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    It is with regret that I have to report that Paragon have confirmed in their amended criteria that they will currently not accept any property where it is let to students, I had originally believed that this related to HMO’s & MUFB’s but clearly to avoid misunderstandings this extends to property which are single family properties but occupied by students.

    For landlords involved in this niche sector and require investment valuations the withdrawal by Paragon is a significant loss to the funding sector.

    Comment


      Normally I am sceptical about Mystic meg reports on boom and gloom but the following has clearly been well researched and in the short term , the degree of correction in property prices is harsher than I have believed. I know only time will tell but this is worth a read but holding a stiff drink in the other hand!

      UK house prices to drop 13 per cent this year, CEBR predicts

      by: Shekina Tuahene

      • 14/04/2020

      House prices across the UK will fall by 13 per cent by the end of this year as consumers scale back on expenditure, the Centre for Economics and Business Research (CEBR) has predicted.

      The consultancy firm based its prediction on research from the Cambridge-INET institute which suggested the average UK worker should expect to face a 35 per cent loss of income over the next four months, as a result of the coronavirus pandemic.

      Analysis published by CEBR last week also showed economic activity had gone down by 31 per cent since the lockdown.

      Some regions hit harder

      The firm said some housing markets would be worse hit than others as the loss of jobs and incomes are not expected to affect the whole of the UK equally.

      It is those who work in sectors such as manufacturing, construction, retail, accommodation, food services and other services sectors who are most likely to face a change in income as a result of the coronavirus pandemic.

      According to CEBR, Yorkshire and Humber and Northern Ireland have the highest shares of employment within these industries at 60 per cent and 59 per cent, respectively.

      Wales and the East of England are the next two regions with the highest employment shares in these sectors with 55 per cent, and 54 per cent. This is above the national average of 48 per cent.

      As a result, CEBR said the housing markets in these regions faced the biggest potential disruption due to job and income losses in the months ahead.

      Mortgage borrowers vs renters

      The crisis is expected to have different impacts on renters and those with a mortgage, CEBR said.

      Some 47 per cent of private renters are under the age of 35, and a study from the University of Cambridge found those under 30 were most likely to have already lost their job or had their hours reduced.

      CEBR said given that the average private renter household in England spends more than a third of their income on rent, even a temporary reduction in incomes could lead to tenants becoming unable to pay their rent.


      The CEBR report said: “Once households will burn through their emergency savings, they will have to make tough choices on where to cut down expenditure.

      “Housing is the single biggest expenditure item faced by most households, which means that the shortfall in incomes has a tremendous potential to disrupt the UK’s housing markets

      Comment


        Here is a summary of all changes announced today by various lenders.
        Lenders who have paused accepting new mortgage applications:
        • Canada Life are temporarily closing Lifestyle Gold Plus, Lifestyle Platinum, all Voluntary Select Options and all Prestige Options to new business
        • Paragon Bank has temporarily withdrawn lending on Short-Term finance, Holiday Let and will also not consider properties which either are or will be let to students

        Lenders who have put in place occupation, status or property restrictions:
        • Barclays have made the following changes to their assessment of income and affordability for any of your clients who want to purchase a new home, remortgage or borrow more on their existing mortgage:
          • Annual and Quarterly bonus will continue to be used for income multiples but the proportion that will be used to support affordability will be reduced to 25%
          • Where an applicant has been furloughed, they will accept 80% of basic income up to £30,000 p.a. in line with the government scheme. Where documentary proof can be provided to evidence employer ‘top-up’ contributions, they will accept this additional income for affordability. Overtime, commission, bonuses or allowances are not able to be used for affordability purposes while the applicant is furloughed.
          • For self-employed applicants, where they are eligible for and either utilising or intending to utilise the government scheme, they will allow 80% of income up to £30,000 in line with the scheme rules. For all self-employed applications, they will now request 3 months’ business bank statements in addition to the standards self-employed income

        LTV Restrictions as of 14th April

        Residential
        • Swansea Building Society are accepting Residential Purchase and Remortgage applications up to 80% LTV
        Buy to Let
        • Swansea Building Society are accepting Buy to Let, Holiday Let Purchase and Remortgage applications up to 70% LTV
        Equity Release
        • Canada Life are from today changing various LTV’s across their Lifestyle Options and Capital Select Options. Check against each product for details of the individual LTV’s

        Comment


          Skipton Building Society has announced that for the present they have made significant changes to their criteria amongst which isthe decision to exclude applications on property including HMO’s where the Tenancy will be for the student market.
          The decision comes on top of the same restrictions on student Lets disclosed at the beginning of the week for Paragon, I do not believe that these two will be the only ones who ultimately decide not to consider this sector of the BtL market until normal market conditions return.

          Comment


            I am pleased to report that Precise Mortgages & Kent Reliance ( Part of One Savings Bank) have today reopened for new business across both Residential & BtL sectors, the only negative element is that loans are presently restricted to a maximum loan of 60% and certain exclusions to eligibility.

