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Maximum borrowing tops broker searches

Brokers most frequently searched for lenders using a maximum borrowing limit in December, a mortgage search platform has revealed.

Knowledge Bank released the monthly data from its criteria searching system today (January 10), which contained more than 80,000 criteria covering 150 lenders.

According to Knowledge Bank, broker activity remained high in the final month of last year with brokers most frequently searching for maximum borrowing criteria in the residential, second charge and self-build categories.

Searches for Help-to-Buy remained in the top five residential searches, a month after making its first appearance on the list last year following an extension of the government scheme in the Autumn Budget.

In the buy-to-let sector, searches for lenders happy to lend to limited companies featured most frequently in December – a pattern matched by lender reports of landlords increasingly transferring properties to limited companies to navigate tax changes in the market.

But searches for lenders willing to lend to first time landlords featured as the second most commonly searched criteria in the buy-to-let sector, closely followed by requirements for first-time buyers.

Nicola Firth, chief executive of Knowledge Bank, said: “The year ended largely as it had started with a huge number of searches across the different product areas.

“During 2018 new lenders entered the market but it was product innovation that really was the stand out change.

“With interest rates remaining low, lenders continue to compete on criteria in addition to rate which makes it increasingly difficult for a broker to know who will or won’t accept their client.”

She added: “On average brokers searched on five individual pieces of criteria for each borrower which shows how essential it is for a system to ensure that cases are not sent to lenders who will inevitably turn them down.”

Source: FT Adviser

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Buy-to-let specialists are thriving

Figures recently included in the Mortgage Market Tracker from the Intermediary Mortgage Lenders Association suggest brokers saw the largest drop in business volumes in the third quarter of 2018 that they’ve experienced in more than two years.

This hasn’t been our experience in 2018 at all, which is most likely down to us deliberately taking a strategic approach to our positioning. Even in a market where buyers, movers and developers are choosing to sit on their hands, we’ve concentrated on areas of the market where we know we can add significant value.

There are a number of trends that have affected the shape of lending in 2018, the most significant being the impact of changes in taxation and affordability testing in the buy-to-let market. The reduction in tax relief on buy-to-let mortgage interest and the tougher stress-testing rules from the Prudential Regulation Authority are beginning to have a visible effect on lending trends.

Limited company buy-to-let has been a big win for us this year, as has our commitment to offering flexible affordability criteria to landlords with other sources of income.

Adding value to investment properties at the outset has also been a focus for landlords increasingly this year. We’ve helped landlords by adapting our application processes for short-term bridge to let and launching our new Refurbishment buy-to-let proposition which features a double proc fee and single application.

We believe this demonstrates both our commitment as a lender to supporting our borrowers and introducers, and also illustrates the value that a specialist lender can offer in today’s market.

Buy-to-let remortgaging has been a significant part of the market this year, and that’s not accounting for product transfers in buy-to-let. The big high street lenders have necessarily had to focus on retention in 2018 as margin pressures have got tougher and transaction volumes have remained subdued.

That has opened up an opportunity for specialist lenders to plug the gaps created by these shifts. We’re big enough to make a meaningful difference to the supply of specialist buy-to-let finance and nimble enough to be able to flex our criteria and underwriting to adapt to the needs of borrowers in a changing market.

What’s in store for 2019? Well, that remains to be seen. But I suspect that it will be a year in which smaller specialists continue to thrive.

And, rest assured, that we will remain committed to supporting brokers and borrowers whose needs are not being met on a high street increasingly under pressure.

Source: Mortgage Introducer

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68% of brokers think Base Rate had no impact on their businesses

More than two thirds (68%) believe that the two Bank of England Base Rate increases seen since November 2017 had no impact on their business, United Trust Bank’s broker sentiment survey has found.

The Base Rate currently stands at 0.75% following an increase from 0.50% on 2 of August this year.  The rate was increased from 0.25% to 0.50% on the 2nd of November 2017.

Some 16% of brokers felt the two increases had had a positive impact on their businesses as opposed to 16% who felt they had had a negative impact.

Harley Kagan, group managing director – United Trust Bank, said: “It is encouraging to see that for a majority of brokers the two Base Rate increases have had little to no impact on their businesses over the last 12 months.

“I believe the same is broadly true from a lender perspective although expectations of higher mortgage rates to come may have been a contributing factor to a general cooling of activity in the residential property market.

“Developers and housebuilders need to be mindful of future demand and pressure on pricing when planning future projects and that, coupled with Brexit uncertainty, is causing some to take their foot off the gas with new starts.

“The Base Rate has been less than 1.0% for the best part of 10 years. Originally a measure to stave off the worst effects of the financial crisis, for many, and especially the latest generation of consumers and borrowers, ultra-low interest rates are now the norm.”

Kagan added: “As such it doesn’t take much of an increase to inject some nervousness into the market, especially for first-time buyers.

