Top tips for securing a mortgage

With the UK property market now entering its busiest period of the year, leading property finance specialists, we have put together some top tips for homebuyers when it comes to securing the best deal on a mortgage. While the affordability of mortgage products remains at almost record lows, there are still plenty of ways to make your mortgage even more cost-effective, although your broker might not always disclose these methods. While some tips will save you money, it really is a case of spending money to make money with some of the others. When combined they should place you in the best position when buying in the current market.

Deposit thresholds

More often than not, increasing your deposit by just a small amount can boost you into the next Loan to Value band, meaning a better rate and even potentially less onerous credit scores with lenders. Always work on 5% increments as these are where the best deals are for your price band.

Seek a no-fee mortgage broker

Pretty simple but many of us fail to do it. All brokers are paid commission on the product they sell you, but around 80% will also charge an additional fee – typically £500. May seem minute in the grand scheme of buying a house, but it all adds up.

Life cover

With the cost required to get on the ladder, many of us can be forgiven for skipping the add ons a broker may suggest. If there’s one cost you don’t want to skip on, it’s life cover. Understandably, many of us today can only get on the ladder with the help of our partners as a joint income is required. However, if the worst were to happen and illness or even death strikes, the lack of any form of protection cover can result in the whole deck of cards coming crashing down immediately. This is the last thing you need in this situation, so make sure your life cover is in place and up to date.

Don’t restrict your options

It’s common knowledge that your bank isn’t the best place to start as they only offer their rates and products. But you would be surprised as to how many brokers and advisers can only offer products from a restricted panel of lenders. As a customer, this means you are missing out on potentially the best deal for you so make sure your broker has access to the entire marketplace.

Get your personal details in order

Such a simple one, but if you’ve failed to update documents to your married name, or you aren’t registered to your current home address, the lender’s computer will literally say no as it won’t be able to find you. This is a shortcut route to having your application declined.

Electoral roll

Once your details are correctly registered, register for the electoral roll. You might not know it, but this has a huge bearing on the scoring system of lenders credit. If you aren’t registered it’s another minor little detail that can see you fall at the first hurdle of a mortgage application.

Forward your post

The £60 it costs to have your mail forwarded for a year will be the best money you’ve ever spent without even realising it. This doesn’t necessarily apply to your mortgage but it will save you money. All too often a client moves house and ended up with a default notice on their phone bill or credit card as they’ve not received the reminder and forgot to pay it.

Overpayments

Again, sounds obvious right? But many of us plod along without even considering it. If your mortgage product allows overpayments – make them! You would be surprised at how much even a small overpayment can make on a monthly basis when it comes to the total interest over the lifetime term of your mortgage.

Lock it in

We’re currently in the middle of an artificially low, interest rate cycle and mortgage product affordability is close to record lows. Great news but make sure you lock in on a fixed rate mortgage to make the best of the current climate. A longer term of a fixed five-year rate is probably the best option however a three year fixed might be a happy middle ground for many between a two and five-year product. However, be aware of any 10 year plus fixed rate products. The fee might be great but over the years we’ve seen best-laid plans fall by the wayside and clients are then hit with huge early exit fees if they need to move or pay their mortgage early.

Working overtime

Any overtime worked can be beneficial towards mortgage eligibility but try and ensure that this overtime is consistent as possible. If there are drastic swings in the hours worked, lenders will often work from the lowest figure when deciding your position in the market.

Credit score

If you’re looking to buy right now and your credit score is no good, then you’ve probably already had a few lenders say no. Your credit score is everything to a lender in this day and age and poor payment history or a low score will put you at a severe disadvantage from the offset. Do all you can to cultivate a healthy score starting now and as most lenders base their judgement on Experian, it’s worth the small investment.

95% mortgage rates plummet: is now the time to apply?

If you are struggling to build up a home deposit, then why not try the 95% mortgage scheme. The cost difference between 95% and 90% loan-to-value mortgages is shrinking. But is it wise to lock into a 95% mortgage deal or should you keep saving up for a larger deposit?

New data from Moneyfacts shows the gap between rates charged for two-year fixed 95% and 90% loan-to-value mortgages is falling, and is now at its narrowest since February 2013. Mortgage rates have become increasingly low, and with so many to choose from, now is definetly the time to buy. 

