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  • loanarranger
    It is certainly true that using the revised affordability stress calculations , even before other considerations are taken into account , that clients were realising that their previous levels of funding were going to prove inadequate if they were intent on realising any release of equity and therefore the lure of 5 Year Fixed Rates have proved an attractive lure to overcome these issues.

    Whilst I readily accept that there are potential issues for both borrowers and indeed lenders who themselves may have to ultimately answer to the Prudential Regulatory Authority as to why they attempted to circumvent the rationale intended for prudential lending , I take a median line on this in so far that good quality property may over 5 years achieve a reasonable increase in the amount of rental and therefore still provide alternative funding options when the time comes to reconsider subsequent funding , indeed I would go further and suggest that if one is using a broker , they should be asked to try and avoid any lender who currently operates a reversionary rate which is clearly out of kilter with the market norm, since this is one feature which could create potential issues if the rental hasn't increased and the alternatives are few and far between what is needed to get a reasonable facility without having to stay and pay what might be an uneconomic mortgage rate.

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  • hopelesslydevoted
    thanks loanarranger - i wondered why 5 year fixes were increasingly available! I have just taken one out but under a remortgage rather than new purchase.

    Leave a comment:

  • loanarranger
    Buy-to-Let lenders and Landlords "at risk" over move to five year fixes

    An excellent article has appeared in Mortgage Strategy (a trade magazine for Intermediaries.

    Buy-to-let lenders that increasingly incentivise mortgages that side-step the Prudential Regulation Authority’s new affordability rules could be putting themselves and their clients at risk, say experts.

    The rules, which came into effect on 1 January, said lenders should stress test all new BTL mortgages at a notional rate of 5.5 per cent.

    The PRA also said lenders should assume that most future borrowers would be high-rate taxpayers. This led most lenders to raise their rental income requirements to 145 per cent of mortgage interest rates from previous market norms of 125 per cent.
    But the new rules apply only to mortgages with terms of less than five years, while the market is dominated by two- and three-year fixed-rate loans.

    The most recent Moneyfacts data shows there were 390 five-year BTL fixes on the market at the beginning of February, up 20 per cent year-on-year.
    Meanwhile, the number of two-year fixes was 400, down by 3 per cent, and the number of three-year fixes was 166, down by 29 per cent.

    In addition, the average rate on five-year fixes has been cut more quickly than that for two- and three-year loans.

    The average five-year fixed rate on 1 January – the most recent data available – was 3.76 per cent, a drop of 0.39 per cent year-on-year.

    But the average two-year fix was 2.92 per cent, having dropped 0.33 per cent, and the average three-year fix was 3.74 per cent, having fallen 0.16 per cent.

    Some five-year fixes on the market use the same strict affordability checks as their shorter-term variants. However, most take a more relaxed approach, such as 140 per cent at 5.5 per cent, or 145 per cent at 4.74 per cent.

    Some lenders can stress at rates as low as 3.99 per cent.

    “The other aspect is that brokers, in their enthusiasm to support their clients’ desire for leverage, inadvertently put them into a deal that works on day one. But when it gets to year five, the tax environment has changed and rents have barely gone up.
    “So not only is the deal locked in and the client can’t readily get out without early redemption penalties, but, more importantly, they are haemorrhaging tax out of every brick in the building.”

    London & Country Mortgages associate director David Holling*worth says: “It raises the question of whether more borrowers will end up going for five years based purely on the amount they can borrow.

    “There is potential for people to say ‘I think a five-year fix is the right thing for me. Oh, look, I can borrow more. What a coincidence.’ But that longer term does give them the ability to plan better and deal with that slightly higher borrowing. That’s the role of the broker: to make sure the borrower understands both sides of the coin.”

    John Charcol senior technical director Ray Boulger says a shift towards five-year fixes makes business sense but lenders should not exploit a perceived loophole.

