Mortgage amount = property value minus deposit/equity.
There is a high level of uncertainty over international trade, Trump’s initial 100 days, Brexit Article 50 trigger for 2017, European elections, etc. which could lead to a slowdown in investment in the UK, both in house building and in manufacturing and services. We will see the beginnings of the readjustment of the UK’s economic structure more in line with the perceived post-Brexit vision – a more export-based economy.
– Dr Eugene Michaels & Melanie Powell, Senior Lecturers of Economics @ Derby University
[one_sixth][/one_sixth]There is a high level of uncertainty over international trade, Trump’s initial 100 days, Brexit Article 50 trigger for 2017, European elections, etc. which could lead to a slowdown in investment in the UK, both in house building and in manufacturing and services. We will see the beginnings of the readjustment of the UK’s economic structure more in line with the perceived post-Brexit vision – a more export-based economy. Companies may soon start relocating and shifting investment and employment, further increasing the uncertainty. Lower productivity may slow wage growth. The lower level of the pound alongside higher oil prices will raise inflation, which will also reduce real wage growth. This is likely to lead to a slowdown in consumer expenditure and possibly demand for mortgages.
[one_sixth][/one_sixth]It is unlikely that 2017 is going to be another 2009. The underlying position of the retail banking sector has improved since 2009. While the recent low growth and low interest rate environment has weakened the profitability of banks, the higher inflation expected could raise the possibility of a small rise in the UK base rate, which would help retail bank profitability. The latest Bank of England Q4 Credit Condition Survey suggests a small rise in supply of funds for secured lending to households, including high loan to value lending, in Q1 2017, but a small reduction in unsecured lending to households. Banks will continue to reduce branch services and improve technology throughout 2017 to reduce costs and improve lending services to raise profitability and market share. In terms of debt, households have reduced their debt since the pre-2009 peaks so, even though borrowing is now increasing, it is doing so from a lower level.
[one_sixth][/one_sixth]The issue of Brexit has not gone away. It is a matter of the time line. Discussions pre-referendum focused on the long run impact of Brexit, but have been interpreted in the media as short-run and, not surprisingly, these have not happened. The short run expected slide in sterling did happen and the effects of this will show on inflation in 2017. Consumers were protected from the effects on inflation in 2016 because of low oil prices, intense competition in the retail sector, and the impact of prior hedges on costs in manufacturing. Teresa May’s statement on Tuesday merely confirms what economists have been saying all along. The Brexit vote means gaining control of immigration and the ability to set bilateral tariff agreements with non-EU countries are the new key political issues. As a result, the UK cannot be a part of the Single Market or the Customs Union after Brexit. This is not ‘new’ information. However, it is now clearer to the public. The impact of this decision, and the related uncertainty, will be spread over the long run, between two and ten years. It will not be possible to evaluate the predicted long run impacts on productivity and growth until then. So much depends on whether the UK can come to some arrangement on ‘passporting’ for the finance sector, what trade agreements emerge from the negotiations with the EU and how quickly comprehensive bilateral trade deals can be negotiated with strategic non-EU countries.
[one_sixth][/one_sixth]Following the financial crisis, there was clear need for a review of responsible lending rules which culminated in the Mortgage Market Review in 2014. While there may be some debate about interpretation of aspects of the review, the overall effect is increased consumer protection. It is unlikely that this will change. More recently, the European Mortgage Credit Directive has been implemented to create a single market in mortgage services. While the directive comes from Brussels, the change is the result of UK law, designed and implemented in the UK. Changing UK regulation is expensive and time consuming. We can assume that the UK will change very little legislation tied to the EU in the first instance for this reason. It is likely that in the longer run over 10 years, some legislation will be adapted as circumstances change. However, there will be pressure to maintain regulation consistent with the EU in som
– Keith Street, Vice Chairman, Group Lending @ The Northview Group
2017 will certainly be a year of change for the housing market. As we prepare for the year ahead, we expect to have some bumps in the road following the vote for Brexit, particularly once the Government has triggered Article 50 and begins the actual process of leaving the EU. Amidst this political background, we do expect to see a more cautious approach from consumers, who may choose to hold off on their house purchases until there is more clarity about the UK’s position.
As we await further political and economic clarity, growth in the specialist lending market will be subdued. However life will go on and we expect to see the continued rise in the self-employed and contractor population. This means the next few months will be highly competitive for the lenders operating in this space. Specialist lenders will continue to meet the needs of the market, recognising the real life circumstances of many borrowers and adapting their product ranges to ensure they remain relevant to a growing number of self-employed and contract workers.
Market stability will be helped with a low interest rate economy and latest predictions seem to indicate that the Bank of England base rate will remain at 0.25% for the next 12 months, which should encourage lenders to continue to offer competitive rates, particularly around remortgage deals.
[one_sixth][/one_sixth]At Kensington we always try to listen to our broker partners and ensure that the products we offer remain relevant to our customers in what is a constantly changing market. This is certainly something that we will continue to do in 2017, and we will be making a number of product announcements in the coming weeks to ensure that we continue to meet our customers’ changing needs.
The past 18 months have been a period of upheaval for landlords, beginning with George Osborne’s announcement of changes to landlord tax relief in August 2015. Over the year that followed we have seen the Stamp Duty tax increase, and most recently the PRA’s changes to underwriting standards for buy-to-let mortgages. 2017 will be another year of change for buy-to-let investors.
From April, landlords will no longer be able to claim back all of the interest they pay on their mortgage at a higher rate of tax. Instead they will face a gradual change in the amount of tax relief they are eligible for. From this April, landlords who are higher rate tax payers will only be able to claim 75% at the higher tax rate, with 25% claimed at the basic rate. By 2021, all financing costs incurred by landlords will only be given as a basic rate tax reduction.
Whilst further regulatory changes are possible, we do hope that landlords are given time to adjust to the raft of measures that have been implemented in 2016. Whatever the circumstances, we are confident that the market will respond to any further changes and provide the support that landlords need. This is still a significant part of the mortgage market worth £227bn and it’s important to remember that UK property remains an attractive investment opportunity for many people in a low interest rate economy.
[one_sixth][/one_sixth]On the contrary, 2016 has been a year of significant increases in the price of property. The recent House Price Index from Halifax has shown that house prices rose on average 6.5% last year. Furthermore, despite the shock of the Brexit vote, the response of the mortgage market has been one of resilience and property remains a highly competitive space.
As the uncertainty surrounding Brexit and global politics continues into 2017, rather than worrying about the best time to buy, customers should focus on securing a mortgage that is right for their circumstances. By speaking with an adviser, borrowers will give themselves the best chance to find a mortgage that fits their needs.
[one_sixth][/one_sixth]Over the coming year, it’s vital that the market continues to support borrowers who find it challenging to get a mortgage. Amidst the on-going uncertainty caused by Brexit, self-employed borrowers, contract workers and those who may have suffered a credit bump in the past will need all the support they can get from brokers and lenders alike. It is vital that as a market we continue to make these borrowers aware that there are lenders out there who can offer them a mortgage to meet their needs.
[one_sixth][/one_sixth]We expect to see customers’ needs continue to evolve throughout 2017, particularly as several regulatory and political changes take effect. As a responsible and prudent lender that always aims to meet the needs of brokers and customers alike, we will continue to update our proposition to ensure our products remain relevant.
[vc_row][vc_column][vc_empty_space height=”30px”][/vc_column][/vc_row][vc_row content_placement=”middle”][vc_column width=”1/4″][vc_single_image image=”7348″ style=”vc_box_shadow_border_circle_2″ css_animation=”flipInY”][/vc_column][vc_column width=”3/4″][vc_column_text]
Overall, 2017 is shaping up to be another challenging year for buy-to-let and the Private Rented Sector but with tenant demand continuing to grow in most regions, there are still opportunities for growth in buy-to-let lending.
