Month: March 2020

What you need to know about Coronavirus mortgage payment holidays

In recent days the Government has announced plans for payment holidays for mortgage borrowers. The original proposal was for residential borrowers which have since been extended to cover Buy to Let mortgages.

As a summary for our clients, we thought it would be useful to forward the below briefing notes from the Financial Conduct Authority.

Payment holidays

A ‘payment holiday’ means you agree with your lender that you will not have to make mortgage payments for a set amount of time. Payment holidays are designed to help you when you may experience payment difficulties – in this case because of the coronavirus situation.

It is important to remember that you still owe the amounts that you don’t pay as a result of the payment holiday. Interest will continue to be charged on the amount you owe.

This means that, at the end of the payment holiday, you will have to make up the missed payments. There will be various options for doing this, for example by increasing your monthly payments slightly, or by adding a short extension to your term. Your lender will be able to explain to you what options it offers.

Applying for a payment holiday

You should contact your lender if you think you may potentially experience payment difficulties as a result of the coronavirus situation.

Your lender shouldn’t need any evidence that your income has been affected by coronavirus.

Interest on your mortgage during the payment holiday

You will still be charged interest during the payment holiday, unless your lender has told you otherwise.

When the payment holiday ends

At the end of the agreed payment holiday, you will continue to make payments. And you will need to agree with your lender a manageable way to make up the missed payments given your circumstances. Your lender will explain to you the options that they offer.

If you are still not able to make your full mortgage payments due to coronavirus, then it may offer you a further payment holiday if appropriate to your circumstances.

Your credit score

Our guidance makes clear to firms that they should ensure that taking a payment holiday will not impact your credit score.

Agreeing the payment holiday

We expect lenders to offer payment holidays to borrowers who may experience payment difficulties as a result of the coronavirus. Many lenders have already committed to this.

Your lender may also offer other options if they are more appropriate for your circumstances, and where it is in your interest.

If you are behind with your mortgage payments.

You can still have a payment holiday. You will need to discuss this with your lender. It will consider whether a payment holiday is appropriate as well as any measures that are already in place to help you through your payment difficulties.

How long do I have to apply for a mortgage holiday?

If you think you may experience payment difficulties and may need a payment holiday, you should speak to your lender in good time before the next payment is due. Please be considerate of others when contacting your lender and allow those with much closer dates into the queue first.

You can apply for a payment holiday at any time before this guidance is reviewed in 3 months. The payment holiday will not start, however, until it has been agreed with your lender.

Contacting your lender at this time

Lenders have committed to responding as quickly as possible, but due to high levels of demand and staff having to work from home, service levels might be slower than usual.

 

Financial Conduct Authority

20th March 2020

It’s business as usual at Concise Financial Solutions

As the outbreak of the Coronavirus continues to expand, we are closely monitoring the impacts of this in the UK and around the world. We will remain compliant with all UK Government and Public Health guidelines as this situation develops and the safety and wellbeing of our clients and team remains the top priority.

We have introduced more frequent and thorough cleaning of the offices so anyone needing to visit can be reassured we are taking the current situation very seriously. We are also actively exercising social distancing practices, so please do not be offended if our team do not shake your hand and keep a sensible distance from you. In addition, any team member displaying symptoms of the Coronavirus will be required to self-isolate.

We are also offering appointments remotely for our clients who are unable to visit our offices plus we have in place the provision for 100% of our team to be fully operational from home should the need arise.

We look forward to speaking with you soon however, in the meantime, be safe and remain healthy.

Coronavirus: UK interest rates cut to lowest level ever
19 March 2020

BBC News

The Bank of England has cut interest rates again in an emergency move as it tries to support the UK economy in the face of the coronavirus pandemic.

It is the second cut in interest rates in just over a week, bringing them down to 0.1% from 0.25%.

Interest rates are now at the lowest ever in the Bank’s 325-year history.

The Bank said it would also increase its holdings of UK government and corporate bonds by £200bn with an effort to lower the cost of borrowing.

It’s a dramatic move by Andrew Bailey, who only took over from Mark Carney as Bank of England governor on Monday.

Last week, the Bank announced a 0.5% cut in rates to 0.25% and a package of measures to help businesses and individuals cope with the economic damage caused by the virus.

The move coincided with additional measures announced by Chancellor Rishi Sunak in the Budget.

