Last April the government introduced one of the most far-reaching and important changes to the mortgage industry for decades: the Mortgage Market Review.

 

The rules, which affect every broker, lender and borrower, were designed to address the lax lending standards that were in place in the lead up to the 2008 financial crisis. They focus on affordability. Self-certified mortgages are out. Borrowers now have to prove to lenders that they have the money to service their loans. That means that all loans are income verified and personal expenditure is scrutinised more than ever before.

 

So what do we, at LMB, think about this, and what have our experiences over the last year been?

 

We are absolutely in favour of sensible regulation and sensible lending. The pre-2008 mortgage market was in need of reform. Our philosophy is that we are there to support our clients for the long term, and we would always make sure that the deals we negotiate for our clients are affordable and sensible.

 

The borrowing process has become much more lengthy and involved and it is certainly true that some loans that would have been approved before the changes came into force would not go though today.

 

On the whole, things have been manageable although there have been a few odd queries from lenders and some irrational decisions. For example we have encountered situations where lenders have penalised a borrower for a savings standing order on their bank statement and reduced lending as a consequence. However having a good broker on hand to negotiate on your behalf can usually sort things like this out.  We have always managed to help lenders see sense.

 

More controversially, lenders may take into account voluntary pension contributions when calculating affordability. In our view this is not helpful as now more than ever people should be encouraged to save for their retirement, and we certainly do not recommend that our clients stop paying into their pensions to help fund a property purchase.

 

We also think that the self-employed and people who have suffered in the past from an adverse credit score would more than ever benefit from specialist broker advice.

 

There is one easy bit of advice that we can give to everybody: if you can, reduce the amount you pay in loans. Lenders will scrutinise the amount you are paying to service personal debt such as bank loans, credit cards and car finance agreements. Sensible management of debt is more easily recommended than implemented, but every little helps.

 

If you want to find out more about how the Mortgage Market Review affects you, pick up the phone or send off an email. We will be happy to go through it with you.

After the longest UK election campaign in history it’s now all over. The people have spoken and cast their votes. Now all that remains, as Bill Clinton once said, is for politicians to work out just what it was that the people actually said.

 

Property has been at the forefront of the parties’ campaigns. The Tories have sought to position themselves as the friends to the property industry, while Labour have focused their fire on perceived fat cats with their “mansion tax”.

 

Here is a quick roundup of the major property-related points that have been raised during the campaign.

 

Chancellor George Osborne has been playing a long game. In December he unveiled a stamp duty overhaul designed to benefit most homebuyers. The party has also promised to extend Help to Buy and has pledged more first-time homes for young buyers.

 

Their most eye-catching property-related policy, however, took almost all commentators by surprise. Their plan to extend right-to-buy to housing association tenants has been extremely controversial. A vintage Conservative policy or a disaster waiting to happen for social housing? It depends which newspaper you read.

 

Labour has made a point of looking at the top of the property market with their so-called “mansion tax” heading up the bill. The proposed tax is a new levy on property worth more than £2 million. The more expensive your property, the more you pay. For example, somebody owning a home worth between £1 million and £2 million is likely to pay about £250 a month, while owners of homes worth tens of millions, and second-property owners will pay much more.  Labour say the tax is justified to fund public services such as the NHS, but critics have claimed it will lead to an “exodus of wealth”.

 

Labour have also pledged to help first time buyers by reducing stamp duty on properties worth up to £300,000 to zero.  They claim their policies will lead to a “building boom” that will solve the “housing crisis.”

 

The Liberal Democrats are promising to boost new property development. They want to build 300,000 new homes a year (100,000 more than the other main parties) in ten new garden cities.

 

UKIP want to release brownfield sites for redevelopment while the Greens are promising their own property revolution: they want to build half a million rentable social housing units.

 

While there is uncertainty now, one thing we know for sure is that the property market is still buoyant in London. However in a time of flux like this it is important to take a level-head view of the market. Advice from the experts at LMB is valuable now more than ever.

 

 

 

 

 

The Bank of England’s recent decision to keep the Base Rate at its record low of 0.5% has prompted a significant change in borrowing behaviour among British homeowners. Research from The London Mortgage Brokers have shown that UK borrowers are increasingly opting for variable or tracker rate mortgages over fixed rate products and here are the five main reasons why:

 

 

1. Base rate at 0.5%

 

The Bank of England Base rate is as low as it has ever been and is not likely to increase until at least the middle of next year.

 

 

2. Slow rise

 

Even when the Bank of England votes to increase the base rate in the New Year, homeowners will still have the reassurance that the rises will be incremental, giving borrowers some time to adjust and adapt to greater monthly outgoings.

 

 

3. Flexibility

 

Some tracker rate products offer the borrower the flexibility to make overpayments of more than 10% per annum (which is usually the cap with fixed rate products), allowing a more ‘user-friendly’ management of income and outgoings in line with household budgets.

 

 

4. No early redemption penalties

 

Some tracker products have early redemption penalties whatsoever, meaning that at any point during the term, the borrower would be able to switch to a fixed rate product either with the same or another lender.

 

 

5. Rock-bottom rates

 

Variable rates currently offer the lowest possible rates on the market. As competition between high street lenders heats up in an attempt to boost end of year figures, rates on the whole are at an all-time low.  However, with a difference of around 0.5% between the fixed and tracker options, in some instances there would need to be at least three or four rate rises for a two-year fixed rate to work out cheaper than a two year tracker, which as it stands in the current macro-climate, looks increasingly unlikely over this period.

 

 

Should I take a tracker rate?

 

When deciding on any mortgage product, it is important to seek impartial advice from an independent adviser who can analyse your personal circumstances and choose a mortgage that suits your current and projected future income.  Although tracker rates are usually substantially cheaper than fixed rate alternatives, they also carry greater risk and therefore need to be considered with the help of an expert adviser.

 

 

To talk to us about accessing a low rate tracker mortgage, call us on (0) 20 7412 8930  or email enquiries@thelmb.co.uk.