– John Heron, MD @ Paragon Mortgages
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_separator border_width=”3″][/vc_column][/vc_row][vc_section][vc_row content_placement=”middle” css_animation=”none”][vc_column width=”1/6″][vc_single_image image=”7232″ alignment=”center” style=”vc_box_shadow_border_circle_2″ css_animation=”none”][/vc_column][vc_column width=”5/6″][vc_column_text]
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_text_separator title=”Changes to Buy-To-Let”][/vc_column][/vc_row][vc_row content_placement=”middle” css_animation=”none”][vc_column width=”5/6″][vc_column_text]Overall, 2017 is shaping up to be another challenging year for buy-to-let and the Private Rented Sector but with tenant demand continuing to grow in most regions, there are still opportunities for growth in buy-to-let lending. The changes coming into force next year however are likely to lead to greater polarisation in the market with professional portfolio landlords increasing their share of the PRS. This will in turn drive a need for more complex “commercial” BTL lending, bringing challenge and opportunity in equal measure…[/vc_column_text][/vc_column][vc_column width=”1/6″][vc_single_image image=”7348″ style=”vc_box_shadow_border_circle_2″ css_animation=”flipInY”][/vc_column][/vc_row][vc_row][vc_column][vc_text_separator title=”The Future of Buy-To-Let”][/vc_column][/vc_row][/vc_section][vc_section][vc_row content_placement=”middle” css_animation=”none”][vc_column width=”5/6″][vc_column_text]The buy-to-let market in 2016 has had to adapt to a number of major changes including the raising of stamp duty rates on second home purchases, new regulations from the Prudential Regulation Authority (PRA) and the granting of new powers of direction to the Financial Policy Committee (FPC). And this is on top of the seismic changes announced in 2015 that will change the way that landlords are taxed on rental income. It would be nice to imagine next year might be less eventful, but in reality the market will have yet more change to adapt to in 2017.
From 1 January, with Auld Lang Syne still ringing in our ears, the new underwriting standards introduced by the PRA will come into force. Most lenders are prepared for this, but the approaches taken will vary. Some lenders will adopt a “one size fits all” approach and set a much higher ICR for all applications which will support streamlined processing, landlords on lower tax rates, however, could be disadvantaged in this process. As a specialist lender with decades of experience in the buy-to-let market, Paragon’s approach will be more bespoke. We will be assessing affordability at an individual customer level and setting an ICR on the basis of the tax rate that we expect the customer to be paying going forward.
While 1 January is the PRA’s deadline on affordability criteria, the more complicated aspects of the PRA’s requirements around complex underwriting of portfolio landlords, do not have to be adopted until 30 September 2017. With different lenders adopting these requirements at different times many landlords and their advisers will have their work cut out keeping track of just what is on offer around the market.[/vc_column_text][/vc_column][vc_column width=”1/6″][vc_single_image image=”7348″ style=”vc_box_shadow_border_circle_2″ css_animation=”flipInY”][/vc_column][/vc_row][vc_row][vc_column][vc_text_separator title=”BTL Mortgage Rate Trends”][/vc_column][/vc_row][/vc_section][vc_section][vc_row content_placement=”middle” css_animation=”none”][vc_column width=”5/6″][vc_column_text]Market share for five year fixes has been growing steadily across all types of mortgages in recent years, and 2017 could see this trend continue. Our latest research indicates that intermediaries already recommend fixed rates of 5 years or longer to more than a third of clients. With many BTL lenders setting a lower “stressed rate” for longer term fixed rates, along with some record low rates being offered, it would not be a surprise to see these products achieving a higher market share still in 2017.[/vc_column_text][/vc_column][vc_column width=”1/6″][vc_single_image image=”7348″ style=”vc_box_shadow_border_circle_2″ css_animation=”flipInY”][/vc_column][/vc_row][vc_row][vc_column][vc_text_separator title=”Landlord Confidence”][/vc_column][/vc_row][/vc_section][vc_section][vc_row content_placement=”middle” css_animation=”none”][vc_column width=”5/6″][vc_column_text]On the fiscal side, from April 2017 we will see the changes announced in the 2015 Summer Budget start to be phased in, with relief on finance costs only available at the basic rate to be fully implemented four years later. The market’s understanding of the impact of these changes is still developing.
Our most recent research would suggest that landlord confidence is starting to recover from a low base but most landlords are clearly indicating that they expect to increase rents in order to recoup some of the additional costs. This will be unwelcome news for hard-pressed tenants who may find that higher rents will make it even more difficult to save for a deposit for a first home.[/vc_column_text][/vc_column][vc_column width=”1/6″][vc_single_image image=”7348″ style=”vc_box_shadow_border_circle_2″ css_animation=”flipInY”][/vc_column][/vc_row][/vc_section]
– Robert Gardner, Chief Economist @ Nationwide
[one_sixth][/one_sixth]“House price growth remained in a fairly narrow range between four per cent and six per cent throughout 2016 in line with our expectations, and only slightly above the three to four per cent we would expect to prevail over the longer term (our estimate for earnings growth over the long run).
“A number of policy changes made it difficult to gauge the underlying strength of housing demand for much of 2016. In particular, the imposition of additional stamp duty on second homes in April led to a record number of property transactions in March as people brought forward purchases to avoid additional tax liabilities, resulting in an inevitable fall back in activity during the summer.
“The picture was further obscured by the gyrations of some forward-looking indicators of economic activity and consumer sentiment in the wake of the Brexit vote, where a number of indicators recorded large, but short-lived, declines.
“However, what made the most difference to the market in 2016 was that the fundamentals underpinning housing demand remained solid. Labour market conditions were robust, with strong employment growth, healthy gains in real wages (thanks in part to low inflation) and borrowing costs falling to new record lows.
“The relative stability in the rate of house price growth throughout 2016 suggests that softening in housing demand that we saw through the summer months was broadly matched on the supply side of the market.
“Survey data indicates that, while new buyer enquiries have remained fairly subdued, the number of homes on the market has remained close to all-time lows, in part due to low rates of construction activity. In fact, the number of new homes built in England has picked up, but is not sufficient to keep up with the expected increase in the population. In the four quarters to Q3 2016, 142,000 new homes were completed, 33% higher than the low point seen in 2010. However, this is still around 12% below the average rate of building in the five years before the financial crisis and 37% below the 225,000 new households projected to form each year over the coming decade.
“Looking forward, house price prospects will depend crucially on developments in the wider economy, around which there is a larger degree of uncertainty than usual.
“Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour market conditions and modestly slower house price growth.
“But we continue to think a small gain (around two per cent) is more likely than a decline over 2017 as a whole, since low interest rates are expected to help underpin demand while a shortage of homes on the market will continue to provide support for house prices.
“The major house builders appear to have capacity to expand output, with most reporting land banks that could support around five years’ worth of construction at current rates of building activity. However, there is a risk that the uncertain economic outlook may weigh on activity in the period ahead.”
– Matt Andrews, MD @ Bluestone Mortgages
2017 should be a very exciting year for many people aiming to move or buy a home. This is particularly true for self-employed and contractors who in the past, have struggled to gain access to credit from high street lenders as many deem them unreliable compared to those in their first jobs, with relatively little job security and short credit histories.
UK unemployment has been falling for some time and recently reached its 11th consecutive year low (ONS). With a particular rise in contractors, freelancers and entrepreneurs, we can expect this trend to continue into 2017. It is clear many hard working people in the UK are now viewing self-employment as a more viable and flexible career choice, and lenders will need to begin to adapt to the changing circumstances of their customers.
Being self-employed should not hinder your mortgage application. After all, your earning potential may actually be more than if you had an employer. For this reason, over the next year more lenders should begin to open doors to people previously turned away from affordable, flexible lending options.
[one_sixth][/one_sixth]As the needs of customers continue to change, so must our financial products and services. We’ll continue to work hard to ensure that our product innovations meet the genuine needs of our customers.
[one_sixth][/one_sixth]Prices will continue to fluctuate and unavoidably sky rocket because demand in the housing market continues to outweigh supply. In order to allow more people to get onto the housing ladder, more affordable housing needs to be built with realistic, affordable lending options made available to support new buyers with one of the biggest financial decisions they will make in their lives.
