Tag Archives: mortgages

Financial Stability Report caps future mortgage income multiples Landlord News, Latest Articles

Bank of EnglandThe Bank of England’s Governor, Mark Carney has today held a press conference to outline new plans to stabilise  the housing market under the Financial Stability Report.

The housing market is the biggest single domestic risk to the UK’s economy, and the Bank of England is seeking to encourage long term price stability. Mr Carney was keen to stress that there is no imminent threat, but household over indebtedness due to rising house prices could threaten disposable income/spending power and hence economic recovery. This is why the last recession was so deep and lasted so long.

Current average household debt stands at 140% of income and mortgages account for 80% of this debt being by far and away the largest liability. Mortgages are also the largest single asset class for the UK’s Banks and Building societies.

The Bank of England will therefore:

  • Cap Banks to no more than 15% of their mortgage lending being above 4.5 times income, currently this is 10% so will have no immediate affect on borrowers.
  • Banks must also asses affordability of a new mortgage based on the current rate plus 3% and again many banks already do this under MMR rules.
  • No new Help to Buy loans can be agreed above 4.5 time income

If you have a mortgage agreed yesterday then today it should still be OK under the new rules.

These measures are not designed to have an immediate affect, but are geared to stop any future overheating by limiting borrowing power without needing to increase interest rates.

The Governor said that current Monetary Policy (includes interest rates) does not need to be diverted due to a single sector specific issue. Raising interest rates to curb borrowing would only hurt household spending and hence slow the economy. This way we avoid economically the tail wagging the dog.


Skipton Building Society Legal Action Advice, Buy to Let News, Cautionary Tales, Financial Advice, Latest Articles, Legal, Mortgage News, Property Investment News, UK Property Forum for Buy to Let Landlords

In 2010 the Skipton Building Society broke a promise to over 60,000 mortgage account holders. 

The basis of that promise was that their mortgage rate would never exceed 3% over the Bank of England base rate – it did – CONSIDERABLY!Skipton Building Society Legal Action

The hike in monthly payments for a person with a £150,000 interest only mortgage has been around £181.25 per month!

Affected borrowers include both home-owners and buy to let landlords.

At the time a small group sought legal advice but insufficient funds were raised to challenge the matter in Court. Looking back at what happened I can only assume this was due to lack of marketing expertise within the campaign group which set out to challenge Skipton.

Given that the rate hike occurred over four years ago the Skipton probably think they have got away with this and are home and dry. Several borrowers have sold their properties or refinanced onto different deals but this makes no difference, they all have a potential claim for compensation.

Saqib Mahmood

Saqib Mahmood – affected borrower

Saqib Mahmood, a non-practising Barrister was affected by the rate hike to his personal mortgage and another on a buy to let deal. Mr Mahmood was part of the initial campaign group and admits “the campaign got nowhere due to lack of marketing expertise. The case we had was strong and Skipton have already capitulated for one borrower to avoid Court Action. I am delighted that Mark Alexander and his team at Property118.com have picked up the gauntlet on this one. I am also affected by the West Brom rate hike”.

Mr Mahmood was also keen to point out what he refers to as ‘the Gerald Ratner moment of the Skipton CEO’. This dates back to 5th March 2009 when the Bank of England base rate fell to 1%. At the time the Skipton chief executive David Cutter told FT Adviser “We have pledged our residential SVR will never be more than 3 per cent above base rate and, even with this at its lowest level for 315 years, we will honour our promise.” – LINK

The Legal Action Campaign Against Skipton Building Society

On the back of organising a successful campaign which raised over £450,000 to mount a legal challenge against the West Bromwich Mortgage Company (whose borrowers are affected by a similar issue) Property118.com has sought Counsels opinion on the conduct of Skipton Building Society. Counsel is so confident that he can get the Skipton’s decision reversed if the matter goes to Court that he is willing to work on a “no-win-no-fee” basis to achieve this. His objective will be to get the terms enforced and claim compensation backdated to the date of the increase. However, this will be subject to recruiting borrowers with a minimum combined total of 500 affected mortgage accounts.

NOTE – No-win-no-fee agreements are also known as a CFA (Conditional Fee Agreement) or a DBA (Damages Based Agreement).

The case will be run on similar terms to the legal action against West Bromwich Mortgage Company, i.e. one borrower will represent all those who instruct Counsel to challenge the legality of the rate hike. Any Court order will only apply to the mortgage accounts represented by the legal action. In other words, there will be no free rides.

There will be two representative legal challenges, one on behalf of consumers (i.e. homeowners and landlords with only one buy to let mortgage) and the other on behalf of landlords with two or more buy to let mortgages.

The Barrister we have engaged is Mark Smith of Cotswold Barristers. This is due to his experience in these matters having taken on the UK’s largest ever direct access barristers case against the West Bromwich Mortgage Company.

Costs and mitigation of risk

Cotswold Barristers will administer the action, Innovative Landlord Solutions LLP (the owners of Property118.com) will be responsible for driving the campaign and associated marketing.