Coronavirus: How the Bank rate cuts affect you

Bank of England boss: Don’t fire people

UK interest rates cut in emergency move

However, the Bank said the measures it had taken so far were not going to be enough, and believed “a further package of measures was warranted”.

“The spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary,” it added.

The move comes as international investors are trying to secure more cash, in particular dollars. This means they’re ditching assets such as UK government gilts, which are the “IOU” notes the government hands over to private investors willing to lend it money.

As the gilts are sold, the price drops and the yield – the effective interest rate compared to the price – rises. What that means is the cost of borrowing to private investors as well as to the government rises – just when the Bank of England wants it to fall and the government is about to borrow huge sums.

The Bank of England’s plan to buy £200bn more bonds is aimed at fighting that effect.

‘Lowest possible’

The fresh rate cut takes interest rates to the lowest they can feasibly go, said Jeremy Thomson-Cook, chief economist at payments company Equals Group.

“Lower rates and additional quantitative easing can keep markets satisfied and borrowing costs for both businesses and the government down but unless money is forced into the hands of small businesses soon, then it will be for nothing; they are the ones laying off staff due to a liquidity shock,” he added.

Karen Ward, chief European market strategist at JPMorgan Asset Management, said: The support to the economy and health system will require vastly higher government borrowing. The central bank showing willing to buy government debt will ensure the market can absorb this additional issuance without undue stress.”

The Bank of England Governor has said today’s second emergency rate cut in just over a week occurred after financial markets became “borderline disorderly”, with fears about coronavirus leading to a rush into the US dollar away from sterling and lending to the UK government.

“We’ve seen very sharp moves in financial markets in the last few days, which is the pace of which frankly, was increasing very rapidly. And we were moving into conditions that were if not disorderly, frankly, bordering on disorderly let me put it that way,” Andrew Bailey told journalists.

The Bank of England Monetary Policy Committee had an emergency call this morning so that rate cuts and further “quantitative easing” could be agreed and announced, with the Bank needing to be “on the offensive” because: “We can’t wait for the hard economic data it will be too late by then”, he said.

He said he had seen a range of private forecasts about the economic impact of the current crisis: “We don’t have a precise forecast – every picture we look at has a very sharp V in it”.

The governor also partly blamed rumours that appeared to emerge from Westminster of a shutdown to London for adding to the volatility in markets that saw sterling fall 5% against the dollar. Such a shutdown would be likely to impact on the functioning of the City.

He said: “I do have to say that, you know, there were rumours going on the market this time yesterday that there was going to be a lockdown in London. And I’d observe that did cause market prices to start moving around at that point.

But I think the government has been clear, and it’s clear that that is not the intention at the moment.”

The governor also said that he had already intervened to try to get loans to businesses to keep people in employment, and he said the Bank had its thinking cap on as regards further monetary boosts it can make.

He reiterated his lack of enthusiasm for zero or negative interest rates because of their impact on the banking system’s capacity to lend, and suggested that was the reason for limiting the cut to an unusual 0.15% (rather than the usual 0.25% or 0.5%) to a record low of 0.1%.

The key Monetary Policy Committee will meet again next week.

What the Bank of England’s emergency base rate cut to 0.25% means for borrowers

• The Bank of England announced an emergency cut of 0.5 percentage points

• This is the biggest cut since the financial crisis in 2008

• The bank rate is one thing that affects how much banks pay savers and charge borrowers

The Bank of England has slashed its base rate by half a percentage point to 0.25 per cent, the steepest rate cut since the 2008 financial crisis. It said the emergency cut, the first reduction since August 2016, was to counter the ‘economic shock’ of the coronavirus outbreak. After two years at 0.75 per cent, it means the rate is back to an historic low.

The Bank of England announced yesterday it would cut its base rate to 0.25% from 0.75% The Bank’s base rate – officially called the bank rate – determines what it pays to Britain’s banks when they hold money with it. In turn, this can affect how much those banks pay savers or charge borrowers, be they taking out credit cards, personal loans or mortgages.

If the bank rate changes, banks usually adjust their own interest rates, though with many savings and mortgage rates at all-time lows there is less room for manoeuvre.

So are mortgages going to get even cheaper?

Andrew Montlake, director of mortgage broker Coreco, said: ‘For a central bank to cut rates on the morning of a Budget is an extraordinary move that reflects the gravity of the Covid-19 situation unfolding.’

