News

The number of interest-only mortgages halves in 6 years

May 24th, 2018 . Posted in News |

The number of UK households with an interest-only mortgage has fallen dramatically since 2012, according to UK Finance.

UK finance report that there are now currently 1.7 million interest-only mortgages, a reduction of 46 per cent in the past 6 years. The value of interest-only mortgages is now c.£250 billion, a reduction of 37 per cent.

An interest-only mortgage sees monthly repayments of only the interest charges on the loan and not the original capital that was borrowed. It was a fairly popular way of financing a property purchase when interest rates were higher and when the housing marketing was experiencing strong house price growth.

Many analysts had feared that interest-only mortgages were something of a “ticking time bomb” as research and anecdotes show many people don’t have a plan to pay off the underlying debt.

As interest rates have fallen, it has become more financially affordable for people to switch to repayment mortgages to begin clearing down the original debt, as well as interest charges.

Managing Director, Hiten Ganatra: “This is positive market analysis, which shows that UK households are putting more emphasis on paying down outstanding mortgage debt.”

If you are a homeowner on an interest-only mortgage and would like to speak to a mortgage broker about switching to a competitive, repayment mortgage please get in touch with our team by calling 01908 465100.


Homeowners are moving less frequently

May 16th, 2018 . Posted in News |

Recent BBC research suggests that homeowners are moving property less frequently now than they did before the 2008 recession. A number of reasons are cited, including higher house prices, stricter lending rules and fewer larger properties available on the market. The research undertaken by Savills for BBC News, shows that pre-2008 people were likely to move, on average, 3.6 times after buying their first property. Now, that is more like 1.8 times after buying their first property.

The knock-on effect on the housing market is that it is likely to become more stagnant as fewer people are looking to buy and sell their properties. Couple that with a decade of inflation that has eroded any wage growth and the result is a generation that has missed the opportunity to move on to the next rung of the housing ladder. Whilst home moves are happening less frequently, current homeowners are taking the opportunity to remortgage existing properties in order take advantage of historic low interest rates.

Mortgage brokers are seeing an increase in remortgaging business. According to the Paragon financial adviser confidence index, remortgage activity is accounting for approximately 41 per cent of business, compared with 37 per cent five years ago.

That trend suggests that more homeowners are investing in their current properties with redecoration, extensions and extended maintenance programmes in order to improve the quality of their current property, rather than trading up for a bigger or better property.

The knock-on effect of fewer housing transactions could cause a mid-market housing bubble due to a shortage of typical second-home properties, such as 2 or 3 bedroom houses.

If you are a homeowner looking to take advantage of historic low rates, or you are looking to secure some additional finance to make home improvements, call us on 01908 465 100. We’re a fee free mortgage broker, which means you won’t be charged a fee by us. We recover our fee from the lender, ensuring that we keep the cost of remortgaging as low as possible for you.


Bank of England delays interest rate rise

May 11th, 2018 . Posted in News |

During the first half of 2018 economists have speculated that interest rates will rise in line with an improving economic picture, stability in wage growth, a strengthening pound and growing consumer confidence. However, the Bank of England’s Monetary Policy Committee held rates at 0.5 per cent in May, as a softening economic outlook and a GDP slowdown prevented an immediate rate rise.

The mid-term forecast is that interest rates will rise in 2018, expecting to normalise at 1 per cent. Despite some shock to the economy, Bank of England governor, Mark Carney, remains confident that the UK economy is on a strong course: “The underlying pace of growth remains more resilient than the headline data suggest.”

The Bank of England’s Monetary Policy Committee voted seven votes to two in favour of keeping rates held at 0.5 per cent, as growth forecasts for 2018 are cut from 1.8 per cent to 1.4 per cent. First quarter GDP growth was near-stagnant at just 0.1 per cent.

Economists suggest that the Monetary Policy Committee want some consistent signs that the UK economy is trending in the right direction before voting in favour of rate rises.

For UK households, historically low interest rates are helping to keep borrowing costs low. The indications are that interest rates will be rising within the next couple of months, perhaps initially to 0.75 per cent. For those on tracker mortgages or on a standard variable rate mortgage, this means an increase in monthly payments. At Visionary Finance, we can help appraise your finances and lock in low monthly payments on a range of competitive fixed-rate deals. Call us on 01908 465 100 for more details.


New Changes to Rental Tax Profits

April 4th, 2018 . Posted in Landlords |

In the July 2015 budget the Government announced proposals to restrict the income tax relief available for interest cost for Buy to Let landlords. So what are the new changes to rental tax profits? The new measures – which have been gradually introduced since 6th April 2017 – are aimed at restricting relief on finance cost on residential properties. These changes will affect individual landlords, partnerships and limited liability partnerships who will no longer be able to claim finance costs as a deduction from rental income to calculate the taxable rental profit. It will be replaced from the individual’s/partner’s income tax liability.