When applying for a mortgage, either as a first time buyer or as a landlord adding to their portfolio, it is a good idea to ask the broker which lenders manually underwrite every application. This will ensure that applications are being treated on a case by case basis, the loan products are suited to a borrower’s specific financial needs, are affordable, and sustainable in the future, no matter what happens in the market. This will ensure you are getting the right option for you.”
[one_sixth][/one_sixth]Our pilot launch phase was focused on the feedback we gained from brokers to ensure we delivered a collaborative and accessible service, before launching to the wider market. By working closely with advisers and gaining constant feedback throughout the application process, we are confident we have developed a strong market position to cater to these consumers, whilst keeping brokers at the heart of our offering.
We are looking forward to rolling out our full market launch, announcing lots of exciting new hires and most importantly, launching more products which are tailored to the real needs of our customers.
– Joanne Jones, Property Partner @ Simpson Jones
[one_sixth][/one_sixth]Every year comes with challenges but we need to embrace them. There has been a lot of negative press following Brexit, but we are feeling positive as within the Derby area there has been an increase in activity.
[one_sixth][/one_sixth]There has definitely been an increase in business levels over the last 12 months, and we certainly don’t anticipate a drop, but are realistic about outside forces which could affect business levels, for example mortgage lending and changes with the Help to Buy Scheme.
[one_sixth][/one_sixth]To manage clients expectations right from the outset of the transaction with regards to timescales for completion. Some Conveyancers are more responsive than others and it is important to keep lines of communication open throughout.
[one_sixth][/one_sixth]Different local authorities have different timeframes in which they work on depending on their staff levels/workload etc. However we order all our searches through one search provider who liaise directly with the authorities to obtain the searches we require. If there is a delay the search provider will contact us direct and advise us of the delay. The average timescale for a Local Search to come back is 2-3 weeks.
[one_sixth][/one_sixth]At Simpson Jones we deal with both online and Local Conveyancers. It is helpful to deal with Local Conveyancers as sometimes it easier to pick up the phone and speak to someone regarding legal issues rather than trying to discuss this via email. We also deal with both remote customers and face to face customers and hopefully we deliver the same level of service to both sets of clients.
Case Management Systems/ Online services for HMRC and H.M. Land Registry have certainly helped Conveyancers. These services allow us to do everything online rather than by way of post which of course quickens the processes that need to be undertaken. Systems are always developing and we here at Simpson Jones are happy to embrace changes but not change for changes sake.
We need to react to each client’s individual needs, as not every client will have access to email etc. and may much prefer to be communicated by post or telephone. As buying a house is such a big investment, clients need to be looked after in whatever manner they are most comfortable.
– Matt Tooth, Chief Commercial Officer @ LendInvest
For the bridging, or short-term, market, we expect 2017 to be a cautiously optimistic year ahead where we can expect to see more deals completed by borrowers and brokers new to the bridging market’s proposition. This will come as the best funded bridging lenders adjust their models to accept longer-term deals, and as the reputation of bridging expands among brokers looking to alternative funding options to fit their clients’ requirements.
Secondly, there’ll be more opportunity too for bridging deals in the residential landlord space for professional investors. The impact of tax changes still to come will create less competition for the professionals as more amateurs exit the market.
Thirdly we predict that appetite to lend will remain strong among alternative lenders especially, whose investors continue to invest, driven by the hunt for a good yield in this lower-for-longer interest rate environment.
[one_sixth][/one_sixth]Where I expect to see the least change is in the impact of macroeconomic conditions on the short-term property finance market. The vote to leave the EU shook the whole industry in June last year and certainly curtailed some appetite to borrow or lend. Uncertainty will reign until Article 50 is finally triggered, but the property finance market is fundamentally resilient and capable of rebounding.
[one_sixth][/one_sixth]For us at LendInvest, 2017 will be a year of building on and consolidating the gains of years gone. After actively moving away from prime central London property in 2015, last year we launched LendInvest in northern England and Scotland – two regions where we see huge potential with increasingly liquid markets and resilient property prices. We’ll also roll out more new loan products to complement our existing six that aim to bring bridging finance to brokers in the shapes and sizes that their clients need it.
– John Gathergood, Associate Professor of Economics @ Nottingham University
[one_sixth][/one_sixth]Undoubtedly 2017 will be another year of volatility and uncertainty about the future of the economy – with Brexit and many important European elections coming up this year. The economy is doing remarkably well given the uncertainties of current times.
[one_sixth][/one_sixth]A major surprise has been the buoyancy of the economy since the Brexit vote. Many forecasters, including the Bank of England and Treasury, were expecting an immediate and pronounced recession, but surprisingly the economy is doing very well. Funding levels appear to be increasing and non-mortgage credit lending is increasing as well as mortgage lending.
[one_sixth][/one_sixth]Credit reference agencies are vital to the performance of the economy. The improvement in credit scoring over past decades has greatly improved the ease with which individuals can apply for and obtain credit. There are clearly issues that need to be addressed, such as the accuracy of credit files and speed of updating. I would recommend everyone to keep a regular check on their credit file, especially if they are considering applying for additional credit in the near future.
[one_sixth][/one_sixth]The mortgage market has seen increased regulation, but government and regulators recognise that regulation can go too far. Macroeconomic stability – such as low and stable interest rates, low unemployment and rising incomes – is more important in many ways than detailed regulations as to how mortgages are issued. Brexit should not have large effects on regulation of the credit market or mortgage market as most UK regulation is quite different from continental Europe even while we are members of the EU.
[one_sixth][/one_sixth]The government has certainly identified the BTL market as a focus for increased taxation and targeted incentives to reduce the attractiveness of BTL. However, given poor annuity rates and uncertainty over annuitisation rules, and low rates of return on most investment options, the BTL market is still very attractive for investors.
[one_sixth][/one_sixth]I don’t see CBRS as a threat to independent brokers. In any market there is a perpetual issue of how to refer discouraged consumers. I expect that CBRS will result in some generic guidance to lenders on how to treat declined applicants.
[one_sixth][/one_sixth]It is important to consider the long-term trajectory of house prices in the UK and other Western economies. While house prices will always be bumpy, the long-term pattern is of demographic aging, smaller household units (e.g. due to the rising divorce rate), buoyant inward migration and a lack of housing supply due to planning regulations. All these factors push up house prices in the medium term and I expect they will continue to do so.
– Richard Angliss, MD @ Home Buyer Systems
I cannot remember, in my 35 years in financial services, starting a new year looking at a more confusing picture. There is a whole cocktail of factors that will surely interplay to affect us all professionally and personally in the housing market. These are predominantly Brexit, the new American administration, inflation, interest rates, the pound and oil prices. All of this will impact on us as individuals and especially our industry in terms of costs of mortgages, levels of employment, house prices, cost of living and so on.
On top of this we have other industry factors such as the impact of the new Buy to Let regulatory changes, housing shortages, the continued fall out of the Mortgage Market Review (MMR) on regulatory requirements, the ending of the Help to Buy scheme.
If we are speaking only of the housing market then this will all look very daunting. If, however, we are talking about the mortgage industry then that is completely different for the simple reason that whether the outlook is doom and gloom or bright and sunny, the mortgage industry has an answer.
For doom and gloom we have remortgages and for sunny and bright we help people move, or get on to the housing ladder. For a mortgage broker things couldn’t be better really. Why?
The Credit Crunch decimated the number of Mortgage Brokers. In 2007 it was estimated there were 30,000 and now 12,000 – a reduction of 60%.
House purchase volumes have recovered and are very close to the pre-Credit Crunch levels.
Conversely remortgage levels have not recovered. Despite recent marked improvement in recent times lending for remortgages is half of what it was in 2007 – there are reckoned to be 3m households on SVR paying an average 4.99%
Regulatory changes have made it much more difficult for new entrants to come in to the industry
The MMR has seriously affected the distribution of mortgages. Pre MMR lenders arrange 60% of all new mortgages and Brokers 40%. Post MMR it is now 30% Lenders 70% Brokers
If you are a Mortgage Broker and you are not extraordinarily busy you have to ask how!!