“However, a return to the interest rates seen before the credit crunch seems unlikely. Whilst a 5% Base Rate appeared reasonable in 2008, the PRA recently challenged the resilience of banks and other lenders using a 4% Base Rate for stress testing, an indication perhaps of what they believe would be an extraordinary interest rate for the current economic environment.

“Hopefully, once the nature of our future relationship with the EU is clearer and uncertainty in the economy is replaced with stability, buyers will be back in even greater numbers and housebuilders will be more encouraged to get on with tackling the UK’s inherent housing shortage.”

However, when asked what impact the increases have had on the UK’s residential property market over the last 12 months, 27% believed the effect had been negative.

Nearly half (46%) expected one more increase of 0.25% between now and the end of 2019, taking the Base Rate to 1.0%, while 12% expected the rate to fall.

Source: Mortgage Introducer

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Landlords rely on brokers for better deals

Landlords rely on brokers to guide their financial choices because they feel intermediaries have access to better deals, according to research by a bridging lender.

In a survey of 2,000 adults who own three or more residential properties, 35 per cent agreed they rely on brokers to inform choices made when securing finance for a property purchase.

The research, conducted by bridging lender Market Financial Solutions, found 41 per cent of the landlords who relied on brokers felt they could access better rates than a borrower going direct with the lender.

Paresh Raja, chief executive of Market Financial Solutions, said: “Whether it is someone purchasing their first house or their 50th, this research shows how instrumental brokers are in guiding property buyers through the financial options available to them.”

Recent figures released by fintech firm Mortgage Brain found a significant difference between the cost of comparable buy-to-let mortgages and mainstream residential products.

As of November 1, the cost of a five-year fixed buy-to-let mortgage at 80 per cent loan-to-value (LTV) was 24 per cent more than the same product type for a residential mortgage.

A two-year fixed buy-to-let mortgage at 80 per cent LTV cost 20 per cent more than its residential equivalent.

The survey of landlords with a portfolio of three or more properties also found a preference to explore financing outside of traditional mortgage products, with 41 per cent expressing a want for a better understanding of the options available to them.

Mr Raja said: “Importantly, beyond the historically dominant mortgage providers, there are now many forms of alternative finance that buyers can call upon.

“And property investors are clearly keen to explore options outside of mortgages that might be better suited to their particular circumstance.”

Mr Raja said with more than a third of landlords relying on brokers, it is vital intermediaries have in-depth knowledge of all financing options and not just different rates for the same product.

Steve Olejnik, managing director at Mortgages for Business, said he thought the number of respondent landlords using brokers to guide financial decisions in the survey was surprisingly low.

He said: “In my experience nearly all buy-to-let mortgage business is done via intermediary channels.

“But there will be landlords who purchase in cash and therefore don’t require finance – I would think therefore that those not going to a broker are predominately cash buyers.”

Mr Olejnik said brokers are becoming increasingly important in filling the advice gap.

He said: “In a buy-to-let environment more complex than ever, landlords really do need broker advice to find the right product.”

Source: FT Adviser

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Brokers warned of buy-to-let mis-selling scandal

A specialist lending panel at FSE London has urged intermediaries to stay clear of buy-to-let tax advice to avoid being involved in the next potential mis-selling scandal.

Louisa Sedgwick, director of sales for mortgages at Vida Homeloans outlined the importance attached to brokers having documentation in place to say they had offered no tax advice, as she cited this as the next potential mis-selling scandal.

Rob Jupp, chief executive at Brightstar Financial, said: “The important thing is that brokers spend the appropriate time making sure that they never cut corners on buy-to-let transactions.

“And that appropriate documentation is in place from specialist tax advisers to accept responsibility for the advice they give.”

Adrian Maloney, sales director of OneSavings Bank, added: “Make sure that your clients are getting the right tax advice and that you, as an adviser, are almost isolating yourself to the mortgage advice.

“Tax advice should only be done by someone who knows the process inside and out.”

In terms of the wider tax implications the panel agreed that some elements of the landlord community were still getting to grips with how the changes will affect them.

Alan Cleary, managing director of Precise Mortgages, outlined that professional landlords – and larger portfolio holders have a greater understanding of the tax changes.

He said: “We have stats which suggest that around half of amateur landlords don’t know exactly what is going to happen to their profitability as a result of the tax changes.”

David Whittaker, chief executive of Keystone Property Finance, added: “Lots of landlords remain blind to exactly what is going on, they are aware there is a problem but don’t know how to quantify it yet. And when most of them do their tax returns most of them are going to get a wake-up call.”

Source: Mortgage Introducer

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Brokers expect landlord business to stabilise

The majority (65%) of mortgage intermediaries expected the level of landlord business to stabilise over the next 12 months, Paragon’s Financial Adviser Confidence Tracking (FACT) Index has found.

