Stephanie Charman
Stephanie Charman looks at what the future holds for the Help to Buy schemes, which have helped so many people onto the property ladder.
Now that the government has confirmed it will end the Help to Buy: Mortgage Guarantee Scheme, or Help to Buy 2, at the end of 2016, many are wondering what the future holds for the first-time buyer market after the scheme has helped so many people onto the property ladder.
Launched in 2014, to help revitalise a sluggish high-LTV market and support first-time buyers, Help to Buy 2 was a scheme in which lenders could purchase a guarantee from the government to cover potential losses on high LTV loans. Should the borrower default, the lender could then claim back the money from the government on loans between 80 and 90 percent.
The announcement of Help to Buy 2’s conclusion has seen a rush of first-time buyers to the market. September saw the number of first-time buyer valuations rise by 18.7% year on year, outstripping the rise in remortgages and buy-to-let activity combined.
Has the Help to Buy package so far achieved its aim?
September’s figures reveal that between all the Help to Buy schemes, which included Shared Ownership and the Help to Buy ISA, over 185,000 people have been able to buy a new home. This was based on the number of completions that can be attributed to the schemes, of which 150,000 were for first-time buyers.
These figures suggests that the goal of the government’s Help to Buy package has mostly been achieved, in that it has helped those looking to get their first foot on the property ladder. This is supported by an average house price for purchases of £191,000, highlighting how the schemes have targeted responsible lending to first-time buyers who buy smaller and often cheaper properties.
According to the government, the Help to Buy ISA scheme has also helped more than 650,000 people save towards their own home. But recent negative publicity has asked whether the scheme is achieving its primary purpose, as the government bonus of 25% is only paid after the completion of a sale, rather than the payment of a deposits, which many argue was its original goal.
Is the market ready for life without Help to Buy 2?
The Chancellor said that despite the closure of Help to Buy 2, the scheme had been successful in achieving its aims, which was to fill the gap until lenders began offering higher LTV loans and the market bounced back. Mr Hammond believes this has now happened, with more than 30 lenders currently lending without the assistance of the scheme: “The mortgage market has become less reliant on the scheme as confidence has returned.”
But figures reveal a decline in the number of 95% LTV products in the market between March and August 2016, dropping from 270 to 225. This does however remain significantly higher than the 195 in August 2015, as well as figures from the Bank of England showing a small increase in business between 90% and 95% LTV.
So whether the market is ready for life without Help to Buy 2 is not fully clear. The autumn statement may indeed look to address the risk to the high LTV market, perhaps with the addition or alteration of housing schemes. Either way, the support of the low deposit arena is crucial, with the current affordability issues facing first-time buyers in the UK.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Stephanie Charman talks remortgages: a sector that has seen a recent surge in interest from consumers because of fixed-rate lender competition and an even lower Bank of England base rate
There is no doubt that “remortgage” is currently the word on advisers’ lips. Some are even seeing remortgages now making up nearly half of their total business. After recent CACI data also surprised many by revealing that the UK mortgage market is expected to see over £14bn worth of maturities in September 2016, the time for many of your clients to remortgage could be now.
Regular contact
Staying in regular contact with your clients is key to creating opportunities for them to save money through a remortgage. Reviewing products with your client when their mortgage is due to come to cessation, is also essential in maintaining business levels and ensuring that you are always in mind when it comes to your client and their finances.
Timing is key, and many advisers are finding that simply reminding clients that they are there to help them make the right decision is a winning strategy. Keeping an eye out for their lifestyle events can ensure you offer a review of their finances at the right time for them and you.
Rate changes
A rise in the Bank of England base interest rate (BBR), something not yet seen in years, would normally be the trigger for a remortgage rush, as borrowers grab a fixed rate before SVRs climb. Instead, it has conversely been the drop in BBR which has triggered a surge in remortgage opportunities, as lenders renew competition and offer even lower rates on fixed rate deals.
Switching to a new deal might not just save your client money, but also give them the opportunity to fix their interest rate to a low figure for the next several years. As a network, we saw a big increase in remortgage business compared with last year, which shows that advisers are already making the most of the opportunity to help their client move to a better deal.
Avoiding SVR
Standard Variable Rates, or “follow-on rates” as they are sometimes known, are currently sitting at somewhere between 3 and 7 per cent. Although these are still historically low, not all lenders have passed on the Bank of England base rate cut, so for some borrowers the margin between SVR and base rate has effectively increased. Meanwhile fixed rates continue to drop, which makes this an opportune time to remortgage for many clients to possibly secure a better deal and long term peace of mind.
Network and lender support
Many lenders have also improved their systems, underwriter access and general application process to make it as efficient as possible. They recognise that with advisers so busy at the moment, saving time wherever possible is paramount to ensuring brokers and their clients are able to make the most of the remortgage opportunities available.