[one_sixth][/one_sixth]If you start from the basic premise that people don’t want mortgages (they are the necessary evil that gets what they do want – a home) then it makes answering this question more simple. What they want is to tell you they need one and instantly they have one – of course at the lowest rate and paying the least possible to set it up. Is that ever going to happen? Probably not but we need to strive to get as close to that as is possible.
Arranging a mortgage is a complex business involving your client, lenders, solicitors/conveyancers, valuers, vendors, estate agents, credit and affordability checks, proof of identity and so on. To be frank the main sticking points are this level of complexity and the fact that Mortgage Brokers are brilliant at advising but mostly rubbish at admin and regulation. The use of technology to overcome these difficulties is crucial. In short keep advisers advising and let technology do the rest.
I don’t want to give too much away but the new Open Banking initiative, which comes in to effect this year, is going to have a massive impact on overcoming many issues around affordability, proof of identity and credit checking.
[one_sixth][/one_sixth]Again I don’t want to be too specific but if you read my answer above and can tell from the general banding about of just some of the massive research we have been doing, you will get a very good idea.
[one_sixth][/one_sixth]Whilst I understand these concerns in the world in general, it does not apply to the mortgage industry. The driving force to employ automated processes is due to two main factors:
Of course as technology improves there are more opportunities to make processes slicker and reduce costs, which in any other business would be the main driver, our industry has more pressing needs.
In our industry I very much see it as an answer to a problem of greater demand than supply. If we were talking about “our jobs” being Adviser’s jobs and a system existing that required a customer to click a button and they instantly get a mortgage, then definitely no is the answer.
Look at the lenders propositions for an answer to this. The MMR destroyed their sales model so part of their response to this is robo-advice. They provide the tools for a customer to do pretty much everything themselves (or that is what they are striving for) but at every step of the way is a button that says “Click Here To Speak To Us” or similar. They know that at some point in the process the customer is going to get to a point where they become uncomfortable and will seek help.
Why does this happen? – because it is such a big deal i.e the single biggest purchase we make with the highest monthly cost – of course at some point they will want to seek help to make sure they don’t make a huge mistake with it.
The Credit Crunch decimated our industry and was massively damaging to our business model. We have been working to establish a new model by developing new systems and Apps to achieve a whole new suite of products to meet the needs of the post Credit Crunch world. This allows us to offer our customers everything from creating leads to efficiently processing their business, and compliantly.
2016 saw the last parts of the big picture jigsaw come together, particularly with our joint venture with Svensoni, the largest paraplanning company in the UK.
We have always been at the forefront of innovation with such things as dealing with Dual Pricing, fee charging, adverse credit sourcing, robust FCA acknowledge compliance sales processes, payment systems and so on. Plus of course choosing Defaqto as our data partner for mortgages has served us well too.
2017 will see us once again add to our impressive track record by bringing to market our latest and biggest innovations in our 22 year history.
There have been many trends that have come and gone that needed to be coped with such as Adverse lending, Self Certificated lending, Dual Pricing to name but a few.
The constant driver of change though has always been regulation. However, in recent years the emergence of the concept of robo-advice has taken centre stage. This concept means different things to different people in terms of how much or little they want to automate and the volumes they are dealing with.
There is absolutely no doubt that this is here to stay and is not a trend that is here today and gone tomorrow. For all the reasons I have mentioned previously technology has evolved to a point that will allow all the “sticking points” to be smoothed out allowing the inevitable benefits to happen.
– Jamie Pritchard, Head of Sales @ Precise Mortgages
[one_sixth][/one_sixth]We’re very optimistic about 2017. Time will tell what effect the regulatory changes will have on the BTL market, but I’m positive that our diverse range of products will see us perform as well as, if not better than, in 2016.
We’re already getting lots of requests to hold workshops. This is good news as it gives us an opportunity to let brokers know about our new products, especially our new buy-to-let products, and how their customers could benefit from them following the PRA changes.
[one_sixth][/one_sixth]Lenders without access to retail deposits were most affected by the economic downturn in 2008/2009. We identified the need for diverse sources of funding early on, which is one of the reasons behind our application for a banking licence. Our business is set up to be sustainable, and to enable us to weather any future economic uncertainty.
[one_sixth][/one_sixth]As a specialist lender we are constantly developing our product range. We have just launched bespoke interest coverage ratios (ICR) for BTL mortgages. Rather than imposing a straight 145% coverage like some lenders, we will assess each applicant’s individual circumstances and create an ICR which reflects their tax position more accurately. In the majority of cases, this will help customers achieve the loan size they want.
If a borrower chooses one of our five-year fixed rate products, the application will be assessed at the pay rate of the product. To ensure your customer will be able to refinance at the end of the five year period, additional underwriting checks may be required.
These are just a few examples of how we are constantly developing our products to adapt to changes within the industry and meet customer needs.
[one_sixth][/one_sixth]We planned for whatever the outcome of the EU referendum happened to be. As the industry has now absorbed and adapted to the recommendations introduced by the Mortgage Credit Directive, I do not see it going backwards just because the UK voted to leave the EU.
[one_sixth][/one_sixth]When I talk to landlords and ask them if they are going to sell their BTLs, the answer is always ‘no’. BTL remains an attractive investment for many, especially when you consider the current returns on pensions and saving accounts. It’s important that both brokers and investors are fully aware of the changes.
I believe that investors in the south may look at other areas of the country and at other types of investment property, such as HMOs, multi-units, holiday lets, that they might not have considered previously.
You can’t advise when a customer should buy a property without first exploring the reasons why they are buying a property. I think the job of a good broker is to understand what their customer’s needs and requirements are. There are various things to take into consideration, such as the location a customer is thinking of buying in; what price range they are looking at; the deposit they have available; the yield they are hoping for; and whether the property is for family, work or buy to let.
[one_sixth][/one_sixth]Work patterns and the way people earn is changing, as is the way they buy property. Lenders who understand these changes and adapt their business accordingly will be best placed to attract business from those brokers who also understand the current market.
With regards to products, all I can say is ‘watch this space’. We never stand still when it comes to innovation. Service is key to our business and I will be expanding the BDM team to help brokers understand our products.
– Les Tonks, Director @ Midas Accountants
[one_sixth][/one_sixth]Recent legislative changes have severely impacted BTL landlords and most will see their tax liabilities increase.
The way in which tax relief is obtained for finance costs (such as mortgage interest) is changing. From 6th April 2017 landlords will no longer be able to deduct this cost in full when calculating their rental profits. By 2020/21 the changes will be in full force and typically, the tax relief available for a higher rate taxpayer will have halved.
The rule change means that landlords will have taxable profits far in excess of what they believe to be the commercial reality. Those with ‘highly geared’ portfolios may be particularly affected.
In addition, a 3% increase in the Stamp Duty Land Tax (‘SDLT’) rates for buy-to-let properties and second homes has halted many landlord’s expansion plans.
[one_sixth][/one_sixth]Many Landlords are considering an incorporation of their property business. It is possible to transfer a portfolio of rental properties to a company and obtain relief from Capital Gains Tax in circumstances where the landlord actively manages the business.
There are several reasons why incorporation may be beneficial:
The new rules for the restriction of finance costs do not currently apply to companies. Therefore, mortgage interest can continue to be offset in full when calculating the profits chargeable to Corporation Tax. Corporation Tax rates are falling to 17% while the higher/additional rates of income tax remain at 40%/45%.
Landlords (as director/shareholders of the company) will only pay income tax on the amount they extract from the company, instead of on the entire profits. The company will receive an uplifted base cost for the properties. This essentially means that post-incorporation, a poorly performing property could be sold with no or a minimal tax liability.
There are other costs to consider such as SDLT, legal costs and other finance costs (early repayment charges, arrangement fees and lending rates available to corporates). Each of these needs to be taken into consideration and expert advice should be sought. Incorporation will not be worthwhile for all landlords, but many can achieve substantial annual tax savings.
