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Mortgage Market Review

#MMR : How will the Mortgage Market Review affect you?

The Mortgage Market Review (MMR) was brought in by the FCA and is in practice from 26th April 2014. The aim is to avoid a repeat credit crunch caused by over and responsible lending in the mortgage market.

What is the Mortgage Market Review?

It means that Financial Advisers will not be able to provide services on a Non-Advise basis. All IFAs will need to hold a relevant qualification. This means there will be better qualified IFAs, and the lack of competition should make this service profitable and worth it for the best IFAs. Overall this is better for people buying property as they will get better advise.

For Lenders: They are now fully responsible for assessing someones ability to pay back a mortgage and affordability. Therefore they will scrutinise income and expenditure to the finest detail.

Mortgage Market ReviewFrom the FCA:

They will look at your spending in three categories:

Essential expenses

This is what you regularly spend on the things you cannot do without, such as:

  • food
  • household cleaning and laundry
  • gas, electricity and other heating costs
  • water bills
  • telephone
  • essential travel (such as travel to work or school)
  • council tax
  • buildings insurance (it is usually a condition of your mortgage that the building must be insured)
  • ground rent and service charges (for leasehold properties)

Basic quality of living costs

This is what you need to spend on occasional essentials, with some allowance for leisure costs, including:

  • clothes
  • household goods (such as furniture and appliances) and repairs
  • personal goods such as toiletries
  • basic leisure costs, including non-essential transport
  • TV licence
  • childcare

Repayments and other commitments

This covers other payments you know you will have to make, including:

  • debts you are paying off, like credit card bills, loans or hire purchase payments
  • child maintenance and alimony payments

The exact details you are asked for will vary between lenders, but you should expect to discuss your regular spending in all these areas.

MMR could be responsible for the surge in the housing market in recent months. Due to the fact that the lending process will be longer and more indepth, potential buyer will have rushed buying to get their transactions complete prior to these new rules coming in place.

What does MMR mean for Buy to Let?

It is still unclear if these rules are applicable for Buy to Let investments, especially as in most cases the loan to value is lower and mortgage payments are intended to be paid with the rental income.

Please comment if you have any further information in relation to Buy to Let impact.

Property Tribes has some interesting points here:
http://www.propertytribes.com/start-preparing-now-big-changes-coming-btl-lending-t-9621.html 

– Thanks Vanessa Warwick

Conclusion

Although the point of MMR from the FCA is to make sure mistakes of the past do not happen again it will damage the property market especially for those responsible lenders, IFAs and investors.

Immediately we will see a drop in market transactions and decrease in first time buyers on the market. The seasoned investors should remain mostly unaffected.

Buy to Let mortgages

UK Property Market Update – Winter 2013

The UK property bubble is building

  • The average family home is up £5,583 and London properties have increased by more than £7,000.UK property prices went up by £7,430 in October
  • Average sale price in London is now £404,199
  • Help to Buy scheme is inflating prices
  • Rents increase 11% to £785pm, 41% of the average UK wage.

UK rents

UK property Sale prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average UK Property Prices In London, where the average sale price is higher than ever, 14 people compete for every property.

Mortgage applications rose by 6% in October, and almost double 2012 numbers. It comes as the Council of Mortgage Lenders said last week the number of homes sold this year will be more than one million for the first time since the financial crisis began in 2007.

The government Help to Buy scheme is pushing prices up.

Out of the 5,375 sold so far, the highest number of Help to Buy sales have been in Leeds, Wiltshire, Milton Keynes and Reading.

The average price of a UK property bought under the Help to Buy scheme was £194,167, with an average equity loan of £38,703.

UK property transactions

Critics warned the UK-wide second phase of the scheme, which began last month and is not restricted to new-builds, would cause a housing bubble.

It guarantees 15 % of the value of the home loan.

After almost coming off the market, Buy to Let mortgages are also being approved strongly. Landlords and investors are buying up and completing deals to keep up with the increasing rent demand and to cash in on the rental increases. This is a very encouraging sign for property investment.

However as the final graphic shows there is still not enough supply in the market, especially in London where there are almost 3 offers for every sale.

PropVestment’s thoughts

Offers and Sales

Yes the UK property market is picking up and in fact picking up a little too fast. But this is mainly due to the Help to Buy scheme which is resulting in unrealistic implications on price and the market. The only ones to benefit are the banks and house builders. First time buyers, buying under the scheme face higher interest rates compared to traditional mortgage products.   
The market right now is too competitive and sellers can take advantage. We do however have concerns that many first time buyers under Help to Buy will suffer from negative equity in years to come once the Government pulls the plug on the scheme and prices fall back to their realistic, natural and sustainable level.

