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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.

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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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Skipton launches deposit-free mortgage aimed at renters

A deposit-free mortgage specifically aimed at people currently renting has been launched by a UK building society.

While a handful of other no-deposit deals are available, they all need the financial backing of family or friends.

Skipton Building Society says while its deal requires 12 months of on-time rental payments and a good credit history, it does not need a guarantor.

However, at 5.49% the interest rate is more expensive than the average five-year fix of 5%.

Generation Rent, which campaigns on behalf of private renters, says the shortage of affordable properties within the budget of first-time buyers is still the main stumbling block for those struggling to get on the property ladder.

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“It’s not necessarily going to help all the people who are looking to buy a first-time home if there aren’t more houses available to buy,” says Will Barber Taylor from Generation Rent.

Currently there are 15 other zero-deposit products on the market, according to financial data firm Moneyfacts, accounting for just under 0.3% of the UK market.

First-time buyers are facing an uphill battle. Rapidly rising rents have made saving for a deposit increasingly difficult, at the same time that the government’s flagship Help to Buy scheme, aimed at helping first-time buyers, is no longer open

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The Skipton, which is the UK’s fourth biggest building society, says it recognised a “gap in the market”.

Stuart Haire, the society’s chief executive, told the BBC that “until now there has been no solution for them [renters] to buy a property due to a lack of savings or access to family wealth”.

David is renting with his partner and new baby in North Yorkshire. “It’s getting that deposit together that’s really difficult with rent prices,” admits David.

“If I can prove I’ve been paying rent for the last 10 years of my life why can’t I have a mortgage.”

The government’s Help to Buy scheme saw the Treasury lending homebuyers between 5% and 20% of the cost of a newly-built home, and up to 40% in London.

The scheme closed to new applicants in October 2022, but there are rumours that something along similar lines could be re-introduced.

But a rise in zero-deposit mortgages may not be welcomed by everyone, as riskier mortgages with a high loan to value were a root cause of the 2008 financial crash.

Mortgage expert Andrew Montlake says then lenders were just interested in volume rather than quality.

“The world is very different now,” he says, and adds that his opinion has changed over the past 15 years, as long as the 100% loan value mortgages are “underwritten sensibly”.

By Colletta Smith & Nicky Hudson

Source: BBC News

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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.

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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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Mortgages – how is the current economy impacting dentists?

As the cost of living and interest rates rise, how does this impact self-employed dentists and their mortgages? asks Vinay Rathod of VR Financial Solutions.

Self employed dentists and those operating under a LTD Company have often faced difficulties when applying for a mortgage.

Recent increases in the cost of living and the Bank of England Base Rate (BBR) have had considerable impacts to how lenders view applicants, especially those who are not employed with PAYE income.

For many years, self employed dentists have faced scrutiny of their accounts, often requiring two to three years of accounts before being able to maximise borrowing potential and get the most competitive rates.

If you have changed from being self employed to trading under a LTD Company you may have found it difficult until you have two full years of accounts under the new company.

Even then, many will have found borrowing limited by their relatively low salary and dividend drawings. I should highlight that there are options to overcome all of the aforementioned obstacles.

This has become even more difficult as a result of the pandemic, and even worse still following Kwarteng and Truss’s mini budget on 23 September 2022.

Huge uncertainty

Following the budget, the financial sector was aghast with announcements that were contrary to anything expected by even the outliers.

Huge uncertainty was quickly followed by huge volatility as financial institutions desperately tried to protect themselves from what might happen – and for once, nobody had any idea what that might be.

The announcements were so contrary to anything expected, and to anything experts all agreed was in desperate need.

When uncertainty exists, people and businesses seek to protect themselves – we enter a state of defensiveness because, human nature is to seek consistency, certainty and avoid the unknown. Financial markets are no different – they crave stability and predictability.

When this is not present, banks and lending institutions favour over cautiousness to growth and profits.

It wasn’t until Rishi Sunak was confirmed to replace Liz Truss that there was any relief felt in the financial sector.

I will try to remain politically impartial in this article, however Sunak’s background working for investment bank Goldman Sachs and various hedge funds, as well as his education in economics, offered some hope of recovery of our fragile economy.

Sunak had even been recorded predicting what we witnessed, months before when debating Truss.

If anybody touted as our future PM could give us back some stability, the financial sector believed Sunak was our man.

