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Nottingham Building Society loosens criteria for contractors

Nottingham Building Society has cut the minimum length of time contractors must have worked on fixed-term contracts to make it easier for these workers to secure a mortgage.

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Nottingham Building Society has cut the minimum length of time contractors must have worked on fixed-term contracts to make it easier for these workers to secure a mortgage.

The mutual says the minimum length of time a contractor must have worked on fixed-term contracts in the same profession is now 12 months.

It adds there is no minimum time required on their current contracts, and contractors working under an umbrella company are acceptable for the firm’s home loans using 46 weeks of income.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Nottingham Building Society sales director Alison Pallett says: “The world of work is evolving. From construction to health and social care, more and more people work on contracts, and it is imperative that the industry reacts in tandem — especially as contracting allows greater flexibility within the workforce.

“These changes reflect our unwavering commitment to empowering contracted workers to access mortgage financing more easily.

“We hope to have further exciting developments to announce shortly, so keep an eye out for them.”

By Roger Baird

Source: Mortgage Finance Gazette

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Nearly a third of key workers and self-employed have been rejected for a mortgage

Around 30 per cent of key workers had been turned down for a mortgage and 28 per cent of self-employed people had been rejected, according to a report.

According to a survey by LendInvest, which was carried out by Opinium with around 1,000 adults who were non-salaried, key workers or had missed a payment, this compares to 14 per cent of the general population.

Nearly a third, 32 per cent, said a barrier to applying for a mortgage was the fear of being rejected and around 29 per cent said they had felt discriminated against by a high street mortgage lender or bank due to their employment status or income streams.

This rises to 39 per cent of those with poor credit and 59 per cent of those who had been rejected for a mortgage.

Over a third said that mortgage products available discourage them from applying.

The most important factors when looking at a lender was offering low interest rates at 59 per cent, followed by good customer service and support at 48 per cent and variety of products at 42 per cent.

Around 41 per cent said that being turned down for a mortgage had left them feeling frustrated, 29 per cent said they were stressed and 28 per cent said they were embarrassed.

Approximately 20 per cent said that they felt hopelessness after being rejected for a mortgage.

However, 19 per cent said they were more determined and 14 per cent said they felt more positive.

Around 77 per cent said they had a negative feeling about the outcome and that rose to 80 per cent for those with poor credit.

Nearly half said they had been negatively impacted by the mortgage application process, with the biggest impact being on finances, followed by mental health and confidence.

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Nearly a quarter think they will never apply for mortgage

Over half said that they had gone to “great lengths” to up their chance of getting a mortgage.

This includes a fifth saying that they stayed in jobs they didn’t like, 14 per cent pushed back retirement plans, 13 per cent opted for a higher salary over their dream jobs and 11 per cent delayed or cancelled plans to become self-employed or freelance.

Nearly three quarters of those that had been turned down at least once had taken action, with over a quarter pushing back retirement plans and 20 per cent delaying plans to become self-employed or freelance.

Around 22 per cent believed that they will never be able to apply for a mortgage and 43 per cent said they thought they were less able to become a homeowner due to the cost of living crisis.

More than half of those with poor credit said the cost of living crisis had impacted on their ability to apply.

However, around 41 per cent of those who don’t own said that a fall in house prices would encourage them to buyer a property.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

New avenues needed for a new breed of borrower

LendInvest called for lenders to offer more flexible underwriting criteria, develop specialist mortgage products, use alternative credit assessments, enhance documentation guidelines, offer in-house expert support, give customers educational resources and guidance and offer a strong customer service.

Esther Morley, managing director, residential mortgages at LendInvest, said: “The research confirms our long-held belief that the traditional high street mortgage model is not fit for purpose for a large proportion of the UK population and is failing to keep pace with the increasingly complex needs of prospective homeowners.

“An increasing number of people across the UK have different income streams that do not conform with outdated legacy platforms and processes, leading all too often to dispiriting ‘Computer Says No’-style responses. Many are left navigating a needlessly complicated, intrusive and stressful process, resulting in hardworking people being denied the dream of owning their own home and suffering unnecessary mental anguish.”

