Brokers unconvinced by Tories’ lifetime fixed rate mortgage proposal ‒ analysis
Johnson said: “The Conservatives have always been the party of homeownership but under a Conservative majority government in 2020 we can and will do even more to ensure everyone can get on and realise their dream of owning their home.”
However, the idea has been greeted with general scepticism by mortgage intermediaries, who argued the government should focus on house building instead.
Flexibility is king
Martin Stewart (pictured), director at London Money, said the idea has already been proven to be a failure, noting that culturally we are a nation of home movers.
He explained: “I always point out to clients that while their mortgage may be portable, they might not be if they have incurred a material change in their lives since first borrowing the money. I prefer to advocate flexibility rather than restrictive long term rates.”
Stewart added that the devil will be in the detail, and that while it makes for a nice headline during an election campaign, “it is ultimately the bottom line that counts”.
Focus on the real problems
James Mole, managing director of London Belgravia Wealth Management, also said he was not a fan of the suggestion, arguing that 25 years is such a long period of time that it makes it a “speculative gamble based on the unknown”.
Mole noted that long-term term fixed rates often have high early repayment charges, which would mean borrowers should be cautious from the outset, before even considering the other terms of a lifetime deal.
He added: “I’m all for thinking outside the box, but I’d rather the government focus on the housing shortage instead of mortgages which may or may not be suitable for a small percentage of people.”
Unrealistic and unworkable
Mark Harris, chief executive of SPF Private Clients, said that while it might be an idea for those seeking their last move or mortgage, for most borrowers it is an “unrealistic and unworkable” prospect.
He added: “Tellingly, there is no detail as to how it will be funded. As we know, pricing is dynamic, so what happens if someone fixes at the top of an interest rate cycle? Will there be exit costs to pay? Even relatively longer-term products such as 10-year fixes have not seen a great take-up due to the implications of fixing for the longer term.”
Jane King, mortgage adviser at Ash Ridge Private Finance, questioned whether the idea would even happen, noting that with a host of potential life changes, few will want to stay in the same property forever.
She continued: “My own clients rarely want to fix for more than five years so I don’t see why there would be any change to this stance in the future.”
Brexit ‘urgency’ helping boost property transactions
While this is an increase of 4.3 per cent from the month before and October last year, the year-to-date transactions are still down on the two previous years.
Brexit urgency driving deals
Andrew Montlake, managing director of Coreco, suggested there was some “urgency” among homeowners to “get their houses in order” before whatever comes next with Brexit.
He continued: “Extremely low borrowing costs, a strong jobs market and more affordable prices are underpinning activity in the market despite the political bedlam. We’re seeing a lot more people lock in to extremely competitive five-year fixed rate mortgages, which offer a medium-term hedge against the uncertainty of how Brexit will play out.”
And Montlake added that while activity levels usually drop in the weeks leading up to a general election, the motivation to get into a new home before Brexit is currently outweighing that caution.
Only those who have to move are
Mark Harris, chief executive of SPF Private Clients, said it was encouraging that transactions have “edged up” on both a monthly and annual basis, but argued they also highlighted that there “isn’t a great deal of activity” in the purchase market.
Harris added: “Only those who really have to move, for whatever reason, are doing so. For them, there are some excellent mortgage opportunities available with lenders cutting rates in an effort to attract business.”
Gareth Lewis, commercial director of MT Finance, said his firm had seen a spike in transactions in the last few weeks, and argued that the end of the year was serving to focus people’s minds and spur them to get on with their house moves.
“There is a bit of a buzz around as people try to close transactions by the end of the year. There was a worry that things would slow down dramatically until the election outcome was known, but thankfully this doesn’t seem to be the case,” he concluded.
Sirius secures £14m for PD scheme; Funding 365 delivers £1.1m to auction deadline
The £14m permitted development project was supported by a total debt package of £7.47m, with Aldermore providing senior debt of £6.12m and Iron Bridge £1.35m of mezzanine to property developers Brickmort Developments in order to refinance and develop the site.
Brickmort Developments was advised by Sirius, which sourced the senior and mezzanine debt on the deal.
The team faced challenges during the process when it came to obtaining vacant possession because there was an existing tenant who was still within their rights in the Landlord and Tenant Act.
The site, Four Oaks House, is a three-storey modern office building which has permission under Permitted Development for conversion into 77 residential units.
