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Brokers warned of buy-to-let mis-selling scandal

A specialist lending panel at FSE London has urged intermediaries to stay clear of buy-to-let tax advice to avoid being involved in the next potential mis-selling scandal.

Louisa Sedgwick, director of sales for mortgages at Vida Homeloans outlined the importance attached to brokers having documentation in place to say they had offered no tax advice, as she cited this as the next potential mis-selling scandal.

Rob Jupp, chief executive at Brightstar Financial, said: “The important thing is that brokers spend the appropriate time making sure that they never cut corners on buy-to-let transactions.

“And that appropriate documentation is in place from specialist tax advisers to accept responsibility for the advice they give.”

Adrian Maloney, sales director of OneSavings Bank, added: “Make sure that your clients are getting the right tax advice and that you, as an adviser, are almost isolating yourself to the mortgage advice.

“Tax advice should only be done by someone who knows the process inside and out.”

In terms of the wider tax implications the panel agreed that some elements of the landlord community were still getting to grips with how the changes will affect them.

Alan Cleary, managing director of Precise Mortgages, outlined that professional landlords – and larger portfolio holders have a greater understanding of the tax changes.

He said: “We have stats which suggest that around half of amateur landlords don’t know exactly what is going to happen to their profitability as a result of the tax changes.”

David Whittaker, chief executive of Keystone Property Finance, added: “Lots of landlords remain blind to exactly what is going on, they are aware there is a problem but don’t know how to quantify it yet. And when most of them do their tax returns most of them are going to get a wake-up call.”

Source: Mortgage Introducer

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Brokers expect landlord business to stabilise

The majority (65%) of mortgage intermediaries expected the level of landlord business to stabilise over the next 12 months, Paragon’s Financial Adviser Confidence Tracking (FACT) Index has found.

This is the first time that intermerdiaries have forecast a stable outlook for buy-to-let since the 2015 Summer Budget when George Osborne, then Chancellor of the Exchequor, announced plans to phase out tax relief on buy-to-let mortgages.

John Heron, managing director of mortgages at Paragon, said: “It’s encouraging to see intermediaries forecast a more stable outlook for buy-to-let business after such a long period of negative sentiment.

“Purchase activity continues at much lower levels but it is interesting to see the step up in remortgage business as landlords look to maximise certainty and minimise costs as the interest rate changes start to take effect.”

The first round of tax changes, which are being phased in between 2017 and 2021, were implemented in the 2017-2018 tax year and will affect tax payments due by midnight on 31 January 2019.

Taken together with the 3% stamp duty surcharge on rental properties and new PRA rules on buy-to-let affordability and underwriting, the tax changes have had a significant effect on property transactions.

Latest figures from UK Finance show that buy-to-let mortgage purchase transactions have fallen by around 40%, dropping from 8,900 in May 2015 to 5,500 in May this year. Landlord remortgaging however, has risen sharply over the same time period, up 64% from 8,900 transactions to 14,600.

Intermediaries said almost half (49%) of landlord mortgage applications are for a straightforward remortgage, with six out of 10 landlords who are remortgaging looking to lock in a better interest rate.

Encouragingly, this quarter’s FACT results also include the first increase in the proportion of landlords raising finance for portfolio expansion since 2015 – up marginally from 22% in Q1 2018 to 23% in Q2. And there was a small increase in applications from first-time landlords, edging up to 14% of the total.

Source: Mortgage Introducer

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More brokers expect lenders to tighten credit policies than relax them

Around 57% of brokers operating in bridging, development and asset finance expect lenders’ credit policies to stay largely unchanged over the next 12 months, United Trust Bank’s recent broker sentiment survey has found.

There were slight variations between brokers operating in the different sectors but, on the whole, 57% of brokers expect lenders to keep their credit policies broadly similar, 32% expect them to tighten and 11% predict that lenders would relax them.

Harley Kagan, managing director, United Trust Bank, said: “It’s good to see that most brokers believe lenders are already operating with an eye on the future.

“However, it’s perhaps unsurprising given the level of uncertainty surrounding Brexit, the UK economy and the residential property market, that many brokers feel some lenders will be tightening their purse strings over the next 12 months.

“Anecdotally we’ve heard from some brokers that lenders who were once happy to consider certain loans are now being far more cautious even with well-established customers.