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How do banks price mortgage products?

Firstly, we must understand where the money actually comes from. Banks do not lend their own money They lend a combination of their customers money, and money borrowed from wholesale financial markets in the form of various complicated financial products.

It was not until the financial crisis of 2007/8 that there were any real rules governing how much capital a bank must possess versus the money they lend.

It was a poor ratio of this very measure that contributed heavily to the 2007-2008 financial crisis. Even now, capital adequacy rules are far from requiring banks to have an equal amount of capital vs. their credit risk exposure.

So then how do banks decide what interest rate to charge to you? Many believe that the interest rates that we pay, are linked somehow to the Bank of England’s Base Rate (BBR).

Historically, you can even see that this has largely been an assumption that you will see to be true.

It is in fact however, the LIBOR (London Interbank Offered Rate) that has historically been the measure used to price many financial products, the most widely recognised being mortgages.

Even this has largely been phased out due to its contribution to the 2008 financial crisis and more recent manipulation of the LIBOR rate by some banks, and replaced by SONIA (Sterling Overnight Index Average).

Financial markets

Back to 23 September last year. The financial market’s concerns resulted in the worry of huge increases in the LIBOR/SONIA rate.

This prediction of future LIBOR/SONIA changes is measured by ‘swap rates’. The swap rate determines the markets estimates of future changes in this rate.

Following the mini budget you can see a step away from the normal and desired slight changes we normally see.

Banks did not know what it would cost them to lend money. They feared they could make losses on mortgages if they didn’t overcautiously raise rates quickly.

This was more than 6% for many, and smaller building societies and money lenders pulled from the market entirely, taking on no new applications.

Lenders ramped up their stress testing – worrying even more because of the rising cost of energy soon being fully exposed to the public when the domestic price cap ends (more doom and gloom I know).

They reduced income multiples and those banks willing to be flexible and negotiate bespoke terms for certain applicants (dentists) started saying no.

This meant more difficulty maximising your borrowing ability, smaller maximum loans, budgets for new homes forced to be reduced and remortgaging made more difficult.

Fast forward to 25 October 2022 and we welcome Rishi Sunak as Liz Truss steps down. Financial markets feel hopeful of recovery under the control of a fellow financial expert.

The man to make unpopular decisions was brought in to reverse almost all of Kwarteng’s measures. Never before was I relieved to know Hunt would be making difficult decisions – a person who clearly doesn’t care about being popular.

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Life after Trussonomics

Confidence brought us stability. Stability meant more certainty. Certainty gave us cheaper mortgages.

We now understand that, despite the Bank of England continuing to increase interest rates in the hope to grasp some control of the runaway train that is inflation, mortgage rates have been consistently coming down.

We have a long way to go. In fact, we are likely never to see the kind of interest rates offered to borrowers a year ago – rates fixed at well below 2%.

But thankfully we are far from the 6% and are back in the less worrying 4 and 5% range – and even for those with a hefty deposit / equity – sub 4%. I am optimistic that we will see more rates in the threes again in the not too distant future.

Rarely has a day passed since October where I don’t have at least one lender email us regarding an incoming rate reduction. Yes, they are slight, but a little does add up to a lot given time.

Those lenders who stopped lending have largely returned – maybe not quite back to business as usual, but they’re already planning for it!

This is something they couldn’t think about just three to four months ago.

Overcome troubles

The lenders who will allow negotiation are coming back to their seats at the table, and we are hearing that delightful word more – yes!

Maximum loans are still impacted due to the cost of living expected still to rise. Those remortgaging will almost certainly have to tighten their belts a little for a couple of years.

But within dentistry we remain fortunate, for the majority income exceeds committed outgoings with some to spare. Tightening belts is not something too uncomfortable for most.

For those whose businesses have boomed during the pandemic, you may now just have a little less to put away than you used to.

But we have long been spoilt with rock bottom interest rates to borrow money. We have long been too easily able to raise low cost finance resulting in being maybe slightly unrealistic of how much money costs to borrow.

I think we should get used to money being less easily available, and not quite so cheap to borrow. The days of mortgage rates in the one percent range are likely long behind us.

VR Financial solutions have a considerable amount of expertise in arranging mortgages for dentists, having consulted lenders and assisted in lending policy being established and improved for self-employed dentists.

