Despite the increase in the Base Rate to 5% by the Bank of England in June, speculation remains as to when the next rate rise will come and where rates will peak. With the expectation that UK inflation will remain stubbornly high for longer, some experts are forecasting rates to reach as high as 7% and remain higher for longer than was anticipated earlier this year. In this uncertain climate, mortgage lenders continue to withdraw and re-issue mortgage products at short notice.
Whether you have a single buy to let (BTL) or are a portfolio landlord, if you are considering a new purchase or refinancing an existing BTL mortgage, then each lenders’ Interest Coverage Ratio (ICR) requirements/policies will be crucial to your success.
In the current times of high interest rates, lenders have set challenging ICRs and many landlords may struggle to secure the finance that they need.
In March the Equity Release Council issued their 2022 Later Life Lending report. The report highlights that in the UK, property wealth has reached £6.7trillion and £5.2trillion after mortgage debt. A significant portion of this wealth is in the hands of the over 55s. For some, the equity in their home could far exceed the value of their pension/investment savings and therefore have a significant impact on the quality of their retirement.
During the December festive holidays, many families would have gathered and spent valuable time with parents and grandparents. Often, it’s an opportunity for the older generation to reach out to children/grandchildren to offer financial support at this critical stage in their lives, when they are looking to take that first step onto the property ladder. Despite the rise in cost of living and mortgage interest rates, First Time Buyers (“FTB”) will remain crucial contributors to the housing market, however, they face two key challenges: the level of deposit and affordability.
In October, we experienced a significant level of uncertainty in the mortgage market resulting in lenders withdrawing a number of residential mortgage products.
In the immediate aftermath of the ‘mini-budget’, 5-year fixed mortgages hit rates above 6%, creating anxiety for existing borrowers who were considering refinancing options.
Since then, the combination of Rishi Sunak and Jeremy Hunt has brought some stability to the market and we are now beginning to see rates drop.
The announcement by the Chancellor, in the March budget, of a mortgage guarantee scheme was the catalyst lenders needed to start focusing again on the low deposit lending market. Some of the biggest banks in the UK have signed up to the scheme and will from April offer 95% loan-to-value (LTV) mortgages. A number of lenders have already launched low deposit mortgages without the support of the government’s scheme and there is an expectation that more lenders will follow. Increased competition should provide borrowers with more choice, greater flexibility and hopefully (eventually) more competitive interest rates.
Kinnison’s Jatin Patel will again be joined by property market commentator, Kate Faulkner.
Kinnison’s Jatin Patel and industry commentator Kate Faulkner discuss the impact that COVID-19 may have on first-time buyers and those looking to step up or down the property ladder.
This week, the guidance covers existing borrowers/’second steppers’, self-employed/partners and retirement.
For the self-employed or partners either looking to remortgage or those purchasing a new home, the big question is, how will lenders review their position and assess their affordability? In recent years a number of lenders have broadened their product offering and introduced greater flexibility to facilitate lending to borrowers who do not earn regular salaried income. During the current COVID-19 period this lending approach is being impacted and it may take some time before all lenders return to the levels of criteria, pricing and underwriting we have come to expect. However, there is still appetite to lend to this expanding group of borrowers and it’s critical that they approach the right lender who has the mortgage product which meets their personal financial circumstances.