Rod Lockhart, chief executive officer of LendInvest, added: “These results shed more light on the difficulties facing those with more complex cases applying for a mortgage and the general sentiment regarding the mortgage process during what is a difficult time for potential homeowners. It’s especially upsetting to see the emotional toll on a worryingly large number of people.

“Our residential mortgage products are designed to address the evolving needs of aspiring UK homeowners. With proprietary technology that streamlines applications and makes even the most complex cases simpler and faster, our aim is to improve the overall mortgage experience.”

By Anna Sagar

Source: Mortgage Solutions

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Like your lunch, contractors, with umbrella company payroll services there’s no such thing as free

‘Free Payroll Services’ are a hook to avoid

Nonetheless, there is a scourge on the umbrella sector, with companies right now posing as legitimate ‘umbrella’ companies but that are not actually doing what ‘umbrella company’ says ‘on the tin.’ These spurious brolly operators seem to be out in force without blushing, often openly using every trick in the book to try and take advantage of unsuspecting contractors.

These operators are using enticers like the promise of “free payroll services” to land custom. So contractors need to be on their guard. Make sure you do your ‘due diligence’ before agreeing to any sort of relationship.

If you’re not paying for the product…

Remember, while nothing comes for free, these operators will be making money in some way in order to be commercially viable. As another saying goes, ‘If you’re not paying for the product, YOU are the product.’

One way they try to make money is to withhold money from your pay that should be going towards HMRC, to cover the tax and national insurance contributions of the contractors they work with.

Liability when using an umbrella company

A key point to remember, though, it is always the contractor who is liable for any money owed to HMRC.

Unpaid tax bills will always see HMRC pursue the contractors and not the providers – and these operators can and do unfortunately disappear just as quickly as they pop up!

Worryingly, I have seen cases where HMRC has come after contractors four or five years down the line. So tax consequences are often not felt initially or for some time. But usually after a few years, these companies have completely disappeared without a trace.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

How are these brolly operators getting away with this?!

There are a number of ways these companies are taking advantage of contractors right now. Pay Per Click (PPC) advertising is a big one and the use of search engines like Google can be a honey trap — particularly with the promise of things like “free payroll services.” Often, these operators might appear as some of the first search results that come up when searching online for an umbrella company.

But sometimes, it can be through brokers or word-of-mouth referrals from other contractors who genuinely believe they are onto a good deal.

Recruiters too need to be mindful of who they recommend to contractors and who makes it onto their Preferred Supplier List (PSL).

Agencies must make sure they are aware of these types of operators and the potential risk they pose to their clients. Many contractors will take the recommendation of a recruiter as gospel, so there is a duty of care here that must be upheld by individual agents.

All that glitters may not be gold

The websites of the operators are also designed to win trust with messaging like ‘100% compliant’ or even ‘HMRC approved’ to dupe people into singing up. Please be aware, ‘HMRC-approved’ simply does not exist, as HMRC does not grant its approval to umbrellas.

It’s also true that these types of ‘brollies’ have always been a problem but right now, with the cost-of-living crisis putting an additional squeeze and pressure on household incomes, it’s creating a situation that they are attempting to take full advantage of.

Hard-pressed due to the current climate, to some workers these schemes might look appealing.

A few contractors are asking for trouble

Yet not everyone is a mark. Although many contractors falling foul of these schemes are very innocent, there are some that are actively choosing umbrella companies that they know are not fully compliant. This is a huge risk as those that know the potential downsides really are playing with fire and won’t have anyone’s sympathy.

The fact it would be them as the party fully liable for the tax they owe to HMRC – sometimes even many years later – is important to remind these individuals of. Indeed, what contractors often think or get told will be saved in tax on their take-home pay, can later get more than wiped out by the tax bill.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

What should contractors look for?

HMRC are trying to close loopholes and do publish an official list of avoidance scheme firms that contractors should not work with. That said, this resource is by no means a comprehensive list.

