Currently viewing the tag: "lending criteria"
Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Would be residential property buyers are dismayed about the change of the rules on residential mortgages, with strict lending criteria tightened following the introduction of the Mortgage Market Review (MMR).

Since 26th April 2014, mortgage lenders have been required to carry out much more detailed checks of a borrower’s financial situation to be sure that they can truly afford to purchase and continue to afford the property, both now and in the future.

The introduction of the MMR is supposed to help regulate the residential property purchase market and does not yet apply to buy to let mortgages, but that could happen in time.

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Land Registry Data Show Property Values Not Rising As Fast As PredictedLand Registry Data Show Property Values
Not Rising As Fast As Predicted

Data from the Land Registry’s House Price Index (HPI) in March 2014, shows that overall annual UK property values have increased by just 5.6%, taking the average UK property value to £169,124 (GBP).

The monthly change from February to March 2014 actually shows a property value decrease of 0.4%, however London saw property values increase by 12.4%, while the Eastern and North East regions experienced their greatest monthly rise, with property values rising by 1.1%.

Wales was the only UK region to experience an annual price drop of 1.6% and was also the only region that showed the most significant monthly price fall with values down 4.2%.

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Property Investors Celebrate Removal Of Income Requirement From Buy-To-Let Mortgages

Property Investors Celebrate Removal Of Income Requirement From Buy-To-Let Mortgages

Buy-To-Let Mortgages On Offer
Based On Rental Income

There is good news for UK based property investors looking for a buy-to-let mortgage as lenders are beginning to understand how landlords make profit from property. Now one lender is taking the lead and offering buy-to-let mortgages based on rental income without worrying about a borrowers personal income.

Mortgage lender, BM Solutions, part of the Lloyds banking group, has removed their minimum £25,000 (GBP) income requirement from all of their buy-to-let mortgages.

Instead, the lender will make a buy-to-let mortgage offer based on the potential rental income expected to be generated by the rental property purchase, rather than being based on a borrower’s employed earnings.

The BM Solutions Buy-To-Let mortgage affordability calculation remains at 125% of the rental income, but the overall lending criteria have been tightened.

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Benefits of Property Investment Portfolio Building

Benefits of Property Investment Portfolio Building

Property Investment portfolio building in the present financial climate is no easy task for the traditional property buyer, mortgage companies and lending institutions have stringent criteria to ensure their financial borrowing is covered.

None the less we are where we are and we have to make the best out of what is available and that isn’t always going down the mortgage route to buy if your aim is portfolio building. It can still be done using normal mortgage procedures but these days it’s better done by a third party portfolio builder as lenders want to see landlords with jobs as well as property.

For hands off property investment portfolio building there have never been better times but for those new to property or trying to build wealth from simple means then other alternatives may need to be used. You will hear lots of terminology such as lease options (LO), rent to buy (RTB), rent to rent (R2R), tenant buyers (TB) etc.

Don’t get too hung-up on the names of agreements.

The basic principle is if the vendor and purchaser can make an agreement between themselves over the property, then the legal people should be able to put that agreement into the right wording to draw up a contract that becomes a win/win scenario.

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Interest-Only Mortgages Are Becoming Too Niche For More Mainstream Lenders

Mortgage Lenders Think Interest Only Mortgages Are Too Risky

More Mortgage Lenders Think Interest Only Mortgages Are Too Risky

Mainstream mortgage lender, Nationwide has announced it will soon stop offering interest-only mortgages to borrowers because that part of the market is a “niche area”.

The high street bank will stop offering interest only mortgages from 18th October, although customers who are currently on an interest-only deal with Nationwide will remain unaffected, at least until the end of their fixed rate term.

Other UK lenders have also tightened up their lending criteria on similar mortgage types amid concerns about financial stability and people not being able to pay the money back, meaning borrowers could also struggle to find similar mortgage deals elsewhere.

Interest-only mortgages allow people to only pay off the capital when the mortgage term ends, enabling them to maximise their initial borrowing capacity. Mortgage brokers have greater access to available products and can advise individual investors further.

Like many other lenders, Nationwide had already limited its interest-only mortgage lending to up to 50% of the property’s value, and it now joins the list of those to pull out of the interest-only market.

In May this year, the Co-operative Bank withdrew its entire range of products, stating house price weakness and uncertainty about the economic climate had resulted in the rapid decline in demand for interest-only loans.

Renting Costs Outstrip Buying

Renting Costs Outstrip Buying

Another new study by mainstream mortgage lender the Halifax has revealed that renting a property now costs over £130 per month more than the monthly cost of buying a home.

Halifax’s latest research has shown that owning property was more affordable than renting in the UK Private Rental Sector (PRS) in all 12 of the UK regions.

On average, people buying property pay 18%, (£132, per month) less on average than those renting, due to rental prices increasing and the perceived fall in property prices and the rates of UK mortgage approvals having fallen.

However the revelations seem to be falling on deaf ears as demand for rental property in the PRS is at an all time high with up to 10 tenants competing for a single tenancy.

So why the demand?

Obtaining a mortgage can be difficult for many people and with lenders tightening both financial and personal criteria for lending, leaving the majority of renters unable to apply or afford a mortgage.

The average monthly costs for buyers of a typical three-bedroom house, including maintenance and repair as well as the mortgage, was £600 (GBP) in June 2012 compared with £732 (GBP) in rent payments on the same type of house.

The Halifax said “Rent payments have risen steadily over the last few years, increasing by 5% in the last 12 months, as buying costs fell by 3%. Four years ago the average cost of buying and owning was 45% – £324 – more than the average monthly rent paid”.

However, there has been a 33% drop in new buyers in four years as lenders push for ever higher deposits with £40,526 (GBP) being the average loan-to-value at roughly a quarter of the property price.

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