Product Development Manager Nathan Reilly takes a look back at an eventful 2017 in the mortgage market, and highlights how advisers have helped their clients this year
2017 was another big year for the mortgage industry, with an array of complicated changes that have put even more value on intermediaries. Advisers have responded by keeping on top of all the ramifications for their clients and spending time with industry representatives and experts to fully understand the details.
Below is a round-up of all the big 2017 announcements. We have supported advisers throughout the year by giving them access to relevant events, such as mortgage workshops and webinars, designed to help absorb the changes. This means that no matter what the industry throws our way, advisers have the support needed to continue delivering the same first-class advice to clients…
Help to Buy
The year began with the end of the Help to Buy: Mortgage Guarantee scheme, as lenders began supporting more borrowers with small deposits. But the Help to Buy: Equity Loan scheme was also extended to 2021. This is great news for those struggling to find the required deposit to buy their first home.
In autumn, Theresa May promised to boost the Help to Buy scheme with an additional £10bn funding, which she confirmed would help another 135,000 people onto the ladder. The Help to Buy ISA is also continuing to be used by plenty of first-time buyers to boost their savings and save money on their house purchase.
Stamp Duty
One of the big mortgage announcements in November’s Budget was the scrapping of stamp duty for first-time buyers. The Chancellor’s flagship budget policy will mean those buying a home worth less than £300,000 will no longer need to pay stamp duty land tax, which according to the government will encompass 85% of those looking to buy their first home. The cut will also apply to the first £300,000 on properties valued up to £500,000, in areas such as London, purchased by first-time buyers.
There was speculation leading up to the Budget that the tax would be scrapped completely, in an effort to support first-time buyers and to make home-owning more affordable for young people in the UK. Solving the housing crisis in the UK was always going to be one of the main focuses of the budget, and this announcement by the Chancellor should go towards increasing first-time buyer transactions in the UK.
Base Rate
Obviously a base rate rise affects everyone. But homeowners especially will have been looking at their current mortgage rate a bit more closely. With rates at record lows for so long, it is only natural that advisers would get calls from clients, asking how this would affect their mortgage.
The move raised some big questions for borrowers, least of all the possibility of another rise in the near future. Those borrowers financing mortgage repayments on standard variable rates (SVR) may have already seen their repayments increase, with those on tracker rates even more likely to have been affected.
Remortgages and Product Transfers
Even after the base rate was increased, the opportunities for homeowners to save money by remortgaging has continued throughout the year, with lenders competing to offer competitive fixed rates and low cost borrowing prevailing. We have been helping where we can, by supporting client touchpoints and encouraging advisers to reach out to clients, especially those with products nearing cessation.
Tax Relief
April saw the first stage in the reduction in tax relief for landlords, which is scheduled to be phased in over a four year period. This move is part of the Government’s plan to redress the balance between investors and buyers in the housing market, by reducing the tax relief landlords received on their mortgage payments.
By April 2020, the tax relief that landlords of residential properties receive for finance costs will start to be restricted to 20%. In the first quarter of 2017, this created increased interest from investors considering moving their portfolio over to a limited company. Limited companies set up for the sole purpose of buying and letting property, will not be affected by the changes.
PRA changes
One of the big impacts in 2017 came in the form of new rules on lending to portfolio landlords. From October 1st, extra stress testing is used for those with four or more mortgaged properties. Some lenders however have approached the new rules differently which may have affected those outside of this definition.
The additional testing has meant more in-depth affordability checks, taking into account properties, as well as personal income and tax liabilities. We held a series of workshops to help advisers understand the changes and how each lender would be altering their criteria as a result. This meant they could go back to their clients and help them prepare their documents.
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