However, contractors should be aware that because of UK laws under the Finance Act 2021, after 12 months, entries on the list must be removed. This is a huge problem as the removal risks giving contractors the wrong idea. My hope is that this 12-month expiry in the legislation can be re-looked at by HMRC and corrected by HM Treasury.

Something else we’d advise contractors to look out for? Accreditation by the Freelancer & Contractor Services Association. This is one of the gold standards in the umbrella employment sector, and firms with an FCSA badge are showing that they are serious about compliance. My take on being an FCSA member is that it’s definitely a trust signal worth factoring into any decision-making you do as a contractor.

However, FCSA is a membership body, and there is still no government-led regulation of the umbrella sector. Regulating umbrella companies is something we believe is still very much needed and would be very welcome.

How should contractors approach umbrella companies in 2023?

Working through the complexities of all of this is very difficult for contractors to navigate, with lots of factors to consider. My recommendation is that you really take the time to decide which PAYE umbrella company provider to work with; do your research carefully, and don’t be afraid to ask lots of questions.

Start by asking your agency whether they have a PSL in place; what due diligence they have carried out and whether their providers have any kind of compliance accreditation or audit standard.

Next, speak to those partners, review your Key Information Documents and any additional take-home pay illustrations or breakdowns you are given by your prospective payroll company. If you are already working through one, there are good companies out there that can check your payslips in real-time to ensure everything looks legitimate and as it should be.

Be in no doubt, there are many good umbrella companies out there that will give you the support you need while contracting. However, it’s important that you avoid companies that can’t explain why your take-home via them is higher than normal (the only difference between compliant providers is the margin), or how they can afford to pay you for ‘free’ and those who can’t provide you with illustrations and payslips. If you’re stuck or still unsure, the FCSA website is a good place to start as members are regularly audited to ensure compliance.

Final thought

Bottom line? There’s no such thing as a free lunch, and no such thing as a free payroll service that won’t come back to bite you! If your take-home is similarly too good to be true then, to avoid a nasty tax bill later down the line, take stock and look instead for a compliant and trustworthy payroll solution. When it comes to managing your personal tax contributions and ensuring compliance with HMRC, do it right first time with an umbrella company that doesn’t need gimmicks, to ensure potentially devasting tax consequences for you — and you alone — are avoided.

By Emma Naylor

Source: Contractor UK

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Why being self-employed isn’t a barrier to mortgages at 50 or 90

It is generally thought that if a person is self-employed, their mortgage options are limited. And if that person is also aged 50 to 90+, those options become even narrower. Of people we surveyed in their 50s (of all professions), only 4% had any idea they could get a mortgage. For those in their 80s, it dropped to 2%.These are shocking statistics because nobody is ever too old to get a mortgage they can afford, including the self-employed. All it takes is a lender with a can-do approach.

At LiveMore, for example, our mortgages are designed to help people aged 50-90+, including those who are self-employed. We have no maximum age for self-employed, but instead look at occupation and plausibility.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Solutions needed for a huge part of society

It’s surprising that mortgage applications are so challenging for such a significant sector of society in terms of sheer numbers. There are around 4.3 million self-employed people in the UK, and the largest proportion of them – 1.8million – are aged 45-54. Almost 1 million are aged 55-64, and nearly half a million are 65+ *. If they can afford a mortgage, why do lenders make it so tough for them to get one?

Lenders willing to show a can-do attitude can not only reach a large base of great customers, but also make a huge difference in many lives.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Helping the self-employed aged 50 to 90+

Flexible criteria is essential to helping the self-employed, including the newly self-employed who face a tough time in the mortgage market at any age. That’s why at LiveMore, we can consider applicants with one year of self-employed figures.

This can be a lifeline for anybody who went self-employed during the pandemic. It’s also helpful for people who used the Government’s Self-Employment Income Support Scheme (SEISS), which can go against them in some lenders’ eyes, but a lender that manually underwrites each case should be able to find a way forward.

At the same time, the Covid pandemic affected many self-employed people who were unable to work during the lockdowns, meaning their income might have been lower than in a typical year.