Brickmort obtained planning permission from Birmingham City Council for the erection of a side extension and one new floor comprising 13 flats.
The development is expected to be completed in July 2021.
Sirius co-founder, Nicholas Christofi (pictured), said: “This was a very complex deal for a client with whom we have worked for more than five years. The property was tenanted by a global company and so we needed to make sure we worked with the most appropriate lenders, with expertise around the potential legal risks.
“Using a combination of Aldermore and Iron Bridge, we were able to deliver a very attractive debt package for the borrowers to enable them to carry out the development of a key site in Sutton Coldfield.”
Keir Morris, property development manager, from Aldermore Bank, added: “Thanks to the collaborative approach of Sirius, Iron Bridge and our legal advisors, we were able to get our client the funding they were looking for.”
Funding 365 delivers £1.1m loan to complete auction purchase
Funding 365 has delivered an unregulated bridging loan at 0.59 per cent a month to enable a borrower to complete an auction purchase of a house in North London.
The rate applies for the whole term, plus the lender’s standard two per cent arrangement fee, and valuation and legal fees at market rate.
The townhouse property was in good condition and tenanted and the lender provided the fully-serviced nine month loan at 60 per cent LTV.
The team at Funding 365 worked closely with the introducing broker SPF Private Clients to meet the client’s auction deadline.
Funding 365 senior underwriter, Jonathan Brooks, said: “We only advertise interest rates that we’re happy to write, so it’s very satisfying to be able to provide yet another borrower with our 0.59 per cent a month interest rate.
“Thanks to Laura and Nancy at SPF Private Clients for introducing the deal and ensuring a smooth process.”
Laura Toke, broker at SPF Private Clients, said: “Funding 365 only had a few weeks before the contractual completion date and I was really impressed at how quick and professional the team were to get the deal over the line within the auction timeframes.”
Together signs ‘eleventh hour’ £1.5m bridging loan for client
The client needed the finance to buy land but had a deal with another lender fall through just days before the deal was due to complete.
The property company’s retained mortgage broker SPF Private Clients brought the case to Together and the specialist lender agreed a commercial bridging loan of £1.5m, secured against the land.
Ritchie Watson, lending director at Together, said: “This was a strategic purchase of a piece of agricultural land, which would be the final piece of the jigsaw in a wider project.
“SPF provided all the necessary documents and our commercial underwriting team pulled out all the stops to get this deal across the line ahead of the customer’s completion date.”
Amadeus Wilson, director of short-term finance at SPF private clients, added: “We knew that Together would be able to provide the necessary funding within a tight timeframe. In the end, the client was delighted that we managed to achieve an impressive three-day turnaround from the application being submitted to funding being received.”
Specialist Lending Solutions contacted Together for the identity and location of the client and land, but was told they would remain confidential.
‘Steady as she goes’ for housing market with price growth unchanged ‒ ONS
As a result, the average property is now worth £230,000, up by £2,000 from this point last year.
On a regional basis, Wales saw the strongest growth over the 12 months at 4.4 per cent. This was followed by Northern Ireland (3.5 per cent), the East Midlands (3.2 per cent), the West Midlands (2.6 per cent) and the North West (2.4 per cent).
Three regions saw house prices fall over the year, with London values struggling the most. Prices dropped by -2.7 per cent in the 12 months, with the South East at -0.6 per cent and the South West with -0.2 per cent also seeing values drop.
Steady as she goes
Mark Harris (pictured), chief executive of SPF Private Clients, said it was “steady as she goes” for the housing market which was no mean feat given the combination of the summer slowdown and Brexit uncertainty.
He continued: “Mortgage approvals rose slightly in June. Lenders remain keen to lend with a number cutting rates or easing criteria in order to encourage business. Remortgaging is likely to be particularly busy this autumn with many borrowers coming to the end of deals and lenders ready to pick up that business with long-term fixes in particular.”
A change to the usual seasonal patterns
Sam Mitchell, chief executive officer of Housesimple, said that a slowdown over the summer was no surprise, but suggested that the threat of a no-deal Brexit could mean “considerable changes” to the usual seasonal property patterns.
He continued: “The Halloween deadline is fast approaching and with that comes the fear and urgency of home movers to complete deals before we leave the EU. While the longer-term outlook remains uncertain, this is likely to stimulate a lot of buyers and sellers throughout the housing chain in the next three months – from first-time buyers all the way up to down sizers.”
