April 2016

 

April 2016

This month Taj talks about a couple of changes to mortgage options for contractors. There has been a launch of a new lender, Bluestone Mortgages, who have also rolled out a policy for contractors. Although unlikely to be a first choice, they will be a good option when other popular lenders cannot lend. One benefit in the policy is that they will lend to those with a gap of up to 6 months in the last year. 

In addition an existing contractor friendly lender, Leeds Building Society, has broadened their interest only criteria. They will now accept up to 75% LTV and will also accept equity in existing properties as a repayment vehicle.

In other mortgage news, Stamp Duty has now increased on additional properties. There has also been an announcement from the Bank of England who have issued guidance to buy to let lenders on stress testing and affordability for buy to let. This could result in a tightening in lending policy for buy to let purchases in the future. 

 

Transcript

Hello and welcome to my blog. In this post budget blog, rather than talking about the budget and what's come to pass the last month or so, I would like to start with something a little bit more interesting I think, which is a couple of changes to mortgage options for contractors.

So, we've got a new addition to the marketplace very exciting stuff. The launch of a new lender Bluestone Mortgages has coincided with them also at the same time rolling out a policy for contractors. Now as a lender they are unlikely to be the first choice for many of you looking for a mortgage. What they do very well is step in when the usual suspects cannot lend, so the main thing that they do which fills a big gap in the market place's for those of you who have had gaps between your contracts, they will accept a gap of up to six months in the last year. They'll take a view on the income and how much you've actually generated and use that for any mortgage application going forward. As you can imagine with that sort of approach they're not going to be the number one choice when it comes to rates, but they do offer a good option as a last throw of the dice if a standard lender has declined to lend. In addition to their generous income policy for contractors, what they will also do is take a flexible view on previous credit history so if anybody has had the odd missed payment here and there they will actually take a view on that and as long as it is not too serious, they will assess it as part of the overall picture of the case. So, good news for some of you who may have struggled to get a mortgage via the more conventional bespoke underwriting groups.

In another sort of broadening of lending criteria we have an existing contractor friendly lender Leeds Building Society, who have broaden their interest only criteria. This is quite an interesting development because a few of the larger lenders who have done this already took initially very very cautious approach to interest only in the immediate aftermath of the mortgage market review. But they've now looked into the FCA rules and looked at what they're doing and realise that they are probably going too far the other way. What Leeds will now do, is they will accept up to 75% loan to value, so if you put down 25% deposit you have got access to interest only, which gives you more scope to put down a smaller deposit than previously. What they will also do, is they will accept the equity in existing properties that you already have as your repayment vehicle which is a very interesting approach,  because most lenders want some kind of investment backed repayment vehicle, like stocks, shares and ISAs. A bit more flexibility there for those of you who do you have property portfolios and want to use that equity as part of your repayment vehicle.

Whilst we're on the subject of additional properties, those of you who do own buy to let properties may have taken a bit of a bashing from the Chancellor in the last few months with the Autumn statement and the most recent budget. Stamp Duty has increased now in the post April world. An additional 3% on any additional properties that you buy, there is a stamp duty charge on top of the base stamp duty charges. There's been some more news from the Bank of England where they've actually said they're going to issue guidance to buy to let lenders about guidelines on stress testing and affordability for buy to lets. Now, this is an interesting development and there aren’t any guidelines at present but any of you know what usually happens with these things we all know is it will result in a change and typing in lending policy, for buy to let at some point in the future. It is one to watch at this stage it is not hard and fast rules that have been publicised, but one thing we do now is any cost that a landlord incurs for letting properties have to be factored into affordability calculations as well as a high stress test rate of 5.5% being utilised rather than the actual rate you are paying. So watch this space on that one, as that unfolds I will bring you more coming weeks and months. But again this titling of the buy to let criteria on mortgages is not going to let up unfortunately. Thank you very much for listening, I will be back next month with an update on what I've discussed today.