For example, one of our customers, aged 58, wanted to remortgage to buy out his ex-partner and move on after their divorce. But his self-employed income had reduced dramatically because of COVID.

Every high street lender turned him down. However, we considered what his income was likely to be post-covid, based on his previous track record, as well as accepting other income he had in the form of health and grant payments from the Government.

When our can-do approach helped him, he said: “LiveMore saved my life.”

Like this customer, who has various income sources, many self-employed people find income is an issue when they approach lenders who deem the case to be too complex.

However, if a lender considers all forms of income, mortgages often become affordable for many self-employed who may have thought they were running out of options. For example, we’re open to contractor’s income, and we’ll consider day rates or the previous year’s earnings.

The self-employed sometimes have foreign income, which many lenders will not accept but this is where it’s important for an intermediary to know their lender, as lenders like LiveMore will still accept overseas income, as long as it’s not the main source of money coming in. We can also consider net profits or retained earnings in limited companies as well as dividends, even when the borrower is no longer working.

So, whatever the profession of your self-employed clients, they may be more eligible for a mortgage than you think. We welcome most income and property types, and we always look for ways to say yes – even in ‘not your average’ cases.

By Phil Quinn

Source: Best Advice

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Accountants ‘worth the money’ for self-employed brokers ‒ analysis

Brokers have emphasised the importance of getting a tax return completed as early as possible, and argued that quality accountants are worth the expense.

With the end of the 2022-23 tax year last week, self-employed workers across the UK can now start to think about completing their tax return.

And brokers told Mortgage Solutions that it is important for self-employed advisers to do this as soon as possible, with one completing their return as soon as the new tax year had begun.

Getting off to a positive start

Samuel Gee, director at Manning Gee Investments, explained that he used to be complacent about his tax return, leaving it until the last minute and feeling stressed about the process.

“But this year I decided to take a different approach and tackled it before 7am on the first day of the new tax year. By being proactive and getting the task done early, I was able to avoid the stress and worry that often come with tax season,” he continued.

Gee added that he has always done his return himself “as it’s fairly simple”, though he has help on hand from those with greater tax insights if needed.

Jamie Alexander, mortgage director of Alexander Southwell Mortgage Services, said he has always submitted his tax return as soon as possible, admitting he has “never understood the mentality of submitting them the following January”.

He added: “I would prefer to know my exact bill as early as possible to prepare for it. I use an accountant who points me in the right direction and provides me with the estimated bill from May.”

Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, explained that his business is run through a limited company, so his personal tax returns are not completed until the year-end of the limited company.

He added: “I do push my accountant to get them done as soon after that as possible; when I was a sole trader I would always get my tax return done as soon as I could after the end of the tax year too, so I can get as much prior notice as to the amount I need to pay by 31st January the following year. No one likes a surprise tax bill bigger than they expected, or have saved for.”

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Leaving it late

But not all brokers are so determined to get their returns sorted swiftly.

Jane King, mortgage adviser at Ash-Ridge Private Finance, admitted she was terrible with her tax return, constantly putting it off to the point that it is often submitted on the 30th January.

However, she noted that as her accounts “are very simple and straightforward” it only takes half a day to put them together.

The benefits of an accountant

Anil Mistry, director of RNR Mortgage Solutions, said that as a limited company, he needs to obtain two sets of accounts: one for the business, and another for personal use.

As a result his accountant has historically deferred completing them both until the final month of the year.

He continued: “In my role as a broker, I find it helpful to have a comprehensive breakdown of my company’s expenditures, categorised by area. This allows me to identify areas where costs can be reduced or budgeted for in the future. I have even asked my accountant to establish new criteria on Dext, such as marketing, advertising, and coaching, to streamline this process, and know what is being spent where.”

Andy Wilson, founder of Andy Wilson Financial Services, said that his return is prepared by the firm’s accountants as part of a bundle of services provided.