We are not asking anybody to part with any money at this stage. However, to fund the campaign, at some point, we will need to begin fundraising to pay for administration and marketing. We will let you know more about this in due course.

Once an initial target of 500 instructions has been obtained, pre-action protocol proceedings will be initiated and papers will be served to the Courts 90 days thereafter. This 90 day period will be known as the Countdown period.

Mark Smith (Barrister-At-Law) will earn nothing unless he wins the case or arranges a settlement for the clients he is representing.

Skipton No Win No Fee

During the Countdown period Counsel will also organise ATE insurance or litigation funding to protect claimants against adverse costs in the event of the legal action failing and the others sides legal costs being ordered to be paid by the group. The case will not proceed if this risk cannot be mitigated, either by these routes or by self-insurance, a model that has worked with great success in the West Brom case.

Legal Action Objective

The objective of the legal action is for the 3% interest rate cap to be Court ordered and backdated to the commencement of the affected mortgages. In other words, those who sign up to this action could receive a lump sum refund (less costs) and lower mortgage payments moving forwards. If the barrister fails to achieve this objective he will be paid nothing for his efforts. If the case succeeds a percentage of the overpayment will be retained to pay ATE insurance, other expenses, and Counsels fee.

For more details please search Google for “Property118 Skipton Building Society Legal Action”

To register your interest please complete the form below.

Legal Action - Expression of interest form

You will not be committing to anything by completing this form but please only do so if you are an affected borrower, or were previously affected if your mortgage with Skipton building Society has been redeemed.

 


You may have more funding choices than you think! Advice, Financial Advice, Guest Articles, Guest Columns, Latest Articles

Banks aren’t always the friendliest of places when it comes to borrowing money. All the “hoops” they expect you jump through, and even then you’ll be told what you can or cannot use the cash for! So it’s good know that you may have more options than you think. Let’s give you a working example: Simone Gilks

John, age 63, has his main residence with an outstanding interest only mortgage of £40,000 which is due for repayment later this year. He has a holiday home (mortgage free) in Cumbria that is used exclusively by him and his family, and he also has four “buy-to-let” properties (mortgage free) dotted throughout the town, and all producing good rents.

John wants to raise cash for various purposes including clearing his mortgage , plus money to help buy another new buy-to-let property, as well as paying for the world cruise he promised his wife 10 years ago! His bank is not being very helpful, so he has an interesting chat with one of our equity release experts.

It transpires that John could in fact use equity release to get cash from his main property and/or his holiday home, and/or his buy-to-lets, or any combination of the three. The cash released can be used for whatever purpose he likes, although the existing mortgage would have to be cleared, but that was part of his plans anyway.

Knowing his debt will increase was at first a concern, but John sees this as a reasonable compromise because equity release means no monthly repayments and so no impact on his income situation. In fact his disposable income will increase as his existing mortgage will be gone.

John is pleased to learn that the interest rate on the equity release loans would be fixed and guaranteed for life. He is told that these type of loans are also portable. This gives him the possibility to be able to move a loan to another property should he need to sell at any time without having to pay off the mortgage if he chooses not to.

Another benefit is the possibility of setting the interest against rental payments for tax purposes, although he knows this will depend on how the cash is used. So tax relief on the cruise is out of the question! Or is it? See this page about Landlord Tax.

John is now arranging a sit-down meeting at home with one of our fully qualified Beauwater financial advisers. John will be presented with written facts, figures and all the pros as well as the cons. John thinks: “That’s something else I never got from the bank … a home visit!”

Initial consultations are free so please feel free to get in touch and I will happily refer you to the most appropriate member of our team. We operate Nationally.

Contact Simone

Mortgages and Life Insurance

Mortgage Express Harsh Realities re Mortgage Arrears Latest Articles, UK Property Forum for Buy to Let Landlords

It would appear that Mortgage Express are now operating a zero tolerance policy on buy to let mortgage accounts which fall two or months into arrears.

In recent months I have heard of several landlords who feel hard done by.

After just two months of mortgage arrears have accumulated Mortgage Express have called in their loans. Repayment of arrears does not appear to save people at this point. It’s too late! Mortgage Express have called their loan in and that’s their right to do so. Mortgage Express will happily accept payment for the mortgage arrears but they are not legally compelled to reverse their decision on calling in their mortgages. Some lenders are more tolerant but tot Mortgage Express it would seem. They have their instructions and they are sticking to them. Their objective is to recover as much money as possible – END OF STORY!

In the examples I have seen Mortgage Express has called in LPA Receivers to collect rents until such a point as tenants can be evicted and the property is then sold. Any surplus of sale proceeds over and above the mortgage and accumulated costs is then offset against any other Mortgage Express accounts which are also called in under their rights to consolidate. Once all Mortgage Express accounts are cleared any surplus balance is then returned to the borrower. However, in all of the cases I have seen to date there has been a deficit and Mortgage Express have then pursued this too, in many cases leaving their former borrower with little if any choice other than to consider personal bankruptcy.