The changes mean that landlords will no longer be able to deduct all of their mortgage interest costs for their property portfolio in order to arrive at the base figure for their company profits. All income will now be lumped together and tax on everything will be subject at least to the basic rate of income tax.

The actual, progressive rules mean that landlords will be able to obtain relief as follows:

  • in 2017 to 2018 the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction
  • in 2018 to 2019, 50% finance costs deduction and 50% given as a basic rate tax reduction
  • in 2019 to 2020, 25% finance costs deduction and 75% given as a basic rate tax reduction
  • from 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction.

The Government also announced measures which affect the 10% wear and tear allowance which was available based on the gross rental income. Moving forwards, only the actual expense will be allowed to be offset against the rental income. Companies will not be affected by these new rules.

Key impact of these changes:
  1. These changes will give rise to higher Income Tax liabilities for landlords due to the reduction in allowable expenditure resulting in an increase in total income
  2. Basic rate tax payers may now fall into higher rates of tax as they will be taxed on turnover as opposed to profits

Lets look at a worked example to assess the impact of these changes in 2020/21 versus pre-section 24 rules*:

A landlord has one BTL property worth £400,000 where his income is from rental is £18,000. She has actual expenditure cost of £1,500 and mortgage finance cost of £9,000. She also is in full time work and has a salary of £48,000.

Pre Section 24 rules New rules – 2020/21
Income  £18,000.00 Income  £ 18,000.00
Expenditure -£  1,500.00 Expenditure -£   1,500.00
Finance Cost -£  9,000.00 Taxable profit  £ 16,500.00
Taxable profit  £   7,500.00
£16,500 @ 40%  £   6,600.00
Tax due on rental profit  £   3,000.00
£7,500 @ 40% Less: basic rate reduction -£   1,800.00
Tax due on rental profit  £   4,800.00
Cash Position  £   7,500.00 Cash Position  £   7,500.00
Tax payable  £   3,000.00 Tax payable  £   4,800.00
Net Cash  £   4,500.00 Net cash  £   2,700.00

 

*Worked example does not constitute tax advice and is just for illustrative purposes only.

What options are available to minimise the impact of the Section 24 rules?

Many landlords are now considering incorporating their business into a limited company to avoid being caught up by the new rules. There are benefits and drawbacks to setting up a limited company for purchasing rental properties with the main one being the mortgage availability for limited company buy to lets. If you would like to weigh up the options and explore mortgage availability why not speak with Visionary Finance who are independent and whole of market mortgage advisers specialising in buy-to-let mortgage advice. Our free and expert advice will certainly benefit landlords looking to continue to grow their property portfolio.

If you have any queries about the borrowing or lending process, please call our office on 01908 465100.


Failure to comply with MEES could affect your finances

March 17th, 2018 . Posted in Landlords |

Some landlords are likely to be affected by the Government’s upcoming Minimum Energy Efficiency Standards (MEES), as these key obligations and responsibilities to comply will largely fall on them. Specialist Landlord Insurance provider Just Landlords explains why it’s essential that landlords stick to the rules.

From 1st April 2018, it will be illegal to grant new tenancies or renew existing contracts if the building in question doesn’t meet the minimum Energy Performance Certificate (EPC) rating of E. As such, it’s important you’re able to get your property up to scratch as soon as possible, as it could greatly affect both your long-term and short-term finances.

Whilst the necessity of an EPC rating is not new, and the necessity of this certification came into place in 2008, the requirement for an E rating will now apply to nearly all buildings and tenancy agreements. As well as possibly incurring an upfront fine and fixed penalty, you might find yourself without tenants until your property meets the necessary standards, losing out on income, which can be avoided.

The most expensive consequence of failing to comply with the new MEES is a potentially hefty fine. If you don’t make sure your building at least holds an E rating before letting it out, and you still let it to tenants, you could be facing fines of more than £4,000, possibly even higher depending on the circumstances and your property.

At only £60 to £120, obtaining an EPC for your property is definitely a better option than possibly being fined thousands for not complying with the new MEES. You simply book a qualified assessor to inspect your property and assign you a rating. If it doesn’t meet the new legal requirement of E, some things you can do to improve it include:

  • Changing lightbulbs to low energy versions
  • Insulating your roof
  • Ensure any cavity walls are filled (funding is sometimes available for this)
  • Install renewable energy sources, such as a small wind turbine or solar panels
  • Introduce a room thermostat, individual radiator valves or a boiler programmer
  • Replace your old boiler with a more efficient model

Whilst it might not seem like the most appealing way of spending your hard-earned profits, especially if you don’t personally live in the building you own, you could greatly improve the quality of life of your tenants. Not only this, but if you should find yourself without tenants, you could attract potential tenants much quicker if your property complies with the new MEES, as well as increasing the value of your property if you come to sell if one day, or even the monthly rent price.