[one_sixth][/one_sixth]The way in which landlords receive tax relief for mortgage interest payments is changing. Basic rate taxpayers should be no worse off as a result of the changes and therefore are unlikely to benefit from purchasing new property via a limited company or incorporating their current portfolio.
Landlords who carry on a rental business in partnership may be able to benefit from a statutory relief which can reduce the SDLT liability to nil on an incorporation.
Whether a partnership exists will depend on the specific facts. HMRC take the view that jointly owning rental property is unlikely to constitute a partnership unless there is “a degree of organisation similar to that required in an ordinary commercial business”.
There are anti-avoidance rules in place which would catch Landlords who form a partnership as an interim step to incorporation in order to benefit from the SDLT relief.
– Graham Felstead, Head of Intermediaries @ Natwest
[one_sixth][/one_sixth]We will all have to get to grips with the new PRA regulations being introduced for assessing affordability for buy-to-let mortgage applications. This will necessitate changes to lenders’ affordability calculations which we will be introducing in early January. Plus, the new HMRC tax regime for landlords starts to get phased in later in the year, so it will be interesting to see how this affects the market for rental property.
In terms of what else to expect, we have an appetite to continue to grow the amount we lend to customers through brokers. As well as consolidating our positions in areas of the market where we are strong, we are very keen to extend our reach into sectors of the market where we haven’t had such a presence.
Having reviewed aspects of the income types we accept, we have made some adjustments recently to introduce a more receptive approach to contractor’s income and widened the acceptance of maintenance payments. We’ll continue to look at things like this throughout 2017 so that we can help more customers.
In terms of growing our presence in other areas of the market, New Build is one such example. It’s a sector that will be keenly watched in 2017 and one that we have made considerable efforts to improve our knowledge and expertise in. There are a number of issues that need to be debated and addressed by those who have a stake in it, such as freeing up planning, addressing labour shortages, getting lender support for new tenures and the development of large scale social and affordable housing – whether for renting to buy or custom build. We’ll be looking at what changes we need to make to our approach so that we are able to have a bigger stake in this market.
Larger loans is another sector where we have made progress and have a desire to go further. Our Concierge Service has received a warm welcome and we will continue to work closely with brokers operating in this sector to grow our understanding and develop our proposition.
[one_sixth][/one_sixth]We have constructed a broad product range across a wide range of LTVs that are well priced with a choice of product fee or no product fee – you could say we have a product for just about every customer. We have plans to further improve this range and will continue to support the Government Help to Buy schemes which have proved to be very popular with brokers and their customers alike.
With communication being very important, I am delighted to have our new web site up and running. We will make sure that it provides brokers with timely and relevant information throughout what promises to be another busy year.
If we thought 2016 was a year of change, we probably shouldn’t underestimate what 2017 might have in store for us. But if we work together like we have this year I am positive it will turn out be another prosperous year for the intermediary mortgage market.
– Steve Sharp, MD @ ADS Accountancy
The most drastic change in the taxation of property income for some years, is coming into effect from the 6th April 2017. Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs. The staged impact of the changes over the next four tax years will result in only basic rate tax relief being given on the finance costs which can result in the scenario of landlords paying tax in excess of their net rental profits. Landlords with high interest costs and who are higher or additional rate tax payers will be impacted the most by the changes.
From April 2016 there was also a 7.5% increase in dividend tax so Landlords who pay for a deposit from their Limited Company income profits are finding it more expensive to extract the funds from their company and then also being hit with the increase stamp duty for second properties.
The ownership of properties will become more important than ever. Purchasing property with partners or other family members or varying the rental income of joint properties to lower rate taxpayers will be of more benefit following the changes.
The increase in dividend tax and restriction in personal higher rate tax relief has also brought the property investment company firmly back on the tax planning agenda. This is especially prevalent for higher rate taxpayers who are looking at using funds from their personal company to finance deposits on property purchases.
[one_sixth][/one_sixth]Basic rate tax payers will be unaffected by the interest restriction and as capital gains tax still favours personal ownership, most basic rate tax payers will continue to buy personally.
[one_sixth][/one_sixth]A pension fund is a great option for commercial property purchases as generous tax reliefs still apply but do not work for residential property.
[one_sixth][/one_sixth]No. Its not possible to legally claim SDLT (Stamp Duty Land Tax) relief when the Ltd company buys the property from its owner. Transfers not for value (e.g. gifts) do not suffer SDLT, but transfers like this between connected parties would have to be done at market value. CGT (Capital Gains Tax) liability would also need checking if gifts are proposed.
[one_sixth][/one_sixth]Trust taxation is very complicated so it really depends on circumstances. There can be some CGT/IHT (Capital Gains Tax / Inheritance Tax) and Income advantages and disadvantages but it really depends on circumstances and types of trust.
Most lenders often favoured by property investors would not touch a trust arrangement. Commercial lenders might be more willing but the trust would have to have significant value.
[one_sixth][/one_sixth]HRMC’s stated aim of the finance restriction changes was to ‘make the tax system fairer’ and to ‘ensure that landlords with higher incomes no longer receive the most generous tax treatment’. I am not sure the landlord who will have a tax liability larger than his rental profits will agree that the system is fairer but the result will likely be a reduction in the property purchases by higher rate taxpayers on mortgaged properties.
[one_sixth][/one_sixth]Relevant life policies are tax allowance for the company as long as they are wholly and exclusively for the purpose of the business. Most providers ensure that they have policies that meet the criteria to be tax allowable. HMRC may target relevant life policies in the future but under the current rules they are allowable so no penalties would be payable should the rules change.
Claiming Critical Illness cover under a relevant life policy is more difficult – Aviva has a product they believe is allowable, where as L&G and others have reviewed and said theirs aren’t. I leave this to far more specialist lawyers to argue over and I go with what the product provider states re: their available schemes.
[one_sixth][/one_sixth]In summary, the increase in dividend tax, stamp duty and restriction on finance costs is making buying a rental property more expensive and the returns lower. The changes make tax planning more important than ever and investors should seek professional advice on the ownership of properties including the property company option prior to purchasing. Current landlords should seek advice on how the changes will affect their future tax liabilities so that they can plan accordingly.
– Jo Breeden, MD @ Crystal Specialist Finance
[one_sixth][/one_sixth]I am genuinely excited about the coming year and the value that can be added by a Specialist Finance partner. There has been talk about the PRA changes and how lenders are increasing stress calculations, but I still feel that we can do more as brokers to educate clients as to what impact this will have n them and their portfolio. It will impact on the lending potential from the “mainstream” buy to lenders, which means clients will be looking for an alternative – which is where we can help.
[one_sixth][/one_sixth]Certain lenders have gone down the banking route, so are taking their own deposits which gives them more funds to be able to lend out, rather than being reliant on wholesale markets and the volatility that could expose them too. One thing that has been shown in recent years is how resolute the housing market is in the UK. We can never predict the future, but the noises we are hearing are all still positive.
[one_sixth][/one_sixth]The bridging and commercial world revolves around the demand from customers. Bridging lenders are certainly becoming more flexible and innovative, with more lenders offering more niches – such as Northern Ireland lending, third charges, desktop valuations and even guaranteed turnaround times on valuations backed by a refund if missed. Commercial lenders are slower to follow suit, but are adapting to demand and looking at the gaps left by the changes to buy to let products.
[one_sixth][/one_sixth]I don’t think they will reverse any of the changes in the short term – the regulator has been keen to reposition the UKs financial markets and bring back that Gold Standard we have always been seen to have in the world. Reversing regulatory changes may signify a loosening of policy. Given the end of some of the Help to Buy schemes we may see further incentives to encourage demand, but I don’t envisage too many changes in the short term.
[one_sixth][/one_sixth]The recent policy changes have meant that Buy to Let is no longer seen as something for everyone, and is now being pushed more down the business route. I still think property is an attractive investment, however is less of a short term cash generator and more of a longer term investment. I would advise investors to speak with an accountant and a mortgage specialist to ensure they are fully aware of what they are doing, how to do it, and how to achieve their desired outcome.