    He says: “It is entirely logical, and exactly what I would have expected, but lenders should not take the mickey.”
    He adds that the move could even be regarded as positive by the PRA, because longer-term fixed rates reduce risk.
    He says: “The PRA has recognised that, if people are taking a longer-term fix, that de-risks the situation.”
    Before the affordability rules came in, the PRA said it would monitor the BTL market for any “fall in underwriting standards” leading from any big shift to five-year fixes.

    PRA policy PS28/16 says: “Respondents voiced concern that this could lead to a fall in underwriting standards if firms were to move their product mix to five-year products and reduce their stress rates accordingly. The PRA will monitor the market and act accordingly if there is evidence that firms’ safety and soundness is at risk.”
    The PRA has been approached for comment.

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  • loanarranger
    Santander changes its criteria

    The following statement from Santander will please new applicants for their BtL products but sadly todate they will not changed their stance for existing borrowers.

    Santander is dropping a controversial clause in its buy-to-let contracts that asked landlords to increase rents by “as much as can be reasonably achieved” whenever possible.

    The change will apply to all Santander’s new buy-to-let contracts, though it will remain in existing contracts.

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  • loanarranger
    Rents due to rise by 25% as supply issue continues: RICS
    By Rebekah Commane 9th February 2017 10:56 am

    The UK residential market ‘lacked momentum’ in January, according to the latest RICS survey, with transaction volumes and enquiries relatively unchanged on December.

    The surveyors report found that a shortage of supply was impacting on the lettings market, an issue it expects to worsen as landlords decrease their portfolios in the next three years.

    Rents are expected to rise by just over 25 per cent in the medium-term while the value of property is expected to grow by below 20 per cent.

    New buyer enquiries were more or less unchanged in January, with just 5 per cent of surveyors reporting an increase in demand.

    RICS members are reporting an ongoing paucity of stock for sale in many areas, contrasted by new buyer demand remaining consistent, which is no doubt a major factor in property values around most of the UK maintaining their current momentum.

    “It would appear many RICS members suggest this is a situation which is likely to continue, particularly given the current factors of changes to tax legislation and an increase in SDLT potentially having an impact on those landlords who would otherwise potentially be considering growing their portfolios to capitalise on growing tenant demand.“

    Yorkshire Building Society chief economist Andrew McPhillip says:
    “Reduced availability of housing stock should outweigh the effects of slowing demand, supporting house price growth in the short term.
    “With house prices expected to continue to increase, the balance could eventually shift in favour of supply as more people are priced out of the market. This trend is likely to cause house price growth to slow as the market becomes less competitive. Additionally, an expected increase in inflation could exacerbate affordability issues and therefore housing demand as fewer people are likely to be able to save for a deposit.”

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  • loanarranger
    Update on the Santander Issue

    A Santander spokeswoman says the lender will review its buy-to-let contract following the furore.

    She says: “We recommend that landlords should set their rents at a prudent level that is fair for the tenant and based on market rates, ensuring that they are able to continue to service their mortgage.

    “The clause in question has formed part of our mortgage terms and conditions since we*re-entered*the buy-to-let market in 2011. It forms part of our terms and conditions because it is important to us that our customers can continue to afford their loan repayments.
    “It is in no-one’s interest for a landlord to default on a loan (including the tenant).

    “We recognise that it is for the landlord to set a rent that both they and the tenant agree upon. As with all our products, the mortgage terms and condition remain under constant review and we will review this particular clause*now that we are aware that it can be misunderstood.”