            Comment


              I have received a briefing note issued to brokers by Mortgage Broker Tools and in light of what I have posted in recent weeks I thought it might be of general help in understanding some of the reasons which lie behind the approach being taken by lenders for Residential mortgages but also spills over to BtL.

              Covid-19 and impact on affordability, criteria and mortgage lending.

              As a result of the Covid-19 lockdown, the lack of physical valuations has caused a huge contraction in LTV's across the market. As an inevitable consequence, lenders are now finding ways to expand the use of desktop valuations/AVMs.

              It seems that the purchase side has been affected the hardest as remortgages more often took advantage of AVMs. HSBC have a facility for an AVM up to £ 2m value.

              The next wave of changes however will be for bonuses, overtime and commission, as lenders stop taking this additional income into account. So far, it doesn't seem as though Nat West, Nationwide and Coventry are changing their affordability calculators to reflect this. Brokers will, however, need to know which lenders take this into account and which lenders don’t. As an example, HSBC will allow additional income for NHS workers, which is to be commended, of course.

              Another class of clients to be hit from an underwriting perspective will be the self employed or Ltd Company Directors. Lenders are unlikely to base a case on 2018/2019 net profit figures when the applicant is in an industry with no work. Again HSBC are first out with a new plan - asking for an applicant’s last 3 months business bank statements and each case will be underwritten individually - potentially a sign of things to come.


              Hope this is of interest and I will return to posting on Monday , now its me time and a glass of merlot.Have a great weekend

              Comment


                Clydesdale Bank announce temporary changes to residential criteria.

                Clydesdale have announced changes to their criteria, what should be noted and which is becoming common practice is the restriction or indeed exclusion of income where employment is currently furloughed , this in my opinion almost excludes the lender from being considered a suitable lender to approach unless the primary borrower has a significant income.

                Key Points:
                • We are now able to accept residential purchase applications to 65% and residential remortgage applications to 75% LTV.
                • BTL purchase and remortgage applications to 60%.
                • A desktop or automated valuation will be used. Please note the maximum property value on all cases is £500,000

                We are temporarily unable to accept the following:
                • Any form of variable income (overtime, commission, bonus). Affordability will only be assessed on basic salary.
                • Where an employed customer is designated as furloughed, or a self-employed customer has applied for the self-employed income support scheme, their income will not be used in the affordability assessment.
                • Personal Income will not be accepted on BTL applications where there is a rental shortfall between 100% and 145%.

                Self-employed customers will also need to provide their last 3 months business bank statements to evidence continued turnover.”

                Comment


                  What does this 100%-145% mean ? I thought all BTL mortgage lenders required the gross monthly rent to cover 155% of monthly mortgage payments

                  " Personal Income will not be accepted on BTL applications where there is a rental shortfall between 100% and 145%."

                  Comment


                    Hi Gordon999, Lenders todate have operated rental stress calculations based on whether the applicant has either less than four BtL properties or above with a variance on whether it is a Ltd Co application . The standard is 125% for the 1st category and the second is up to 145%, however to complicate the assessment some lenders will consider Top Slicing whereby a percentage of the applicants primary income might be considered if the rental failed to meet the indicated stress calculations. ( where 5 year deals were being offered these would have a lower stress rate) .
                    I must confess I have not come across the need for 155% which based on a pay rate plus a premium of say 2% or the actual product pay rate whichever is the higher would make the affordability almost impossible.

                    The second point indicates that if the rental was insufficient between these two levels the lender would not include top Slicing to allow the figures to be sufficient to get the loan required.

                    Personally I have never felt it prudent to involve an element of subsidy from earned income to meet the borrowing for BtL; either a property is self supporting or it’s not but others clearly take a different view but this could then impact on the ability to meet mortgage costs for both residential and buy to Let should difficulties be experienced like those whose main employment may be furloughed and be capped at 80% or a max of £2500.

                    Comment


                      HSBC removes 95% Loan to Value facility and withdraws from the Buy to Let sector during the current crisis.


                      "We cannot currently accept any applications for a loan of more than 90% of the property value, or for a buy-to-let mortgage."
                      HSBC has announced that it has removed its 95% LTV product range from sale for all new business applications.

                      HSBC is also unable to accept applications for buy-to-let mortgages during the Covid-19 outbreak due to limitations on physical valuations

                      Comment


                        Bank of Ireland changes its position on applicants whose employment is furloughed

                        “The bank will assess the income of furloughed borrowers based on 80 per cent of their basic salary up to a maximum of £2,500 per month or £30,000 a year or 100 per cent of the salary where the employer is topping up the furloughed amount. This will be subject to evidence provided.

                        Bonuses, overtime and dividends will be excluded from the income assessment.

