Bucks BS allows kids to help parents by joining mortgage
In a reverse joint borrower sole proprietor scenario, instead of parents or grandparents being added to the mortgage to boost the affordability of younger borrowers, the children are added instead.
According to the society, the initiative Parents Supported By Juniors can provide housing security for older borrowers.
There are no maximum age limits and the term can be based on the younger applicants’ retirement ages.
The mortgage is in all applicants’ names, but the property remains in the name of the parents or grandparents while the children are joint borrowers but are not added to the title deeds.
This means there is no stamp duty payable by the children for a second home.
Tim Vigeon, head of lending at the mutual said: “We are pleased to be able to offer a flexible lending solution, in order to help those coming to the end of their interest only mortgages, remain in their properties.
“This is another example of how Buckinghamshire Building Society’s human and bespoke approach to underwriting supports those in challenging situations.”
Hanley Economic BS re-enters expat BTL market
Earlier this month, Visionary Finance managing director Hiten Ganatra issued a call for more lenders to enter the expat market to meet the strong demand at present.
This Hanley Economic deal was initially launched in January but was withdrawn in April because of the Covid-19 crisis.
It has an application fee of £299 and a product fee of £500. The minimum loan size is £30,000, with a maximum loan size of £500,000.
Rental income must be received in sterling and achieve an interest cover ratio of 145 per cent at Hanley’s stressed interest rate.
Mortgage payments must be made in sterling from a UK bank account. The property cannot be occupied by the borrowers’ family and applicants must not have more than three buy-to-let properties in total, including unencumbered properties.
David Lownds (pictured), head of marketing and business development at Hanley Economic Building Society, said: “We’re pleased to be back in the expat buy-to-let marketplace with what remains a highly competitive product offering.
“Due to the fact that we can accept applications from 35 countries, we expect this to be a popular option for those investors who are realising the investment opportunities currently presenting themselves across the UK housing market.
“Although there remains a lot of uncertainty in the world, we expect the expat buy-to-let market to remain active as we navigate our way through the Brexit period and we hope this reintroduction will help provide some much needed choice in this product area for our intermediary partners and their expat clients.”
Mortgage payment holidays could trap prisoners on high cost loans
Lead campaigner Rachel Neale says mortgage prisoners, who pay higher-than-average interest rates, took a payment holiday believing it would not scupper their chances of switching to a high street lender under the Financial Conduct Authority’s (FCA) reduced affordability rules.
But during a meeting with UK Finance officials to talk about lenders’ adoption of the revised rules, Neale asked if a recent statement made by economic secretary John Glen that payment holidays may affect lenders’ decision to lend was correct. UK Finance confirmed it was true.
Glen’s comments were reported by the Mail on Sunday, and Mortgage Solutions has since seen sight of the letter.
Glen wrote that while credit files should be protected in accordance with FCA guidance when taking out a payment holiday, it may be that a lender’s willingness to lend is affected, particularly in the short term.
When the government issued its announcement on 22 May that the three-month payment holiday scheme would be extended it added a note which read: “Payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files.”
However, on the same day the regulator issued its statement that said “credit files aren’t the only source of information which lenders can use to assess creditworthiness”, sparking concern from brokers over how lenders would treat borrowers who had paused payments.
Neale said: “We met with UK Finance and asked them if it was correct that people can be refused a mortgage if they have taken a mortgage payment holiday. They said yes, they can be refused help because the FCA has given banks and building societies that permission.”
Neale says lenders are not acting in the spirit of the initiative which was to help borrowers, including mortgage prisoners, during the pandemic.
She added: “We were told that if mortgage prisoners had taken a three-month payment holiday, banks and building societies may assess them under the reduced affordability assessment, but any longer than that and it would be unlikely they would be accepted.
“It is utterly unfair how the UK public is being misled. We were told a payment holiday would not impact borrowers moving or borrowing during these times.
“We have again been let down by the government in this along with a mortgage industry that will not look to help those paying the highest price.”