The move follows announcements from banks including NatWest, Lloyds and Royal Bank of Scotland that they would offer repayment holidays for mortgage customers affected by coronavirus. Montlake added: ‘This takes things to a whole new level. Borrowers on a tracker rate will see an immediate benefit but savers will inevitably feel the squeeze.’

Lloyds Banking Group announced those on mortgages which track the bank rate or are on a reversionary rate will see a reduction of 0.5 per cent by 1 April.

‘Strangely this does not necessarily mean rates will come down as lenders will be pricing in the fact that their own staff levels may be low in the weeks and months ahead and they may not be able to cope with the increased demand’, Montlake said.

The Bank of England’s drastic rate cut marks the first time since 2016 that rates have been cut, and the first emergency cut since the 2008 financial crisis ‘Lenders will be in a tailspin as they seek to get their heads around this drastic move from the Bank of England. We are living in truly unprecedented times’.

‘On a commercial level, this emergency rate cut by the Bank of England will put even more pressure on lenders that are already struggling with slim margins.’ Mortgage rates are currently at near-historic lows, especially on deals where homeowners lock themselves in for 10 years.

Those currently on fixed-rate mortgages will obviously not see an effect until they come to remortgage, but when they do the rates they are paying could fall, if the base rate is not adjusted again before then.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘This is a bold and decisive move from the Bank of England. ‘Swap rates – which banks use to price mortgages – have tumbled in recent days and both the reduction in base rate, plus lower swap rates, will lead to even cheaper mortgage products.

‘We would expect five-year pricing to fall close to its previous record low of 1.29 per cent in 2017. ‘The big question is could they fall below 1 per cent?’

However, Laura Suter, personal finance analyst at investment platform AJ Bell, said: ‘Mortgage rates are already near record lows and it’s unlikely providers will be able to cut them much more – let alone pass on the entire rate cut. ‘The exception is those on tracker rates, who will see a near-immediate effect on their monthly repayments.’

By GEORGE NIXON FOR THISISMONEY.CO.UK
PUBLISHED: 07:32, 11 March 2020 | UPDATED: 17:39, 11 March 2020

Tax and legal changes you need to know about if you’re a private landlord

From electrical safety tests to capital gains tax, here are the things to look out for

Martina Lees
Friday February 28 2020, 12.01am
The Times

● Legal changes will hit landlords this year, none more so than losing the right to take back their properties automatically at the end of a tenancy.
This right, granted under Section 21 of the Housing Act 1988, sparked the buy-to-let boom. The government has pledged to abolish such “no-fault evictions” in its upcoming Renters’ Reform Bill, while also giving landlords more rights to regain their property through the courts. Details have not yet been published on how this would work.

● Electrical safety tests will be required for all new tenancies in England from July 1. An engineer must test electrical installations, including wiring and switches (inspections cost £160-£300), and any faults must be fixed. Landlords must give tenants the report, which is valid for five years, before they move in, or face fines of up to £30,000.

● Tax relief cuts on mortgage interest will be fully phased in from April 6. Landlords earning more than £50,000 will then be able to claim a flat tax credit of 20 per cent on all their loan costs.

● Capital gains tax will hit accidental landlords harder. If you sell a rental property that you used to live in, you will be taxed on the amount it went up in value after you moved out, although you do get a grace period. From April 6 this period will be halved from 18 months to 9 months. Accidental landlords will also no longer get lettings relief, a tax break that exempted up to £40,000 of their former home’s gain in price (up to £80,000 for married couples).

● Minimum energy efficiency standards (MEES) will ban landlords from letting homes with the lowest efficiency ratings of F or G to existing tenants from April 1. The rules have applied to new lets in England and Wales since 2018. Landlords should check a property’s rating on its energy performance certificate (EPC) and ask an assessor what you can do to improve the rating to at least E.

● The tenant fee ban, which kicked in for new tenancies last year, will apply to existing lets in England from June 1. Although the law caps deposits at five weeks’ rent (where the annual rent is less than £50,000, and six weeks’ rent where it is more), landlords will not have to immediately refund tenants who have paid a higher deposit — only when they renew their contract or move out. They will no longer be able to charge existing tenants for professional cleaning or gardening, as long as they return the property in the same state it was in when they moved in. They can only be charged for the costs of changing or ending the contract early on their request, breaching it or replacing lost keys.