We work closely with many lenders and have established close relationships to allow us to negotiate and overcome many of the troubles being self employed result in.

At an uncertain time like this, it’s more important than ever to take professional advice.

By Vinay Rathod

Source: Dentistry

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Mortgage Approvals Down but Sunnier Days Ahead for The Property Market in 2023

Recent uncertainty in the property market during the closing stages of 2022 has led to the number of mortgage approvals declining by -20% in the past year, while the number of remortgaging approvals has soared as existing homeowners stay put and look to stabilise their financial foundations by borrowing more.

The cost of living crisis and increasing price of borrowing has had a significant effect on the mortgage sector.

In 2021, there were a total of 944,704 house purchase mortgage approvals in the UK. In 2022, this dropped to 753,946 approvals, marking an annual decline of -20.2%.

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Financial concerns induced by the cost of living crisis clearly caused many potential buyers to postpone their plans in 2022, not least due to the fact that mortgage prices shot up seemingly overnight following the shambolic mini budget unveiled by the government in September of last year.

At the same time, the number of remortgaging approvals increased from 460,462 to 539,528 between 2021 and 2022, an annual rise of 17.2%.

This serves as further evidence of public concern brought on by recent economic uncertainties, with more homeowners trying to reduce their mortgage rates or release some equity to fund soaring costs elsewhere in their lives.

These market trends are further supported when analysing the overall monetary value of mortgage approvals.

In 2021, the total value of property purchase approvals was £208bn. In 2022, this dropped to £176bn, a decline of -15.3%.

At the same time, the overall value of remortgaging approvals increased from £92bn to £113bn, marking a 22.6% rise.

However, while the total value of homebuyer mortgages has fallen, the average value of each individual approval has actually increased by 6.2%, from £219,899 in 2021, to £233,510 in 2022.

This shows that while the number of buyers entering the market has fallen, the amount each is borrowing has grown, as they tried to contend with house price highs that were driven by the pandemic market boom and, as of yet, have shown little signs of reducing.

The average value of a remortgaging approval has also increased, rising by 4.6% between 2021 and 2022.

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“Despite house prices continuing to climb in 2022, the immediate economic uncertainty that rattled the mortgage sector following September’s mini budget has had a notable impact when it comes to the number of mortgage approvals attributed to new house purchases in 2022.

At the same time, there has been a notable uplift in homeowners deciding to play it safe and stick with their current home, opting to remortgage in order to improve both their home and their financial stability.

However, mortgage rates are already on the decline so far this year, dropping by -14% in January alone.

On top of that, the wider economic outlook for 2023 is looking far brighter than many people feared towards the end of last year.

All in all, we expect spring and summer to bring sunnier days to the property market and a rejuvenated level of buyer activity to sweep the market.”

Source: Property Notify

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Britain’s biggest homebuilder hoping better mortgage deals could stimulate UK housing market

The average selling price of a Barratt home was up 13.6 per cent to £372,000 in the second half of 2022.

Britain’s biggest housebuilder said better mortgage deals could lead a recovery in the market this year.

Barratt Developments said things could start easing, after reservations dropped 57 per cent in the final months of 2022 – following the disastrous Liz Truss/Kwasi Kwarteng mini-Budget which caused a meltdown in the markets and higher interest rates.

The Leicestershire-based housebuilder has adopted a cautious approach to the year ahead despite a 16 per cent rise in pre-tax profits in the second half of 2022 to £501.6 million (compared to the second half of 2021).

Total sales for the half year were up almost a quarter at almost £2.8 billion – thanks to a “significant step-up” in the average selling price – with the average selling price of a Barratt home up 13.6 per cent to £372,000. The number of new home sales completed was up 7 per cent at 8,626.

The group – which is based in Coalville and includes Barratt Homes, David Wilson Homes and Barratt London as well as the Wilson Bowden commercial property arm – said it had seen a “modest uplift” in reservations this month, though they were still down 46 per cent lower on this time last year.

In recent months mortgage costs have gradually fallen back following actions to stabilise markets – including a new Prime Minister and Chancellor – and signs that wider interest rates may soon be peaking. Five-year fixed-rate mortgages are now available at below 4 per cent.

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Chief executive David Thomas said the “tremendous efforts” of its employees, sub-contractors and supply chain partners had helped it deliver a strong performance in the second half of 2022.