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  • loanarranger
    Beware of a clause in Santanders BtL Mortgage Contract

    I thought that the following article which appeared in an Intermediary publication would be of interest to anyone who has a BtL mortgage or intending to apply from Santander

    "Santander has come under fire for a clause in its buy-to-let mortgage contracts that asks the landlord to increase rents by “as much as can be reasonably achieved” whenever possible.
    Other industry figures and consumer rights campaigners have strongly criticised the lender’s inclusion of the clause.
    The landlord, who did not want to be named, says “I, and many landlords, believe it is an outrageous clause and, if consistently enacted, would have a significant increase on rents across the country, thus further worsening the housing crisis.
    “The media paints landlords as greedy but I wonder if they are aware that we are being contractually obliged to increase rents due to companies such as Santander?”
    The landlord’s contract states:
    “a) …a reasonable time before any opportunity arises for a review of the rent payable under the lease, you will get written advice from a qualified valuer who is a member of the Rics whether the market rent at the date of the review is likely to be higher than the rent currently payable under the lease;
    b) You will provide us with a copy of the valuer’s advice;
    c) If the valuer advises that the market rent at the date of the review is likely to be higher than the current rent, you will promptly take all steps which it is open to you to take under the lease to ensure that the review takes place and leads to the maximum increase in the rent which can reasonably be achieved;
    d) You will notify us promptly of the result of the review.”

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  • loanarranger
    January sees largest fall in BTL products since 2009

    First posting for 2017 and the news isn't positive.

    January has seen a "significant drop" in the number of buy-to-let mortgage products, with 74 deals withdrawn from the market in just one month, according to Moneyfacts data.
    The total number of live BTL products stood at 1,482 in December but has fallen to 1,408 this month.
    More : Majority to be affected by stricter BTL rules

    The 75% loan-to-value sector has seen the largest reduction in product numbers, falling from 606 to 540 in just one month.

    Moneyfacts says it is "little wonder" that the BTL market has taken a hit due to tougher affordability rules coming into play on 1 January and more changes due in September .

    However the total number of products available remains higher than the 1,256 recorded in January 2016.
    Charlotte Nelson, Finance Expert at Moneyfacts, said: “The BTL mortgage market took a hit last month, seeing the largest reduction in product numbers since March 2009. Usually, the month of December is quiet, with providers gearing up for the holidays. This time, however, the BTL market has seen a surge of activity, with the number of BTL products falling back to July 2016’s levels. Withdrawals have not been limited to just a few providers, either, with the reductions having been spread across the board.

    “Alongside tougher affordability, major changes to the way in which income from property rentals is taxed will be coming in April. Lenders are perhaps withdrawing products to get back to just their ‘core’ range in an attempt to wait and see what other providers will be doing in the run up to April.

    “2017 is set to be an uncertain year, which could be a lethal cocktail for landlords, particularly now there are less products on the market. Anyone unsure about their options should seek out a financial adviser.”

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  • loanarranger
    One Savings Bank makes changes to lending criteria

    One Savings Bank which includes brands like Kent Reliance and Interbay Commercial have announced significant changes to their stress rate calculations along with a redefinition of who qualifies under Portfolio criteria and the differences between small and large HMO's.

    "OneSavings Bank will be changing its affordability assessments for new buy-to-let business from 28 December.

    The minimum rental cover stress rate will be the highest of 5.5 per cent or the initial pay rate plus 1.55 per cent.

    Remortgages with no additional borrowing will not have a minimum stress rate, with rental cover assessed against the initial pay rate plus 1.05 per cent.

    Five-year fixed rate applications will continue being stress-tested at the initial pay rate.

    OneSavings Bank has also changed its definition of standard property to include HMOs or multi-lets/student lets of up to five rooms.

    The new definition also applies to blocks of flats with up to four units, as well as single dwellings.

    OSB will now define a portfolio borrower as someone owning four or more investment properties, including the subject property.

    Non-portfolio borrowers will be individual applicants owning three investment properties or fewer, including the subject property.

    The new definitions do not apply to those borrowing through a limited company.

    The changes apply to OSB brands Kent Reliance and its subsidiaries InterBay Commercial and Prestige Finance.

    OSB group chief credit officer Richard Wilson says: “We have invested a significant amount of time and resource reviewing the new policy and our changes reflect a fair and equitable position for the markets we serve.

    “We believe what we have delivered is a robust and responsible revision to our policy in line with the new PRA rules.”