He explained: “The returns are submitted on our behalf, after checking and our approval, at the same time as the business accounts are prepared and signed off. This will usually be around July each year. This is because our network requires the finalised accounts as soon as possible. I never allow this to be last minute as it would stress me out.”

Wilson also emphasised that while accountants are not cheap, they do provide brokers with peace of mind. “In 12 years, I have never had a single query from HMRC as a result of their diligence,” he added

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Accountants save more money than they cost

James Miles, director of The Mortgage Quarter, said that as a broker he can see first hand how important it is to get your accounts in order ASAP and be ahead of the curve so that you can submit your tax return.

He continued: “Despite being surrounded with numbers constantly I’d be naive to think I’m the best person to be submitting my own returns. With tax laws changing every year and allowances bouncing around as much as the stock market, use a professional accountant. It’s a must and I have no doubt they’d save you more money than their cost.”

And Taylor-Barr highlighted the value provided by quality accountants, noting that not only can they ensure that the return is done correctly, they can also highlight potential savings or allowances you were not aware of.

By John Fitzsimons

Source: Mortgage Solutions

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Self-employed saw unaffordable loans jump by a third after mini-Budget: MBT

Mortgage enquiries from self-employed applicants who failed to find an affordable loan jumped by almost a third following last September mini-Budget, data from Mortgage Broker Tools shows.

The criteria platform says that prior to the tax-cutting fiscal event by former Chancellor Kwasi Kwarteng, 28% of mortgage enquiries from self-employed applicants were unable to achieve the loan size requested as they were considered unaffordable.

But after the mini-Budget, this number lifted to 37% of self-employed home loan enquiries that were considered unaffordable by lenders.

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Current Chancellor Jeremey Hunt reversed almost all of Kwarteng’s tax-cutting measures, which had caused UK borrowing on international money markets to rise in October and his Autumn Statement in November, calming rates. The Chancellor presents his full Budget on Wednesday (15 March).

“In recent weeks, competition has returned to the market, with lenders cutting rates and offering more achievable stress testing,” adds the criteria platform.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

Mortgage Broker Tools chief executive Tanya Toumadj says: “As we saw from the mini-Budget last autumn, fiscal policy statements can have a significant impact on financial markets, interest rates and ultimately the accessibility of mortgage finance, so we’ll all be watching closely to see what the Chancellor has to say at the dispatch box.

“It’s unlikely that this Budget announcement will have quite such a dramatic impact on mortgage affordability, but even small changes can have a potentially huge impact on the prospects for individual clients, particularly in the current uncertain economic environment.”

By Roger Baird

Source: Mortgage Finance Gazette

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Resilient UK tech companies ‘making hay’ from distressed sectors

The UK’s challenging economy, with its strikes, covid hangovers, cost of living crisis and shortages, is clearly troubling tech companies the least.

And more than just shrugging off the challenges, firms specialising in IT and software might even be benefitting from the difficulties which other key sectors are suffering.

SFP Group, a company rescue and MVL specialist, insolvency house Opus Business Advisory Group, and Integro Accounting issued this two-fold analysis to ContractorUK.

‘Highly confident’

Issued on Friday, the analysis is based on a study by Integro, a contractor accountancy firm, showing 89% of tech firms as “highly confident” they can ride out the next quarter.

The finding represents the strongest show of tech company confidence for three years, given 79% and 76% said the same in 2021 and 2020 respectively.

And the high confidence was in contrast to companies in the other polled sectors.

Similarly on sales, more than half (53%) of IT consultancies said they felt their performance would improve during the rest of 2023. Only two per cent forecasted a dip.

‘Covid benefitted tech sector, to the detriment of others’

By contrast, not even a third of housebuilders anticipated an uptick, which was echoed by pubs (not even 20% foresee an increase) and retailers (more than 40% foresee a decrease).

“Covid…accelerated market shifts that have outlasted the pandemic, which has been to the benefit of much of the UK’s tech sector but to the detriment of other sectors”, said Integro’s Christian Hickmott.

Even subsequent to covid, industrial action in the transport sector which is “damaging” retail, leisure and hospitality outfits has “been a boon” for many tech firms.