‘Lenders can delve deeper’
Around 1.9 million mortgage accounts are currently in the payment deferment scheme, according to Experian. Its analysis found that a quarter of those who had paused their payments had not seen any reduction in their disposable income and were using the scheme to shore up cash for the future.
Mortgage brokers have been warning borrowers of the risks of taking a payment holiday they may not have needed.
Association of Mortgage Intermediaries chief executive Robert Sinclair said: “There is a definite gap between what was intended when Rishi Sunak announced this as a benefit to consumers and the FCA’s statement.
“When Sunak’s office said taking a payment holiday will not impact on your credit file, he meant it won’t impact you at all.
“But the statement that later followed from the regulator gave lenders the right to reflect on whether there have been deferred payments using other means, like missing unsecured credit payments or reviewing their credit history.
“Lenders have been told they can delve deeper.”
Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA) said it was “understandable” that lenders would want to take a closer look at the financial position of a borrower who has yet to return to their monthly payments or who has applied for an extension to their first payment holiday.
Lenders would want to establish why the holiday was requested and whether borrowers’ income had been affected.
“While the FCA does allow lenders to carry out modified affordability assessments, the rules state that this can only take place when a borrower is up to date with their mortgage repayments,” added Davies.
“By definition this does not include borrowers who have taken a payment deferral and thereby have not repaid outstanding sums due on their mortgage.
“However, each lender will have a different approach to how they underwrite these cases, and they will take into account the impact of repaying the deferred amount to make a prudent and responsible lending decision.”
What lenders are doing
Only three lenders have openly confirmed they are using the flexible affordability assessment to offer mortgage prisoners a remortgage.
West Bromwich Building Society said it does not hold mortgage payment holidays against borrowers but they must confirm there have been no changes to their income or expenditure because of the pandemic.
NatWest states on its Mortgage Prisoner hub that payment holidays are not the same as missed payments.
Mortgage Solutions asked Halifax how it would view a mortgage prisoner who had taken a payment holiday.
The bank said payment holidays do not adversely affect a customer’s credit file. It makes decisions based on a full understanding of customers’ individual circumstances and the affordability of repayments.
The FCA declined to issue a formal response when asked if mortgage prisoners who have paused payments would be allowed to benefit from the relaxed affordability rules.
A UK Finance spokesperson said: “A customer will not be eligible for the revised affordability assessment if they do not meet the requirements set by the FCA. When conducting affordability assessments for new or increased lending, lenders use data from a variety of sources.
“The regulator’s guidance states that consumers should not be considered to be in payment shortfall during a Covid-related payment deferral period.
“We would encourage anyone who can afford to make mortgage payments to do so as this will improve the chances of getting a mortgage with a new lender.”
Zephyr Homeloans cuts rates and expands reach
The lender has joined the Brilliant Solutions Mortgage Club panel with members able to access all Zephyr’s rates.
Matthew Arena, managing director for Brilliant Solutions, said: “It is fantastic to welcome Zephyr Homeloans to the buy-to-let panel of our mortgage club which will enable our advisers and their clients to benefit from Zephyr’s highly competitive rates and expertise in the buy-to-let sector.”
Following the reductions, rates start from 3.14 per cent for a two-year fixed-rate standard property buy-to-let mortgage and 3.44 per cent for a standard five-year fixed-rate loan.
The lender’s rates for new build and flats above commercial property now start at 3.54 per cent for a two-year fixed rate loan and 3.84 per cent for a five-year fixed rate loan.
Rates on standard properties, houses in multiple occupancy and multi-unit block properties available up to 75 per cent loan to value (LTV) have also been lowered.
The LTV is restricted to 70 per cent LTV on loan sizes between £1m and £1.5m.
Paul Fryers (pictured), managing director at Zephyr Homeloans, said: “We’ve had one of the busiest months in Zephyr’s history, and we are delighted to be able to reduce rates further and help the increasing number of landlords who are looking to expand their portfolios.