    Leave a comment:

  • loanarranger
    Aldermore announce changes to their Rental Stress Criteria

    The way they calculate affordability on buy-to-let cases is changing; from 23 December 2016 all cases submitted will be subject to their new underwriting standards and affordability rules.

    The key changes are detailed below

    1) The new Interest Coverage Ratios (ICRs) with effect from 23 December*are:

    Single Investment Property Including Multi-Unit Freehold

    * Minimum ICR Minimum ICR
    (including surplus personal income) (excluding surplus personal income)
    Private Individual 145% 120%
    Limited Company 125% 110%

    House in Multiple Occupation (HMO)

    * Minimum ICR Minimum ICR
    (including surplus personal income) (excluding surplus personal income)
    Private Individual 185% 160%
    Limited Company 155% 140%

    Loans on capital repayment will need to meet the ICR based on the interest only cost.

    The rental income alone must be sufficient to cover at least 100% of the stressed mortgage payment.

    If the required ICR is not achieved, personal surplus disposable income can be used to meet the shortfall, subject to the minimum ICR shown in the table above.

    2) All applications will be stress tested against the following interest rates with effect from 23 December:

    All applications *
    Product type Stressed interest rate
    Term variable rate Higher of 1) pay rate + 2%, or 2) 5.5% Fixed rate <5 years
    Fixed rate 5+ years Higher of 1) pay rate, or 2) 5.5%

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  • loanarranger
    CML downgrade forecasts for 2017

    CML downgrades 2017 lending forecasts
    By Sam Barker 15th December 2016 10:57 am
    The Council of Mortgage Lenders has downgraded its 2017 lending forecasts from £261bn to £248bn due to economic uncertainties, tax increases and housing regulatory changes.

    The CML now expects gross lending of £248 billion in 2017 and £252 billion in 2018, with net lending of £30 billion in each of those years.

    CML director general Paul Smee says: “Overall, the mortgage market remains resilient but is likely to plateau rather than grow much for the next couple of years. Gross lending is likely to hover around the £250bn mark in 2016, 2017 and 2018.

    “Property transactions look set to drift down slightly, although we do not expect house prices to fall, and net lending seems unlikely to get above £30bn next year.”

    “2016 has been a tricky year with challenges presented by high stamp duty costs and the referendum outcome, and uncertainty will continue into next year, coupled with the impending changes to mortgage interest tax relief for landlords which will have a negative impact on buy-to-let.”

    Leave a comment:

  • loanarranger
    Barclays simplify Buy to Let Criteria

    Barclays have issued the following note regarding changes to the manner in which they will assess Buy to Let applications.

    From today, Wednesday 14 December, we are simplifying our affordability assessment and minimum gross income requirements on all applications for new Buy to Let (BTL) lending.

    We are making the following changes:
    • Separate rental coverage requirement removed;
    • Minimum gross income requirement simplified to be £25,000 per annum (for joint applications, at least one applicant must earn £25,000).

    Barclays considers both personal and rental income within our affordability calculation, and already undertakes a full affordability assessment of the borrower(s).

    Since our income affordability test includes all relevant landlord costs, such as those associated with renting out BTL properties, applicant level tax liability (including mortgage interest tax relief changes being phased in from April 2017) and assumes a minimum borrower interest rate of 5.5% for existing and applied for BTLs, we no longer need a separate rental coverage ratio test.

    Why are we introducing these changes?

    The Prudential Regulation Authority (PRA) recently announced new minimum underwriting requirements, which lenders must comply with by 1 January 2017. Whilst Barclays already complies with these new standards, we have taken the opportunity to tailor our assessment so that it is based on a borrower’s individual circumstances.

