from 30 September.

                        The Prudential Regulation Authority’s new rules mean that all lenders must undertake tougher affordability checks on landlords with four or more mortgaged properties.

                        Lenders have flexibility in interpreting the new rules but must request more paperwork from brokers, including in-depth details around landlords’ business plans, cashflow forecasts and more.

                        With 30 September fast approaching, few large lenders – with the majority of market share – have provided details about their portfolio lending approach, giving brokers little time to react.

                        One leading Broker stated that “Collectively, lenders haven’t got their message out to the market about what their message will be on 1 October. This is not helpful.

                        One Savings Bank sales and marketing director John Eastgate says: “The changes coming up will cause delays. The opportunities for brokers to have their heads spinning will be colossal.”

                        Another source of service delay will arise as lenders and brokers adapt to the new paperwork required when the rules come in. It is generally accepted that many brokers won’t be used to the documents they will be asked to provide, so may not get it right first time: equally underwriters will encounter documents they haven't been trained for. The same leading broker commented that
                        “At every level there will be unproductive conversations as people challenge what is asked for. There will be thousands and thousands and thousands of these conversations, and anyone who doesn’t think that is deluded.”

                        Another potential cause of buy-to-let delay is if some large lenders either choose not to underwrite portfolio landlords or limit their lending to this group.
                        Fleet Mortgages chief executive Bob Young says: “We don’t know which of the large lenders will continue into portfolio lending and, if they do, will they come in on a restricted basis?”
                        Young expects all large lenders to undertake portfolio lending but has concerns about the lack of certainty.
                        He adds: “I suspect there won’t be enough supply for the current demand, let alone increasing demand. So that will cause issues around availability of product.”

                        The smaller specialist buy-to-let lenders with a portfolio lending capability stand to benefit from any reduced appetite for these customers on the part of larger players.

                        But these smaller lenders may find themselves unable to pick up all the slack, which would also create more broker service delays.

                        Another leading broker in the article states: “Many lenders have yet to confirm if they will lend in the portfolio space but it is clear that specialist lenders will see an influx of business and may not have the resource to process applications in a timely manner, although they have the expertise.

                        “Even if they have the resource, the underwriting will be more thorough, meaning further delays or requests for extra information.”
                        Both brokers commented say brokers can prepare by being realistic with landlords about the delays, and being ready to communicate lenders’ stances on portfolio lending. One additionally adding: “It is imperative that we manage our clients’ expectations and do not commit to promises we are unable to deliver on just to win business.”


                          but must request more paperwork from brokers, including in-depth details around landlords’ business plans, cashflow forecasts
                          The PRA statement gives as an example that business plan and cash flow forecasts are additional information lenders may request, not must request. That would seem appropriate for new portfolio landlords but superfluous for established portfolio landlords. It is to be a proportionate approach based on the borrower.

                          My recent impression from two different brokers (one independent, one national chain) was that they thought they were already pretty much compliant.
                          Although they didn't require business plan cashflow forecast per se, they did have a set format to fill out for my whole portfolio, income, costs, LTV etc.
                          They also required historical information from previous sa302 equivalents and last 6 month's bank statements.

                          Mildly surprised they didn't take into consideration my savings, investments and pensions pot as that is also mentioned in the PRA statement.


                            Nice to see TMW now only interested in mortgaged BTL's as previously even unencumbered were to be considered part of the '4 or more'. The next mortgage I raise will be my third and therefore outside the 'portfolio status'. This has a big baring on the type of property I do it against as it would be the last time I'd be stressed at 125% rather than 145%. I was considering a smaller investment in the north but would do this as pure cash now due to these rules. I'd look to invest in property worth four times as much closer to my other properties on a leverage basis as it will max out what I can borrow at 125%.


                              I think it is fair to say that the whole question of how lenders will treat investors who fall within the criteria of more than 3 Investment properties has yet to be decided on and even those who have made pronouncements may amend provided that such actions do not infringe the dictums as laid down by the PRA. I think what may catch some investors out is the stress testing across the entire portfolio and not as current on each property submitted for loan assessment.

                              In terms of taking account of other investments etc held by the borrower, I feel that commecial criteria is sneaking into the criteria in sofar as whatever assets are held should remain independent and not the loan being underwritten by other income streams

                              Life as a broker is going to be more challenging over the next few months , those that have attended training sessions by lenders in recent weeks and take a keen interest in understanding everything which governs the BtL sector will be much better placed in helping established clients than perhaps those for whom their main business is in residential homeloans and have been very reliant on sourcing systems to guide them through the mortgage placement process.


                                Hi JayDavys

                                May I clarify the criteria as it presently stands for rental assessment so far as TMW is concerned.

                                125% ICR

                                Borrowers must be lower rate tax payers (gross income of £45k or less in England/Wales or £43k or less in Scotland) upon completion of the mortgage with no more than 3 rental properties (with or without a mortgage).

                                145% ICR

                                Applies to borrowers who do not meet the criteria above

                                TMW have made an announcement in the trade media that they are working on a platform which will take the guestimate out of "How do I fit within the new rules" , details of the article are below.

                                "The Mortgage Works is developing new technology in partnership with EDM Mortgage Support Solutions ahead of the Prudential Regulation Authority’s landlord underwriting standards changes in September.

                                The intermediary-only arm of Nationwide Building Society is creating the solution with EDM MSS to allow brokers to upload portfolio property details directly into the platform.

                                The details will then be validated via the EDM MSS’ PRISM (Portal for Risk Information Sharing in Mortgages) platform and allow for the results to be sent to TMW’s dedicated team of portfolio underwriters for assessment, significantly simplifying the underwriting process.

                                PRISM is an EDM-hosted digital hub that “brings manual processes online, enabling lenders to access third party data and make business decisions around the suitability of properties immediately”, according to the lender.


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