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    Many Forum readers will know that TMW has now agreed to accept Limited Co BtL applications , one important part of their criteria is that via such vehicles the loan rental assessment is calculated at 125% irrespective of the Directors personal tax rate , this is an important element since for many Higher Tax payers the imposition of a higher rental stress calculation impedes on the ability to raise adequate levels of funding on a personal level. Having said that before anyone makes such a decision consulting with a good tax adviser is essential.


      A very interesting report has today been published and compiled by the Centre for Economics and Business Research

      Buy-to-let market faces tough three years and 360,000 lost mortgages – Shawbrook

      A continued dampening of the sector over the next three years is expected before the market stabilises in 2021 and returns to growth in the following two years, according to the UK buy-to-let report produced by Shawbrook Bank and compiled by the Centre for Economics and Business Research (CEBR).

      The report compares this projection with a scenario in which the government’s various policy interventions – mortgage interest tax relief, stamp duty land tax and a tightening of PRA underwriting standards – were not introduced.

      The number of buy-to-let (BTL) mortgage approvals for purchases dropped in 2016 by 13%, followed by an even steeper fall of 27% in 2017 as the sector adjusts to new regulation.

      Shawbrook’s report anticipates this trend will continue until 2021, but will be less severe than the market has experienced in recent years with strong demand in the private rental sector and a core of professional landlords countering the effects.

      Return to growth

      From 2021, moderate growth in the BTL market is anticipated for the years leading up to 2023.

      In comparison under the no-reform scenario, Shawbrook Bank would have expected the share of BTL mortgages to have stayed higher for longer, averaging at around 13% of the whole mortgage market between 2018 and 2023, compared to 7% under the new scenario analysis.

      Furthermore, the analysis estimates that 360,000 more BTL mortgages would have been issued if the changes to the tax system and underwriting process had not occurred.

      Managing director for commercial mortgages Karen Bennett said: “While the series of government and regulatory changes have had a significant impact on the sector, we have seen the impact felt more heavily among the amateur landlord community which has presented growth opportunities for professional investors.

      “Recent political turbulence has had an amplifying effect on investor confidence but positively, the market remains buoyant for those with a long-term strategy who draw upon specialist advice to fully understand the impact of these policy shifts.

      “Regulatory change that supports the public interest is not something to be afraid of, and we predict that this high performing asset class will remain a fundamental strength over the long-term provided lenders continue to adapt and change alongside it.”


        Barclays Bank clarifies its position regarding Ground Rents taking account of the issues which have been identified in recent months .

        Escalating ground rents

        Escalating ground rents are acceptable provided the amounts and terms are clearly stated and they comply with the following requirements:

        RPI linked Ground rents:
        • Ground rent is indexed to RPI no more frequently than every 5 years.
        • Ground rent up to 0.1% of the current market value is acceptable
        • We may accept ground rent up to 0.2% of the current market value subject to review

        Doubling ground rents:
        • Should not double more frequently than every 20 years
        • Should not continue to double after 125 years
        • Ground rent up to 0.1% of the current market value is acceptable
        • We may accept Ground rent up to 0.2% of the current market value subject to review

        Ground rent rises linked to the property value

        These are not acceptable to Barclays


          Is this the beginning of a more pragmatic approach by lenders.
          Today a lender has announced that provided the BtL property was purchased pre Jan 2017 and the remortgage is on a £ for £ basis they will apply a lower rental stress calculation of 125% @5.5% with a proveable minimum income of £20000.
          On the face of it some might say "Well" but for a number of borrowers they might experience difficulty in seeking a lower rate than they are currently paying simply because they have 4 or more properties or are higher tax payers and are subject to the normal stress calculation of 145%@5.5% or slightly lower if capital raising or purchasing another property.


            News from BM Solutions

            BM Solutions has announced a series of cuts and removals to and of its various fees.

            The changes include the removal of the £295 mortgage account fee across the brand’s buy-to-let remortgage and purchase products, and the introduction of a new flat fee of £300 for Level 1 standard valuations, which applies to all purchase mortgage applications.

            Revaluation fees for additional borrowing are also now set at £300, and in addition, the £100 administration fee for Level 1 standard valuations and Level 2 homebuyers report valuations has been cut entirely.


              Libor linked Mortgages changes
              Loans that are presently linked to 3 month Libor will shortly be abolished with lenders applying a new rate which is akin to a Standard Variable rate. The downside to this is that it removes the transparency of knowing that at the quarterly review date the 3 month rate is applied with possible round up to one or two decimal points plus the stated premium as per the mortgage offer. Whilst I am sure that lenders will not take advantage of this change I would urge any borrower to keep and eye on the effective rate to ensure that they are not paying slightly more than would have otherwise have been the case under the present arrangement.


                Lenders criteria may get tougher in 2019
                At a conference with lenders yesterday it was revealed that the Financial Conduct Authority was expressing reservations on the methodology of data being remitted by lenders and its potential impact on lending and the market as a whole both for Regulated& Non Regulated Mortgages. Coming on the back of expressions of concern by the BoE there seems to be a probability that the manner in which loans were assessed might prompt a realignment of current underwriting, Whilst this is speculative at this moment in time certainly it was clear that certain new lenders were presently accepting mortgage applications where credit worthiness was questionable indicate that lessons may have not been learnt from the Wild West Lending pre credit crunch days.
                I will update on this as lenders make their own pronouncements in the coming months particularly where it might impact on Buy to Let.