This is despite borrowers with the smallest deposits often being seen as more risky and recent reports suggesting uncertainties relating to the economy and Brexit are having an impact on the housing market. Currently in the market is a mortgage price war to attract first-time buyers with deposit as low as 5%, providers are minimising their rates to The narrowing rate gap has been driven by “healthy competition” by providers looking to attract people with a 5% deposit. 

The mortgage rate gap on 95% and 90% two-year fixed-rate mortgages was 0.65% in February 2019, down from 0.77% in January 2017, according to the latest Moneyfacts data. This is both because 95% mortgages are getting cheaper and 90% mortgages are growing more expensive. The average mortgage rate for 95% loan to value mortgages fell by 0.95% to 3.3% from October 2017 until today, while 90% loan to value mortgages rose 0.03% to 2.65% over the same period. Generally speaking, the higher the loan to value and therefore the smaller your deposit, the higher your interest rate will be. With a minimal deposit, the lender faces a greater risk if you default on your mortgage.

The counter-trend towards cheaper 95% deals may be explained by providers trying to compete in the first-time buyer market, to try and secure more loans from these customers. This is fantastic news for potential first-time buyers who are looking to find their first step onto the housing ladder. 

Top Ten 95% mortgages for first time buyers

 Maximum LTVInitial RateSubsequent Rate (SVR)Overall Cost for Comparison
Monmouthshire95% 2.54% fixed for 2 years5.24% Variable 4.9% APRC
Newcastle Building Society95% 5.54% Unit5.99% Variable5.1% APRC
Lloyds Bank95%2.65% fixed until 31 July 20214.24% Variable4.0% APRC
Barclays95%2.75% fixed until 30 April 20223.45% Variable3.2% APRC
HSBC95%2.89% fixed until 31 July 20214.19% Variable4.0% APRC
Halifax 95% 2.93% fixed until 31 May 20214.24% Variable 4.2% APRC
Post Office Money95%2.98% fixed until 31 May 20214.74% Variable 4.5% APRC
NatWest 95%3.08% fixed until 30 June 20214.34% Variable4.2% APRC
Halifax95% 3.09% fixed until 31 Jul 20214.24% Variable4.1% APRC
Lloyds Bank95%3.09% fixed until 21 Jul 20244.24% Variable3.7% APRC

Unlock the door to a home of your own with a Help to Buy ISA

The Help to Buy scheme continues to grab the headlines, with its success rate for getting first-time buyers onto the property ladder. A recent study from the Ministry of Housing, shows that almost half a million completions have taken place since 2013, with 430,000 of these completions made by the first-time buyer market.

There was a total of 494,108 completions, which have taken place using one or more of the governments Help to Buy schemes, over 93% of which took place outside of London. The average house price purchased through the schemes, was around the £200,000 mark. First-time buyers have now opened 1.4 million Help to Buy: ISAs offering government bonuses of up to £3,000 on top of their savings.

These figures highlight how invaluable the Help to Buy scheme has become, and how it will continue to support home buyers into the next decade. It has also helped prop up the new build sector and provided housebuilders with a solid target plan for the delivery of new homes. Demand will continue to grow for new build homes even though some questions arise around the price, value and borrowing requirements and affordability. Build quality and energy efficiency standards attached to new build properties continue to be a primary focus for the property developer sector. Help to Buy has certainly created a positive pathway for the growing numbers for first time buyers, housebuilders, lenders.

So how does it actually work?

Launched on April 1st, 2013 and available until 2023, help to buy is an equity loan scheme. Under the scheme, the buyer is only required to find 5% of the property value for a deposit. The government then lends you up to 20% of the value of the property in the form of an ‘equity loan’. The remaining balance can then be topped up through a mortgage. There’s no interest to pay on the equity loan for the first 5 years, after that the interest kicks in at 1.75%.

It’s open to both first-time buyers and home movers, but it is restricted to new build homes. From April 2021 onwards only first-time buyers will be able to apply. When you come to sell your home, the government will take back its 20% share. If you don’t sell, the money is due back after 25 years. The idea with the help to Buy equity loan is that, because you’re theoretically only borrowing 75% from the mortgage lender, payments will be lower than if you had used a 95% mortgage. Help to Buy is a great route to get onto the housing ladder, or to even upsize your house if you are wanting to start now. But you must be quick, as its not going to go on forever!