This is the first time that intermerdiaries have forecast a stable outlook for buy-to-let since the 2015 Summer Budget when George Osborne, then Chancellor of the Exchequor, announced plans to phase out tax relief on buy-to-let mortgages.

John Heron, managing director of mortgages at Paragon, said: “It’s encouraging to see intermediaries forecast a more stable outlook for buy-to-let business after such a long period of negative sentiment.

“Purchase activity continues at much lower levels but it is interesting to see the step up in remortgage business as landlords look to maximise certainty and minimise costs as the interest rate changes start to take effect.”

The first round of tax changes, which are being phased in between 2017 and 2021, were implemented in the 2017-2018 tax year and will affect tax payments due by midnight on 31 January 2019.

Taken together with the 3% stamp duty surcharge on rental properties and new PRA rules on buy-to-let affordability and underwriting, the tax changes have had a significant effect on property transactions.

Latest figures from UK Finance show that buy-to-let mortgage purchase transactions have fallen by around 40%, dropping from 8,900 in May 2015 to 5,500 in May this year. Landlord remortgaging however, has risen sharply over the same time period, up 64% from 8,900 transactions to 14,600.

Intermediaries said almost half (49%) of landlord mortgage applications are for a straightforward remortgage, with six out of 10 landlords who are remortgaging looking to lock in a better interest rate.

Encouragingly, this quarter’s FACT results also include the first increase in the proportion of landlords raising finance for portfolio expansion since 2015 – up marginally from 22% in Q1 2018 to 23% in Q2. And there was a small increase in applications from first-time landlords, edging up to 14% of the total.

Source: Mortgage Introducer

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More brokers expect lenders to tighten credit policies than relax them

Around 57% of brokers operating in bridging, development and asset finance expect lenders’ credit policies to stay largely unchanged over the next 12 months, United Trust Bank’s recent broker sentiment survey has found.

There were slight variations between brokers operating in the different sectors but, on the whole, 57% of brokers expect lenders to keep their credit policies broadly similar, 32% expect them to tighten and 11% predict that lenders would relax them.

Harley Kagan, managing director, United Trust Bank, said: “It’s good to see that most brokers believe lenders are already operating with an eye on the future.

“However, it’s perhaps unsurprising given the level of uncertainty surrounding Brexit, the UK economy and the residential property market, that many brokers feel some lenders will be tightening their purse strings over the next 12 months.

“Anecdotally we’ve heard from some brokers that lenders who were once happy to consider certain loans are now being far more cautious even with well-established customers.

“This ambiguity will frustrate brokers, but as long as they’re aware that experienced, ‘through the cycle’ lenders like UTB are still very keen to lend, they should be able to find quick and competitive funding solutions for their clients.”

For bridging finance, 58% think lenders’ credit policies will stay broadly the same, 28%think lenders will tighten their credit policies and 14% think lenders will relax their credit policies.

For development finance, 60% reckon lender credit policies will stay broadly the same, 33% think they will tighten their credit policies and only 7% reckon they will relax their credit policies.

Under asset finance 53% predict lenders’ credit policies will stay broadly the same, 35% thought they will tighten them and 12% expect them to relax their credit policies.

Kagan added: “From a broker perspective there are obvious advantages to dealing with a specialist lender which can quickly adapt to changing market conditions and be flexible in applying their credit policy to marginal cases.

“At UTB we consider every proposal on its merits and when required will use our knowledge and experience to formulate a solution which will hopefully give the borrower and the broker what they need whilst satisfying the Bank’s risk appetite.

“United Trust Bank is an approachable and dependable lender. We help housebuilders, property developers and SMEs who wish to seize opportunities in spite of uncertainty and support them through the ups and downs of the economy and the housing market.”

Source: Mortgage Introducer

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Broker searches show need for later life mortgages

The top search on Criteria Hub backs up evidence that more older borrowers are looking to buy property. The deep search engine for mortgage advisers, clubs and networks, has revealed the number one search for residential mortgages is the phrase “maximum age at end of mortgage term”.

This reinforces evidence of the growing number of cases where older borrowers are looking to seek funding either to raise capital or for new purchases.

In the buy-to-let (BTL) section, the requirement from lenders for applicants to show an income separate from their rental income has meant that brokers’ primary search is to establish which lenders have a minimum personal income requirement.

Jason Hegarty, director of Criteria Hub, said: “Simple criteria like maximum age limits for residential mortgages and minimum income requirements for buy-to-let cases might not seem important, but the volume of enquiries about the same topic allow us to create a bigger picture of the areas where advisers are seeing the most demand.”

Martin Stewart, director at London Money, said: “Longevity is going to be the silent killer for current mortgage criteria and the sooner people wake up to the fact that the speed in demographic changes is moving faster than the pen that writes the rules, the sooner we can start to address the issue.

