May 2016

There have been a number of announcements in the past month that may affect those looking for a mortgage. 

The first, that Taj covers is the consultation paper issued by The Prudential Regulation Authority, recommending lenders to run stricter tests on potential buy to let investors. Nationwide has already responded by restricting their buy to let policy. New clients will have to deposit 25%, up from 20%, and will have to prove rental income of at least 145% of the monthly mortgage payments, up from 125%.

Secondly, Taj looks in to how two popular lenders have raised limits for mortgage terms by 5 and 10 years, to 80 and 85.

Finally, Taj mentions the introduction from Barclays of the first 100% mortgage since the financials crisis of 2008. He will return next month to update you on any progress and further new announcements. 

 

Transcript

Hello and welcome to my blog.  This month we have some interesting news emerging from the regulator of all things financial in the UK, not the FCA for a change but the PRA, the Prudential Regulation Authority who are now flexing their muscles about the way mortgages are lent in the UK. The first restriction that they are forcing upon lenders is on the buy to let market in yet another blow to landlords. One of the largest buy to let lenders in the UK, The Mortgage Works who are part of the Nationwide Building Society, have been told that based on the amount of lending they are doing on buy to lets the Prudential Regulation Authority is not comfortable in them offering buy to let loans with a deposit as low as 20%. The minimum deposit from the Mortgage Works is now going to change to 25% and they are also going to be asking landlords to have a higher rental yield in order to qualify for their mortgages. Before they wanted 125% of the monthly mortgage payment and now they want 145% of the monthly mortgage payment for coverage purposes.

Some slightly more optimistic news coming out from two contractor friendly lenders, two of the biggest contractor friendly lenders in the UK, Nationwide and Halifax, who have actually announced that they're going to be increasing  their maximum age at mortgage expiry to 80, from the current 75.This is very good news particularly for those of you who are in your fifties and sixties who are looking to take mortgage terms over a longer period of time to spread those payments out. These two lenders are very flexible as far as income assessment is concerned so cautious optimism around this. Further details will emerge from Nationwide in July and we'll see how all of this works in practice. Halifax’s policy is live already, but the underwriting outcomes will determine how successful this is.

On to some more mortgage product innovation. Something that hasn't been happening too much in recent months. High street lender Barclays are actually looking to help those with no deposit onto the property ladder. They have launched a 100% mortgage which requires no deposit whatsoever. What's the catch I hear you say, the catch is you will need some help from family because they will have to deposit the equivalent of 10% of the property value into a Barclays savings account that is linked to these mortgage arrangements. The money will be tied up three years, but after that three year period family members can release their money and you’ve got a mortgage without any debt and without any burden on anybody else at that point as well. A really good idea from Barclays who tend to be at the forefront of product innovation, they are lender who have been contractor friendly previously and we are cautiously hopeful that they will revert back to a similar policy that they had back in 2012.

So again, a really good news story I think for those particularly first-time buyers who are looking to get onto the property ladder but are struggling to save for the deposit.

That's all from me this month; I will keep you updated regarding these policy innovations and indeed any of the buy to let restrictions in coming blogs. Thank you very much for watching.