He said: “However, the economic backdrop has clearly been challenging and consumer confidence weakened significantly during the half, which meant we saw lower reservation rates for future sales – particularly in the second quarter.

“Whilst we have seen some early signs of improvement in current trading during January, we will need to see continued momentum over the coming months before we can be confident that these challenging trading conditions are easing.

“Our business remains fundamentally strong, both operationally and financially, with an experienced leadership team, a strong net cash position and a resilient and flexible business model.

“We are well-placed to navigate the challenges ahead and are focused on driving revenue whilst taking a decisive and disciplined approach to costs. As always, our priority is delivering excellent quality and service for our customers.”

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Barratt said if the recovery in demand continues, it expects to deliver total home completions of between 16,500 to 17,000 in 2022-23, down from 17,908 in the previous year.

But house prices are still under pressure with figures on Tuesday showing annual growth slowed to its lowest level in three years last month.

Halifax said the average house price is now more than £12,000 below a peak seen in August last year.

By Tom Pegden

Source: Business Live

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How to understand what’s going on with UK mortgage rates

The UK mortgage market has tightened as confidence in the economy has faltered in recent weeks. Lenders withdrew more than 1,600 homeloan products after the (then) chancellor Kwasi Kwarteng’s September mini-budget sent the UK economy into a tailspin.

Rates on the mortgage products that are still available have risen to record levels – average two-year and five-year fixed rates have now passed 6% for the first time since 2008 and 2010 respectively.

The Bank of England has intervened to try to calm the situation. But this help currently has an end date of Friday 14 October, after which it’s unclear what will happen in the financial markets that influence people’s mortgage rates.

This is a crucial issue for a lot of people: 28% of all dwellings are owned with a loan, with mortgage payments eating up about a sixth of household income, on average.

Looking at how the market has developed over time can help to explain how we got here and where we are going – which is basically headfirst into a period of high interest rates, low loan approvals and plateauing house prices.

All financial markets are driven by information, confidence and cash. Investors absorb new information which feeds confidence or drives uncertainty, and then they choose how to invest money. As the economy falters, confidence erodes and the interest rates that banks must pay to access funding in financial markets – which influence mortgage rates for borrowers – become unpredictable.

Banks do not like such uncertainty and they do not like people defaulting on their loans. Rising interest rates and uncertainty increase their risk, reduce the volume of mortgage sales and place downward pressure on their profits.

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How banks think about risk
Once you understand this, predicting bank behaviour in the mortgage market becomes a lot easier. Take the period before the global financial crisis of 2008 as an example. In the early 1990s, controls over mortgage lending were relaxed so that, by the early 2000s, mortgage product innovation was a firm trend.

This led to mortgages being offered for 125% of a property’s value, and banks lending people four times their annual salary (or more) to buy a home and allowing self-employed borrowers to “self-certify” their incomes.

The risks were low at this time for two reasons. First, as mortgage criteria became more liberal, it brought more money into the market. This additional money was chasing the same supply of houses, which increased house prices. In this environment, even if people defaulted, banks could easily sell on repossessed houses and so default risks were less of a concern.

Second, banks began to offload their mortgages into the financial markets at this time, passing on the risk of default to investors. This freed up more money for them to lend out as mortgages.

The Bank of England’s base rate also dropped throughout this period from a high of 7.5% in June 1998 to a low of 3.5% in July 2003. People desired housing, mortgage products were many and varied, and house prices were rising – perfect conditions for a booming housing market. Until, of course, the global financial crisis hit in 2008.

The authorities reacted to the financial crisis by firming up the mortgage rules and going back to basics. This meant increasing the capital – or protection – that banks had to hold against the mortgages they had on their books, and strengthening the rules around mortgage products. In essence: goodbye self-certification and 125% loans, hello lower income multiples and bulked-up bank balance sheets.

The upshot of these changes was fewer people could qualify to borrow to buy a home, so average UK house prices dropped from more than £188,000 in July 2007 to around £157,000 in January 2009. The damage was so deep that they had only partially recovered some of these losses to reach £167,000 by January 2013.

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New constraints
Of course, prices have boomed again more recently. This is partly because banks had slowly started to relax, although with less flexibility and more regulation than before the global financial crisis. This reduction in flexibility cut product choice, but low interest rates and low monthly payments have encouraged individuals to take on more debt and banks to grant more mortgages.