Now you can get a 100% mortgage for first-time buyers

Britain’s biggest lender Lloyds is to offer 100% mortgages to first-time buyers in return to lending last seen before the financial crash, but theres a catch. The bank will grant the loan on one condition, if the buyer has family that can stand behind the loan. Under the new Lloyds Bank “Lend a Hand” deal, a first-time buyer will be able to borrow up to £500,000 for a new home, without putting down a penny of deposit. The Lloyds move marks a major expansion into the first-time buyer market, as most other mainstream lenders demand a minimum deposit worth 5% of the property purchase price, although Barclays has offered a similar “family springboard “deal. Lloyds has priced the mortgages to uncut the Barclays offer.

Saving for a deposit is usually cited by first-time buyers as the biggest hurdle to home ownership. Lloyds said the average deposit put down by first-time buyers has climbed £33,211, and a staggering £110,182 in London. The Lloyds deal requires that a member of the family, such as a parent, grandparent or close relative, helps out. The bank will only grant the 100% mortgage if the family member puts a sum equal to 10% of the value of the property into a Lloyds saving account.

The deal is structured so that “Bank of Mum and Dad” can help out their children, yet still keep control of their cash savings that they will need later in life, Lloyds will pay what it described as a market-leading interest rate of 2.5% on the money deposited. Vim Maru, group director of Lloyds Banking Group, which also controls Halifax, said: “We are committed to lending £30bn to first-time buyers by 2020 as part of our pledge to help people and communities across Britain Prosper, and ‘Lend a Hand’ is one of the ways we will do this. Vim Maru continued to say “At the heart of this market leading product is helping address the biggest challenge first-time buyers face getting on to the property ladder, whilst rewarding loyal customers in a low-rate environment.

The Lloyds’ mortgage is structured as a three-year fixed rate deal priced at 2.99%. During the three-year period, the family member who has deposited the money with Lloyds cannot access their cash. Initially the deal is available in England and Wales only. The latest mortgage offering comes hard on the heels of a surge in 10-year fixes to beat Brexit uncertainty. Lenders such as First Direct have slashed interest rates on ultra-long term dates as low as 2.44% a year pegged for a decade. But these deals require buyers to put down large deposits, often as much as 40% of the value of the home being bought or re-mortgage.

Lloyds research found that buying their first home remains the number one life goal for people aged 18-35, but half have said that saving for a deposit is the biggest barrier. It also found that 41% of parents said they wanted to help their offspring on the property ladder, but were worried that they would need the money later in life.

Getting onto the property ladder in 2019

Buying a first home can be as daunting as it is exciting for first-time buyers but there are a number of simple steps people can take to prepare themselves and make the process as smooth as possible. 2019 could be the best year to get onto the property ladder, with some industry experts predicting that Brexit could cause house prices to drop further. So if getting onto the property ladder is your number-one new year’s resolution, read on for our step-by-step guide to the home-buying process, plus links for further information.

Saving for a deposit and other costs

Finding that all-important deposit will be the forefront in first-time buyers’ mind, so setting a savings goal to focus your efforts in the crucial first step in the process. Hopefully as a first time buyer, you’re saving into a Help to Buy ISA or Lifetime ISA, so that you can claim a government bonus of up to 25% when you buy. If you haven’t already, and you want to buy in the next few months, its worth opening a Help to Buy ISA before they’re withdrawn from the market in November 2019. Otherwise, you could opt for a lifetime ISA, but you need to have saved for a year to benefit from the bonus. As well as saving for a deposit, you need to think about the additional costs involved with buying a home, including surveying charges, moving costs and solicitor fees. There is also stamp duty to consider in some cases. First time buyers are exempt from stamp duty on properties up to £300,000 but there are still charges if properties are priced above this threshold, something which is particularly relevant to buyers in London.

Investigate mortgages

A mortgage is a home loan which you pay off gradually each month over the course of a set number of years, known as a mortgage term. Most mortgage lenders will offer you a maximum of between 3 and 4.5 times the combined annual incomes of you and any other people you’re buying with. Speaking to a mortgage broker could help as this will ensure you have access to a broad range of deals. Checking your credit score is a must before considering taking out a mortgage as this will be the deciding factor in whether you are accepted for the loan and what rate you are offered. You should always make sure all the information is accurate and up to date. You can enhance your credit score by paying off an outstanding debts and being meticulous about meeting agreed payments such as utility or mobile phone bills. Also ensue you are making more than the minimum payment on credit cards in the six months prior to your mortgage application.