Buy to Let mortgages

Source: Daily Mail
Tesco Mortgage Buy to Let

Supermarket Tesco launches 1.99% Mortgage – every little helps

Tesco Bank launches fixed 1.99% Mortgage

Tesco Mortgage Key Facts

  • Tesco Mortgage Buy to Let1.99% Fixed until end 2014
  • 4.24% There after
  • 4.00% APR
  • £995 Arrangement Fee (£195 Booking Fee, £800 Product fee)
  • 60% Maximum LTV (Loan to Value)
  • More suited for Remortgages than First Timer Buyers

 

Tesco Bank 1.99% Mortgage

Read more

Barclays Family Affordability Plan & Helpful Start for the First Time Buyer

A Helpful Start for the first time buyer

Barclays helping the first time buyer

Barclays has introduced a new mortgage scheme. Helpful Start is part of their Family Affordability plan. It  allows parents to help their children with mortgages in a way not seen before. A parent’s income is also taken into consideration when applying for the mortgage  without them being on the property deeds.

The scheme is available across all of the lender’s mortgage range, including its NewBuy product.
It enables parents to help their children get on or to move up the property ladder through a joint mortgage without giving a lump sum away.
If the mortgage is approved, all parties will be liable for the monthly payments. The parents will appear on the mortgage but they won’t be co-owners of the property.

Helpful Start is however  not available in Scotland and Northern Ireland.

Family Affordability Plan

When considering to lend to a first time buyer, lenders look at three criteria

  1. Affordability
  2. Credit Worthiness
  3. Loan to Value

The Family Affordability Plan and Helpful Start tackles the first criteria, which has significantly made it difficult for first time buyers to get on property ladder. It will not alter the amount the customer can borrow.

When the first time buyer is ready to manage the mortgage on their own, they can remove their parents from the mortgage by remortgaging soley in their name in traditional way.

There has been a reduction in the number of guarantor-type products in the market over the past few years, this scheme is a step in the right direction.

Ash Shah, Crystal Financial Services

PropVestment always recommends clients use a Independent Mortgage broker like Ash Shah or Crystal Financial Solutions. He comments as follows:

This is a excellent move taken by the High Street lender in a difficult market for first time buyers and those wanting to upscale. Independent Brokers like myself have a wealth of tools available to help clients, and the addition the Family Affordability Plan is a excellent addition to my Tool chest.

PropVestment Conclusion

Helpful Start and the Family Affordability Plan is what first time buyers have been calling for, the last few years have been hard for them to get on the property ladder. We welcome such a scheme and hope other lenders see the light and follow with their own schemes.

READ our first time buyer articles:

For a FREE consultation please contact us info@PropVestment.com , we can help all property investors and first time buyers

FirstBuy – Does it help “PropVestors” or just another government gimmick?

  • First Time Buyers

    Help for 10,000 FTBs

  • Shared equity means, shared losses
  • Help only for a few FTB and only New Builds

What is it?

1. FirstBuy will be offered on selected properties across a range of new build schemes following an assessment of offers submitted by developers.

2. Eligible purchasers who need assistance to buy will be offered an equity loan of up to 20% of the purchase price. The equity loan will be funded equally by the HCA and the developer. Potential bidders should note that it is an absolute requirement of the programme that developers must provide matchfunding equity.

3. The maximum property price expected for FirstBuy is £280,000, based on the affordability assessment for purchasers.  On an exceptional basis, depending on location, a purchase price of up to £300,000 will be considered.  We expect that most bids will be for lower priced properties which will be favoured, taking account of location.

4. Purchasers will be required to raise funding, (a mortgage plus any deposit where available) of at least 80% of the purchase price. The buyer’s mortgage loan is secured as a first charge on the property in the usual way and ranks ahead of the equity loan charge.

5. Both the developer and the HCA will take an equal second charge over the property to secure their interest. The equity loans are secured as second charges on the property and are on an equal footing between the HCA and developers.

6. The form of equity mortgage will be prescribed by the HCA (and will follow the form of equity mortgage used for HomeBuy Direct, which is familiar to lenders and solicitors, and to the market).  Both the developer and the HCA will lend on the same terms.  The use of a standardised charge will simplify the conveyancing process, make the product more attractive to lenders and help with marketing the product to individuals. Each equity loan term is 25 years but repayment is required on sale of the property. Read more