Wary of the commitment
Dilpreet Bhagrath, mortgage expert at Trussle, described the market as “stagnant”, suggesting that the Brexit situation was making would-be buyers wary of committing to a move.
She added: “However, for those that can afford to get onto the housing ladder, more borrowers are thinking strategically of how best to protect themselves against the ongoing Brexit chaos by locking into decade-long fixed rate mortgages. And with some lenders offering longer term security products, this approach is possible.”
SPF completes near £4m development deal
Each apartment from the developer Prestbury Estates includes four bedrooms, while the penthouse apartment has its own cinema room.
SPF organised the finance with Together Money for the development in Bowden, with the apartments due to be launched in coming months.
SPF said that it was “uncommon” to be able to raise this level of debt against such high-value, high-spec apartments, with most lenders preferring to fund lower value, mid-market properties.
Russell Hall, director of the broker, said that Together had taken a “refreshingly proactive and commercial approach”, completing all due diligence and releasing funds within two months of the application.
He continued: “Without SPF’s role in the proceedings, Prestbury Estates would have been unable to continue with its growth aspirations, tying up all its cash flow on this single development.”
House prices remain ‘subdued’ ‒ Nationwide
However, on an annual basis price growth dropped from 0.5 per cent to 0.3 per cent.
As a result the average property is now worth £217,663.
Robert Gardner, chief economist at the mutual, noted that while annual growth has now sat at less than one per cent for eight straight months, and pointed out that key indicators of consumer confidence remain “subdued”.
He added: “Housing market trends will remain heavily dependent on developments in the broader economy. In the near term, healthy labour market conditions and low borrowing costs will provide underlying support, though uncertainty is likely to continue to exert a drag on sentiment and activity.”
Buckle up for Brexit
Michael Biemann, chief executive officer of Selina Finance, noted that low supply and “rock-bottom” mortgage rates were helping the property market keep its head above water, but cautioned that the market would remain subdued for the coming months.
He continued: “In the long term, the UK property market will come good, but for now we are entering the biggest unknown for generations and people should buckle up for Brexit accordingly.
“The level of remortgage activity over the past two years shows many have been doing precisely that.”
People don’t want to move
Mark Harris, chief executive of SPF Private Clients, noted that while first-time buyer numbers recovered to the levels seen before the financial crisis, there remains a lack of people willing to move home.
He continued: “Lack of properties on the market is undoubtedly playing a part as sellers wait and see what happens with Brexit before making a decision. The cost of moving is also having an impact, with homeowners remortgaging and releasing cash to improve their homes, rather than shelling out tens of thousands of pounds on stamp duty.”
Like watching paint dry
Jonathan Samuels, chief executive officer of Octane Capital, said the market was stuck in a “protracted limbo”, adding that checking the property portals was akin to “watching paint dry”, with new listings few and far between.
“Mixed signals surrounding the property market is an understatement. The signals emerging from the market at present are less mixed than mad,” he continued.
Brokers shrug off Johnson’s latest potential stamp duty reform ‒ analysis
It has been suggested this week that Boris Johnson, the front-runner in the ongoing Conservative Party leadership contest, is considering revamping stamp duty should he become Prime Minister.
The Association of Accounting Technicians said it had met with Johnson to discuss the idea of switching the tax so that it is paid by vendors rather than buyers, with Johnson reportedly open to the suggestion.
Phil Hall, head of public policy and public affairs at the trade body, said that such a change would save the taxpayer £700m a year by rendering the relief currently enjoyed by first-time buyers redundant, and argued that it was “much more progressive” as it would be paid on the lower priced property being sold rather than the higher priced property being bought.
Giving landlords a boost
Stuart Powell, managing director of Ocean Mortgages, suggested this was simply “headline catching” prior to the leadership vote, noting that it was an idea that has been mooted for years.
He added: “It will be interesting to see how it affects the second home purchase market. If stamp duty is not paid on the second purchase any more, this could adversely affect the first-time buyers as landlords purchase the properties they are buying, one of the key sectors it is due to help.”
However, while Powell was sceptical about how likely it was to happen, he noted that if it sparked a real debate about stamp duty and how it can be reformed for the better, then that is welcome.