“This ambiguity will frustrate brokers, but as long as they’re aware that experienced, ‘through the cycle’ lenders like UTB are still very keen to lend, they should be able to find quick and competitive funding solutions for their clients.”

For bridging finance, 58% think lenders’ credit policies will stay broadly the same, 28%think lenders will tighten their credit policies and 14% think lenders will relax their credit policies.

For development finance, 60% reckon lender credit policies will stay broadly the same, 33% think they will tighten their credit policies and only 7% reckon they will relax their credit policies.

Under asset finance 53% predict lenders’ credit policies will stay broadly the same, 35% thought they will tighten them and 12% expect them to relax their credit policies.

Kagan added: “From a broker perspective there are obvious advantages to dealing with a specialist lender which can quickly adapt to changing market conditions and be flexible in applying their credit policy to marginal cases.

“At UTB we consider every proposal on its merits and when required will use our knowledge and experience to formulate a solution which will hopefully give the borrower and the broker what they need whilst satisfying the Bank’s risk appetite.

“United Trust Bank is an approachable and dependable lender. We help housebuilders, property developers and SMEs who wish to seize opportunities in spite of uncertainty and support them through the ups and downs of the economy and the housing market.”

Source: Mortgage Introducer

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Broker searches show need for later life mortgages

The top search on Criteria Hub backs up evidence that more older borrowers are looking to buy property. The deep search engine for mortgage advisers, clubs and networks, has revealed the number one search for residential mortgages is the phrase “maximum age at end of mortgage term”.

This reinforces evidence of the growing number of cases where older borrowers are looking to seek funding either to raise capital or for new purchases.

In the buy-to-let (BTL) section, the requirement from lenders for applicants to show an income separate from their rental income has meant that brokers’ primary search is to establish which lenders have a minimum personal income requirement.

Jason Hegarty, director of Criteria Hub, said: “Simple criteria like maximum age limits for residential mortgages and minimum income requirements for buy-to-let cases might not seem important, but the volume of enquiries about the same topic allow us to create a bigger picture of the areas where advisers are seeing the most demand.”

Martin Stewart, director at London Money, said: “Longevity is going to be the silent killer for current mortgage criteria and the sooner people wake up to the fact that the speed in demographic changes is moving faster than the pen that writes the rules, the sooner we can start to address the issue.

“We all need to realise that things change whether we want them to or not. It is far better to get ahead of the curve and wait for the problem to arrive than forever be chasing it off in to the distance .

“There is an opportunity for government, regulator and lender alike to grasp the issue. The later life sector will be more fruitful and longer lasting than buy-to-let so moving capital and resources into a new area would make perfect sense.”

This comes as Criteria Hub revealed the top three searches made by its broker users for residential and buy-to-let mortgages so far in 2018.

The second most popular search for residential enquires was “defaults (unsatisfied) potentially accepted”.

This indicated if a lender can potentially accept applications from applicants that have had or currently have unsatisfied defaults registered against their name.

In the buy-to-let category, the second most common search was on expat buy-to-let, which indicates if a lender can potentially consider buy-to-let applications from expats.

Finally, the third most popular search for the resident market was “interest-only: sale of mortgaged property”.

This specifies whether interest-only, with the repayment vehicle ‘sale of the mortgaged property’, is an acceptable repayment method on residential mortgages.

Lastly, the third most common search for the buy-to-let market was ‘first-time buyer’, which indicates if a lender can potentially consider applications from those trying to get onto the property ladder.

Source: FT Adviser

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Keep educating clients about buy-to-let – the appetite is still there

As we all know, buy-to-let is now a lot more challenging for brokers. Gone are the days when a broker could just pull out a calculator and work out how much a landlord could borrow.

In the post-PRA world, brokers now have to gather a huge amount of additional information the landlord’s property portfolio as well as their business plan and cashflow statements, before they can even start to think about LTVs.

And that is all assuming the landlord is aware of the changes, many landlords themselves still have a lack of understanding around why lenders need so much more information than they did before.

While the topic has been covered frequently in the trade press since the rules were introduced five months ago, there has been relatively little about the changes in the consumer press. Therefore, many borrowers are unaware of the changes until they actually come to remortgage or buy add another property to their portfolios.

This means many are taken aback when their broker then explains to them how much information they now need to provide, and how much extra time is needed to put together a buy-to-let mortgage application. And actually, even those who do know about the changes might not know quite the impact all the extra information needed will have.

