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Craig Upton
Longer Mortgages = Bigger Problems, Bank of England Warns
The Bank of England had waded into the rather heated debate regarding the long-term mortgage products many lenders are now offering. There’s been a distinct rise in the number of banks and building societies offering 30-year and 35-year mortgage repayment. Though supposedly to help bring down the monthly costs of repayment, the BOA warned that longer mortgage terms do little other than “store up problems for the future”.
One of the biggest issues highlighted in the report was the way in which longer mortgage repayment periods could have a huge impact on the pension savings of borrowers. By extending mortgage repayments into old age, it becomes necessary to meet them with retirement funds, which may already be stretched to their limits.
But what was interesting was how the report didn’t highlight the way in which longer mortgage repayment periods also mean massively higher overall interest payments for the borrower.
In the UK, mortgages have been offered with a standard repayment period of 25 years for several decades. However, as house prices continue to rise, borrowers have been seeking realistic ways of bringing down their monthly mortgage bills in order to get on the housing ladder. In response, banks are now routinely offering repayment periods of up to 35 years. But in doing so, the overall costs payable by the borrower skyrocketed.
Take, for example, a smaller loan of £100,000, charged at a rate of 4.5% with an initial charge of £500. Over the course of 25 years, monthly repayments would be around £556, and the total amount payable would be £167,250. By contrast, up to a 35-year mortgage, while monthly payments are reduced modestly to £473, the total amount to repay increases to £199,250, an increase of £32,000 and double the amount borrowed.
In the case of a larger loan, say £400,000, with the same interest rate and fee, the change is even more dramatic. If paid back over 25 years, you’d be looking at £2,223 per month and a total repayment amount of £667,500. Over the course of 35 years, monthly repayments come down to £1,893, but the total repayment amount increases to £795,550, a hike of nearly £130,000.
But it’s not just in the UK that this is happening, either. In most countries where wage growth is being outpaced by house price inflation, longer mortgages are being offered to bring monthly repayment amounts down. It’s particularly prevalent in Sweden and Japan, where mortgages are available with repayment terms of more than 100 years.
As far as the Bank of England is concerned, those considering signing a long-term mortgage today need to think very carefully about tomorrow. Lower monthly repayments are all well and good, but not if they make it difficult to get by in later life. Plus, the longer the mortgage term, the longer the period during which your home is at risk of repossession if you fall behind on your payments.
UK Reaches Highest Remortgaging Level Since 2009
In addition to a recent surge in the number of first-time buyers taking out new mortgage products throughout March 2017, recent figures have strongly indicated that the number of existing homeowners applying for a remortgage is also on the increase. In fact, LMS, one of the UK’s leading conveyancing firms, has just published a report suggesting that remortgaging hit an eight-year peak during February this year.
Breaking down the figures, the actual number of remortgage applications that were processed and approved this February reached a staggering 44,000, which is a record high when comparing all the previous months, covering an entire period stretching way back to January 2009. With a yearly increase averaging an impressive 35% per annum, it seems that property owners across the UK are unable to resist the temptation of remortgaging in order to lower their monthly payments, increase their borrowing terms, and release additional funds for home improvements, among an entire host of other similarly valid reasons.
However, although the remortgage sector and first-time buyer markets have experienced a notable increase in activity, it seems that traditional mortgage borrowing is entering a minor slump, with the number of conventional mortgage applications falling by a total of eight percent in February. This means that, in February alone, remortgage lending represented around forty per cent of all mortgage borrowing, which is a six-year record.
Explaining the popularity of remortgaging products
So, what are the main reasons for this substantial turnaround and considerable surge in the number of remortgage products being applied for? According to industry experts and a wide cross-section of UK economists, the average homeowner is deciding to switch providers as a means of saving money by taking advantage of the significantly low interest rates that are now attached to secured borrowing.
Another reason for the current trend is the fact that most lenders have indicated that the low mortgage rates available at present are not going to last forever, with many lenders already announcing expected increases in the coming months.
In the words of Andy Knee, who is currently chief executive at LMS, “February enjoyed the biggest boom in recent remortgaging history. Remortgage transactions rose to their highest level in eight years as homeowners took advantage of continued low rates and the opportunity to lower monthly repayments.”