“As buoyancy in the buy-to-let market continues, these new rates provide potential borrowers with highly competitive products across a broad range of properties.”
Sirius Property Finance opens New Zealand office
Robert Collins (pictured), a co-founder of Sirius, will establish the bespoke brokerage and debt advisory service in Auckland in the new year.
“I cut my teeth in property finance down under and, while it is geographically distant, the legal and banking systems share many similarities with the UK,” said Collins.
“On top of this, both New Zealand and Australia have growing populations, increasing need for housing and a burgeoning demand for specialist and development finance.”
Rob Jupp, chief executive of The Brightstar Group, parent company of Sirius, said it was an “exciting step” for the brand.
He added: “We’ve identified a number of opportunities where an entrepreneurial debt advisory business can make a real difference in the New Zealand market, and the opening of our Auckland office in 2021 will be another significant milestone for The Brightstar Group.”
Stricter mortgage credit scoring and higher rates expected in Q4
The sentiment survey of lenders highlighted that they expect their credit scoring criteria for mortgages to get tighter in quarter four.
Credit scoring had already tightened in quarter three which covers the three months to the end of August.
And as criteria tightens, mortgages are expected to become more expensive in the coming months.
In terms of mortgage pricing and margins, lenders reported that overall spreads on secured lending to households relative to the Bank Base Rate or the appropriate swap rate widened in Q3, and were expected to widen further in Q4.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Borrowers who have found it harder to get a mortgage will not be surprised to hear that lenders tightened criteria in the third quarter and expect to tighten further in the run-up to the end of the year.
“Concerns about the impact of the pandemic on earnings and what will happen to property prices, particularly for those borrowing at high loan to values (LTV), is behind this growing caution.
“Mortgage pricing is on the rise, a trend expected to continue over the course of the rest of the year. With base rate likely to remain where it is, or even fall further, and swaps continuing to bump along at low levels, lenders are taking the opportunity to improve their margins and profitability.”
More high LTV lending
Despite stricter lending policies, banks expect the availability of mortgages and secured loans, which increased slightly in quarter three, to remain unchanged until the end of November.
Banks expect the availability of mortgages to those with less than 25 per cent equity in their homes to improve slightly over quarter four.
The survey also reflected a greater willingness to lend to borrowers with less ten per cent equity in their homes over the next quarter.
Banks reported that demand for remortgaging decreased in quarter three as purchasing a home became borrowers’ priority.
While borrowers’ appetite for house purchasing is expected to remain the same over the quarter, remortgaging is expected to increase.
Default rates on mortgages were unchanged in quarter three but are expected to rise in the three months to the end of November.
Borrowers used mortgage payment holiday to build reserve fund – Experian
A further quarter of households on a payment holiday have seen their disposable income increase, choosing to take the payment holiday to build up a reserve fund in case their future earnings decline.
Currently, around 1.9 million mortgage accounts are in the payment deferment scheme. The average balance of a borrower who has taken a payment holiday is £150,000, 30 per cent higher than the £114,000 average balance of a borrower who has not used the scheme.
Mortgage applications increased year-on-year by 13 per cent in July, followed by rises of 25 per cent in both August and September and the market is on track to lend £216bn this year, according to the analysis.
Due to the lockdown restrictions, lending is expected to be down on last year’s total of £250bn.
Lisa Fretwell, managing director of data services at Experian, said: “People moving home is good news for the economy, as activity in the property market fuels growth in related services.
“Most moves require a mortgage and, while lenders want to extend new loans, they have a responsibility to ensure homebuyers are only taking on what they can afford in the long-term.
“Covid-19 has complicated the financial situation for millions of people, and the challenge for lenders to understand each applicant’s circumstances has become more difficult as a result.”
Competitive rates and a busy remortgage market on cards for 2021
Appearing on Mortgage Solutions Television in association with Kensington Mortgages, the panellists debated how the mortgage and housing market would look next year.
Craig McKinlay, new business director of Kensington Mortgages said he hoped to see a return to normal service levels and product availability before quarter two next year.
