Specialist distributors team up with Castle Trust and Foundation Home Loans
Castle Trust offers short-term finance, second-charge loans, complex buy-to-let products and development finance.
The distributor said it has ‘rapid growth plans’ in place for 2020 which have been kicked off with its expansion into the North of England with the appointment of Simon Bancroft.
Meanwhile, Foundation Home Loans has partnered with packager firm, The Mortgage Trading Company.
The Mortgage Trading Company will have access to Foundation’s range of buy-to-let mortgage products including solutions for portfolio and limited company applicants.
Based in Leeds, The Mortgage Trading Company works with lenders in order to provide solutions for advisers’ more complex mortgage enquiries.
The Mortgage Trading Company also packages residential, second-charge, commercial and bridging finance deals.
Earlier this month, Foundation cut rates by up to 20 basis points on its individual and limited company fixed-rate product range for both single tenancy properties, as well as large HMOs and short-term lets.
Resist building on flood plains, Environment Agency urges
Speaking to BBC 4’s Today programme, Sir James Bevan said building new homes on flood plains should be resisted if it was possible.
If development had to proceed, homes should be designed to be more flood proof using techniques such as only putting garages on the ground floor to keep people safe upstairs. Trees can be planted and wetland habitats can be created or rivers could be restored to their natural shape, where they have been artificially straightened.
Bevan told the BBC that “almost all” residents can remain where they are and their flood defences improved but he wanted a conversation about their sustainability and protection in the long term. However, he added that some communities may need to be moved out of harm’s way if the risks became too great.
His views follow the widespread flooding following the recent storms, Ciara and Dennis.
Tenant demand for housing rockets while supply falls – ARLA
The average number of prospective tenants who registered for rental homes per branch rose by 57 per cent from 56 in December to 88 in January.
Year-on-year, demand for rental accommodation has increased by 21 per cent, rising from 73 in January 2019.
However, the number of properties managed per branch fell from 206 in December to 191 in January.
Supply had not been that low since July last year when it stood at 184.
Year-on-year supply was down from 197 in January 2019, but up from 184 in January 2018.
Given the supply and demand imbalance, tenants have seen the cost of renting rise.
More than 40 per cent of letting agents said they had seen landlords increase rents, compared to 32 per cent in December.
Year-on-year, this figure is up from 26 per cent in January 2019, and 19 per cent in January 2018
David Cox, ARLA Propertymark chief executive, said: “This month’s results are a huge blow for tenants. With demand increasing by more than half, but rental supply falling, rent costs are unsurprisingly being pushed up.
“Our recent research found that tenants could miss out on nearly half a million properties as more landlords exit the traditional private rented sector and turn towards short-term lets which will only serve to worsen the problem for those seeking longer term rental accommodation.
“With the Budget around the corner, it’s important the government works to make the private rented sector attractive to landlords again, rather than introducing complex legislation which ultimately squeezes the sector and leaves tenants worse off.”
ERCs: Understanding the bigger picture is vital for brokers – Murphy
These prompts may come from a range of sources, and they can sometimes present positive options for borrowers who are coming to the end of their fixed term.
However, there is a significant group of borrowers who are being prompted to switch early on in their deal, and this is where problems may arise.
Switching in-deal has found great success in the US, where mortgage deals tend to have longer fixed-terms and, more importantly, no early repayment charges (ERC). These two differences between the UK and US housing markets may seem small, but their impact is considerable, especially when considering the suitability of mortgage auto-switching tools.
US versus UK
The average fixed term for a US mortgage is 23 years, whereas in the UK the average fix is 3.5 years. American borrowers also do not face early repayment fees for choosing to change deal during their fixed term. In the UK, the early repayment charges can be significant with varying conditions between lenders.
Due to these fluctuating terms, there is no one-size-fits-all approach when it comes to remortgaging in the UK, and to assume otherwise could lead to expensive consequences for consumers, from a rise in overall expenditure to foreclosure due to unaccounted-for fees.
At the end of the day, whether or not a switch will benefit the client comes down to a full understanding of ERCs and both their short and long-term impacts, so that both brokers and their clients are as informed as possible when the time to remortgage comes around.
For example, individual borrowers’ circumstances play a vital role when it comes to switching deals mid-term – advisers need to fully understand all aspects of each product, along with the factors facing their clients, if they are to offer useful advice for those considering a switch.
The bigger picture
The prevalence of switching offers is a direct consequence of the continuously falling interest rates we have seen over the last three years, which have led to a steady rise in demand for in-deal switchers.