                  Originally posted by loanarranger View Post
                  Libor linked Mortgages changes
                  Loans that are presently linked to 3 month Libor will shortly be abolished with lenders applying a new rate which is akin to a Standard Variable rate.
                  Can they do that? Surely if borrowers signed up for a LIBOR tracker, the lender can't just alter the terms onto a SVR of their choosing.

                  Mortgage Express, amongst others, tried and failed with their BofE base rate tracker mortgages.

                  Is this only for new lending?

                  Whilst I am sure that lenders will not take advantage of this change
                  You have greater faith in them than I have. Post credit crunch, a number of lenders behaved despicably trying to weasel out of contracts.


                    Phew! You had me worried there.
                    It is not a SVR set by the lender, it is a replacement index independent of their control;


                    LIBOR is to be replaced, for GBP Sterling, with an updated version of the Sterling Overnight Index Average (SONIA). SONIA, which is based on actual transactions (as opposed to the estimations on which LIBOR is based), is less likely to be open to manipulation.


                      Correct, I spoke with Paragon this morning and indeed they are using Sonia as the basis of rate setting rather than 3 Month Libor but this only applies to loans which were indeed linked to Libor but any mortgage offers being made now quote a reversionary rate which is between 4.85% and 5.60 depending on which incentive product is used.
                      I have clients with reversionary rates of 1.5% above 3 month Libor for the remaining period of the mortgage and would naturally be concerned if the mechanism changed to the present norm.


                        TMW Stress Test
                        I understand that TMW are giving serious consideration to making adjustments to the stress Calculations covering Portfolio Investors & Further Advances. Although the lender has achieved the required level of lending in 2018 for BtL they have noticed that the level of new applications has fallen in recent months and the negative feedback received from brokers with particular focus on applications for property in southern England.
                        Lenders do not move quickly but I would expect any adjustments to be announced in early January in order that they can rebuild their mortgage pipeline for 2019.


                          It has been revealed today that Nat West is giving serious consideration to changing its policy towards allowing Landlords to accommodate Housing Benefit Claimants on AST’s; todate this has been strictly forbidden.


                            TMW are gearing up for 2019 by making adjustments to the Stress Calculations, this comes on the back of adverse comments made by mortgage brokers where the lenders stress Calculations were perceived as stymying the introduction of businesss.

                            New 10-year fixed products
                            • available up to 65% LTV, with reduced stress rate (4% or payrate + 0.75% whichever is higher)
                            • There is the option of either 5 or 10 year ERCs, available at 3.24% and 2.74% respectively.
                            • Each product includes a £1,995 fee, free standard valuation and £250 cashback
                            5 year fixed products
                            • We’ve reduced our stress rate from 4.99% to 4.50% for all applications up to 75% LTV.
                            Like-for-like remortgage
                            • We’ve reduced our stress rate from 5.50% to 4.99% for like-for-like remortgage applications between 65% and 75% LTV.
                            Please see our product guide for full rate details-

                            Interest Cover Ratio
                            125% ICR
                            • All Ltd Co applications (excluding HMO)
                            • Landlords must be lower rate tax payers (gross income of £46,350 or less in England/Wales or £43,430 or less in Scotland) upon completion of the mortgage.
                            • Landlords must have no more than 3 rental properties (with or without a mortgage), including any TMW applications in progress.
                            • For purchase and Let to Buy applications, 75% of the proposed gross rental income will be added to current gross income to account for the increase in taxable income. For joint applications, half of the 75% proposed gross rental income will be added to the current gross income for each applicant.
                            • Proof of income will be required in the form of a SA302 or tax calculation see table below
                            145% ICR
                            • Applies to landlords who don't meet the criteria above
                            170% ICR
                            • Applies to HMO applications, regardless of tax status


                              BM Solutions have announced their intention to increase the minimum property value from £40000 to £50000. Not a big deal but worth considering for those properties located in areas where such properties can be purchased at such low prices.


                                An article appeared in a Trade publication highlighting the increase in First time Homebuyers whilst Buy to Let loans decline

                                The number of loans given to borrowers taking their first step on the ladder increased 5.8 per cent year on year, making up £6bn of new lending – a 9.1 per cent increase.

                                At the same time, new buy-to-let mortgages dropped nine per cent year on year to 6,100.

                                The deals were worth £0.8bn of lending, down 9.1 per cent.

                                However, there were 15,000 buy-to-let remortgages – an increase of 9.5 per cent year on year – and worth £2.4bn, an increase of 9.1 per cent.

                                There were 36,200 homemover mortgages in the month, an increase of 1.1 per cent from a year earlier.

                                The group accounted for £7.8bn of new lending, up four per cent year on year.

                                The number of remortgages in November increased by 1.3 per cent from 2017, but the £6.8bn of lending was flat.

                                Meanwhile, homeowner remortgaging activity has steadied, after reaching its highest level in a decade the previous month as a large number of fixed-rate deals came to an end.

                                “In the buy-to-let market new home purchases remain subdued, while remortgaging continues to grow as landlords lock into attractive rates.”


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                                • Reply to Turning a btl to holiday home
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                                • Reply to Mortgage News
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                                • Mortgage News
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                                • Reply to Turning a btl to holiday home
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                                • Reply to Turning a btl to holiday home
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                                • Reply to Turning a btl to holiday home
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