Choosing the right property

According to the Post Office, three fifths of properties sold in 2018 were in areas affordable for first-time buyers. Understanding the rate at which a property sells in the area you are looking to buy could also help you negotiate on price and also help to plan for additional costs, which has created a rate of sale map to help buyers. Being prepared to compromise is also a vital quality in a successful first-time buyers and, as adjusting your expectations and having a flexible approach is important.

Research the area and start the house hunting

If you don’t already live in the area you’re thinking of buying in, try and stay there for a couple of nights to see if its definetly somewhere you want to live. Test your commute and check out what the atmosphere and noise levels are like at different times of day and night. For many people, the hunt begins with setting up search alerts on a portals such as Rightmove. But while this is a sensible place to start, it shouldn’t be where your research stops. You’ll need to register with estate agents and start going on real-life viewings to really get a feel for the types of homes available for your budget. Contacting local property developers in the area is a great way to get a first look at available property on the market, in the coming months. Buying property from developers not only cuts fees with estate agents, but also allows you to have your home finished personalised to you.

To see what developments we have to offer in 2019, head over to our website.

The Power of Prop Tech 2019: What is it and why does it matter?

Property technology will continue to transform the industry

The UK’s property industry has remained stubbornly resistant to change, even as innovation reshapes entire verticals across the wider economy. Compared with finance or retail, where e-commerce now accounts for around 20% of total UK retail sales, technology-led disruption in the property sector has been marginal. Whilst most of us bank and shop very differently today to how we did just a few a years ago, the fundamentals around buying a house, acquiring a mortgage or renting office space has remained more or less the same. But all of those things are about to change.

Technology has been continuously remapping the way we work in the industry, and we can expect to see this trend continue in 2019. Over recent weeks, we have seen the Property technology innovations make national headlines, with the worlds first AI auctioneer overseeing an online property auction using blockchain to create an electronic audit trail and google making it’s first property tech move outside of the US by investing into UK property management service AskPorter. And its not just google who think that PropTech is a good idea.

Historically the property industry has been slow to embrace technological change. However, attitudes appear to be changing now we are heading into the year of 2019. A survey carried out by Property Week underlines the steady increase in the number of businesses looking to adopt new technology, with 68% of respondents saying they reembrace tech and are ‘willing to innovate and trail new products’. With 67% of property companies saying they believe the investments they have already made in tech have given their business a USP.

Innovative property technologies in the UK Market

1. Move bubble – a collaborative site for property owners, agents and renters

The site’s aim is to champion the renter’s needs and in doing so it’s a collaborative site where owners, agents and renters can work together as individuals to streamline the rental process. There’s a huge shift going on with the younger generation coming onto the market. They’re demanding more simplistic, value adding, mobile, cloud based solutions that enable collaboration between end-users, offering far greater levels of transparency.

2. Virtual View App – the UK’s first mass-market augmented reality property platform

Founded in 2016 out of the startup accelerator Rainmaking Loft, Virtual View App combines digital and printed marketing materials to allow users to access 3D property models and floor-plans, photo galleries and videos by scanning an image. There’s the ability to look at other elements of the property process, such as unique videos to market properties or cloud services that manage rental-related documentation.

3. Splitwise – an app to make shared living simple

In the ‘hassle-free’ space, Splittable claims to “make it easy to split bills and track expenses with your housemates”. This innovative application focuses on making shared living easier by tackling the often tricky subject of bills. Claiming to stop arguments before they start, Splittable makes it simple to split bills flexibly while helping users keep track of house share expenses.

So what does the future hold for property technology?

There is a lot of excitement around property technology both locally and globally. The key for success in property technology both locally and globally. The key for success in the property industry is to continually improve visibility and transparency, and to work hard to empower investors and other stakeholders as part of the value chain. That’s why its extremely important to get comfortable with new technology to make your business flourish, times are changing, and you know what they say, “innovate or die”.