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  • loanarranger
    Is your broker fit for purpose in the new regime of Buy to Let funding

    An article in a Mortgage Trade magazine today from Bob Young Chief Executive of Fleet Mortgages raises an interesting point regarding the knowledge base of brokers: no longer is it going to be sufficient to look at a Mortgage Sourcing screen and pick out the cheapest product there is going to be much more emphasis on providing quality and constructive advice taking account of everything which is happening within the Buy to Let sector and importantly what underpins a lenders attitude particularly in respect of Portfolio Landlords.

    "Depending on which statistical analysis you read, buy-to-let is either bouncing back, due to an influx of Chinese investors, or stagnating, having been crippled by the Government and regulatory measures. I believe the sector lies between two stools.
    It does not take a genius to work out that activity is considerably down on that experienced in February and March this year. Purchasing has undoubtedly been affected but where it is still happening there is much more use of limited company vehicles. Remortgage activity has tended to dominate in recent months.
    The speculation around buy-to-let will continue regardless and advisers simply have to play the market with a straight bat. Business is clearly being conducted but, if you are assuming it is only individuals purchasing, you are probably mistaken.
    You will need to demonstrate your knowledge in terms of both remortgaging and purchasing properties via limited companies. If you are not clued up on these markets, you will cut yourself off from the majority of buy-to-let business being written.
    On top of this, you need to prove your knowledge of the Prudential Regulation Authority’s buy-to-let underwriting rules. Lenders will not be waiting around for the deadline dates. Instead, changes are likely to be steadily introduced over some months, which will obviously change the loan levels available and the ability of clients to meet criteria.

    Leave a comment:

  • JayDavys
    Originally posted by loanarranger View Post
    Leeds BS make changes to their rental stress calculations

    Leeds Building has announced a number of criteria changes in response to the PRA’s new underwriting standards for buy-to-let mortgages.

    The changes, which come into effect on 1st January 2017, include an affordability stress test rate of 5.50% for purchase and capital raising remortgages, and 5.00% when there is no additional borrowing.

    The income coverage ratio for buy-to-let and holiday let mortgages will go up from 125% to 140%, and the ICR will take into account mortgage interest tax relief.

    An ICR assessment will not be required for existing Leeds Building Society BTL customers who have come to the end of their existing deal and there is no additional borrowing.

    Leeds has also removed minimum income requirements, which were previously £25,000 pa or £40,000 for joint applicants.
    Additionally, its entire range will be available up to 70% LTV.
    Thanks for all the updates loanarranger - amidst the bad news nice to see another lender with no minimum income requirement, one for me to consider in the near future

    Leave a comment:

  • loanarranger
    Precise goes precise into the forthcoming changes affecting Buy to Let Applications

    I am setting out in full a briefing note issued to brokers introducing business to Precise Mortgages.Whilst it may be viewed as being harsh they do at the very least explain everything in detail.

    What’s happening?
    From 15th December 2016, Precise Mortgages will be changing the way it assesses buy to let applications.
    Along with all lenders regulated by the Prudential Regulation Authority (PRA), applications will be subject to a series of minimum standards that rms should use when assessing a ordability.
    As part of these changes we have to consider the costs your customer will face when owning a buy to let, including tax on the income from that property. You should make sure you are aware of the changes in the way buy to lets are taxed, and consider the impact on your customer’s tax position. They may wish to seek specialist tax advice.
    What are the changes?
    Interest Coverage Ratio (ICR) test: When assessing the a ordability of owning a buy to let property, your customer’s tax position has a signi cant impact on this calculation.
    Tax band
    ICR rate
    Basic rate
    Higher rate
    Additional rate
    Limited company
    Bespoke ICR*
    125% to 160%
    *Bespoke ICR: Our underwriting process will look at the information you provide and will calculate an ICR based on your customer’s individual circumstances. In many cases this will result in a more favourable ICR when compared to generic ICRs. If, for example, joint applicants include one basic rate tax payer and one higher or additional rate tax payer, a bespoke ICR should be considered. Likewise, if your customer is a basic or higher rate tax payer at the point of application but the rental income from the property will move them up to the next tax band, you should consider using our bespoke ICR.
    Assessment rate: As part of the changes being introduced we also have to consider the impact of rising interest rates on the a ordability of the buy to let. This calculation will be driven by the type of product selected and will be based on:
    Loan: Gross loan inclusive of capitalised fees will be used for all assessments. What happens next?
    Tracker products
    Higher of pay rate +2%, or revert rate +2%, minimum 5.5%.
    Short term xed rates
    Higher of pay rate, or revert rate +2%, minimum 5.5%.
    5yr+ xed rates
    Pay rate. Additional underwriting checks may be required.