[one_sixth][/one_sixth]In short, no more than normal. It makes a nice headline of banks referring their declines – however in practise Im not sure how practical this is. The referral is only there post acceptance of an application – banks will only take an app on if they think it has legs, and secondly its only if they fully reject the case, not if- as is common- they offer an amount lower than the client requires. Brokers with existing relationships with banks may get deals, Im not sure others will.
[one_sixth][/one_sixth]For me the advice of when to buy depends on your planned exit time. If you want to buy and sell on quickly, then unless you are doing works to the property then this is not a viable strategy. If you can afford to hold an asset for the medium term, then I cant see property falling much more. The fact is we still have a housing shortage in the UK, which combined with a growing population will only get worse. Property is and always will be a solid asset – it all depends on the timescales in which you assess your gains and losses.
[one_sixth][/one_sixth]Limited Company borrowing is still an area much neglected by borrowers. Lenders assess things differently, and in some cases will offer more than they will to an individual. There are also tax implications for the limited company ownership to factor in which again may be beneficial.
We aim to be the best at what we do and really add value to the transaction. We want to work with good brokers looking for the best solutions and combine that with market leading products and service.
– Carolyn Thornley-Yates, Head of Intermediary Sales @ HRBS
[one_sixth][/one_sixth]We welcome the challenges of a rapidly-changing market environment and feel that we are well placed to react quickly to the varying needs of our customers and intermediary supporters – 2016 was our best year since pre-credit crunch days, despite political uncertainty and new regulation in the form of the Mortgage Credit Directive and preparation for the PRA BTL standards which took effect in January 2017. We are expecting more success in 2017 irrespective of any turbulent conditions which may come to pass.
[one_sixth][/one_sixth]The market seems very well funded at the moment – the opposite of drying up. The Bank of England has been very active to ensure there is lots of liquidity and there are some who think this has gone too far, given the negative impact on savings rates. But retail funds are still plentiful and although as a smaller society we’re not really active in the capital markets, our contacts there tell us that funding transactions remain buoyant. We can’t speak for the specialist lenders, but the mainstream ones like ourselves (especially the smaller organisations) look to have few funding concerns.
[one_sixth][/one_sixth]HRBS has remained relevant to its target market with a combined approach of offering excellent rates, service and meeting the needs of underserved borrowers in the prime mortgage arena. Our manual approach to underwriting, expertise and ability to look at cases as a whole allows us to consider carefully-selected niche lending areas. In 2016 we reintroduced interest only lending, launched a joint borrower/sole proprietor proposition and outlined our plans to accept personal income to supplement small rental income shortfalls on BTL applications. We anticipate that our involvement in niche lending will evolve further in line with changing market conditions and new regulation. There’s nothing new in the pipeline but we haven’t ruled out Consumer BTL and a return to ex-pat mortgages.
[one_sixth][/one_sixth]As recent changes are already partially or fully embedded, and with Brexit looking to be a very long drawn out process, it is our opinion that things will stay as they are on the regulatory and fiscal front. The new EU data protection regulation due in 2018 is confirmed to proceed regardless.
[one_sixth][/one_sixth]Our simple business model of deposit taking and first charge lending serves us extremely well. We currently have no plans to expand into the second charge market.
– Mark Flower, Head of Commercial Mortgages @ Business Finance Quote
[one_sixth][/one_sixth]Commenting on the commercial sector I am very happy with the direction our market is taking. More businesses than ever are realising that using a broker can work for them. We did a deal at the back end of last year saving the client 1.4% per annum – and that’s with his existing bankers. Regulation is making it tougher for new entrants, and whilst this is not exactly a good thing it means that if they have to partner as an AR [Appointed Representative] with an experienced firm for say 2 years at least they can learn the ropes the right way.
[one_sixth][/one_sixth]In the short term I do not see credit drying up, although I reserve further comments until we know exactly what sort of deal we get in relation to trading with the single market. There is still a lot of cash around chasing a decent return, and whilst our fundamental statistics are ok and there are no scare stories coming out liquidity is available
[one_sixth][/one_sixth]To be honest I have not seen a major change in commercial or bridging lending criteria. The fundamentals for underwriting good credits haven’t really changed since I entered banking 38 years ago – Ability to repay – creditworthiness- management experience – security. Probably the most stringent criteria has been against lending on trading businesses such as guest houses, pubs, hotels, where loan to values have dropped back from 75% of MV1 to as low as 65% of bricks and mortar. Bridging continues to widen its product range, and whilst exit route appears to be one of the most important criteria for them, the range of deals we can now offer is very wide indeed.
The government has always used a sledge hammer to crack a nut, and this is exactly what they have done with recent changes. My understanding is that they have made some of these moves to reign in house price growth, which I can understand. But is there method in their madness by hammering people who, having seen their savings rates washed away to almost nothing, investing in a property in order to get some sort of return, probably in retirement, hit so hard that in future years their net income after tax could end up in negative territory ! If Brexit does have some positive news for our industry it will be to remove these crazy rules.
I hope but also believe the UK will negotiate a good deal for this country, and I have always been a believer in less rather than more red tape. Thus exit could prove to be a great positive for this country and the property sector. We will have freedom on setting taxation levels, interest rates, regulations etc, and capital might take flight to our country given what is happening in some of the Euro currency denominated countries. As one of the biggest net contributors to the European budget, a budget that permanently exceeds its income, it is a big hole to fill if some sort of deal can’t be struck with the UK. As to products competition amongst lenders has created a perfect storm of great deals for customers, so certainly in the short term I see us being very busy.
[one_sixth][/one_sixth]As a commercial broker we are starting to see a gradual increase in the enquiries for semi commercial properties, and some of our lenders are reacting by introducing more competitive rates and deals. As in all things the devil is in the detail as any investment depends on a clients ultimate goals. By this I mean if an individual sees future growth in property values and is targeting asset appreciation rather than income they will still continue to buy in their own name or as a partnership. I just wonder what will start to happen over the coming 3 years as investors start completing their tax returns, and see their net income dwindle, will panic set in and huge volumes of properties start hitting the market? With no crystal ball to hand it is tough to tell yet.
[one_sixth][/one_sixth]To date we have not felt any impact from the mandatory CBR, and my own view is that we never will. As a former director and chairman of the NACFB, I remember many years ago when we invested in a similar style platform, where deals were listed and banks had the opportunity to bid for lending on them. Our business is a people business. Buying or remortgaging is a stressful time, and I am a great believer that customers want a professional to pick up these stresses and deal with them.
[one_sixth][/one_sixth]Customers when making investments customers have to do their own thorough research. Recently I have had London clients buying in the North West for example, purley because they are driven by yield and they have done their own research as to where they feel the best chance of achieving that would be. All I would say is that over a long period of time now property has proved to be a solid investment, but past returns do not guarantee future returns.
[one_sixth][/one_sixth]We have just updated our website so that customers can get an instant idea of monthly repayments for some of our term products. We are also looking at potential recruitment of a new Southern Business Development Manager. We added 3 new lenders to our panel towards the back end of last year, and continue to work with more investors on our development mezzanine products.
– Louisa Sedgwick, Director of Sales @ Vida Homeloans
[one_sixth][/one_sixth]We are excited as the specialist market is growing and, as a new specialist criteria-driven lender, we have the appetite to challenge the market and innovate. Imminent tax changes will inevitably drive a move towards limited companies for BTL.
[one_sixth][/one_sixth]We can’t speak for other specialist lenders. We are well-funded and backed by significant private equity and banking warehouse providers on terms that are over several years. So we are looking forward to 2017.
[one_sixth][/one_sixth]We see lending into retirement as a niche area with great potential, also buying together (up to 4 incomes), remortgaging from bridging, Right to Buy, interest only and part and part.
[one_sixth][/one_sixth]Predominately things will stay as they are. There has been a period of adjustment but the market is stronger for it. The Competition Review may have an impact on distribution but not in 2017.
