Month: July 2020

Mortgage lenders begin return to 90% LTV

By Chloe Cheung

Mortgage lenders are beginning to return to higher loan to value ranges, as three lenders have announced they will resume offering products at 90 per cent amid a “more active housing market”.

Nationwide Building Society has announced an increase in the lending limit to 90 per cent LTV for first-time buyers from July 20, with no set limit on the number of home loans available.

The building society said its return to higher LTV lending was enabled by the temporary stamp duty cut, announced by the chancellor last week, as well as a “more active housing market” following the lifting of lockdown restrictions that had effectively closed the property market until May.

Nationwide’s 90 per cent LTV mortgages will be available to first-time buyers direct and via brokers.

Henry Jordan, director of mortgages at Nationwide Building Society, said: “First-time buyers are vital to breathing life into the housing market and economy. We understand one of the biggest barriers to homeownership is raising a deposit. As a building society, owned by our members, we are extremely well placed to look at ways of helping people into a home of their own.

“While we will continue to monitor the market carefully, we feel it is the right time to enhance our lending, initially to those looking for their first home. We welcome the government’s announcement on stamp duty and hope our combined changes create a positive impact on a market that, despite being in relatively good health, is still recovering.”

Existing Nationwide mortgage customers who are moving home will be able to continue borrowing up to 95 per cent LTV, while the maximum for further advances has increased to 90 per cent LTV.

Meanwhile Coventry for Intermediaries has also announced its return to the 90 per cent LTV market with a limited launch.

The lender is offering two five-year fixed-rate products to new and existing borrowers from 8am today (July 14) until 8pm tomorrow.

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said it was “fully prepared to meet strong demand” throughout the two-day window.

Mr Stinton said: “This is about supporting the market without compromising on the high levels of service that we’re famous for. Transparency and certainty – especially in this environment – is essential for brokers so they can support their clients, which is why we have issued our pledge of 48 hours’ notice of withdrawal of these products at time of launch.

“We expect the next couple of days to be really busy and brokers can help us to process applications smoothly. Checking our criteria beforehand – particularly on self-employed and furloughed employees – will help to speed up the process for everyone.”

Mr Stinton added: “Only full applications will secure the product – as all AIPs will be temporarily suspended during this period. All the details are on our website along with a dedicated coronavirus update page”.

Additionally, in an email to brokers seen by FT Adviser, intermediary lender Platform announced it will be reintroducing a fee-free, five-year fixed-rate product at 90 per cent LTV to new business on July 15.

Platform had temporarily withdrawn its 90 per cent LTV fee-free range available to new business on July 9 due to “unprecedented demand”.

Chris Sykes, mortgage consultant at Private Finance, commented: “Three lenders announcing their return in one day should spur on other lenders to do the same.

“We have seen issues in the past few weeks with the lenders offering 90 per cent mortgages being inundated with applications and not being able to cope with the level of enquiries so spreading the cases more is an encouraging sign signally a potential widespread return of 90 per cent mortgages.”

Accord Mortgages, for example, temporarily withdrew its 90 per cent LTV products a second time this month, as the lender said it experienced the busiest month in its history.

Mr Sykes added: “With Nationwide being one of the biggest lenders for first time buyers hopefully it encourages the likes of Santander and Barclays to return to this market in the near future too”.

Data from Money facts shows there were 72 residential mortgages available at 90 per cent LTV on June 26, less than 10 per cent of what was available at the beginning of January (751 products).

By Chloe Cheung

chloe.cheung@ft.com

Keep calm, review your finances

With the COVID-19 outbreak impacting every area of our lives, it’s understandable that many of us are more anxious than normal.

One way to improve your mental wellbeing is to sort out your finances. In a survey, 45% of people said that money is a major cause of stress, rising to 66% among those with no savings or investments to fall back on. So, reviewing your finances is an excellent way to reduce stress levels during these difficult times.

 The perfect time to re-mortgage?

For many people, their mortgage is their biggest monthly outgoing, so it could pay to see if there’s a cheaper deal out there – especially given recent events. On 11 March, the Bank of England slashed its base rate from 0.75% to 0.25% as an emergency measure to limit the economic shock caused by the COVID-19 outbreak. Shortly afterwards, it cut the base rate again to a record low of 0.1%.