Barclays amongst other lenders is making the most of the recent CACI data, offering an SVR comparison tool, to provide you with a complete overview of current SVRs that some of your clients may be paying.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Stephanie Charman highlights how Mortgage Intelligence has helped appointed representatives and Next Intelligence club members work through the number of changes in the BTL sector with additional support and services.
The BTL sector seems to have grown as fast as it has changed in recent years. There has been a raft of recent alterations to rules and guidance surrounding the sector, which has seen some complicated scenarios cropping up for advisers.
But we also know that BTL is a big part of what our advisers do at the moment, which is why we have done what we can to help them service clients effectively and grow their BTL business even further.
A winning combination
This year we have expanded our lender panel to ensure we provide a comprehensive offering for advisers in such a changing environment. We have several new lenders that have joined to provide new propositions and options for adviser clients, such as Fleet Mortgages and Kent Reliance who specialise in BTL lending.
But we also know that this makes understanding all the different lenders and what they offer a new challenge and keeping up to date can become time consuming. That is why advisers call our Broker Support Team to talk through the latest lenders. They are experts at knowing who might be able to help advisers in a variety of BTL scenarios.
We believe the winning combination of an expanding and comprehensive panel with our experts on the Broker Support Team will help more advisers not just service their clients effectively, but also save time calling around all the different lenders.
The hub of knowledge
Lenders are continuing to develop their criteria in response to market conditions and to prepare for future changes. We want to help advisers keep up to date with all the lender changes in the sector. That’s why we have created the fantastic new BTL Hub on Broker Zone, our adviser website for appointed representatives and club members.
This is the new home for BTL, where advisers can find everything they might need to understand any changes and get to grips with lender propositions and offerings. We also have recordings of all the latest BTL webinars, hosted by lenders, including Q&A with advisers.
With criteria changes a focus for many lenders in 2016, we have ensured that advisers are armed with all the latest knowledge to help clients. The BTL Hub is full of guides and datasheets on how lenders define a HMO, calculate affordability, exposure, rental calculations and general lender criteria and overviews.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Head of Mortgages and Insurance Stephanie Charman takes a look at clients with adverse history and what advisers can do to help them
There are many reasons why a client may have an adverse credit history and may need to consider a more complicated borrowing scenario. Knowing who you can turn to help your client in these circumstances is very important and we want to help you find the right solutions for your client wherever we can.
Why might clients with adverse credit need helping?
Someone with adverse credit will most likely have something on their credit history that could mean a regular high street lender will not want to lend to them. A low credit score can be detrimental when looking to borrow. This can be caused by something as simple as not being on the electoral roll, missing a bill payment or not having an established credit history, which is why helping your clients get ‘mortgage ready’ is really important.
Recent adverse is much more damaging to the client’s credit score as most lenders consider any adverse which is over six years old. Your client may also need to remortgage to consolidate existing credit, which may help them with their credit score in the long term but should be considered alongside other potential options. Bad credit also affects both parties if your client was named on an agreement that has caused adverse credit history, regardless of which party has caused the issue.
Who and what can help clients with an adverse credit history?
As we all know, bad credit can be repaired. This can normally take two or three years, depending on the severity of the adverse credit, and some clients may have already attempted to repair their credit using credit cards, small loan, or a finance arrangement.
Some specialist lenders do not even use credit scoring on prospective borrowers, although they will still examine a client’s file. Some lenders that do this are Magellan Homeloans, Precise Mortgages, Kensington Mortgages and Aldermore. Some other main lenders will also look at mild adverse but still credit score. Positive Lending can also be used for second charges and on some adverse borrowing needs.
BTL lending is really tough on those with adverse credit, especially when the credit is caused through previous arrears, defaults, missed payments or CCJs. In this case, Precise Mortgages may consider the client under some circumstances.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Head of Mortgages and Insurance Stephanie Charman takes a look at the new Flood Re scheme, designed to help make flood insurance more affordable for those in high risk areas.
Although an agreement was made between the Government and the ABI in 2000 to make flood insurance widely available across the UK, it did not take into account the affordability issues that recent large scale flooding has highlighted for those in high-risk areas.
That is why the Government has launched the Flood Re scheme, created to offer affordable flood insurance to more than 350,000 high-risk homes. Partly funded by a recent increase in insurance premium tax, the scheme went live as of 4th April 2016.
Scheduled to be in place for a full 25 years, a big part of the scheme will be to help people improve their understanding of their own flood risk level and whether they can help reduce the risk by taking action themselves.
So what will Flood Re do?
The government has confirmed that the scheme’s main goals are:
- Ensure affordable flood cover is available to households at the highest risk of flooding
- Increase availability and choice, including insurers and products, for consumers
- Level the playing field for new entrants and existing insurers in the UK market
- Increase the flood preparedness of authorities, insurers and communities
After some small businesses suffered affordability issues following the latest winter floods, the government is now also looking at a similar scheme to be available for small to medium sized enterprises as well as homeowners.