[one_sixth][/one_sixth]The BTL sector will clearly face some challenges in 2017 but specific niches within the overall market will continue to offer opportunities for innovative lenders and intermediaries.
[one_sixth][/one_sixth]Given that the Bank Referral Scheme was only launched in November 2016, it will take most of this year to tell whether it is achieving its objectives, namely whether high street banks are passing on SMEs who have been unsuccessful in applying for finance to the three designated alternative finance platforms and whether those platforms are successfully referring the SMEs to alternative finance providers. If it is successful enough to be rolled out into residential mortgage lending, then we would obviously be very interested in the opportunities it would bring to specialist mortgage finance providers.
[one_sixth][/one_sixth]The UK property market isn’t a single market but has many segments and sub-segments. General advice is therefore always difficult to give. It’s more about the local dynamics at work and of course the buyer’s own circumstances and financial objectives.
We expect gross lending to be about the same as 2016, however specialist lending will make up a larger proportion of the overall market than it did in 2016. It will also be interesting to see what effects the Government’s housing policy has on the mortgage market in the next few years.
As a new lender, we will have lots of tweaks and amendments to systems and criteria as the year develops, as we listen to intermediaries and fine-tune our proposition as a result. We plan to become a major player in the specialist lending market in the years ahead.
– Tim Wheeldon, Chief Operating Officer @ Fluent Money
There will always be those who see the glass as half empty, but even after the uncertainty that 2016 generated, I am cautiously optimistic that barring any external financial shocks, the housing market will continue to be positive. Structurally, the supply/demand ratio is out of sync and needs to be addressed, but whether Government will actually produce a long term strategy for building or rely on sticking plasters as it has done in the past, remains to be seen.
It will therefore be a busy time for intermediaries as they try to find the right solution for their clients needs whether they be straightforward or complex.
[one_sixth][/one_sixth]There is no comparison between 2009 and today. Back then, the securitisation market was shut and lenders and funders were pulling up the drawbridge. In 2017, our lenders are in a very different situation and we are confident that funding will not represent an issue this year or for the foreseeable future. Much of the concern over Brexit was for funders looking at exposure to the bridging market and particularly those lenders concentrating within the M25 and the likely property price bubble.
[one_sixth][/one_sixth]Harsh lessons were learned in 2008 and lenders, brokers and regulators are determined that we never again see a race down the credit curve. With MCD and prior to that MMR, along with closer oversight from the BoE, there is much greater control over assessing risk to customers and also to lenders. Common sense lending prevails but not at the risk of quality. Competition is a good thing for customers, but there will be no headlong rush to write business at any cost. Not going to happen.
[one_sixth][/one_sixth]MCD has made every lender and master broker take a long hard look at their processes and attitude to risk. In my opinion, the industry is stronger for it even though it has inevitably increased costs. Clearly, there have been casualties and there will likely be others among master brokers who are unable to find a model which allows them to remain profitable. But any market needs a measure of natural selection and the industry will be stronger as a result.
[one_sixth][/one_sixth]The jury is still out. We, as an industry, need to a lot more educating among brokers so they feel comfortable with second charge loans. We have seen more interest from brokers coming to second charge options for the first time but it is not yet a flood. Many brokers are reluctant to change from the remortgage path which has worked so well for them, if not necessarily for their customers in certain circumstances. But with the regulator insisting on second charge being treated as a viable option, pressure is growing on intermediaries to conform to the new realities and provide a second charge option.
[one_sixth][/one_sixth]What we say is that all competition is good for the market. We would prefer brokers to deal with us, but they must make up their own minds. We offer a high class service across a ‘whole of market’ panel of lenders and save our introducers a huge amount of time to source the best alternatives for their customers. To me, it is a no brainer to use a competent master broker.
[one_sixth][/one_sixth]That would be very interesting and something that I am sure that the large residential lenders would fight against. Setting up brokerage operations like the Nottingham could be very cost intensive and with no guarantee of being successful or profitable. Bradford & Bingley’s model from a few years ago, certainly was a good idea in principle but was abandoned for that main reason.
With such a mismatch between supply and demand, it would take another financial shock to see house prices fall considerably. London has its own bubble as well and the Brexit vote certainly showed that funders were more than a little concerned about a downturn in house prices. Is it a peak? Every time someone calls it a peak, the index seems to move further ahead. Will there be a correction? Very possibly, but no one is envisaging a massive fall any time soon.
My advice to any buyer would be to figure out whether you are buying a home or an investment. Certainly, over the long term buyers have done extremely well. But if you consider that we buy a house as a home, then provided the financials make sense going in, blips in prices should not be of great concern if you are planning to live there for a period of time.
[one_sixth][/one_sixth]We live in a demand driven market and until Government actually develops a joined up, grown up policy to house building then prices will continue to rise. On the lending side, there has not been this much product choice since before the 2008 credit crunch. Borrowers who can afford it have never had it so good.
We have high expectations of building our market share in the intermediary sector through Fluent for Advisers, which we launched in July last year. We have developed a particularly effective facility offering whole of market coverage and the option of full advice to the client from the outset or providing suitable lending alternatives for the adviser to recommend to clients.
– Liz Syms, MD @ Connect Mortgages
There is certainly a lot of uncertainty around things like Brexit and how the new PRA and tax relief changes will play into the BTL market this year. However, there is also a lot of opportunity. A higher number of property investors may need to seek advice for example around the additional complexities such as should they consider a Ltd company for purchases now, and help with navigating which lenders can offer the most flexibility around rental calculation affordability.
[one_sixth][/one_sixth]The biggest issue for 2009 was not the lack of demand from consumers for mortgages, but the access to funding. Therefore, the biggest concern would be if Brexit does cause a funding issue. The fact remains however that we have more lenders available in the market today that we did prior to the credit crunch, and some of the new lenders have launched recently despite Brexit, so confidence does seem stable.
[one_sixth][/one_sixth]Aside from reductions in rates, I have not seen a massive amount of innovation in the bridging market. The commercial mortgage market however has developed quite dramatically. More flexibility has become available via the challenger banks, such as interest only terms and affordability calculations more akin to the BTL market than the traditional commercial market. Other new entrants such as Atom Bank aim to offer high street type rates with challenger type flexibility and a more streamlined application process.
[one_sixth][/one_sixth]My understanding is that the FCA plans to leave in place for the immediate future all the rules implemented by MCD, however Brexit could allow for changes in the future should some of those measures need amending. My concern is that the barrage of changes targeted at landlords will cause a greater housing problem if other measures to tackle the shortage of property are not addressed at the same time with the same vigour.
I believe serious property investors are resilient and will adapt to the change. All the measures do not change the fact that property still represents an attractive investment compared to other investments and the housing shortage will only contribute to increasing rents. Investors are already considering in increased numbers investing in properties such as HMOs and multi-lets because of the increase yield these types of properties offer.
All investors should be looking to take specialist property tax advice to establish if purchasing property via a limited company is a better tax solution moving forward. Commercial and semi commercial property also looks attractive as it sits outside many of the changes.
[one_sixth][/one_sixth]I think it is too early to say if this has impacted commercial mortgage brokers. I would like to think that it will in fact be a positive for commercial brokers as consumers become more aware that there are in fact alternatives to high street commercial loans.
[one_sixth][/one_sixth]Trying to predict when to purchase a property is like trying to pick when to invest in the stock market! As long as you are not trying to make a killing within a couple of years and buy with a long-term view, home movers should buy the best they can afford and investors should buy for strong yields and cash flow which is more predictable than second guessing movements in property values.
[one_sixth][/one_sixth]The industry lost many good people during the credit crunch which has contributed to the shortage. However, we have had some success with recruiting new people to the industry for our internal staffing needs. People with a good attitude and skill set and supported with the strong training programme can be of mutual benefit.
Recruitment of members for the Network has been successful by identifying our key market, which is commercial mortgage brokers who now need FCA authorisation and prefer not take this directly with the FCA. By concentrating on our USP of support for this broker type, we have been able to increase member numbers.