“Meanwhile, inflation has risen to 2.3% and real wages are starting to fall. The consequence is that homeowners will have less in their pockets come the end of the month. Remortgaging can help alleviate a potentially difficult financial situation; for example, one in five reduced their monthly repayments by remortgaging in February,” he hastened to add.
Switching products now, before it’s too late
Since March this year, the economic climate has entered a slightly worrying phase of minor instability and unpredictability. With this in mind, the time to take advantage of the currently low mortgage rates by means of switching lenders or remortgaging with an existing provider with the aim of getting a better deal is in the here and now, before the opportunity to seize such a competitive deal passes by completely.
And The Winner Is? UK Property Finance Receive a Nomination for the 2017 Best Bridging Broker Award!
The team at UK Property Finance has always measured its success in terms of satisfying the needs of its loyal customers as opposed to simply making a quick buck. Since the second we started in this business, we’ve always tried (and succeeded) to do things differently while offering streamlined, easily accessible, and highly flexible finance to borrowers at any level in the property investment and real estate development sectors.
When you are constantly out on a limb, forever doing your utmost to please your customers with every financial package you broker while delivering a superb level of service that your competitors would never dream of providing, it’s always nice to receive a little recognition for your efforts and the support of your peers. This is precisely why we are so unashamedly proud and completely over the moon to have been nominated for the ‘Best Bridging Broker’ title at this year’s internationally revered Bridging & Commercial Awards, a ceremony that pinpoints and celebrates the best performers across the entire spectrum of alternative finance providers in the UK.
2017 bridging and commercial awards
“Bridging & Commercial is proud to announce the shortlisted nominees for the 2017 Bridging & Commercial Awards, in association with Titlesolv. The top brokers, lenders, and individuals in the bridging, commercial, development finance, peer-to-peer, and specialist banking markets have been shortlisted and are now in the running to win one of the industry’s most prestigious awards.” – Bridging and Commercial
At a time when banks, building societies, and most other mainstream lenders are tightening their belts and turning an increasing number of borrowers away, we have been busily providing practical, alternative property development finance solutions for individuals and commercial developers at all levels of experience and with portfolios of all manner of shapes and sizes. First-time buy-to-let landlords, new-build housing developers, and those who purchase and renovate properties at auction have all used our services to provide an essential lifeline that enables them to flourish and succeed in a world where the main finance providers of yesterday are seemingly unwilling or genuinely unable to help.
Our unrivalled commitment to offering intelligent and highly bespoke property financing for our diverse cross-section of enormously varied clientele has resulted in our company name being shortlisted for the 2017 Bridging & Commercial Awards as one of the country’s leading bridging loan brokers. With the voting stage now completed (the judges’ final decision was made earlier this month, on May 18th), we now find ourselves waiting, with a true sense of excitement and trepidation, for the official results to be delivered on June 8th at The Hurlingham Club.
(You can find out more about the event and the complete list of nominees at the following link: http://www.bridgingandcommercial.co.uk/article-desc-11886_B&C-Awards-2017-shortlist-announced.)
Whatever the outcome, the team at UK Property Finance is already overjoyed and celebrating!
Regardless of whether we win or lose, the fact that we have been nominated in the first instance is a worthwhile award in itself and one that we are extremely proud to have received!
UK Property Finance Announce Full Support of the FCA’s Attitude towards Dealing with Unregulated Finance Brokers
Britain’s leading choice for alternative intelligent finance seeks clampdown on negligent lenders
Unregulated finance brokers who are currently offering inappropriate funding solutions for those in genuine need of responsibly sourced products are finally about to face serious action from the Financial Conduct Authority, a firm decision that the team at UK Property Finance believe is sorely overdue while echoing the sentiments vocalised by the FCA in their recently issued statements.
According to the FCA, many of the mortgages and secured loan products offered to borrowers by unregulated lenders have led to a growing number of both residential and commercial customers facing complete ruin. As a direct reaction to this unprincipled lending practice, the FCA is now advising all potential borrowers to exercise a significantly increased level of precaution when dealing with the brokers and lenders that they are considering applying to for finance.