This is great news for so many clients that may have struggled to get flood insurance for their home or business because of affordability.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Stephanie Charman takes a look at the latest developments on the government’s Lifetime ISA: A new savings account to help young people save for a house, or retirement.
How does it work?
As of April 2017, anyone between the ages of 18 and 40 will be able to open a Lifetime ISA, or “LISA”. Any savings put into the account before the account holder’s 50th birthday will also receive an added 25% bonus. There is no maximum monthly contribution, they can save as little or as much as they like, up to £4,000 per year. The total amount someone can save each year into all ISAs will also be increased to £20,000 as of April 2017.
What can it be used for?
The savings and the bonus can be used to either pay towards a deposit for a first home worth up to £450,000, or to help fund retirement. As with the Help to Buy ISA, the accounts are limited to one per person, as opposed to one per home, which means a couple can save twice as quickly if buying together. This has made it a popular move for young couples hoping to plan for not just their first home, but their future as well.
What if they already have a Help to Buy ISA?
If they already have a Help to Buy ISA, the funds can be transferred over to the Lifetime ISA in 2017, or they can continue to save in both. But only one account will receive the bonus for a first home. So if they have both and intend to use the bonus on the Help to Buy ISA to go towards their deposit for a home, the Lifetime ISA must be used for retirement in order to receive the bonus on that account.
Can they also have a pension?
The treasury is keen to remind savers that the account is not a pension and therefore can exist and run alongside other long-term savings such as private pensions. Savers can still pay into a pension and get tax relief on their contributions.
Who will offer the Lifetime ISA?
The details surrounding who will offer the LISA is still being worked out. But as with the Help to Buy ISA, it will likely generally be offered by banks and building societies. The treasury says that the new LISA will be like other ISAs, in that the funds will contain a mixture of stocks, shares and cash. When the funds are eventually withdrawn, the returns will be free of tax.
When will they receive their LISA bonus?
If using the account for retirement, all the savings can be withdrawn tax free, including the 25% bonus, once they have reached their 60th birthday. It is possible to withdraw the funds before this time, but the governmental bonus will be lost, including any interest or growth gained. There will also be a 5% charge added if the funds are withdrawn before their 60th birthday.
If any or all of the savings are being used to go towards a residential property, the funds can be withdrawn at any time, as long as the account has been held for over 12 months, and will retain the full bonus. In this case, they will need to claim their bonus through their solicitor or conveyancer, which may be subject to additional fees.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Stephanie Charman takes a quick look at five of the most important tax and savings announcements to come out of George Osborne’s 2016 March budget.
The 2016 budget may have passed by without turning too many heads, but there were fact in some key changes worth noting:
Capital Gains Tax
The headline rate of Capital Gains Tax (CGT) is to be cut from 28% to 20%. CGT is an annual tax on the gain made from selling an asset (such as a person possession, second home or shares), which has gone up in value. It was also announced that the basic rate of CGT will be cut from the current 18% to 10% at the beginning of the new tax year. The reduction in CGT will not apply to residential property, which means the previous higher rates will still apply to gains from additional property.
Lifetime ISA
George Osborne announced the introduction of a new Lifetime ISA, to be launched in April 2017. This is to go alongside the Help to Buy ISA, which is available to help those saving for a deposit for a home. But the new Lifetime ISA, or “LISA”, can be used to save for retirement as well as a property, without paying tax on the interest earned. The new account is available to those aged 18 to 40 and offers a bonus of 25% on any savings, up to £4,000 a year, deposited before the account holder turns 50.
Tax Threshold Increase
One of the biggest announcements from the Chancellor was that the higher rate of tax threshold is to be raised to £45,000. This is a move surrounded by political controversy, especially in conjunction with the planned cuts in disability benefits. These changes are expected to save half a million people money, and are to be phased in to increase from £42,385 to £43,000 in 2016 and finally to £45,000 by this time next year.
Stamp Duty
As well as confirming the planned 3% stamp duty land tax (SDLT) surcharge on all purchases of additional homes, the government also withdrew the originally planned exemption for those with 15 properties or more. Osborne also announced that purchasers who move before they sell their main residence now have 36 months to sell and reclaim the extra stamp duty paid.
Personal Allowance
As well as the increase in the higher rate tax threshold, George Osborne announced that the Personal Allowance will increase to £11,500, from £10,600. This is the amount of money you must earn before you start paying income tax. The threshold will rise to £11,000 in 2016, eventually climbing to the new figure by April 2017.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Head of Mortgages and Insurance Stephanie Charman highlights the main reasons your client’s home insurance claim may be rejected and the importance of getting to know their policies.