Homeowners are keen to capitalise on offers which promise lower overall repayment rates, but once the fees of valuations and solicitors have been factored into the final savings amount, an initial saving of £5,000 might work out to less than £20 a month. This considerably reduces the incentive for the homeowner to switch.
Furthermore, even if the proposed new deal does provide a significant saving on monthly payments, it is unlikely that this would be better in the long run. The saving generated by running down the current deal to the end of the ERC period, and then choosing the cheapest available product, would often be greater.
More simply, even if the new deal is cheaper than the current deal, it is still unlikely to be as cheap as waiting and taking the best deal at the end of the ERC period.
An adviser’s primary function within the mortgage process is to provide complete and trustworthy advice to their clients.
Without a proper understanding of ERCs and the costs associated with switching mortgages while the borrower is tied in to a deal, advisers are unable to fulfil this duty.
Barclays, Leeds BS and Nottingham BS shake up deals – rates round up
Barclays has made rate reductions across its range of two- to ten-year fixed rate deals by up to 0.11 per cent. Highlights from its rate cuts include a 1.29 per cent two-year deal at 75 per cent loan to value (LTV), down from 1.32 per cent for purchases, and a 2.23 per cent five-year fix at 90 per cent LTV down from 2.33 per cent for purchases and remortgages. Both deals come with a £999 product fee.
It has withdrawn a pair of two-year fixed deals at 1.50 per cent and 1.60 per cent at 60 and 75 per cent LTV respectively. Both deals had a minimum loan amount of £2m, and maximum loan amount of £5m and came with a £2,499 product fee.
It has also increased rates on 12 deals. For example, the bank’s five-year fixed rate buy-to-let purchase deal available up to 75 per cent loan to value has increased from 2.13 per cent to 2.22 per cent.
Its two-year fixed rate remortgage deal priced at 1.55 per cent at up to 85 per cent LTV, will increase to 1.65 per cent and on its purchase and remortgage range it has increased its two -year fix at 85 per cent, with a £2,499 product fee, from 2.09 per cent to 2.19 per cent.
Leeds Building Society
Targeting first-time buyers, Leeds Building Society has cut the cost of its 95 per cent LTV deal by 0.40 per cent to 2.84 per cent. The fee-free product also has a free standard valuation.
After the two-year fixed rate ends borrowers have the option of continuing on to a discounted deal for a further three years. The discount is 1.25 per cent off the mutual’s standard variable rate which is currently 5.69 per cent, giving borrowers a reduced rate of 4.44 per cent.
Borrowers are free to leave the three-year discount period at any time without paying an early repayment charge.
Nottingham Building Society
The Nottingham Building Society has cut rates on its retirement interest-only (RIO) mortgages and introduced new deals.
The mutual’s existing two-year fixed product has been cut to 3.20 per cent from 3.40 per cent and the three-year fixed is now 3.30 per cent down from 3.42 per cent. Both have no fees.
Its five-year fixed rate has dropped to 3.45 per cent from 3.55 per cent and comes with a £995 fee.
The society has added a three-year discount priced at 3.25 per cent to the existing two-year discount at 2.99 per cent. Both deals have no fees. It has also reintroduced a seven-year fixed product at 3.85 per cent with a £995 fee.
All of the RIO mortgages come with a free valuation and 40 per cent LTV limit.
Habito secures further funding from Russian billionaire
The mortgage broker has so far raised £25m from investors, according to the Telegraph, in its latest funding round. This brings its total capital raising to £50m.
A spokesperson for Habito told the Telegraph it had yet to finalise the deal and was continuing to look for additional capital.
Through his investment fund Gemini, Milner took an early small stake in the company which it is now looking to build on.
Existing investor Atomico and new backer Augmentum are also involved in the latest funding round.
Brightstar wins Sunday Times award for second year
The specialist distributor also received the highest score in the history of the competition.
Headquartered in Billericay, Essex, the Brightstar Group, which also incorporates Sirius Property Finance, secured a best companies score of 874.2 for people engagement this year, compared to the 844 it achieved last year.
It also received a Three Star Best Companies accreditation; a mark awarded to companies that have demonstrated extraordinary levels of workplace engagement.
This year, the Best Companies survey received 757 applications and surveyed nearly 400,000 employees. Brightstar, which was founded in 2011, was an early adopter of the Women in Finance Charter and has been an ambassador for the campaign.
It has also championed awareness about employee wellbeing and mental health issues.