    Leave a comment:

Latest Activity


  • Reply to SDLT and purchase reservation fees
    by combo75
    I don't know, my head is spinning.

    I have just been to look at a 4 bed Student let terraced house, currently let out £1850pcm.

    The current landlord is diabolical and the students are complaining about the state of the place. It needs quite a bit of updating but it's not a...
    02-07-2020, 18:27 PM
  • SDLT and purchase reservation fees
    by ritfor
    Hello folks,

    For second homes:

    Purchasing a property for 33k. Reservation fee 6k. Total 39k = No SDLT.
    Purchasing a property for 35k. Reservation fee 6k. Total 41k = 3% SDLT.

    This is correct isn't it?

    20-06-2020, 12:03 PM
  • Reply to SDLT and purchase reservation fees
    by BTL investor

    You could be right, the truth is that nobody knows what’s going to happen that’s why the experts are predicting different outcomes but I struggle to see how me purchasing a property today for £200,000 with £7,500 of stamp duty and receiving a pre-tax and pre-expenses rental...
    02-07-2020, 11:41 AM
  • Reply to SDLT and purchase reservation fees
    by BTL investor
    combo75 I don’t see the attack on landlords coming to an end anytime soon, both labour and conservative governments have spent the last 3 or 4 decades funding free homes to asylum seekers, single mothers and pretty much anyone that doesn’t want to go to work to buy their own home or pay their own...
    02-07-2020, 11:11 AM
  • Reply to Renovation Loan for a Right To Manage Company
    by loanarranger
    Good point hech123, I would add that even if a bank were prepared to lend as unlikely as it is , why on earth would the Directors be prepared to give their Personal Guarantees forsuch borrowings. I fear that the liability rests in seeking a surcharge for the respective leaseholders to fund the costs...
    02-07-2020, 09:32 AM
  • Renovation Loan for a Right To Manage Company
    by AlleyRTM

    I am a director of a Right To manage company, and we need extensive renovations to our roof, and other parts of the building.

    Does anyone know of a way to gather the funds to pay for this, like a loan or grant?

    Is it possible for an RTM company to take...
    30-06-2020, 04:39 AM
  • Reply to Renovation Loan for a Right To Manage Company
    by hech123
    I would imagine not. You should get it from the leaseholders, it is there responsibility. You may get a loan at high rates if there is any value in the Freehold if you own that but if you are just a RTM company with no assets then getting a loan would be extremely difficult . Really you should have...
    02-07-2020, 08:37 AM
  • Reply to SDLT and purchase reservation fees
    by hech123
    I very much doubt the market is going to have a correction downwards, I am really not even sure why any experts are predicting this. Large house price falls usually fall exponential growth in houses making them very unaffordable. Add to this that banks are well capitalised and looking to expand lending....
    02-07-2020, 08:32 AM
  • Reply to SDLT and purchase reservation fees
    by combo75
    Hi BTL, I am in the same position as you and I am sitting on quite a bit of money for deposits. But I am not willing to pay £16-22K in SDLT towards buying a property.

    I have noticed that a lot of property seen in my area is coming down but not by enough.The furlough scheme is keeping everything...
    02-07-2020, 08:25 AM
  • Reply to SDLT and purchase reservation fees
    by ritfor
    Apologies Gordon, I should have said that the property would be in need of refurbishment....
    01-07-2020, 17:31 PM