ASK THE EXPERT Tony Peters from Planit Mortgages Limited offers his advice on all your mortgage needs
WHAT NOW FOR THE MORTGAGE MARKET? Due to the Stamp Duty changes for Buy to Let (BTL), mortgage approvals shot up by a staggering 180% in the month prior to the changes being made. This obviously created a slump in the market for the following month…or so you’d think it would. However, this was not the case. Why was that? Residential buyers! Yes. The biggest beneficiaries of higher stamp duty for BTL buyers was residential house buyers just as was predicted in this column a couple of months ago. I’ll try not to let my head swell too much.
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So, what has caused this surge of homebuyers to enter the marketplace? Well, first of all, the competition has been handicapped by the raft of new measures intended to clamp down on landlords and even more importantly, the lenders have responded by offering a whole host of concessions to homebuyers. The first out of the gate was the 100% mortgage from Barclays. Not quite a catch-free offering as it sounds. A guarantor or guarantors (usually bank of mum and dad) deposit 20% of the purchase price into a Barclays savings account. The buyers are given the full sale price to complete the purchase. After 2 years, the guarantors are given their money back plus interest. The mortgage being a repayment mortgage will reduce the amount owed and hopefully the property will have risen in value so the loan is now around 90% Loan to Value (LTV) and a lower risk to the lender. Barclays are not alone in this arena either. There a few lenders looking for business at 100% with family support. However, if you do have a deposit saved, there are plenty of 95% and 90% deals out there and the lending community are competing for this business for the first time in many years. You can now buy a £200k house with only a £10k deposit and it will only cost as little as £900 per month. Typically though for first time buyers, this will be nearer £1000 per month which is the minimum you would pay in rent for a 3-bedroom house in this area anyway. So, what’s stopping you? An adverse credit file? Maybe for not much longer. In recent times, it probably would but having completely cleared the low-hanging fruit of sub 75% LTV, great employment, no debt, clean credit file perfect borrowers and with BTL lending shunted into the corner, lenders are turning their attention to the rest of the market and that means the not so perfect borrower. Sure, you may need a bigger deposit of 15-20% but defaults, CCJs, Debt Management Plans, historic mortgage/secured loan arrears and other financial blips are now being assessed and accounted for in the interest rates offered. These rates are not the 10% plus rates from olden days but rates that would have been reasonable for prime borrowers not that long ago.
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Next, I think income multiples will be looked at. With 85% of lender’s mortgage books being forced to be 4.5 times earnings or lower, lenders will be looking to see if there is any capacity within the other 15% of funds available.
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All this lending and house-building lower than the growth in demand for homes will push prices ever higher. So, if you have the means to get on the property ladder, do it now before it is pulled up and away from you forever.
Web: www.planit-mortgages.co.uk Email: firstname.lastname@example.org • Tel: 01202 233660
Unit 4, 13 Cobham Road, Ferndown Industrial Estate, Wimborne, Dorset BH21 7PE 29
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