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Research reveals how UK home owners are switching mortgage deals
Some 18% of borrowers in the UK have changed their mortgage details or come to a new arrangement with their lender in the last three years, new research has found. Meanwhile, one in 12 have moved to an interest only mortgage and the same number have extended their mortgage term, meaning they could end up paying more, according to the research by Ocean Finance. It says that despite enjoying more than five years of record low interest rates, the squeeze on real incomes over the same period has left many home owners struggling to keep on top of their monthly repayments. An interest only mortgage sees the borrower paying off the interest on the loan every month, but not repaying any of the capital, which makes the monthly repayments cheaper. However, this means that at the end of the term they do not own the property and will need to find a lump sum to repay the debt, perhaps by selling their home. Extending the term of a mortgage might mean extending the period of time they have to repay the loan from an initial 25 years to as much as 40 years. While this means they should pay less each month, it is likely to see them paying more overall due to the interest they will continue to be charged over the extended period of the mortgage. The firm points out that a longer mortgage term may also mean people have to rethink their future plans, such as working later in life to continue repaying their mortgage, rather than retiring. The research also found that 3.8% of home owners revealed they had agreed with their lender to make temporary lower payments. Meanwhile, 2.3% of home owners surveyed said they were taking a temporary holiday from making payments. ‘While repossession figures have been low, this has masked the real struggle that many borrowers have had to keep paying their mortgage. As incomes have been squeezed over the past few years, one in six borrowers has had to find a way to reduce their monthly payment,’ said Ian Williams, spokesman for Ocean Finance. ‘Switching to an interest only mortgage or extending the term are both being used as a way to lower repayments. While both of these can help provide short term relief and may serve to keep the roof over people’s heads, it may be that this is simply storing up problems for the future,’ he pointed out. ‘In addition, with the Bank of England currently predicting that it expects to start to raise the base rate of interest in the middle of next year, more home owners may find that they start to struggle, especially if they are still on a standard variable rate or tracker mortgage,’ he explained. ‘It might therefore be worth their while speaking to their existing lender or a mortgage broker about whether they could benefit from switching to a new mortgage now,’ he added. Continue reading
Research reveals UK landlords experience difficulties accessing buy to let finance
Three in 10 landlords in the UK plan to look for additional buy to let lending or to re-mortgage in the next three months, yet many may not gain access to finance, it is claimed. According to the latest report from the National Landlords Association (NLA) some 67% of landlords rely on a buy to let mortgage to fund their portfolio, but one in five, or approximately 300,000, landlords have not been able to expand due to difficulties in accessing buy to let finance over the last year. Furthermore, 59% say that lenders fail to consider their individual circumstances, and 56% that current buy to let lending criteria is too conservative. There are two ways a landlord can obtain a buy to let mortgage, either by going direct to a lender or by using the services of a broker, and the NLA believes it is vital that landlords have access to a wide range of products in order to find the one most appropriate solution for them. ‘A significant number of landlords are having trouble accessing finance and expanding, which is a major concern because the private sector is vital in meeting the ever increasing demand on housing at the moment,’ said Carolyn Uphill, NLA chairman. ‘Many landlords are frustrated as lending criteria is too prescriptive. There’s no one size fits all mortgage, and as the leading landlord association in the UK we understand that landlords need access to a range of products that meet their specific individual circumstances,’ she explained. She pointed out that NLA Mortgages provides a free online buy to let mortgage search facility which sources from over 600 mortgage products to help landlords find the best product to suit their needs. Mortgage schemes that are not available in the general marketplace are also available through NLA Mortgages, all via the NLA website. ‘We urge any landlords who are having difficulty in finding a mortgage that meets their needs to get in touch to see how NLA Mortgages can help,’ she added. The NLA’s research also asked landlords what they would say to lenders if given the opportunity. ‘Mortgage lenders are becoming increasingly difficult to work with. The requirement to produce further information on income is causing delays and becoming problematic…if your income does not fit their box on criteria they say no, which wastes time and slows the process,’ said one. ‘Mortgage lenders should consider each borrower on their own merits, and not impose a blanket ban on lending to individuals earning less than £25,000, regardless of their personal circumstances. Someone who is lucky enough to have no outgoings, servicing a mortgage with personal income of £25,000 a year is more than adequate,’ said another. Continue reading
UK landlords experiencing high levels of tenant demand, latest monthly survey shows
UK landlords are still experiencing high levels of demand during the third quarter of the year with just 3% reporting that it is declining, the latest monthly buy to let survey shows. Overall 41% of landlords surveyed said tenant demand was growing or booming and 51% said in their view demand was stable, according to the Private Rented Sector Trends survey from specialist lender Paragon Mortgages. The survey, which has been running for the past 13 years and tracks landlord confidence and their views on the wider buy to let market, also shows rental arrears are expected to remain stable. Looking ahead, 61% of landlords felt that the level of tenant arrears would remain stable over the next 12 months. In comparison 12% of landlords stated that in their view tenant arrears would increase and 8% expect a decrease. Landlords were also asked what the most important factor is when they are looking for new buy to let mortgage finance. Interest rates remained the most important, having been top of the list for the past 12 months, followed by average loan to value and product fee. ‘Our latest survey of landlords reveals that that the past quarter has been a stable and steady one, with just over a third of landlords saying they feel more optimistic about the prospects for their rental portfolios,’ said John Heron, the firm’s director of mortgages. At this point in the year, we can usually gauge how the wider buy to let market has performed and what likely lending volumes for the calendar year will be,’ he explained. He pointed out that last year, the Council of Mortgage Lenders (CML) reported total buy to let lending for 2013 as £20.7 billion. ‘Current thinking is that gross buy to let lending this year will be around the £25 billion mark, which represents a healthy increase over 2013 but there has been some evidence that the rate of growth has slowed as the year has progressed,’ added Heron. Continue reading