“Clearly the market is going to be very busy in the run up to stamp duty ending and [with] the Help to Buy changes, so I think the market will stay busy up until maybe January and then get a bit quieter,” said McKinlay.
“And when it gets quieter hopefully that will allow lenders’ operations to recover and get back to higher LTVs if demand does drop.”
Hosted by contributing editor Samantha Partington, McKinlay was joined by Sally Laker, managing director of Mortgage Intelligence, Martin Reynolds, chief executive of Simply Biz Mortgages, and Adrian Scott, group mortgage services director of Connells Group.
Scott said the natural lull in purchase business after 31 March would give the market chance to regroup and reprice deals competitively, driving down interest rates.
Laker said the period would give brokers chance to get cases through ‘in a timely manner’ once again, however, she thinks there will still be plenty of families who want to move after the stamp duty holiday has ended.
Remortgaging, which looks set to be strong next year, will compensate for any slowdown on the purchase side of the market, said Reynolds.
“The data we’re seeing for cessations for  is up on this year, and that is including a big December this year when some lenders have their biggest cessations ever.”
He added: “Brokers will always be busy.”
Virgin Money raises high LTV residential mortgage rates
The biggest increase on residential mortgage rates has been applied to the five-year fixed rate fee-saver deal available up to 75 per cent LTV. The deal has increased by 0.35 per cent to 2.43 per cent.
The 85 per cent LTV five-year fix has received a 0.25 per cent price hike to 3.44 per cent, along with the 65 per cent alternative which is now priced at 2.18 per cent.
The remaining rate rises are between 0.9 per cent and 0.20 per cent.
On the shared ownership range, rates have been increased by up to 0.30 per cent.
Both two-year fixed rates at 90 per cent LTV have been hiked by 0.30 per cent, pushing the fee-carrying deal up to 3.64 per cent and the fee-free option to 3.94 per cent.
After a 0.16 per cent increase, the five-year fix at 90 per cent LTV with a £995 fee is now 4.24 per cent.
Rent yields rise in seven out of nine English regions
In the lender’s quarter three Buy-to-Let Rental Barometer, which analyses rents in the regions Fleet lends to, yields in the North East rose the highest with a two per cent increase year-on-year to 8.8 per cent.
East Anglia and the West Midlands followed with rises of 0.8 per cent and 0.6 per cent, taking yields in those regions to six per cent and 7.2 per cent cent respectively.
The only two regions that experienced a negative change were the North West and East Midlands, where yields dropped 0.2 per cent and 0.1 per cent to 7.8 per cent and 6.8 per cent respectively.
The results are a notable contrast to quarter two when only three regions posted positive rental yields over the period.
National yield up
Overall, the barometer shows rental yields on residential buy-to-let properties of 6.4 per cent across England, up 0.4 per cent from the 6 per cent achieved in the third quarter of 2019.
Steve Cox (pictured), distribution director of Fleet Mortgages, said: “It’s clearly positive to see the majority of regions in England posting increases in rental yields, and those regions which have showed a very slight dip were already at relatively high levels to begin with.
“We learnt from the post-credit crunch period over a decade ago that rents are not as susceptible to a recession as property prices, with many occupants more willing to opt for the shorter-term financial commitment offered by renting than longer-term property ownership.”
Cox said how yields performed in the coming months would give a better idea of how sustainable the current buoyancy of the rental market is, with unemployment expected to rise.
But early indications from Fleet’s analysis did not point to sharp falls in yields.
He added: “What we may see is further structural changes in rental demand particularly in urban centres with tenants who can now work from home feeling they are no longer tied to a property near to the office, and may look further afield where they might get more for their money.
“However, we have not yet seen any evidence to suggest this is becoming a trend.
“Within a shorter time-frame, the fact that, in England at least, the stamp duty holiday is available to landlord borrowers has undoubtedly been a factor in the increased interest in property investment purchases, with both new and existing landlords looking at the opportunities available and seeking to secure the savings that are available from the holiday.”