                        Support for borrowers

                        Customers will also be able to complete product transfers while on a payment break and this can be done through brokers. Brokers will have to contact the bank directly.

                        Illustrations and offers will then be emailed to the broker, and customers can sign electronically, eliminating the need to send documents in the post.

                        BOI UK will also give customers who have exchanged contracts the option to extend their mortgage offer for up to three months if necessary, to allow them to move at a later date.

                        Either a customer or their broker can complete the request form and both as well as the solicitor, will receive a confirmation letter when processed.

                        Bank of Ireland UK continues to lend up to a maximum of 85 per cent loan-to-value (LTV) across all new residential mortgages and further advances. For buy to let, this is limited to 75 per cent.

                        Desktop valuations also remain in place.

                        Iain Smith (pictured), head of intermediaries at Bank of Ireland, UK: “We’re continuing to work very closely with brokers and be there for them during these unprecedented times.

                        “The continuity of our services remains our top priority, and our business development managers will be contacting intermediaries to explain how we can support them and their customers.”

                        Comment


                          Barclays have announced an increase in the maximum loan to 80% with changes to the product rates.

                          Comment


                            A lender is set to launch a Vulnerability Calculator to help mortgage advisors provide a more accurate advisory service to assist clients seeking mortgage funding. Clearly I like other brokers cannot give a seal of approval until it is launched but given the genuine uncertainties which everyone is and will be facing anything which can help in deciding what is the most appropriate funding for each potential borrower.

                            Here at Viva Retirement we are always trying to push ourselves and the sector to raise standards.



                            As the client is at the heart of what we do, we have taken a lot of time to build what we believe is the sector’s first vulnerability calculator.

                            We are very proud to say that we will be using this calculator for all business going forward.

                            It will significantly contribute to helping identify vulnerability and giving clear instruction to the adviser on how best to deal with clients identified as vulnerable, or at a higher risk of vulnerability, to make sure that the client is looked after appropriately.

                            As with most companies, Viva has always had a vulnerability policy in place, but we found that some aspects were very rigid with age being the main driver followed by major changes in client circumstance, while other factors were being left open to interpretation by the adviser.

                            In reality, this makes it hard to take into consideration many variable factors that have an impact when assessing vulnerability and so we have radically changed the way that we approach this topic to give it the importance that it should rightly have.

                            Scoring of vulnerability

                            Pilot results have validated this approach and we are pleased to say that this will be launched imminently.

                            There are now a series of questions built into our fact find, the answers to which will give a total scoring and will determine the outcome of how each client is dealt with.

                            Each question has a specific weighting depending on how important it is to the financial planning that is taking place.

                            These questions now include things like looking at the previous financial situation, if debt management was ever in place, third party involvement and if the client already has a lifetime mortgage.

                            No grey areas

                            The difference with this calculator is that there will no longer be any ‘grey’ areas of assessing vulnerability and each output will direct the adviser to a certain course of action.

                            We are very excited by this development as we are committed to our ethos; treating each client as if they were our own parents.

                            Comment


                              Great way to end a Monday, BM Solutions are returning to lend up to 75% for remortgages with effect from Wednesday 29th April but purchase applications remain at 60%.
                              There are a few other positives which I will update tomorrow.

                              Comment


                                Whilst my postings might have given the impression that the world was about to fall (or at least the Buy to Let mortgage market) I thought I would pass on some positive news.

                                Although sadly some niche lenders have for the present withdrawn from the market for both residential and BtL mortgages I am able to confirm that slightly over 85% of those participating in one or both of these sectors remain open for business: whilst the norm maximum for residential purchases are restricted to 90% there are a very small minority of lenders who will consider up to 95% and for Buy to Let it is very much 75% as standard with one exception who still market an 80% , I am refraining from mentioning any lenders given the state of flux that some are presently operating and there may be a very small number of lenders outside the numbers mentioned who have yet to check the information normally supplied to Mortgage Sourcing organisations.

                                Focusing on BtL , I can confirm that there are presently at least 24 & 26 lenders open for business depending on whether the funding is for a purchase or remortgage.

                                Rates quoted as at today suggests the best 2 year fixed rate as being 1.59% and 5 year at 1.94% , there are numerous alternatives available where product fees might make it more attractive so do not be immediately swayed by the lowest rate , it could bite back as indeed taking note of the Reversionary rate , here there is a disparity amongst the main players. For those not inclined to consider a fixed rate , then the key attention of lenders is towards the short date rates with Tracker Rates as low as 2.49% ,Discounted 2.15% and Standard Variable Rates from 2.65%.

                                So all in all the market is to a greater extent open for business but the acid test will be the actual valuations being given via the AVM's or Desktop Valuations until such time as valuers can undertake physical valuations.

                                Hope the above is of some help.

                                Please note that rates do change and without normal notice being given by lenders so best to check very carefully as to what might be appropriate for you.

                                Comment

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