Nottingham building society
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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.

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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

payroll
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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.

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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

brokers
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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.”

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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

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

house price
Marketing No Comments

House price growth set to drop into negative territory

The UK’s current house price inflation has slowed to 7.8%, the slowest rate of growth recorded since November 2021, according to Zoopla.

Following October’s mini budget which then saw the property market stall, the property portal says that the housing market is transitioning from an unsustainably strong market to one more balanced, albeit with affordability challenges for homebuyers most reliant on mortgage finance and a weaker economic outlook for 2023.

Buyer demand has dropped 44% year-on-year with a slower decline seen in sales at -28%, which are now back to pre-pandemic levels.

New sales have fallen by up to 50% in the previous market hotspots and high-value areas where higher mortgage rates will hit buying power hardest such as the mid to upper price bands in Southern England (excluding London), East Midlands and Wales. Sales have fallen less in more affordable areas and London where market conditions have been weaker.

Agents will welcome the fact that more homes are coming to the market for sale with the total stock of homes available up 40% vs 2021 – but still almost 20% below pre-pandemic levels and rising supply will boost choice for consumers.

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House price inflation is losing momentum fast, with more recent trends over the last quarter growth rates running at less than a third of the last year. However, Zoopla’s data is yet to record price falls over the last three months across UK countries, regions or major UK cities.

The property website expects price growth to dip into negative territory in H1 2023 as the market adjusts to weaker buying power and concerns over the economic outlook.

It adds that sellers now have to accept discounts to asking prices in order to achieve a sale – a trend that has become more apparent in recent weeks.

The average price achieved in recent weeks has been 3% below asking price when for much of 2021 and the first half of 2022 it has been 0%. Zoopla expects discounts to widen further in 2023.

The portals says that history shows that when discounts reach 5-6% this points to flat to falling prices., it is important sellers who want to achieve a sale are realistic on selling prices and speak to agents for the right advice for their home.

Falling demand and sales mean new and current sellers are being forced to set asking prices at more realistic levels to help secure buyer interest. 1 in 10 homes (11%) have recorded a price reduction of 5%+ (although this remains below 2018 levels) and 1 in 4 (25%) have experienced a price reduction of any size since 1 September 2022.

Asking price reductions are greatest in Southern England, where sales volumes have fallen the most with almost 1 in 3 homes in the South East and East of England reducing asking prices to attract more demand.

The outlook for mortgage rates is the most important factor for home buyers and those planning to move in 2023.

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Looking ahead, Zoopla expects sales volumes to drop back to 1 million over 2023 (from 1.3m in 2022) with house price falls of up to 5%, concentrated in the high-value markets most sensitive to higher borrowing costs

Richard Donnell, executive director at Zoopla, said: “The housing market is adjusting to a reset in the level of mortgage rates but the likelihood of double-digit house price falls at a UK level remains low.

“While the outlook for house prices is weak, we see a shift to more needs driven motivations to move in 2023 and beyond which will support sales volumes. Ongoing pandemic impacts, increased labour market flexibility plus more retirement will continue to encourage moves. Cost of living pressures will compound these trends encouraging homeowners to consider their next move. The rapid growth in rents, which shows little signs of slowing, will add to cost-of-living pressures and add continued impetus to first time buyer demand.

“Sharing advice for sellers looking to list their home for sale, Polly Ogden Duffy, Managing Director at John D Wood & Co. comments: “Tidy up, freshen up, and clean up! Presentation is everything when it comes to selling a home in a competitive market. As well as setting realistic expectations on the price you will achieve. If your property comes with a compromise, such as having a small garden, it’s on a busy road, or it requires a replacement kitchen or bathroom – you need to price accordingly. Competing with other properties at the same price point that come without these drawbacks, will only mean that yours will be last to sell. A combination of waiting too long to adjust your price, and more property coming to the market in the New Year will only provide even more choice for buyers.”

By Marc Da Silva

Source: Property Industry Eye

mortgage rates
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Where does the housing market stand with a 3% base rate?

With constant increases in the Bank of England base rate, mortgage rates have been hitting the headlines with regularity.

While rates have risen, housing market sentiment has fallen. A record half (52 per cent) of adults across Britain disagreed it was a good time to buy a property, according to a September survey by the Building Societies Association.

So where does this leave first-time buyers, and those looking to remortgage?

Mark Harris, chief executive of SPF Private Clients, says that for first-time buyers it is arguably as good a time as any to buy, if they have found a home they want to purchase, are happy with the price they are paying, can afford to pay it and are prepared to stay put for a few years.