Bad news for downsizers
Mark Harris, chief executive of SPF Private Clients, warned that it was highly unlikely that the probable next prime minister would actually go through with such a change to stamp duty, though noted there would be a benefit for buyers as they would then have a larger deposit to play with.
He continued: “That said, if the vendor is also buying their next home, they will have a smaller deposit. It would be good for those who continue to trade up and of course first-time buyers, but bad news for those trading down.”
The problem isn’t with the process
Mark Snape, managing director at Broker Conveyancing, argued that the current system “seems to work” and that any issues with stamp duty are not around the process, but the level at which it is charged.
He continued: “I sense any stamp duty change will be more focused on dropping the current rates it is charged at – we’ve already been told Johnson wants to cut stamp duty for all those buying property under a value of £500,000 and will drop the percentage rate on the most expensive properties.
“Any further, and much more fundamental change, is in my view still likely to be some time away.”
How is the market for mortgage advice referrals shifting? – analysis
Digital broker Habito’s leap into buy-to-let mortgage lending yesterday shows the possibilities offered by technology and the changing and diversifying potential of the broker role.
However, lead generation is still the biggest challenge for any broker firm as many new digital advisers have found as without a database of clients, the cost of acquiring those clients is simply too high for a sustainable business model.
Estate agents have historically provided a decent source of referrals for mortgage brokers, but Knight Frank’s move into equity release earlier this week underlines the struggles agency firms are having to diversify their business as the sales market slumps.
The slump in residential property sales affects mortgage brokers as it means fewer leads from estate agents and a need to look elsewhere for business.
John Phillips, national operations director at Just Mortgages, said he has seen a shift in the level of referrals.
“Back in 2017, around 75% came from estate agency referrals, with 25% from remortgages, client services, recommendations and referrals from other professionals such as accountants and solicitors,” he says.
“By 2018, the percentage of leads we got from estate agency had dropped to 71%, now it is 64%. Overall, the property market is down about 20% over the past three years, so brokers need to work hard to get their leads from elsewhere.
“At Just Mortgages we are good at shifting with the market, so while some brokers have been hit hard as estate agencies struggle, we have diversified and actually seen our business increase overall.
“So despite the fact that we get fewer of our leads from estate agency, we are up 14% year on year.”
Business development is key
Mark Harris, chief executive of SPF Private Clients, says one third of its business typically comes from professional introducers, while the rest is from existing clients or their recommendations.
He says: “I would expect the percentages to be different for younger businesses and/or those with high staff turnover.”
Jonathan Harris, director of mortgage broker Anderson Harris, says the market has become “more stodgy,” adding; “Brokers have always relied on referrals from professionals and other introducers.
“A brokerage cannot survive on direct business, regardless of how effective their branding, reputation and longevity.
‘As a general rule, 50% of business comes from existing clients and existing client referrals, and the balance has to be made up from introductions.
‘Business development, both new and looking after existing contacts, is a key part of the broker’s role.”
BoE: Consistency of mortgage approvals ‘reassuring’, says broker
The narrow range of the figures suggest the mortgage market continues to ‘trundle along’ quite steadily with no great shocks either way, said Mark Harris, chief executive of mortgage broker SPF Private Clients.
He said: “This is reassuring as there is plenty of political and economic uncertainty, which is preying on people’s minds and creating a delay when it comes to making big decisions.
“Lenders remain keen to lend and several have cut rates in recent weeks so mortgage rates are likely to remain low for a while yet, further supporting the market.”
Remortgaging approvals also fell in May, to 46,700.
Gross mortgage lending grew by 1.4 per cent to £63.3bn in Q1 2019, official figures from the Bank of England show.
The central bank’s policy committees examines these figures each month to understand economic trends and developments.
The lending detail
The annual growth rate for mortgage lending remained stable at 3.2 per cent, and has now been around 3 per cent since late 2016.
The growth in consumer credit continued to slow, falling to 5.6 per cent on an annual basis in May. The extra amount borrowed by consumers to buy goods and services was £0.8bn, broadly in line with the £0.9bn average since July 2018. However, borrowing for credit card lending increased to £0.3bn.
Stuart Wilson, corporate marketing director at more 2 life, said consumers continue to use credit cards and other unsecured borrowing to meet their ongoing commitments.
“Our own research supports this, revealing that one group in particular is turning towards unsecured borrowing to help boost their income, with 29 per cent of over 55s saying they’ve taken on debt to help cover their day to day expenses.”