If you have been offered property finance or borrowed advice from a lender that is not an FCA-regulated body, then it is almost certainly in your best interests not to proceed.
Unregulated lenders should be avoided at all costs
“A large percentage of the problems we have witnessed in the industry, from the crash of 2008 onward, have been caused by regulated brokers participating in activities that are outside the’regulatory perimeter’. However, our resources are limited, and it is therefore essential that we use them as effectively as possible to maximise our impact. If our objectives are endangered by unregulated bodies, then we shall be forced to operate outside the perimeter wherever necessary.” FCA (Financial Conduct Authority)
When it comes to identifying the main root of the problems faced by the financing sector, the FCA is quick and forthcoming to cast the finger of blame directly on those who are involved in unscrupulous lending practices. Each time a borrower decides to work alongside an unregulated finance provider that is not committed to offering a level of service that is completely above board and delivered with assiduousness, a serious and unnecessary risk becomes almost inevitable.
Although a high degree of caution is recommended for those looking for cheap mortgages and other secured borrowing products, it has become increasingly apparent that many are not following the warning. With this in mind, UK Property Finance has advised that if you are going to deal with a broker offering greater levels of convenience than a high-street lender, then you should only do business with an FCA-authorised and regulated broker, regardless of the service or product required.
A dramatic increase in bridging loan popularity
Bridging loans are unique and easily accessible financial products that are suitable for those in need of short-term funds that are to be paid back in either a closed or open timeframe. The team at UK Property Finance has noticed a large and widespread increase in the number of bridging loan applications they have processed over the last few years, with business going from strength to strength. Offering fast and uncomplicated access to exclusive funding that banks and high street lenders are unable to provide, bridging loans are the perfect choice for landlords, developers, and property investors from all backgrounds and in every part of the UK.
Development Finance In Greater Need As Two Thirds Of Adults Prefer Brand-New Properties
It’s becoming clear that, as far as the average would-be home buyer in the UK is concerned, one type of property takes precedence over all others. We’re not talking about the size, shape, or specification of the property either, but rather the all-important matter of whether it’s new. While it may not necessarily be within the financial means of all home buyers, it seems that new-build properties represent the properties of choice for the vast majority.
According to the results of a new survey carried out by the Skipton Building Society, two in every three home buyers prefer the idea of moving into a brand-new property. Along with this, 38% of respondents said that they would love to have their new home built from scratch to their own specifications, if money wasn’t an issue.
When quizzed further on their reasons, more than half of those who favour new-build properties cited their primary explanation as being able to decorate and personalise the place to their own tastes prior to moving in. Interestingly, around 45% stated that they would not even consider a property that was more than 46 years old, while over 20% said that they would be far less likely to buy a property if they knew that a person had died in it at any time.
Speaking on behalf of Skipton Building Society, communications manager Rebecca Willey talked of the reasons why new homes seem to be appealing to more would-be buyers than ever before.
“It seems it’s not just the unexpected costs associated with buying an older home that is scaring the nation; a fear of ghosts, mysterious property pasts, and even dead pets buried in the garden are enough to put people off buying an older house,” she said.
“While it may spook some, purchasing an older property full of historical charm is a real treat for others.”
“However, it’s not hard to see why so many people want a new-build home, as they provide an opportunity to create the home of your dreams without the hard work and baggage from previous owners.”
For those on the business end of the spectrum, such demand paints a picture of a golden era for those working in property development. Demand for high-quality new-build properties of an affordable nature is accelerating at a previously unseen pace, all across the United Kingdom. For many developers, simple financial restrictions or challenges in sourcing capital at the opportune moment can stand in the way of what could be an incredible opportunity.
The team at ukpropertyfinance.co.uk specialises in intelligent, affordable, and immediate financial solutions for all property development purposes. By removing the complications and red tape associated with major banks and lenders, gaining access to essential funding when and where it is needed has never been easier.
UK Property Finance welcomes a new addition to our development team
UK Property Finance is delighted to announce an expansion to our development team, with a new team member having recently joined us.
A former advisor from Lloyds Bank, Luke Hosea, has recently joined our rapidly growing team and brings with him a wealth of expertise and insight into the sector.