“Buyers will be aware that there is talk of property prices falling and potential negative equity for first-time buyers in particular because they tend to take on higher loan-to-value mortgages.

“But such issues are only really a problem if the buyer intends to sell again in the short term. Over time, prices tend to appreciate in value and usually recover even if they dip initially.”

Richard Howes, director of mortgages at Paradigm Mortgage Services, says first-time buyers could take advantage of any fall in house prices, but adds: “It’s the issue of affordability coupled with the cost of living increases that could really impinge on their ability to buy.”

With falling house prices widely predicted across the market, Simon Gammon, managing partner of Knight Frank Finance, says it is reasonable to expect lenders to be hesitant about offering competitive high LTV mortgages.

“We have already seen a reduction in the number of 90 per cent and 95 per cent mortgages available, and those that are still available come at a significant premium in terms of rate. We can therefore expect it to be harder for first-time buyers to get onto the property ladder in the foreseeable future.”

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Just Mortgages national director Carl Parker says it is without doubt becoming more challenging for both first-time buyers and those looking to remortgage after a low fixed rate.

“This is just because rates have risen so quickly, making it hard for people to adjust. However, swap rates are starting to fall back and therefore mortgage rates are dropping a little too. However, they are unlikely to ever return to the historic lows of the past 10 years.”

Vikki Jefferies, proposition director at Primis Mortgage Network, also points to fixed rates stabilising despite the 0.75 percentage point increase in bank rate. But she agrees that borrowers reaching the end of a fixed rate will be faced with higher rates than they are used to.

“This may come as quite a shock for some, especially with house prices falling and reductions in loan-to-value ratios. As a result, product transfer could prove to be a better option for some as customer loyalty can be considered, which sometimes includes preferential rates.

“With fixed rate mortgages currently seeing higher rates than standard variable rate mortgages, talking through the options available to clients is now more important than ever.”

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Indeed, Harris at SPF Private Clients says many clients are seeking variable or tracker rates with no early repayment charges to remortgage. “These are comparatively so much cheaper, at least initially than a fixed rate.

“[Clients] plan to move onto a fixed rate, once pricing of these falls. Meanwhile, if interest rates don’t rise as fast or as far as previously predicted, a variable rate mortgage may turn out to be a good option.”

When it comes to house prices meanwhile, Howes at Paradigm Mortgage Services cites expectations of price growth to slow, rather than prices to fall. “With the recent surge in prices since Covid, most homeowners will have equity they can utilise.

“Indeed, the average LTV of the top five lenders is 60 per cent and they cover around 72 per cent of all lending in the UK, so the average person looking to remortgage should be okay.

“What is of concern though is that remortgage affordability could be an issue, and of course the conveyancing market with its delays and current timescales makes it less attractive than perhaps doing a further advance and product transfer.

“This area could be an issue for advisers, where the DIY product transfer could come into play, at a time when advisers are needed more than ever.”

Parker at Just Mortgages agrees that the need for mortgage advice is at its peak. “The daily fluctuation in mortgage rates has made the role of brokers absolutely vital to help borrowers assess their affordability against changing criteria, and navigate options in this mortgage landscape.

“It is also essential that brokers make the time to reach out to existing clients, to see what help and advice they need, and help to put their minds at rest during this changing interest rate environment.”

By Chloe Cheung

Source: FT Adviser

Self-employed mortgages
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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

contractors
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Union urges contractors to follow Kier lead on sick pay

Campaigning by Unite has secured sick pay of up to £100-a-day for Kier workers.

Union bosses are now calling on other contractors to follow suit and boost their terms beyond the statutory rate which can be as little as £16 per day.

Unite regional officer for the construction sector Malcolm Bonnett said: “Unite has been campaigning hard to end the discrimination on sick pay for construction workers so we’re delighted by this victory.

“Statutory sick pay in the UK is the lowest in Europe so it was vital we persuaded the employer, a wealthy business, that they had a duty to pay when workers are ill.

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“From here, we build further. Unite is determined that other construction employers act to end sick pay discrimination, too.”

A Kier spokesperson said: “At Kier, we recognise that our people are our greatest asset and our teams have been working hard to provide industry-leading policies and measures to support our people.

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“In the last 12 months, we have launched improved family-friendly policies, our new and enhanced standard for sick pay for all and we have become signatories of the Real Living Wage.

“All of these actions reflect the plans we put in place as a result of our strategic review. They form part of our Performance Excellence culture and underline our focus and commitment on doing the right thing.”

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By Grant Prior

Source: Construction Enquirer

mortgages
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Mortgage affordability test scrapped by Bank of England

Mortgage borrowing rules have been eased after the Bank of England scrapped an affordability test.