 Banks withdraw mortgage products

Interest rates may be at an all-time low but finding a suitable deal may be tricky. Since the base rate cuts, banks have withdrawn over 1,500 mortgage products from the market due to the risk of offering certain deals in the current climate.

There are still excellent rates and products available, however, so it’s well worth putting in the legwork to secure a cheaper deal.

 Protecting yourself and your family

The rapid increase in confirmed cases has served as a reminder that illness can impact our finances when we least expect it. Reviewing your protection needs will reassure you that your family would be looked after if the worst happened. Check to see whether your existing policies still offer adequate cover and consider whether you need to take out any additional cover, e.g. life insurance, critical illness cover, income protection or payment protection insurance (PPI).

 Your policy and coronavirus

The Association of British Insurers (ABI) is now offering advice on whether different types of insurance policies are likely to pay out for policyholders affected by coronavirus. For those considering taking out a new policy, things may be more complicated, with some insurers introducing COVID-19 exclusions in a bid to stem their losses.

The importance of advice

The availability of mortgage and protection products is constantly changing, so financial advice is essential to finding the right deal. We are monitoring the situation closely and can provide clear advice to protect your financial wellbeing.

 As with all insurance policies, conditions and exclusions will apply
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you re-mortgage

 

Stamp duty slashed until 31 March for home buyers and buy-to-let investors

By Stephen Maunder, Which Website

8 Jul 2020

The government has scrapped stamp duty on house purchases of up to £500,000 until 31 March 2021, potentially saving homebuyers thousands of pounds in tax.

The move, which was announced by Chancellor Rishi Sunak yesterday afternoon, is designed to reignite the property market after the COVID-19 outbreak.

Here, we explain how the new rules will work and offer advice on who could be the biggest beneficiaries of the change.

Stamp duty slashed on purchases up to £500,000.

The government has raised the stamp duty threshold in England and Northern Ireland to £500,000 until 31 March 2021.

Previously, stamp duty kicked in at £125,000 (or £300,000 for first-time buyers), meaning people moving home later this year can make significant savings.

The change will also help people buying properties costing more than £500,000. As stamp duty is tiered, they will pay nothing on the first £500,000 and then normal rates on anything above that (see the table below).

The government says the temporary move will mean nine out of 10 people buying a home this year won’t need to pay any stamp duty at all.

The changes will apply from today in England and Northern Ireland, but will not apply in Scotland or Wales.

The new rates until 31 March 2021

Portion of property price	Percentage
£0-£500,000	0%
£500,001-£925,000	5%
£925,001-£1.5m	10%
Above £1.5m	12%

 

How much will you save?

Ultimately, the more expensive the home you’re buying, the more money you’ll save under these new rules.

The government predicts that the average stamp duty bill will fall by £4,500, but for properties priced at £500,000 the saving will be £15,000.

The examples below show how much you’ll pay depending on the price of the home you buy.

Property price £600,000 0% on the first £500,000; 5% on the next £100,000 – total bill of £5,000 (previous bill £20,000)

Property price £750,000 0% on the first £500,000; 5% on the next £250,000 – total bill of £12,500 (previous bill £27,500)

Property price £1m 0% on the first £500,000; 5% on the next £425,000; 10% on the remaining £75,000 – total bill of £28,750 (previous bill £43,750)

Does the stamp duty cut apply to buy-to-let?

If you’re buying an investment property or second home, you’ll still need to pay the 3% stamp duty surcharge, but this will be on the new temporary rates – so you could still make big savings.

The temporary rates for buy-to-let and second home purchases are shown below.

Portion of property price	Percentage
£0-£500,000	3%
£500,001-£925,000	8%
£925,001-£1.5m	13%
Above £1.5m	15%

 

Before today, if you bought an investment property for £250,000, you’d have paid 3% on the first £125,000 and 5% on the second £125,000, resulting in a stamp duty bill of £10,000.

From today, you’ll only pay 3% stamp duty on the whole purchase price, meaning a bill of £7,500 and a saving of £2,500.