He is joining the company to expand our development finance projects. He has a strong background in the finance market, having worked in the industry since leaving school. Luke has spent a year travelling in the United States of America and Australia, which he found thoroughly enjoyable and an experience of a lifetime.
He now wishes to further his career within the finance industry, which has been his main vocational interest throughout his school years and travel experience. He has sound experience in the business-to-business finance sector and is a great new member of our development team.
We wish him all the best in his time here at UK Property Finance.
Development Finance – Bridgingloans.co.uk have the experience
The last six months have seen a marked upturn in lenders’ willingness to fund property development deals, from small refurbishment projects to multi-million-pound new-build developments. At Bridgingloans.co.uk, we have been able to take full advantage of this volume increase due to our expertise in the marketplace.
Recently completed deals have highlighted just what issues can arise:
- On a small barn development, it was found at the 11th hour that the client’s insurance did not cover her for the full risks involved, and the lender would not draw the funds. Solution: We introduced our specialist development insurance broker, who quickly assessed the problem and provided the cover required in a timely manner to enable drawdown.
- During the valuation stage of a mill purchase in the North of England, the valuer identified a potential environmental risk and (quite rightly) requested a specialist report. The client looked around and obtained quotes in excess of L2,000. Solution: Through our network of specialists, we quickly identified the most appropriate local environmental specialist who completed the report in less than 10 days and at a fraction of the costs previously quoted.
- We were approached by a local property developer who wanted to reinstate the build of a site mothballed back in 2008. His issue was that his existing bank was on the verge of appointing receivers due to the dormant position on the site. Solution: BridgingLoans.co.uk were able to source a lender who agreed to both the take-out of the bank and provide the development finance and funding required. In addition, we maintained constant contact with the existing bank, which ensured the receivership was put on hold, which allowed the refinancing to take place.
In each case above, the ability to quickly identify and resolve the issues enabled the loan process to continue and lead to the completion of the case.
Through the experience of the team, we can quickly resolve the majority of issues that invariably happen during any development deal and reassure the clients that we can help overcome the problems. For both first-time and experienced developers, this added value makes ukpropertyfinance.co.uk the ideal choice.
Increased Involvement In Development And Renovation Finance
In the last few months, UK Property Finance has substantially increased its involvement in locating the funds needed to cater for the surging demand for development and major renovations requiring finance. UK Property Finance, which is a trading style of Penuptra Consulting Ltd., is a directly FCA-authorised and regulated business focusing almost entirely on niche area funding. The company has an enhanced reputation of being a “one-stop” financial shop where brokers and members of the public alike can, with one simple telephone call or email, access a wide range of property-related finance expertise and money. The offering includes brokering for residential, commercial, BTL, and equity release first charge mortgages, secured second and third charge loans, general insurance products, and first, second, and third charge, etc., regulated and unregulated bridging loans that can be secured on solely or a mix of land, property, or commercial units.
As part of its drive into the development funding arena, UK Property Finance has in recent months become involved in a multi-apartment, mixed-use, 3-stage development on the south coast of England. The client, a recently formed limited company where the directors have a huge amount of experience and specialise in obtaining planning permission for difficult sites and projects, agreed to a purchase price for the brownfield site, subject to eventual planning approval. They then spent the next 2 years putting in much time, effort, and money to obtain formal approval. With the planning now agreed upon, the value of the land had increased substantially, way beyond the price our client had originally agreed to pay the seller, and as such, this made the proposal very advantageous to our client, and, as you would have thought, many lenders. Our client then trawled through the normal high-street bank culprits in an attempt to locate the development finance required to complete the project before selling the already pre-sold units, but unfortunately, for one reason or another, our client was rejected.
Luckily, UK Property Finance was then recommended to our client via his local bank. Due to the increase in valuation, we submitted the case to one of our large and varied panel of commercial lenders and managed to enable the size of the purchase loan available to be based on the actual valuation of the land (with planning), not the purchase price (which was without planning). This pretty much meant that our client, who had already spent a substantial amount of time and money obtaining the planning permission, could now purchase the land without any further down payment from themselves.
The achievement of planning also increased the land value to such an extent that our client required minimal remaining financial input to complete the build prior to the properties being sold off to pre-agreed purchasers.