The “stress test” forced lenders to calculate whether potential borrowers would be able to cope if interest rates climbed by up to 3%.

Removing the test may help some potential borrowers get loans, such as the self-employed or freelance workers.

But other rules such as strict loan-to-income limits will not make it easier for most people to get a mortgage.

The withdrawal of the affordability test was announced in June but has come into effect on Monday.

Get in touch with UK Contractor Mortgages today to discuss your Buy to Let & Residential Mortgage requirements.

“Scrapping the affordability test is not as reckless as it may sound,” said Mark Harris, chief executive of mortgage broker SPF Private Clients.

“The loan-to-income framework remains so there will still be some restrictions in place; it is not turning into a free-for-all on the lending front.

“Lenders will also still use some form of testing but to their own choosing according to their risk appetite.”

In other words there will not be an immediate impact for borrowers as lenders will not need to change the way they assess loans.

However, some may well change their own rules in the future.

Mark Yallop, chairman of the Financial Markets Standards Board, said although the change would make it “slightly easier” for some borrowers to get a mortgage, he did not think with would have a significant impact.

“The biggest constraint on new mortgages is the ability of borrowers to afford a deposit,” he added.

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What was the scrapped test?
The mortgage affordability test was introduced in 2014 as part of a widescale tightening up of the mortgage market to ensure there were no repeats of the mis-selling scandal that partially contributed to the 2008 financial crisis.

The rule was put in place to ensure that borrowers did not become a threat to the financial stability of lenders by taking on debt they subsequently might not be able to repay.

Lenders had to not only work out if borrowers could afford a mortgage at the rate they were being offered, but also work out how they would be affected if interest rates soared by 3%.

Borrowers who could not prove they could cope with such an eventuality might have been turned down for a loan on that basis, even if they could easily afford a mortgage at the existing rate.

For that reason the test was seen by some as a barrier for some borrowers.

“The rule change could have a positive effect on borrowers who have been disadvantaged when it comes to getting on the property ladder,” said Mr Harris.

For example, some potential first-time buyers who have been comfortably affording rents far higher than potential mortgage payments have failed affordability assessments.

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What checks remain for borrowers?
There are some key protections in place to help ensure that borrowers don’t take on loans they may not be able to afford.

The main one is a loan-to-income “flow limit” which limits the number of mortgages that lenders can grant to borrowers at ratios at or greater than 4.5 the borrowers’ salary.

In short, it is very rare that a lender will consider a higher loan-to-income ratio because of the restriction.

After a review of the rules in 2021 the Bank of England’s Financial Policy Committee judged that “the LTI flow limit is likely to play a stronger role than the affordability test in guarding against an increase in aggregate household indebtedness and the number of highly indebted households in a scenario of rapidly rising house prices”.

“The change in the affordability rules may not be as significant as it sounds as the loan-to-income ‘flow limit’ will not be withdrawn, which has much greater impact on people’s ability to borrow,” said Gemma Harle, managing director at Quilter Financial Planning.

The FCA’s Mortgage Conduct of Business responsible lending rules also require a wide assessment of affordability.

By Simon Read

Source: BBC

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Barclays makes major lending push with £2.3bn deal for Kensington Mortgage Company

In a major push to broaden its lending offering, banking giant Barclays said this morning it has agreed a deal worth around £2.3bn to buy specialist lender Kensington Mortgage Company.

Barclays said the acquisition will allow it to offer more mortgage options to the self-employed and people who have multiple or variable incomes.

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The bank will also take ownership of a portfolio of mortgages offered by Kensington Mortgage Company, worth £1.2bn, in efforts to lend to a greater variety of customers.

The deal comes after the pandemic has led to an increase in the number of self-employed borrowers and those with complex incomes due to the impact of the Government’s furlough scheme and the wider effect on job volatility.

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The Maidenhead-based specialist lender has around 600 staff and offers buy-to-let residential mortgage options as well as owner-occupied lending.

The transaction is expected to complete towards the end of 2022 or early 2023.

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Matt Hammerstein, chief executive of Barclays, said: “The transaction reinforces our commitment to the UK residential mortgage market and presents an exciting opportunity to broaden our product range and capabilities.

“KMC is a best-in-class specialist mortgage lender with an established track record in the UK market, strong broker and customer relationships and data analytics capabilities.

“KMC complements our existing UK mortgage business and broker relationships through the addition of a specialist prime mortgage originator and the utilisation of our strong UK funding base,” Hammerstein concluded.

By Michiel Willems

Source: City A.M.