Research from the Association of British Insurers (ABI) has revealed that more than one in five home insurance claims are rejected. The figures have been published after an analysis of 1.8 million claims made during 2013 and 2014.
But under what grounds might your client’s claim be rejected and what can they do to protect themselves?
Wear and tear
The ABI stated that this was the main reason for home insurance claim rejections. If the policy holder fails to maintain the property to an agreed level, then this can lead to wear and tear that would not be covered.
Storm damage caused to a property’s roof might well be a valid reason to claim, but damage caused from a lack of repair may not be. In a nutshell, home insurance is there to cover clients in the event of a sudden or unexpected event such as a violent storm, not for the repair of property over time.
Claiming below the excess
One of the other reasons for invalid claims highlighted by the ABI, was when the value of the claim fell below the policy excess. The excess is of course the amount the policyholder must pay out when a claim is made.
Being tempted into increasing the excess when the policy is taken out in order to decrease the premiums might seem financially beneficial, especially if they don’t need to make a claim. But it can also increase their chances of non-payment when they eventually do, especially if the excess covers a relatively wide variety of circumstances.
The wrong level of cover
Unlike motor insurance which covers specific events and has a claim rate of 99%, home insurance often covers a number of differing circumstances. But it may also not cover damage from pets, to fences and boiler repair, which may come as a surprise to some.
Prioritising price, rushing through the application or even not reading the policy documents thoroughly when policies are taken out or renewed, can leave policyholders without the level of cover they thought they had.
Get to know the policy…
The ABI are using these statistics to raise awareness among consumers about purchasing home insurance and to help improve transparency and build trust. But it is still a complicated area. That is why talking your client through the options is important to ensure they have the right sort of cover for their circumstances.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Head of Mortgages and Insurance Stephanie Charman takes a look at the upcoming stamp duty tax changes on buy-to-let and second homes.
As of 1 April 2016 the stamp duty land tax (SDLT) on second homes and buy-to-let purchases will be increased by 3%. If that was not enough for landlords, the government has also announced that as of April 2017 the tax relief claimed by landlords on their financial costs will be capped at 20%, instead of the higher rate of 45%, which will be phased out over the following years.
Chancellor George Osborne also added that the current ‘wear and tear’ allowance afforded to those letting out furnished property would be scrapped and replaced with tax relief against the cost of replacing furnishings. With so many changes on tax all within a small time frame, it has created a complicated scenario for many landlords, who may be seeking the financial guidance of an adviser to ensure they make the right decisions.
In an effort to curb incentives for housing investment, the government has introduced the tax changes to “level the playing field” between landlords and first-time buyers. This has caused some controversy within the industry as some feel the changes are unfairly targeting landlords when the housing crisis is also affected by many other factors.
Some landlords are even considering incorporation and setting up a limited company to apply for their mortgages, to ensure their portfolio remains as tax efficient as possible. But this is a complicated area and these changes will affect each landlord differently.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Stephanie Charman highlights some useful ways to help landlords check their tenants’ ‘right to rent’.
From 1 February 2016 (December 1st 2014 in the West Midlands), landlords that let private rented accommodation must ensure they have completed a ‘right to rent check’ for all new tenants that began their tenancy on or after 1 February 2016. This is to ensure that the landlord’s tenants have the right to live in the UK before letting the property to them.
The government has designed the scheme with the help of a panel of industry experts, which included trade bodies, charities and local authorities. The government wants to update the landlord code of practice to include changes to the acceptable document list tenants can provide, whilst also making it as user friendly as possible. This is all part of the wider, stronger but fairer reform on immigration that the government wish to make.
Who is responsible?
Currently, any landlord that is found letting property to someone who isn’t a relevant national or in the country lawfully, could receive a penalty of up to £3,000 per tenant. For those using agents to rent out their property, they must ensure that the letting agents carry out the checks if they’re acting on a landlord’s behalf and have agreed to do them. These checks also apply when renting out a part or all of their home when taking in a lodger or subletting.
Someone who isn’t a relevant national but has permission to enter or remain in the UK also has a right to rent, but follow-up checks must be made by the landlord or agent. A relevant national can be either a British citizen, EEA national or a Swiss national. All of these can rent accommodation, but evidence that they are a relevant national must still be provided.
What is the right to rent tool?
When talking to your clients about their buy to let property, it is good for them to know that there is currently an online tool which can help them. The tool guides landlords through the process of checking if their tenants have the right to rent residential property in the UK, which will be mandatory procedure from 1 February. If they find that a tenant can no longer legally rent the property, they are asked to contact the Home Office, or face a fine for non-disclosure.
The government have released an online tool and a checklist . Both these tools will help landlords prepare for any checks imposed and ensure they have all the necessary documents and have asked all the questions of their tenants. There is also a full list of acceptable documents for proving relevant nationality available.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.