There are even some lenders who are not sure about all the information they need themselves and therefore, even when all the information has been provided, applications are taking a lot longer than they used to. Brokers are also finding that different lenders are asking for the information in different formats, creating even more work for brokers.

While in the main, brokers know about the changes, for those who only occasionally deal with clients with portfolios of properties, the extra information required can seem as incomprehensible to them as it does to their clients.

And this is then compounded by the fact many reports are suggesting that landlords are ‘selling up on masse’ as a result of the changes so there is little buy-to-let business around away.

However, we have not seen any evidence of this, and in any case, I think we need to give landlords more credit.

Landlords are not going to sell up just because of a few changes to tax rules, most will take a much more pragmatic approach. And even those who do sell up, it is more than likely another landlord will take on the property anyway.

We know that for many brokers, the extra time and effort needed to put together a buy-to-let application may put them off, but the reality is, there is still a huge appetite out there for buy-to-let, and we are working hard to support all our brokers to enable them to keep writing good quality buy-to-let business.

Source: Mortgage Introducer

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UTB poll: 92% of brokers braced for rate rise

Some 92% of property and asset finance brokers think the Bank of England will further increase the base rate this year, research from UTB has found. 

A poll of over 120 respondents found that just 7% believe the base rate will remain unchanged throughout 2018. Surprisingly 1% feel that we could see a drop.

In a further question, brokers were asked to indicate whether they believed Theresa May would still be the Prime Minister at the end of the year.

And 72% believed she would see out the year in Number 10, however 28% believed there would be a change of Prime Minister in 2018.

Harley Kagan, group managing director – United Trust Bank, said: “Since November 2017 when the base rate was increased, speculation about when the next move would come has been rife.

“However, in all the polls we’ve held at UTB, this result has shown the biggest consensus amongst finance brokers expecting a rate rise this year.

“However, although there seems to be expectation that an increase could come as early as May, there are several factors which might cause the Monetary Policy Committee (MPC) to show more caution.

“For example, The Term Funding Scheme ended in February. This provided below market cost liquidity to banks in order to encourage lending to the public and its removal may already be having an impact on saving and lending rates.

“In addition, the Bank of England has so far assumed a relatively smooth path to Brexit, but with substantial divisions within parliament, and within the Conservative Party itself, Theresa May is unlikely to find it easy to guide through her preferred Brexit based on a fragile majority. Indeed, more than a quarter of brokers believe she may not be the PM presiding over the actual Brexit at all.

“With so much uncertainty still surrounding what the UK’s economic and trading position will look like come April 2019, there’s a strong argument for leaving rates alone until the outlook becomes clearer.”

Source: Mortgage Introducer

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Only 10% of brokers think the UK government is in control of Brexit

Just 10% of brokers believe that the UK government is in control of the Brexit process, United Trust Bank’s broker sentiment poll suggest.

The survey of over 140 intermediaries working in the fields of property and asset finance, carried out by UTB in October, found almost two thirds (63%) of brokers felt that it was actually the European Commission who were in control whilst 24% thought that negotiations were evenly balanced. The remaining 3% didn’t know.

Harley Kagan, group managing director at United Trust Bank, said: “Since the EU referendum result was announced UTB has taken the view that Brexit would increase uncertainty and that we all needed to adapt to it.

“I’m pleased to say that that’s precisely what UTB and the vast majority of our customers have done.

This news follows a difficult period for the government following the recent departure of two cabinet ministers, Michael Fallon and Priti Patel and criticism of foreign secretary Boris Johnson.

Kagan added: “However, although Brexit hasn’t stopped UTB from having another successful year, there’s no denying that UK businesses and households would benefit from having a clearer picture of what life outside of the EU will look like after March 2019.

“At the moment, we appear to be making very little headway on very important issues such as trade and the free movement of labour, both of which could have a considerable impact on UK PLC.

“On the positive side, we’re not the only business which has grown despite the uncertainty. Figures from UK Finance show that mortgage lending for home purchases and remortgages has increased year on year.

“The FLA has reported strong growth in both asset finance lending and second charge loan volumes and bridging finance volumes have increased once again. Uncertainty appears to be the new normal and change will continue to happen.

“Whether you believe that Brexit, a slowing economy, cooling house prices or any other factor beyond our direct control will bring opportunity or failure, you’re probably right. At UTB, we choose opportunity every time.”

Source: Mortgage Introducer