Important things to know about Help to Buy ISAs in 2019

The Help to Buy ISA was launched on the 1st December 2015 and runs until the end of November 2019, with all bonuses having to be claimed by the 1st of December 2030. With just under a year left to open and start saving, now could be a good time to consider one. They offer an alternative to taking out a loan to help fund an initial deposit for your first home along with other benefits, with the way they work and how you can take advantage of them.

How do they work?

Help to Buy ISAs work in a similar way to regular ISAs, the only difference is, the government will top up any contributions made by 25% (up to a limit of £12,000). A minimum amount of £1,6000 is required to qualify for a government bonus and you can start with a deposit of anything up to £1,000. After the initial deposit has been made you can only save up to £200 a month, so you can’t simply transfer £12,000 across, for example. Then when it comes to buying your first home with the ISA, 25% will be added to it as long as its between the minimum and maximum contributions.

Qualifying Criteria

In order to open and use a Help to Buy ISA you simply need to be a first-time buyer over the age of 16. The good news is that they are available to each first-time buyer and not each home, so if you have a partner or want to buy a property for a friend, you can combine savings and get up to £6,000 from the government towards your home. Any home worth under £250,000 (or 450,000 in London) is eligible and it can be used with any mortgage, not just a Help to Buy one.

Limitations to Help to Buy ISAs

Within all the criteria mentioned, there are a few further restrictions. Help to Buy doesn’t work if you are wanting to buy a property overseas or open more than one. Technically you can’t buy a property and rent it out with one, but if your circumstances change and you have to work away, for example, you will be able to rent it out.

Should I open one in 2019

Any first time buyers will be looking into getting a good financial position before purchasing a property by ensuring they fulfil their financial obligations. If you are considering buying a house in the years should seriously consider open one. As long as you meet the qualifying criteria and open one before the 2019 deadline then theres little reason to not open a Help to Buy ISA.

First time buyer mortgage rates fall to a record low

This is why now is the time to buy for first time buyers, the banks in the UK are
making it easier for first-time buyers to get on the property ladder by offering the
lowest mortgage rates since records began in 1995. Interest rates on two and five
year deals have fallen to a twenty three year low, according to the latest Bank of
England figures.

People looking to buy a property with a 5 % deposit and take out a loan for the
remaining 95% could get a two year mortgage with an interest rate of 3.3%, down
from 4.02 % a year ago. For five-year mortgage, the average rate was 3.89% at
the end of October. It was 4.71% in the same month the previous year. Both rates
beat the record lows for each type of mortgage reached a month earlier, at 3.39%
and 3.95% respectively, suggesting that lenders are increasing efforts to push
businesses up. The reason for these rates falling is mainly down to the stiff
competition among leaders in the industry.

Low-deposit mortgages are often popular among first-time buyers, but are usually
more expensive than other property loans, meaning lenders have more scope to
cut rates. Saving up a large deposit typically results in a cheaper mortgage. The
average two-year mortgage rates for a buyer with a 10 % deposit is 2.24%.
Even with cheaper 95% mortgages and exemptions on stamp duty, first time
buyers still need to raise more than £10,000 to put down a 5% deposit on a
typical property. The current lowest rate for a two year fixed mortgage with a 5%
deposit is 2.76%, from Halifax, however this is only available through brokers,
who charge a fee. It is common to see mortgage lenders offer low rates in the
final months of every year in an attempt to hit their end of year targets. However,
it is thought that the current low rates for first-time buyers will continue into
2019.

The economic benefit of development to the local community

Some people call us greedy and some call us ruthless, but really developers helps communities grow which fuels economic growth. A lot of people fail to recognise how far the economic benefit stretches with the creation of new developments. Many people just assume that it is merely a percentage of housing that is allocated to the council for social housing, under the section 106 affordable housing act, but really it’s so much more than that. For many property developers it is very frustrating, as they are penalised for being greedy and bringing too much change into a community, but people do not see the bigger picture and the economic growth we create.

The house building industry is a massive driver of the UK economy and makes a huge
contribution to communities across the country. While delivering much needed new homes of all tenures, house builders are quietly creating and sustaining jobs, boosting investment in infrastructure and amenities in village, towns, and cities. As well as becoming ever more reliant on private builders to deliver affordable housing through planning agreements, vast sums are ploughed into new roads, schools and community facilities each year. Below we talk about the economic footprint provided in the UK of the property development industry.

