IR35
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IT contractor jobs agencies plough on with ‘ambiguous, burdensome’ IR35 reform

IT contractors’ recruiters are putting a brave face on Spring Budget 2023 making no tweaks to IR35, leaving them and their clients to struggle on with administering the off-payroll rules.

Agencies appear to be adhering to the letter of the law, even if ‘blanketing’ — all PSCs inside IR35, and ‘banning’ — no PSCs whatsoever, is continuing, typically at large organisations.

‘Flirting’

Even the government “flirting” a few chancellor statements ago with repealing the 2017 and 2021 rules hasn’t affected the status quo, First Point Group’s Phil Jones told ContractorUK.

“Each contractor role is individually assessed within the guidelines and determined as inside or outside IR35,” said a by-the-book Jones, from FPG’s London office.

Viki Dowthwaite, of Trinnovo Group confirms that “the continuation of these rules” by the chancellor sees clients “continue to assess each contractor’s individual working practices.”

‘Ambiguous, burdensome IR35 rules’

She made no mention of the agency’s high-growth technology sector clients engaging in blanketing or banning, but there was a hint of sympathy should they feel they have no choice.

“These rules present a long-term, ambiguous job and a heck of an administrative burden [for clients who must assess] the different IR35 markets, and the legal wording [of contracts]”.

Like clients, agencies have been given a tool by HMRC to test IR35 status but it’s “not fit for purpose,” continued Dowthwaite, contract lead for Trinnovo’s Trust in SODA and Broadgate.

‘Agencies led by their large clients’

“CEST is popping out 20% of [the time with] ‘undetermined’ and businesses have no further support or guidance provided by HMRC to enable them to make the final determination.

“And often,” she continued to ContractorUK, “particularly in the case of large organisations, agencies must be led by the end-client’s approach to IR35.

“We can advise on why they should take a practical approach, engaging outside IR35 contractors where appropriate, but ultimately, it’s up to the end-client and HMRC to adopt a more user-friendly approach.”

The angst behind her comments will be recognised by the 52% of agencies somewhat or very “concerned” by compliance with IR35 reform, Cool Company has found.

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‘Four in ten encounter difficulties when recruiting due to IR35’

A further 43% of agencies say that IR35 compliance has caused them “difficulties when recruiting for contract [opportunities],” adds a Cool survey of January 2023.

Fresher findings on IR35’s impact will be released shortly by the Association of Independent Professionals and the Self-Employed (IPSE).

A poll from IPSE asking for contractors’ input on IR35 is still open and accepting both tick-box answers and comments on the framework.

‘Some end-users moving away from blanketing, but not all’

The association’s Andy Chamberlain is hoping to see an improvement on the one in five contractors who were subject to a blanket inside IR35 determination (as of October 2021).

“We’re hearing some clients are moving away from blanketing, while others, particularly in financial services, continue to insist on the umbrella route,” Mr Chamberlain told ContractorUK.

Ahead of the IR35 poll closing soon, the IPSE policy director added last night: “It feels like the picture overall is getting better. But that’s not the experience of every contractor out there.”

‘Blanketing is beyond me’

Indeed, one limited company contractor confesses to no longer being ‘out there’ out all, directly due to ‘blanketing’ and despite beating IR35 in a high-profile case against HMRC.

“I stopped contracting because one of the [well-known] companies blanket-banned PSCs,” posted Elaine Richardson, whose ECR Consulting defeated the Revenue in 2011.

“[Blanketing] is entirely beyond me…[but I hope with skills shortages or similar it] comes back to bite those clients who just blanket ‘assess’ as inside for their own convenience.”

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

‘HMRC to look for opportunities to improve off-payoll rules’

Responding to a ‘Reverse IR35’ petition this month, HM Treasury said the government has “continued work to understand…how improvements could be made to the way the rules work in practice.”

Adds the response of March 9th 2023: “The government very much values the contributions of flexible workers, including the self-employed, to the UK economy and is committed to the tax system becoming simpler and more dynamic to help reduce burdens on businesses and individuals.

“HMRC will continue to provide support and guidance to individuals and businesses operating the rules and will continue to look for opportunities to improve the way these rules work in practice.”

‘Sense’

At Trinnovo, Dowthwaite believes the improvement is to revert to what the rules stated for 20 years; where they previously placed responsibility, and where the rules today place the decision-making responsibility for PSCs whose clients are small companies.

She told ContractorUK: “Surely it would make more sense, if the person conducting those working practices and contracted by any agreement advises on their own status.”

By Simon Moore

Source: Contractor UK

Bank of England
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How will the rising Bank of England rate impact the UK property market?

James Quinn, founder of GB Home Surveys, looks at the measures the Bank of England has taken to tame inflation and its effect on the property market.

It is undeniable that the last 12 months have been incredibly difficult for families and businesses across the UK. From soaring energy food prices brought by the ongoing conflict in Ukraine, to the aftereffects of the UK’s departure from the European Union, not to mention former Prime Minister Liz Truss’ disastrous mini-budget, many recent events have spawned significant volatility in the national economy.

This instability has, in turn, caused inflation to shoot up considerably, and it currently stands at approximately 10%. As such, on Thursday 2nd February, the Bank of England announced that it was raising its interest rate by 0.5 percentage points to reach 4%, explaining that this was the best solution for bringing inflation back under control.

While the increase will likely be welcomed by savers, who will experience a healthy boost to their bank balance as a result, it means others will face higher borrowing costs, making an already challenging financial situation even harder for many people.