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‘IT contractors insulated’

Integro’s boss, Mr Hickmott explained his assessment: “There had been a drift back to pre-pandemic working practices, but with transport disruption ongoing, more organisations are entrenching remote working and the associated technology. And this looks set to continue for the foreseeable future.”

Yet it is not only large or established providers that are the tech sector’s unfazed, as individual IT contractors are also often “insulated” from the disruptions, says Opus.

“With low start-up costs and overheads, [and] an ability to work remotely, in most cases, IT consultants stand to be some of the biggest winners from the current difficulties,” says the advisory’s Gareth Wilcox.

In a statement to ContractorUK, Wilcox spoke of “continued demand” for such small, tech-led enterprises from an “economy increasingly forced to diversify, streamline and digitise.”

‘Bruised and battered’

As to those sectors feeling force and pressure, SFP Group said that on top of hospitality, the “bruised and battered” were in the haulage, manufacturing and construction sectors.

“The IT sector appears to remain robust [however],” SFP Group’s senior consultant Patrick Hogan told ContractorUK.

“That may be because, in simple terms, almost anything that businesses do today have a strong IT bias and if you do not keep up with the rapidly evolving technologic advances, you could find yourself being left behind”.

At Integro, Hickmott confirmed “businesses are continuing to invest in digital transformation projects to drive productivity gains”.

The accountancy boss calculates that the gains are being sought as a way to ‘lessen the impact of inflation,’ and the investment will “boost” IT skills-demand further.

‘Inflationary pressures’

But it’s not all plain sailing for technology-focussed companies.

The Integro poll found that more than four in ten IT-led firms have had to absorb the costs of price increases, rather than pass them onto clients.

With only 17% succeeding at passing inflated costs on to customers, “inflationary pressures are clearly having an impact on the overheads of IT businesses,” the firm said.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

‘Costs and shortages possibly yet to peak’

Another barrier to growth – skills shortages – continues to impede technology businesses too, but according to the study, potentially to a lesser extent.

In fact, the chunk of tech business not suffering from a shortage of workers they need has expanded by five per cent, from 62% at the end of 2021 to 67% currently.

“Covid has retreated for now, [but] many other challenges around rising costs [and] labour shortages…persist and are possibly yet to peak,” cautioned SFP Group’s Mr Hogan.

“This does unfortunately mean more challenges ahead for many businesses.”

‘Making hay while the sun shines’

But Integro points out that strong demand for software and IT services puts tech firms in a “relatively stronger position” if they can get clients to the negotiation table on prices.

At Opus, Wilcox recommends acting sooner rather than later:

“Given the difficulties being felt elsewhere in the economy, it could be a case [for tech companies] of making hay while the sun shines.

“[After all,] the strength of companies [including those which were polled] is often defined by their current contract,” he said. “And inevitably, contracts will be up for renewal at some point”.

A tad more optimistic is SFP’s Mr Hogan, who reflected: “It is [clearly from these findings] not all doom and gloom. Indeed, as insolvency practitioners, it is true that we rarely find ourselves dealing with distressed tech operators. That surely must tell a compelling story about the strength of the IT sector.”

By Simon Moore

Source: Contractor UK

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There is still appetite for lending in the housing market, says top property lawyer

Without a doubt, 2022 was a turbulent year for the UK housing market. House prices may have hit record levels, but the Bank of England created havoc. By December, the base rate had been increased nine times over the previous 12 months, depressing market activity and putting the brakes on property prices.

According to optimists, there will not be a price crash but a soft landing thanks to a 25% fall in mortgage rates over the course of this year. They argue that forbearance measures from big lenders will help struggling borrowers as they switch to interest-only or competitive fixed-rate deals without the need for affordability tests. Since nearly two million people will need to re-mortgage as their fixed-rate deals expire in 2023, this will cushion the blow and reduce the volume of distressed/repossession sales.