[one_sixth][/one_sixth]Our focus for 2017 is to ensure we continue to have a strong offering across all the key areas such as residential, commercial and BTL. Maintaining strong lender relationships, a wide lender panel, and ongoing adviser training across all these areas will ensure we are diversified enough to weather any potential storms should they occur.
– Phil Whitehouse, MD @ MCI Mortgage Club
[one_sixth][/one_sixth]The mortgage market has proven over time that it is very resilient and intermediaries especially adapt to change remarkably well. So if more change comes along, the market is well able to cope. That said, I do not expect vast areas of planned change by The FCA or Government this year as they will be pre-occupied with implementing Brexit plans. The ‘divorce’ from The EU takes The UK into unchartered territory and no part of the economy will probably come through this unscathed. The housing market is built on confidence and this may take a few hits during 2017 but the fundamentals of the market still remains very strong underpinned by a large shortage of housing and what is seemingly ever increasing demand.
[one_sixth][/one_sixth]History tells us that it is impossible to make predictions in this area. Never say never would appear a suitable phrase!
[one_sixth][/one_sixth]We have seen a mixed response amongst our brokers as some have embraced the niche lenders with enthusiasm whilst others tend to stick to ‘High St’ names and therefore refer niche cases to specialist packagers. That said, Niche lenders have increasingly come to market with competitive products and made it easier for intermediaries to access their products through Mortgage Clubs by wider BDM coverage and attending specialist industry events and roadshows.
In 2017 I see that improvements to sourcing systems and general awareness should help brokers access niche products and so an increase in this market is highly likely.
The measures taken by The Government have seemed to work according to anecdotal evidence in the trade press as many Buy to Let Investors have said they are reducing their portfolios. The Government changes were unpopular and despite calls from the market, the government does not seem to want to reverse such changes as it would create further confusion.
I expect that the move away from The EU will not mean that The FCA will make any reversal of regulation as the basis of most policies is fairly sound and well structured and once part of EU law, is difficult and costly to change. It may however mean that any future regulation is driven by The UK’s needs rather than instigated in Brussels.
[one_sixth][/one_sixth]The BTL market seems now to be a troubled market and will have to find its new level. It clearly isn’t the attractive place it was for investors but I expect some re-invention as time progresses. I cannot see much more regulatory change as there is already an overload and the government and FCA will have lots on their plate in 2017!
[one_sixth][/one_sixth]The Bank Referral Scheme (Designated Platforms) was introduced in November 2016 after over two and half years of delays and government issues. The aim was to try to help small business accessing finance. The idea seems commendable but the dynamics of the residential housing market mean that this is highly unlikely to be repeated in that market because there is an existing structure, regulation and supply of lenders. Even if it was introduced in some way, there is no chance that the intermediary market would die out. Customers value the independent role of the intermediary and recent statistics show the intermediary share of the market is increasing to unprecedented levels.
[one_sixth][/one_sixth]History has shown that house prices occasionally stumble but on the whole there is a rising trend in prices due to lack of supply versus increasingly high demand. To predict the exact time to buy or sell is almost impossible and so people should carry on with their chosen housing transaction when they are ready. Choosing the right property is however of vital importance and so potential buyers and investors should tread cautiously and only proceed when they have taken the right advise and conducted all appropriate due diligence and planning.
[one_sixth][/one_sixth]The housing market is very resilient and a cornerstone of the UK economy and so it will evolve and improve in a continual cycle. All the factors are in place for this to continue and this, coupled with some welcomed initiatives to build new homes, bodes well for the intermediary market going forward. Keep calm, have a plan and don’t worry, it’s a great industry to work in.
Technology will continue to be an important part of the intermediary market and as MCI Club is part of the EKeeper Technology Group we are well placed to give our brokers first class and cost effective support and access to latest developments.
We have plans to expand our BDM team so as to get even closer to our customers and work with them for our mutual benefit. Our lender and insurance panels will continue to grow as new providers come to market and we will also introduce access to other products and services that the intermediary is able to promote along side mortgage cases.
– Charles Haresnape, MD @ Aldermore Mortgages
[one_sixth][/one_sixth]Many of the doom and gloom housing predictions made ahead of the EU referendum failed to materialise, but there is still a great degree of uncertainty in the market. However, the UK’s housing market has demonstrated its resilience, and 2017 will most likely show us a slower, but upward trend, in house prices, particularly given current housing supply issues.
An additional influence on the market will be the release of the Housing whitepaper, as well as the tapering off of full mortgage interest tax relief on buy-to-let loans from April.
[one_sixth][/one_sixth]The market is indeed becoming more and more specialised, and as such the idea of ‘the average borrower’ is becoming obsolete. Self-employed workers are a great example where they may be perfectly credit-worthy but are disadvantaged by a computerized process. Specialist lenders are able to take a more hands-on, manual approach to get a better picture of a customer’s situation. As lending criteria has tightened in the market, it is always borrowers on the fringe who suffer from a one-size fits all approach. Therefore the number of customers requiring bespoke financing options is likely to grow.
With self-employed workers set to overtake the number of public sector employees in 2018, Aldermore will be looking to expand our lending in this sector.
There will always be a period of friction whenever new legislation is introduced as it beds into the market, but regulation such as MMR, which was designed to make lenders behave more responsibly, should always be welcome. Some changes, such as the new tax treatment of buy-to-let, has definitely made several landlords review their portfolios, and the government should always be cautious when introducing legislation on such a hugely important segment of the market.
We should get more clarity on plans for the future of the UK’s housing market when the whitepaper is released, but as it stands the FCA has said there are no plans to roll back the MCD regulation.
[one_sixth][/one_sixth]While landlords have definitely had to weather a lot of changes over the past year, including additional stamp duty, interest relief reductions and stricter lending criteria, the underlying fundamentals of the buy-to-let market remain strong. Mortgages for Business’ Complex Buy to Let Index for the end of 2016 showed that so-called vanilla buy-to-let transactions accounted for a greater share of the market: 39% were for house purchase in Q4, up from 28% in Q3, with HMO purchases up from 23% to 26% in Q4.
[one_sixth][/one_sixth]The chances of this happening are low in the medium term. It’s important to see how the commercial scheme operates in practice but the importance of the broker remains in residential as they can look around the market for an appropriate lender.
2017 will probably be the year we see the price of an average property in the UK break the £300,000 mark, but average price rises are unlikely to top 5 per cent.
London is likely to experience a much slower growth rate than previous years. However, some regions, such as the North of England, should see a faster rate of growth, influenced both by relatively more reasonable prices for first-time buyers as well as increased activity from landlords seek better yields in the wake of the changes to the treatment of buy-to-let.
Our own research has shown that raising a deposit continues to be a bigger issue than house prices for first time buyers, but for those looking to buy, it is worth considering how long you intend to be at your current location and the timescale of your purchase. Rates are currently at historic lows, and product offerings are likely to remain competitive for the foreseeable future.
For investors, the more research you can do, the better. There has been a growing trend over the past year for investors shifting away from rental growth to looking to increase yields through strategies such as renovations. In addition, it is worth remembering that not all lenders are the same: some will excel in a certain geographical location, whereas others will be able to bring a particular expertise to the table within a specific sector, such as student housing.
[one_sixth][/one_sixth]The key is that the new government has an ideal opportunity to show leadership in fleshing out a much awaited joined-up housing policy.
Aldermore has just recently introduced a slew of changes to our residential products, with a range of rate reductions as well as other changes such as reduced legal fees and revamping our early repayment structures both on allowances and charges. As well as this, we have solidified our commitment to those borrowers who have smaller deposits and have launched a new high LTV range for buyers to fulfil customer demand following the closure of the Help to Buy: Mortgage Guarantee scheme.
The Self Employed sector is growing significantly and is a major part of the UK economy, but it continues to be underserved within the mortgages industry. Many self-employed customers feel like second class citizens. We believe that with our expert and specialist underwriters we can take the time to really understand our self-employed customers to ensure they get the best deal possible.
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