1. Before a site has even been acquired, a company has many employees working in
house, depending how large the company is. As you can see already there are jobs
created and business rates paid even before the development takes place, this could be
anything from graduate to apprenticeship jobs helping the community grow.

2. Acquiring a development site is a key stage and the beginning of the property
development process, there are many systems in place to help to source a site, which is
normally done in house. Once this is found, each party has to have a legal
representative which they will outsource to a local law firm.

3. Development appraisal forms the backbone of the financial side of property
development and is arguable the most important step within the property development
process. A developer will know their appraisals inside and out and be able to quickly and efficiently put together an initial site appraisal and cash flow. This will be done in house, and is the deciding factor as to whether the site is worth purchasing, where many different considerations will be taken into account. This is the start of outsourcing the project to different expertise in the field. This could be a planning consultant, architect, solicitor, engineer. This changes from site to site, but there is always lots of jobs to go around in the local community.

4. A development cannot happen or go ahead without funding. Money is one of the 3
pillars of property development and is an area new and inexperienced developers struggle with the most. For each site that you look at, you need to understand how you
will fund it and how to structure the financial side. Each site is different and will require
a different set of funding criteria, and because it’s become increasingly difficult for
developers to get funding, they have to sometimes work with different funding
partners, this can lead to inefficiency and become very expensive.

5. One of the 3 pillars of property development is planning, and the required permissions to actually be able to start and finish a development project. As a property developer, we need to manage the process to ensure all the permissions are in place and that we have a scheme designed that is viable. A developer will know how to optimise and maximise every single square foot on a site to achieve the maximum amount of profit the sit can yield, which in fact means more affordable housing due to being a percentage measurement. There are many other permissions required, not just
planning. For example, building control and party walls. These all need to be managed
along the process to ensure that a development can actually go ahead and happen.

6. Reaching the construction step along the property development process is a major
milestone and there will have been some serious work, effort tune and money invested
into the project. There are many ways to contract with a builder, and this will also
depend on the role you are taking during the construction process.

7. Once the development is finished, it will then be sent off to different estate agents
around the area, but also the development company itself may choose to market the
properties. Sometimes they may hire private marketing companies around the area to
give it that extra push, or work with local newspapers and PR companies.

As you can see from the above, no matter what angle the development is going there is always a need for outsourcing jobs in certain expertise. What people do not understand is the idea of job creation for so many local businesses from development companies. It being a major boost for the local economy, providing modern and attractive spaces for businesses, creating new jobs and encouraging more visitor numbers into the town throughout the year. Below you can see some statistics put together from Litchfield’s of the economic footprint of developers around the UK.

• A total of £38 billion for the economy is generated by house building each year.

• A total of £4.2 billion is either given from developers to help provide affordable housing
in the local area.

• There are over 698,000 jobs created each year from a variety of fields of expertise.

• There is an around £2.7 billion in tax paid each year, which comes from a Council tax, Stamp Duty tax, Corporation tax, National Insurance, Pay As You Earn tax.

• A total of £5.9 billion spent in local shops and services by residents of new homes.

• A total of £1.2 billion is spent on tenants making their houses feel like home
i.e. furniture

 

 

New homes developers say higher interest rates and Brexit isn’t a threat for first-time buyers

This year has left much uncertainty in the housing market, with not only the interest rates being pushed up by the Bank of England but also the countries uncertainty around the Brexit ‘no deal’. In turn, this has led to mortgages rates sky high and UK wage development low, this is thought to of made it increasingly difficult for aspiring homeowners.

The increase in borrowing will have an immediate impact on households and is expected to dampen economic activity over the coming months. However, with scarcity at risk, there has been a high growth of first-time buyers, cashing in on the governments Help-to-Buy governments scheme. Estate agents across the UK, have not only seen a significant increase in new build homes being sold, compared to last year. But also housing asking prices across the market have also fallen by 2.3 pc this month according to Rightmove.

Mortgage approval rates for July showed another month of growth, which shows first-time buyers are still finding their way onto the property ladder. On the other hand, re-mortgage approvals fell by 7.3% July, showing that it’s becoming difficult to upgrade your home, rather than buy your first home.

Richard Carr chief executive of Fortitudo says this is a positive direction for the housing market for first-time buyers and Fortitudo will continue to help the housing market to grow, with our new build developments continuing to be associated with the Help-to-Buy Government schemes.