Inflationary pressures and a fiscal squeeze have made mortgages unaffordable for many people relative to their incomes. Average UK house prices are now eight-times average earnings, according to Schroders. In London, the ratio rises to 11 times. Nevertheless, the economic mood is gradually moving away from ubiquitous gloom. For example, as the leading indicator of where corporate earnings are headed, UK equity markets have been back on an upward trajectory since November 2022.

A notable shift in sentiment can also be seen in reduced rates for two-year and five-year fixed mortgages: after spiking at 6.5% last October, they have now fallen back towards the 4.5% mark. For potential buyers, interest rates matter because they affect both affordability and lenders’ willingness to lend.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Several commercial retail lenders such as Santander, Barclays, Nationwide, and Halifax have recently announced mortgage rate reductions to an average of around 4.5%.

When big commercial lenders cut rates, the market becomes more attractive and more affordable for domestic buyers, particularly first-time buyers – and not just to overseas or domestic cash buyers as happened when rates recently spiked. Notwithstanding the media hype about banks planning to reduce their mortgage lending, they still have plenty of appetite to lend.

The market has now fully digested everything that happened during the past year, including the “new normal” level of interest rates. These increases are now priced into people’s thinking, enabling industry professionals to advise with renewed confidence about where rates might be heading.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

History shows that whenever the UK property market is reportedly down, it does not stay down for long. Good properties are not always available: in busier markets, people often lose out because of increased competition, so buyers with available funding should press ahead on properties they really want.

But there is a caveat: incomes will need to rise in real terms in order to increase domestic buyers’ purchasing power. Without that boost, the market may still be more attractive and affordable to overseas and cash buyers.

By Goli-Michelle Banan

Source: Today’s Conveyancer

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Despite interest rates rising to 4%, mortgage opportunities abound for contractors

It’s always darkest before the dawn, or so historian Thomas Fuller would have us believe. Despite him coining that phrase in 1650, it’s so apt for the mortgage market right now, in 2023!

Yes, the Bank of England recently raised the base rate to 4% (from 3.5%) in its fight to bring inflation under control. But in contrast, strong competition among lenders to attract new business early in 2023 implies positive indicators of recovery.

Why the focus on variable rates has skewed our focus

To date, commentators have placed too much emphasis on lenders’ standard variable rates (SVRs) reaching 6-7%. SVRs have traditionally been short-term solutions, with many borrowers typically sitting on them until better rates become available.

But the majority of borrowers in the UK aren’t on SVRs! They’re on fixed-rate mortgages and need only really concern themselves with SVRs when they need to remortgage.

To that end, increasing numbers of options provided by keenly-priced products are appearing for borrowers. We’re now seeing lenders offer fixed interest rates at under 4 %, and they’re still coming down!

How has the mortgage market reacted to the BoE interest rate rise?

From what we’re seeing, the market has hardly flinched since the bank’s decision on February 2nd to raise the base rate by half a per cent.

The market wholly expected this most recent rise to 4% — being the tenth in succession. But from that most recent vote, there are signs of opinion changing on the bank’s Monetary Policy Committee (MPC).

Two members now believe the base rate is too high. One MPC member, Silvana Tenreyro, reportedly told the Treasury Committee:

“It took time for changes to the bank base rate to feed through to the real economy and so far, just a fifth of the impact has been felt”.

Tenreyro now believes that monetary policy is doing enough to meet the BoE’s aim of bringing inflation down to its target rate of two per cent, hence her vote against the latest rise.

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

Interest rates may rise further yet — but one bump, or two?

Many mortgage brokers support Tenreyro’s stance, including me. Monetary policy was doing enough to meet the aim of bringing inflation significantly down. Unless another big global shock happens, many chief economists believe a fall in inflation is guaranteed. Eventually.

Even so, two out of nine is still a minority (on the MPC). As such, the financial markets’ expectations are that the BoE base rate may yet rise to 4.5 per cent, but maybe as a result of 2 0.25% increases, rather than a single .50% rise.

What’s actually happening on the ground?

Even before the BoE announced the latest raise, lenders had already taken strides to factor it into their rates.