With economists forecasting that rates will increase further in 2023 – with a potential rise set to be made on 23rd March – it is understandable why many are concerned about the potential impact that high-interest rates will have on the UK’s property market. So far, however, the market has proven itself to be far more buoyant than many had expected it to be.

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

Confidence and competition

When the BOE was forced to hike interest rates to 3.5% in the latter stages of 2022, this naturally fed through to mortgage rates as well, making it considerably harder for first-time buyers to secure the funds needed to purchase a home. While the situation was already gloomy for borrowers at this point, Liz Truss’ now infamous mini-budget made things even worse, ramping the level of volatility up to unexpected new heights.

In the wake of the mini-budget, mortgage providers pulled nearly 1,000 products from sale, leading to a significant rise in the cost of a mortgage. Despite this, in the early stages of 2023, it appears that inflation may now have peaked, which is helping to build confidence in the financial markets.

This is highly encouraging for the mortgage market. Confidence means lenders are willing to lend, and borrowers have access to the products that they need as a result. Considering the hole that the mini budget left in lenders’ mortgage books, it is surprisingly positive that lenders are now lending on fixed-rate mortgages below the BoE base rate for the first time in a long time. With more and more lenders starting to do this all the time, a healthy level of competition has resumed in the market, which is advantageous for borrowers who have a wide range of products to choose from.

Property prices remain high

In addition to the signs of positive activity for the benefit of prospective buyers, high-interest rates are also proving advantageous to many homeowners.

The UK property market has long been marked by supply and demand issues, with the number of people looking to get on or move up the housing ladder far outstripping the number of homes available.

This has already kept property prices high and, as of November 2022, the average house price in the UK stands at £294,910, which is a 10.3% rise from the previous year. With interest rates now having risen to 4% as well, it is unlikely that there will be a significant drop in house prices or value any time soon – particularly with experts predicting a lower peak in the BOE rate at 4.5%.

While average house prices have come down a little, they have not fallen as far as many had first anticipated they would. In fact, in some parts of the country, such as the East Midlands and the North West, prices have actually risen slightly. With supply and demand issues persisting – given that the UK is not building homes quickly enough – and interest rates proving better than expected, house prices may not actually decrease by as much as some are predicting.

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

Things are looking up

While inflation remains high, the BOE is anticipating that it will fall over the course of 2023, as wholesale energy prices continue to drop. As such, the rate of inflation is not likely to reach the level that many had feared it would. This is not only positive news for businesses and households who have been hit by hefty bills and day-to-day expenses in recent months, but also for the stability of the UK’s property market.

Given the renewed confidence in the financial markets, the healthy level of competition in the mortgage market, and the fact that house prices remain steady across the country, the outlook for the property market is fundamentally positive despite rising interest rates, which is itself a positive signal for the UK’s economy as a whole.

By JAMES QUINN

Source: Property Reporter

Self-employed mortgage
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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.

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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

tech companies
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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

mortgages
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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.

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

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

housing market
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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

house prices
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Average asking prices for UK homes rose by just £14 in the past month

UK property prices have risen at their lowest-ever rate for February, according to data from the property website Rightmove.

Average asking prices for residential homes rose just £14 between January and February this year.

But the picture was mixed across the country, with prices rising and falling in different regions.

The average increase – effectively zero in percentage terms – is the smallest February rise ever recorded by Rightmove.

Months immediately after Christmas typically see big seasonal price increases, with more people buying and selling homes.

But average prices were still nearly 4% higher compared to a year earlier.

Rightmove said the negligible rise between January and February suggested sellers were realistically pricing their homes in order to sell them in a market that has slowed sharply in recent months.

House prices generally reflect the health of an economy.

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Rising prices help fuel economic growth, whereas falling prices can dent consumer confidence and dampen the economy.

This month mortgage lender Nationwide Building Society reported the longest run of monthly falls in selling prices since the 2008 global financial crisis.

Prices rose at different rates up and down the country, despite the average figure.

The North East, North West, West Midlands, East Midlands and East of England all saw decreases of -0.1%, -0.3%, -0.1%, -2.3% and -0.1% respectively.

Property prices in Scotland spiked by 7.5% over the month, followed by London (2.1%), Yorkshire and the Humber (1.9%), South West (1.6%) and South East (0.7%).

Growth in Wales was flat at 0%.

Tim Bannister, director of property science at Rightmove, said asking prices usually increase at this time of the year, which marks the beginning of the spring selling season.

‘This month’s flat average asking price indicates that many sellers are breaking with tradition and showing unseasonal initial pricing restraint,’ he said.

With asking prices remaining flat – rather than falling – Rightmove says this could be a positive sign that the housing market is not crashing as many analysts have predicted.

Economists polled by the Reuters news agency in November believed prices would drop by 5% in 2023, though even bigger falls have been predicted.

Still, there were some positive signs in the market.

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Property demand was recovering after former prime minister Liz Truss’s botched ‘mini-budget’ in September 2022 which sent mortgage rates soaring.

Sales were up 11% in the first two weeks of February compared to the same period in 2019, Rightmove found.

After Truss’s mini-budget, which was widely criticised for recklessly cutting taxes, the number of sales in the housing market crashed by 30%.

The Resolution Foundation calculates the mini-budget cost the nation £30 billion.

Property sales remain down 11% on pre-pandemic levels.

By Josh Askew

Source: Metro

contractor
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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.”

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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

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Marketing No Comments

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%.

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

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.

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

“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