Availability of loans fuels house prices so the cycle starts again, although within a more regulated market this time. But the result has been largely the same: average house prices have risen to just shy of £300,000 and the total value of gross mortgage lending in the UK has grown from £148 billion in 2009 to £316 billion by 2021.

But when new information hit the markets – starting with Russia’s invasion of Ukraine earlier this year – everything changed and confidence tanked. The resulting supply-side constraints and spiking fuel prices have stoked inflation. And the very predictable response of the Bank of England has been to increase interest rates.

Why? Because increasing interest rates is supposed to stop people spending and encourage them to save instead, taking the heat out of the economy. However, this rise in interest rates, and therefore monthly mortgage payments, is happening at a time when people’s disposable income is already being drastically reduced by rising fuel prices.

Mortgage market outlook
So what of the mortgage markets going forward? The present economic situation, while completely different from that of the 2008 financial crisis, is borne of the same factor: confidence. The political and economic environment – the policies of the Truss administration, Brexit, the war in Ukraine, rising fuel costs and inflation – has shredded investor confidence and increased risk for banks.

In this environment, banks will continue to protect themselves by tightening product ranges while increasing mortgage rates, deposit sizes (or loan-to-values) and the admin fees they charge. Loan approvals are already falling and cheap mortgages have rapidly disappeared.

Demand for homeloans will also keeping falling as would-be borrowers are faced with a reduced product range as well as rising loan costs and monthly payments. Few people make big financial decisions when uncertainty is so high and confidence in the government is so low.

Optimistically, the current situation will cause UK house prices to plateau, but given the continued uncertainty arising from government policy, it’s realistic to expect falls in certain areas as financial market volatility continues.

Source: The Conversation

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What’s The Future For UK Mortgage Rates?

The Bank of England raised interest rates in September from 1.75% to 2.25%. The 0.5 percentage point increase marks the seventh rise since December 2021 when Bank rate stood at just 0.1%. It also puts Bank rate at its highest level for 14 years.

Concerns are mounting around further, and steeper, interest rate rises in the face of sterling volatility and increasing market uncertainty. Some mortgage lenders, including Halifax, Virgin Money and Skipton Building Society are pulling mortgage deals for new applicants.

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Interest rates, mortgages…
So what do climbing interest rates mean for mortgages? The two million homeowners on variable rate deals, such as base rate trackers, will see an almost immediate rise in their monthly repayments following the recent Bank rate rise to 2.25%. As an example, a tracker rate rising from 3.5% to 4% will cost almost an extra £60 a month on a £200,000 loan.

Remortgagers and first-time buyers will also be faced with higher mortgage costs when they come to source a deal, with the cost of new fixed rates having already factored the latest rise into the price.

… house prices and Stamp Duty
As well as more expensive mortgages, those looking to buy or move home are grappling with relentlessly rising property prices. The average cost of a property coming to the market increased by 0.7% in September (£2,587) to £367,760, according to Rightmove. Annually, average asking prices are 8.7% higher in September than a year ago.

However, Stamp Duty cuts announced in Friday’s Mini Budget – which raised the nil-rate band on the purchase of a property from £125,000 to £250,000 – means that with a third (33%) of all homes listed on Rightmove are now exempt from the tax.

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Fixed rate mortgages
More and more homeowners are now opting for longer-term fixed mortgages in a bid for stability in the face of continued rising interest rates. But while, historically, borrowers would pay more to fix in for longer, the price gap is closing.

According to mortgage broker Trussle, the top interest rate on a no-fee 75% loan-to-value fixed rate mortgage is now 3.25% over two years, 3.35% over five years, or 3.99% over 10 years. Refer to our mortgage tables below for what deals are available today for your deposit level and circumstances.

Why are interest rates rising?
The Bank of England’s Monetary Policy Committee (MPC) uses interest hikes as a means of cooling the economy and taming rising inflation. The Consumer Prices Index (CPI) measure of inflation already stands at a heady 9.9% in the 12 months to August against a government target of 2%.

And with the pound falling dramatically on the international currency markets this week, there are fears that inflation could continue to balloon, prompting the Bank of England to hike rates to as high as 6% from their current 2.25% by next year.

The Bank’s MPC is scheduled to next meet on 3 November to decide on interest rates. However, depending on what happens in the markets and wider economy, there is a possibility that an ’emergency rate rise’ could happen sooner, although the Bank has suggested this is unlikely.