The Feb 2nd decision will, however, see the cost of borrowing increase for borrowers on SVRs and tracker mortgages across the UK. But fixed-rate mortgages will remain, to a greater extent, unaffected.

There are already signs that the worst is past. The market has picked up again; buyers and sellers who delayed remortgaging when rates were highest are jumping on current rates.

What we’ve seen over the past few weeks is a raging price war between lenders with fixed rates falling daily. And this week, we saw the first re-introduction of sub-4% fixed rate deals appear (since September 2022).

Mortgage rates were already on a downward path late last year following the turmoil of September’s mini-Budget. This trend has continued since and has trickled into February.

One reason for the trend is that medium-to-long-term swap rates, which factor heavily in determining mortgage rates, have continued to improve. This movement has given lenders greater confidence, and has resulted in the more competitive fixed-rate mortgage products our contractor clients are now taking advantage of.

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

A new norm…

For those of you wondering if now’s the right time to pounce on your property of choice, let me just reiterate what I said last month. We are categorically not going to see fixed-rate mortgages priced at sub-2%.

In truth, we’ll be lucky to see sub-3 % rates return, even if inflation reaches its 2% target. The general consensus among brokers is a gentle optimism that mortgage interest rates will settle between 3.5% to 4.5%.

It’s a similar story with house prices. It was obvious we’d see a correction following the turbulence and uncertainty late last year. But much of this has already happened, and we’re not (and never were) going to see the 20% crash in housing stock that many ‘experts’ predicted.

All this means that if we’re not at the ‘new normal’ already, we’re not far away from it (failing another global disaster landing).

Neither house prices nor mortgage rates look likely to drop off a cliff any time soon, so contractors – you can proceed with a level of impunity we’ve not seen in a while.

Final thought

The caveat is, as always, what’s best for you will be determined by where your current rate and fixed-term mortgage are now. For specific advice, talk to your specialist broker about your aspirations, and take it from there. We’re happy to have that conversation with you.

By John Yerou

Source: Contractor UK

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Conservative MP calls for Sunak to reverse IR35 reforms

Conservative backbencher Sir John Redwood has called for Prime Minister Rishi Sunak to reverse the “very bad deal” IR35 is bringing to self-employed workers.

Appearing on Sky News over the weekend, Redwood said: “I think, first of all, the self-employed are getting a very bad deal.

“I think we should reverse the 2017 and 2021 changes to so-called IR35. We want to promote more self-employment – make it easier for people to get into self-employment.

“That is the quickest way to expand capacity.

“Then I think we need to look at business taxes. I don’t think the Corporation Tax delayed increase will raise the money The Treasury and the OBR think it will.

“All the evidence is, in the past, when Conservative governments have had the courage to cut the Corporation Tax rate – never a popular move – it raises more money.”

Get in touch with us today to speak with the UK’s Best Contractor Mortgage Broker.

The highly controversial changes to off-payroll working tax rules came into force in 2012, with a year’s delay due to Covid-19.

The legislation mans medium to large-scale businesses are responsible for determining the IR35 status of contractors they hire.

The reform was set to be repealed as part of the mini-Budget in September 2022, before the plans were abandoned by new Chancellor Jeremy Hunt.

IR35 insurer Qdos has welcomed calls from Sir John to reverse the off-payroll working rules,

Get in touch with us today to speak with a specialist Contractor Mortgage Advisor.

The he firm’s chief executive, Seb Maley, said: “Millions will welcome Sir John Redwood’s comments. Whichever way you look at it, IR35 reform has damaged flexible working in the UK,” Mr Maley said, “It’s made it harder to work self-employed and harder for businesses to engage these workers – at a time when the economy desperately needs the skills and flexibility of independent workers.

“Rishi Sunak himself saw through IR35 reform in the private sector when Chancellor. So he’s no stranger to this legislation, nor the challenges it has created. Reversing IR35 reform would be the fair and logical thing to do.

“However, when it comes to IR35, the government has anything but fair and logical. Its head has been buried in the sand for years.”

By Ryan Duff

Source: Energy Voice