“We all need to realise that things change whether we want them to or not. It is far better to get ahead of the curve and wait for the problem to arrive than forever be chasing it off in to the distance .

“There is an opportunity for government, regulator and lender alike to grasp the issue. The later life sector will be more fruitful and longer lasting than buy-to-let so moving capital and resources into a new area would make perfect sense.”

This comes as Criteria Hub revealed the top three searches made by its broker users for residential and buy-to-let mortgages so far in 2018.

The second most popular search for residential enquires was “defaults (unsatisfied) potentially accepted”.

This indicated if a lender can potentially accept applications from applicants that have had or currently have unsatisfied defaults registered against their name.

In the buy-to-let category, the second most common search was on expat buy-to-let, which indicates if a lender can potentially consider buy-to-let applications from expats.

Finally, the third most popular search for the resident market was “interest-only: sale of mortgaged property”.

This specifies whether interest-only, with the repayment vehicle ‘sale of the mortgaged property’, is an acceptable repayment method on residential mortgages.

Lastly, the third most common search for the buy-to-let market was ‘first-time buyer’, which indicates if a lender can potentially consider applications from those trying to get onto the property ladder.

Source: FT Adviser

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Keep educating clients about buy-to-let – the appetite is still there

As we all know, buy-to-let is now a lot more challenging for brokers. Gone are the days when a broker could just pull out a calculator and work out how much a landlord could borrow.

In the post-PRA world, brokers now have to gather a huge amount of additional information the landlord’s property portfolio as well as their business plan and cashflow statements, before they can even start to think about LTVs.

And that is all assuming the landlord is aware of the changes, many landlords themselves still have a lack of understanding around why lenders need so much more information than they did before.

While the topic has been covered frequently in the trade press since the rules were introduced five months ago, there has been relatively little about the changes in the consumer press. Therefore, many borrowers are unaware of the changes until they actually come to remortgage or buy add another property to their portfolios.

This means many are taken aback when their broker then explains to them how much information they now need to provide, and how much extra time is needed to put together a buy-to-let mortgage application. And actually, even those who do know about the changes might not know quite the impact all the extra information needed will have.

There are even some lenders who are not sure about all the information they need themselves and therefore, even when all the information has been provided, applications are taking a lot longer than they used to. Brokers are also finding that different lenders are asking for the information in different formats, creating even more work for brokers.

While in the main, brokers know about the changes, for those who only occasionally deal with clients with portfolios of properties, the extra information required can seem as incomprehensible to them as it does to their clients.

And this is then compounded by the fact many reports are suggesting that landlords are ‘selling up on masse’ as a result of the changes so there is little buy-to-let business around away.

However, we have not seen any evidence of this, and in any case, I think we need to give landlords more credit.

Landlords are not going to sell up just because of a few changes to tax rules, most will take a much more pragmatic approach. And even those who do sell up, it is more than likely another landlord will take on the property anyway.

We know that for many brokers, the extra time and effort needed to put together a buy-to-let application may put them off, but the reality is, there is still a huge appetite out there for buy-to-let, and we are working hard to support all our brokers to enable them to keep writing good quality buy-to-let business.

Source: Mortgage Introducer

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UTB poll: 92% of brokers braced for rate rise

Some 92% of property and asset finance brokers think the Bank of England will further increase the base rate this year, research from UTB has found. 

A poll of over 120 respondents found that just 7% believe the base rate will remain unchanged throughout 2018. Surprisingly 1% feel that we could see a drop.

In a further question, brokers were asked to indicate whether they believed Theresa May would still be the Prime Minister at the end of the year.

And 72% believed she would see out the year in Number 10, however 28% believed there would be a change of Prime Minister in 2018.

Harley Kagan, group managing director – United Trust Bank, said: “Since November 2017 when the base rate was increased, speculation about when the next move would come has been rife.

“However, in all the polls we’ve held at UTB, this result has shown the biggest consensus amongst finance brokers expecting a rate rise this year.

“However, although there seems to be expectation that an increase could come as early as May, there are several factors which might cause the Monetary Policy Committee (MPC) to show more caution.

“For example, The Term Funding Scheme ended in February. This provided below market cost liquidity to banks in order to encourage lending to the public and its removal may already be having an impact on saving and lending rates.

“In addition, the Bank of England has so far assumed a relatively smooth path to Brexit, but with substantial divisions within parliament, and within the Conservative Party itself, Theresa May is unlikely to find it easy to guide through her preferred Brexit based on a fragile majority. Indeed, more than a quarter of brokers believe she may not be the PM presiding over the actual Brexit at all.

“With so much uncertainty still surrounding what the UK’s economic and trading position will look like come April 2019, there’s a strong argument for leaving rates alone until the outlook becomes clearer.”

Source: Mortgage Introducer