In 2017 the business opened a wellbeing room to provide its people with a dedicated space to relax and unwind as part of its mental health action plan.
Clare Jupp (pictured), people development director at Brightstar Financial, said: “I would really like to thank our team who share an outstanding attitude to work and full commitment to giving a fantastic service experience to our introducers and clients.
“We believe that we have created a working environment and business culture where there is a strong sense of belonging and where our people feel cared for, motivated and rewarded for their contribution and achievement, but we are conscious that we cannot rest on our laurels, so to build on our fantastic performance from last year is particularly pleasing.”
Brokers’ views on the reality of high loan-to-income lending – analysis
Analysis of high loan to income (LTI) lending from the Financial Conduct Authority (FCA) released this week found that loans issued at 4.5 times income or above had grown by four to seven per cent since the LTI cap was introduced in 2014.
The cap restricted the number of mortgages advanced by a lender at 4.5 times income and above to 15 per cent of its overall book.
The regulator said this indicated lenders had directed their high LTI lending allowance to those with higher incomes, a suggestion backed up by mortgage brokers’ experiences.
The FCA’s data also showed that since the cap, the proportion of homemovers receiving an income stretch had increased, along with joint borrowers. The proportion of first-time buyers who have received an income stretch of 4.5 times or more had reduced. The regulator did not say, however, what proportion of joint borrowers were first-time buyers.
Mortgage Solutions spoke to mortgage brokers based around the country to find out how lenders were applying their high LTI lending.
First-time buyer not a factor
Overall, brokers said it was less to do with whether the borrower was a first-time buyer or homemover and more about how much money they earned.
Rachel Dixon, mortgage adviser and director of RH Dixon, based in Lemington Spa, said most of her clients generally secured loans around 4.5 to five times income, regardless of whether they were first-time buyers or not.
She said the most influential factors were earnings, deposit size and being joint applicants.
“I work in an engineering town, we have Jaguar Land Rover so the workforce is largely professionals earning good salaries, said Dixon.
“I place vanilla business, most of my clients earn more than £40,000 and that’s the income threshold that seems to work in a borrower’s favour.
“Where I struggle is if I see a single applicant. They are often capped at 4.5 times yet the power of two applicants can unlock a higher multiple of say five times.”
For example, a single applicant earning £50,000 could access a mortgage of £225,000 based on a 4.5 multiplier. Joint applicants where one borrower earns £50,000 and the other earns £10,000 might get a five times income stretch taking them to £300,000.
Brokers say that lenders will go up to five times income, and beyond for borrowers including first-time buyers providing they meet certain income and loan to value requirements.
Barclays, for example, will lend up to 5.5 times earnings if a single borrower, including a first time-buyer, earns at least £75,000 or joint borrowers have earnings of £100,000.
However, the maximum loan amount is capped at either the affordability assessment, the income multiple restriction for the borrower’s circumstances, or the maximum loan to value, whichever is the lowest.
Professionals and high earners
Nick Morrey, product technical director for John Charcol, said: “The thinking behind offering professionals a high LTI loan is that their earnings will rise so the multiple of say six times, will come back down to five times fairly rapidly.
“The argument for offering high earners an LTI stretch is that such people have a higher percentage of income at their disposal and can therefore pay a greater proportion of it towards their mortgage.”
Lenders calculate income and treat pension contributions in different ways which can increase or decrease the amount of earnings included in an income multiple calculation.
Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, who advises clients in London and the South East, said: “I get a better income stretch from Platform because it does not take company pension scheme contributions into account, which reduce someone’s salary.
“For NHS staff, whose pension contributions can be a significant proportion of their income, getting these ignored often bumps up the loan quite significantly.”
The five-year fixed boost
Tyneside-based Brian Dowling, mortgage and protection consultant at Baltic Mortgage Solutions, says to get a higher loan amount, borrowers are being forced into taking five-year fixed deals that come with a more generous mortgage offer than shorter terms such as two-year fixes.
In one case, Dowling said he had a client who wanted a mortgage of £720,000. The lender offered £706,000 on a two-year fixed rate and £850,000 on a five-year deal.
Stuart Powell, managing director of Ocean Mortgages in Plymouth, thinks lenders’ decisions to “play it safe” with income multiples is sensible.
Powell sees a lot of borrowers for equity release enquiries where they have taken a 25-year mortgages on interest-only. Many, said Powell, borrowed five to eight times their income to get the mortgage and now they are struggling to find another lender who will accept an application from them.
“Yesterday I had to tell a client that I could not find a residential or equity release deal for them,” he said.