Mortgage Express Harsh Realities

I have been asked by several borrowers whether I would be prepared to fight this for them. Whilst I think the situation is particularly harsh on both borrowers and tenants, now that I understand what is actually happening here I cannot see that anything illegal is being done by Mortgage Express.

It’s harsh but apparently it’s what all Mortgage Express buy to let borrowers signed up to.

The message therefore is do not fall into arrears on your Mortgage Express accounts.

It seems clear to me that Mortgage Express are now coming under massive pressure to call in mortgages which are in default. In my cynical opinion, that is the only reason they want to meet with their borrowers. It’s a fact finding exercise whereby they present opportunities for their borrowers to admit to being in default, other than for mortgage arrears.

My advice to all Mortgage Express borrowers is to read your terms and conditions very carefully and to follow them to the letter. If Mortgage Express want a meeting then ask them to confirm in writing what gives them the their rights to insist on a meeting and immediately seek professional advice. Also remember that if your tenants don’t pay you that’s not an acceptable excuse for not paying your mortgage. In fact, there is NO acceptable excuse I can think of other than Mortgage Express not taking payment. Therefore, if you haven’t got a decent liquidity fund I strongly recommend that you fully reference your tenants and purchase insurance against the risk of your tenants not paying your rent.

If it makes you feel any better the latest take on the word Gangsters in Banksters!


Kent Reliance Buy to Let no minimum income and 85%! Buy to Let News, Landlord News, Latest Articles

Kent Reliance Buy to Let have withdrawn their minimum income criteria of £25,000 even for 85% Loan to Value.

However this does not mean there is no criteria as a borrower would have to demonstrate a “reasonable” income and be able to prove it with payslips or 3 years accounts if self employed ie this is not non status.

It does mean that if an application stacks up on rental income and the borrower looks like they will be able to afford their ongoing commitments then Kent Reliance will consider the mortgage rather than just declining straight away as before if income was even £1 below 25,000.

To get figures and check how much you can borrow on Kent Reliance Buy to Let 85% LTV products you can use our Mortgage Calculator and quote engine.

Andrew Ferguson who is Head of Sales and Distribution for Kent Reliance, said “we have become increasingly confident in the BTL sector and having examined the way in which our book has performed, allied to the growing evidence of the strength of the rental market, we felt that insistence on a minimum income requirement was becoming less and less relevant as a measure of affordability. We shall however keep it under review.”

85% LTV Products:

  • 4.89% 2 year discounted variable rate, 2.5% Product fee and No Early Repayment Charges. Reverts to SVR currently 6.58% (ouch!)
  • 4.99% 2 year fixed, 2.5% Product fee and 4% year 1 and 3% year 2 Early repayment penalty. Reverts to SVR currently 6.58%.

The amount you can borrow on both of the above products is Stress Tested at 125% interest cover on a Notional rate of 5%. In short that means you can borrow 192 times the monthly rental income.

Lending Criteria:

  • Minimum Property value £75,000 or £250,00 for HMOs
  • No more than 20% exposure in any one block or development
  • Maximum of four properties on one Freehold
  • Studio Flats minimum of 30 square metres
  • HMOs maximum of 8 beds
  • Student properties maximum of 6 beds
  • Limited company applications accepted, but must be a Single Purpose Vehicle.
  • Flats above commercial will be considered except where above noisy, smelly or out of hours businesses.

If you require any assistance with a Buy to Let mortgage or any type of property finance just give us a call on 01603 489118 or email: info@property118.com if we can’t get to the phone straight away and we are always happy to help or know someone who can 🙂Kent Reliance Buy to Let


HMO Internal locks ‘deal breaker’? Advice, Latest Articles, UK Property Forum for Buy to Let Landlords

I’m at the point of exchange on an HMO licensed 5 bed house, currently let to students. I received a letter from the mortgage lender Birmingham Midshires (BM Solutions) saying one of their conditions is that there are ‘no internal door locks’. I checked and there are thumb locks on all the bedrooms. The letting agent who manages the house asked the students about removing them, they refused. BM Solutions logo

I’ve heard stories about BM Solutions withdrawing the offer after exchange, and apparently there will be 5 days between exchange and completion. I can’t risk losing 20% of my deposit if they discover there are still internal locks. What should I do? Is this really a deal breaker?

Apparently it’s only 1 of the students that has a problem with the locks being removed, but as I don’t yet own the house I can’t speak to her directly and can’t change the contract, everything is dealt with by the letting agent.

Has anyone else come up against this one? Should I risk it and tell the mortgage lender that I did request the locks to be removed (if they ask)? Or should I actually pull out now before it’s too late?

Any advice much appreciated.

Regards

Duncan


Flatlining property market is as good as it gets Latest Articles, Mortgage News, Property Market News

Flatline imageThe mortgage business is flatlining as buyers, sellers and lenders wait for the property market to jump start.

The latest property market statistics show fewer buyers are in the market and this is affecting sales and mortgage advances. Continue reading Flatlining property market is as good as it gets


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