One of the main longer-term drivers behind rising inflation is the cost of energy. The government has intervened by replacing the energy price cap – which had been due to send energy prices soaring to over £3,500 a year from 1 October – with a cheaper Energy Price Guarantee.

This will limit the cost of typical-use household bills to £2,500 a year for two years, with an additional £400 automatic discount applied to electricity bills for every household between October 2022 and March 2023.

By Laura Howard

Source: Forbes

BoE
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Bank of England to suspend market operations for State funeral

The BoE said CHAPS will be closed on 19th September, in line with its normal bank holiday arrangements.

CHAPS handled around 174,000 payments each day, in the year to February 2021, with an average payment value of £2.1m. That works out at around £367bn each working day.

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CHAPS is used by banks and large corporations to settle high-value money market and foreign exchange transactions, by companies to pay taxes, and by solicitors and conveyancers to settle property transactions.

The Bank’s Real Time Gross Settlement (RTGS) service, which underpins large transfers between bank accounts, will also be closed.

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Back in 2014, RTGS collapsed for most of a day, putting thousands of housing market transactions on hold.

Last week the BoE said the sale of corporate bonds held by the Asset Purchase Facility will be delayed by a week, to 26 September, following its decision to delay its next interest rate decision by a week (to 22nd September).

Source: London Loves Business

mortgages
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“Mortgage accessibility for self-employed only becoming harder”

External factors worsening affordability for the group.

Self-employed borrowers have always had to jump over extra hurdles in order to get a mortgage product, however this has only become more difficult given the current state of the financial market.

The cost-of-living and energy bills crisis have both impacted affordability, combined with the pandemic, rising inflation, base rate increases and the war in Ukraine – with the latter having affected fuel prices.

As such, people are paying more for the same, with wages not having increased in line with rising inflation, this has resulted in affordability for the self-employed having declined significantly.

“Self-employed borrowers have always found it disproportionately hard to get a mortgage compared to their counterparts with more traditional income streams,” according to Matt Harrison (pictured), sales director at finova.

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For example, he explained that in most cases, a self-employed applicant needs to show two or more years of company trading accounts as evidence of income, while an employed applicant may need just three months of payslips.

“This has only gotten harder following the COVID-19 pandemic. The way the pandemic impacted the economy has made it especially hard for people who are self-employed to borrow money,” Harrison said.

Early on during the pandemic, many mortgage lenders began to withdraw from the specialist market, or made significant changes to their self-employed criteria. This made it increasingly difficult for self-employed borrowers to access products and left them stranded, unable to buy unless they accepted much higher rates.

Harrison explained that government support for self-employed workers was not as clear cut as the furlough scheme, and many who accessed the Self-Employment Income Support Scheme (SEISS) grant are now finding that this has impacted the amount they can borrow, or which lenders they can use. The last date for making a claim was also September 30, 2021 – meaning the after-effects of the pandemic are still being felt by the self-employed, without a scheme currently in place to help support them.

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According to the Office for National Statistics, there are 4.8 million self-employed people in the UK, which makes up 15.1% of the workforce, a stark increase from 3.3 million in 2001.

With the number of self-employed on the rise, finding solutions for their house buying needs is only becoming more and more important, Harrison outlined.

“As well as more complex income requirements, a lack of education on situations specific to the self-employed can make it harder for these borrowers to secure a mortgage. Take incorporation relief, for example,” Harrison said.

He explained that to be eligible for incorporation relief an individual must be a sole trader or in a business partnership and transfer the business and all its assets, except cash, in return for shares in the company. In order to work out the amount one must pay Capital Gains Tax on, you must deduct the gain made when selling a business from the market value of the shares received.

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“There are many ways self-employed people release income in tax efficient ways, which means that communicating the company outgoings to the underwriter can be increasingly complex, especially when there may be spousal company shareholdings, umbrella companies or director loans,” Harrison said.

According to Harrison, these complex requirements are then compounded by the other typical peculiarities that come up in a mortgage application.

“To deliver the best service, brokers need to put in additional time and care researching, packaging and presenting a self-employed borrower’s mortgage application to make sure the lender does not need further information, therefore increasing timescales in what can already be a lengthy process,” Harrison concluded.

Source: Carpenter Surveyors