“Their mortgage term had come to an end and they could not borrow enough for equity release. The new affordability calculations meant that even though the wife was working and the husband was retired no lender would offer the amount they needed.
“They had no alternative but to sell their home. These are the sort of cases we all need to work together to avoid in 25 years’ time.”
A spokesman for UK Finance said: “While mortgage lenders are looking to help customers to get onto the property ladder, they are very careful that this is always affordable. High LTI mortgages are only likely to be available to those who have good prospects for wage increases.
“Before they are able to offer any mortgage, lenders must undertake a strict affordability assessment in accordance with the rules outlined by the regulator, regardless of LTI, to ensure the borrower can repay their mortgage over the lifetime of the loan in all foreseeable circumstances.”
Trio of appointments at Brightstar, Crystal and Catalyst
Hollands (pictured) has 25 years’ experience in the mortgage industry, having previously held roles at Yorkshire Building Society, Bank of Ireland Mortgages and TSB.
He has also worked as a mortgage broker and was most recently national account manager at Sainsbury’s for Intermediaries.
This recruitment follows the appointment of Darren Perry in December, also to the role of national account manager.
Crystal Specialist Finance (CSF) has appointed Samantha Pettit as business development manager – North and promoted Dan Morris to key account director.
Pettit will be responsible for growing sales and serving intermediaries located in the Midlands and the North of England. She joins from Clever Lending where she held the post of broker relationship manager.
In his new role Morris will take responsibility for key relationships with mortgage networks and large national distribution partners. He joined CSF in May 2016 and previously held the post of director of intermediaries.
Both Pettit and Morris will report to interim group sales director, Jason Berry.
Meanwhile, Catalyst Property Finance has promoted James Farge to head of new business.
Farge will manage Catalyst’s internal new business team.
Reporting to Catalyst’s chief executive, Chris Fairfax, Farge will be responsible for generating new short-term loan business, overseeing the process from the initial enquiry to the offer.
He joined the company at the start of 2019 from a property sales background.
Homemover mortgage lending up 10 per cent in December
There were 29,400 homemover mortgages completed in December 2019, 3.2 per cent more than in the same month a year earlier.
On average, homemovers borrowed £230,847 to purchase a house representing a six per cent rise on December 2018 when they borrowed £216,886.
Both loan to value (LTV) and income multiple measures nudged up slightly from 67 per cent to 68 per cent LTV and 3.31 times income to 3.33.
First-time buyer activity
Lending activity to first-time buyers was more subdued. Gross mortgage lending grew by four per cent year-on-year to £5.1bn. The number of mortgages advanced to first-time buyers rose by 100 to 29,490. The average loan size grew by four per cent to 174,275 while the LTV and income multiple ratios increased slightly from 76 to 77 per cent LTV and 3.52 to 3.54 per cent.
Mike Scott, chief property analyst at estate agency Yopa, said: “The number of mortgages for home purchase was up by 1.7 per cent compared with December 2018, confirming the upturn in the market that we have seen in other recent data. It takes a long time for an increase in buyer interest to feed through into mortgage completions, since the whole homebuying process takes at least four months, and so this December figure demonstrates that the upturn in market activity must have started much earlier in the year.”
Scott said it was disappointing that almost all the increase in activity was seen in the homemover market but added that the first-time buyer sector had performed well over the last two years and had not gone into reverse.
“It is likely that first-time buyers are running up against their affordability limits, with the average first-time buyer in December borrowing 3.54 times their gross household income, compared with 3.52 in both November 2019 and December 2018,” Scott added.
“Even with the recent surge in market confidence, there seems to be little scope for first-time-buyer house prices to rise faster than average earnings growth, which is currently running at 3.4 per cent a year.”
There was little change in the pound-for-pound remortgage market in the 12 months to December. There were 16,490 remortgages with no additional borrowing in December 2019, 0.5 per cent fewer than in December 2018.
The number of capital raising remortgages issues in December grew by six per cent year-on-year to 16,820. The average additional amount borrowed was £50,702.
There were 16,820 new remortgages with additional borrowing in December 2019, 5.9 per cent more than in the same month in 2018. For these remortgages, the average additional amount borrowed in December was £50,702.
There were 5,700 buy-to-let home purchase mortgages completed in December 2019, 3.6 per cent more than this time last year. The value of lending remained static at £800m.
Some 13,300 landlords remortgaged their properties in the final month of the year, representing a rise of 2.3 per cent on the year before. The value of lending rose by five per cent to £2.2bn.