With potentially no tenants in the property until the EPC rating is improved, it could mean that months of rent are missed, meaning you’re losing out on valuable months of income. Not only does improving your EPC rating benefit any future tenants on cheaper fuel bills, but, if there is a period of time in which there is nobody renting the property, the landlord is generally responsible for bills. Especially during the winter, when turning the heating on in your properties helps keep damp and frozen pipes at bay, this will be much more cost effective for all involved if your property is more energy efficient.


Mortgage Broker or Bank?

February 13th, 2018 . Posted in News |

Whether you are a first-time buyer looking for a mortgage, remortgaging, looking to move into a bigger home or want to take advantage of the government’s Help to Buy scheme, you have one important decision to make: whether you should use a mortgage broker or bank.

In this article we will look at the benefits and pitfalls of going direct vs using a firm of independent mortgage advisers like Visionary Finance.

 

Going Direct to your Bank/Building Society

Of course, it is possible to approach your bank or building society and arrange your mortgage directly with them. One of the major benefit of doing so is that the bank will know your profile as a customer thereby potentially reducing the requirement of supplying supporting paperwork and documentation. They may also be able to offer you a pre-approved lending limit so you will know at the outset how much you lending you will be eligible for. By having a pre-existing and long-term relationship with your bank/building society, however, provides no guarantees that you’ll benefit from any preferential mortgage rates, because banks and building societies can only offer mortgages from their own product range. A further limitation to using your own bank/building society is that you have to fit their specific eligibility criteria. If your circumstance does not meet the rigid lending criteria you will either be offered a lower loan amount or declined an offer for lending. This lack of flexibility in lending policy, as well as limitations in mortgage products, can mean that you may be paying a higher rate of mortgage interest and not benefitting from the best deal in the mortgage market.

 

Using a Mortgage Broker

When identifying which firm of brokers you would like to work with, it is important to consider the following:

  1. Is the broker independent of all banks and building societies?
  2. Does the broker offer mortgages from the whole of the mortgage market or are they tied to a limited panel?
  3. Is the broker charging a fee for their service or are you getting a fee-free brokerage service?

Some mortgage brokers are tied to certain lenders only, meaning they are restricted in the number of lenders they have access to, thereby limiting the possibility of you getting the best mortgage deal. As a consumer, your best position would be to engage with a broker who will offer you mortgage options from the whole of the mortgage market meaning you get the lowest rate based on your circumstance. Many independent mortgage brokers charge a brokerage fee which will be payable to them once they arrange your mortgage for you. In addition to the brokerage fee charged, the broker will also receive commission from the lender. Paying a brokerage fee doesn’t mean that you will receive any special access to rates or lenders because if the broker is whole of market a non-fee charging broker can do exactly the same things as a fee charging broker. Charging a fee in addition to receiving commission is merely brokers topping up the amount they earn on a case.

 

Why Visionary Finance?

We have built our reputation on providing excellent customer service, and what makes us an attractive brokerage is that we do not charge a brokerage fee and we are an independent whole-of-market mortgage broker.

Our service offering provides a very convenient solution for our clients ensuring that most of our document verification is done electronically. We also transact with many of our clients by telephone and email allowing their mortgage to be facilitated without having time consuming face to face meetings. We’re able to utilise and leverage our wide knowledge of the market to provide you with a mortgage deal that suits your circumstances. Our expert mortgage advisors are able to provide you with impartial advice and we take pride in offering a personal service.

We are also specialists in the new build sector and for help-to-buy mortgages. We have built relationships with some of the largest housing developers in the country, offering a tailored solution that helps first-time buyers to get on to the property ladder.

Additionally, we have extensive knowledge in buy-to-let mortgage market particularly since the recent PRA and FCA changes that were introduced in September 2017. We have built an excellent reputation with landlords across London and the South of England. Our knowledge of the buy-to-let mortgage market and the tax implications for landlords puts us in the best position to provide expert advice.

If you are considering a mortgage broker or bank, check out this useful guide from money.co.uk, or get in touch with our team today by calling us on 01908 465100 and we’ll demonstrate our customer service.


Is now a good time for interest rate security on your mortgage?

February 12th, 2018 . Posted in News |

In light of the recent announcement by the Bank of England that rates are likely to rise sooner than first expected, why not allow us to review your mortgage and to explore the option of fixing your mortgage to hedge against any interest rate movement.

In February’s Bank of England Monetary Policy Committee meeting, it was decided that the base rate would be kept at 0.5% but warned that an increase in the base rate would come sooner than was anticipated. Ben Broadbent, the Deputy Governor of the Bank of England, said on Friday that he did not think that a couple of interest rate rises in the space of a year would come as a great shock. On the back of these comments the financial markets are predicting that there is a 70% chance of a rate rise in May 2018.

As a result of these forecasts we have looked into the best fixed-rate mortgage options for you to consider, in order to minimise your exposure to interest rate movements.

If you would like to discuss your specific circumstance or mortgage requirements with us, then please get in touch immediately on 01908 465100. We will run through a few questions to understand your circumstance and will be able to instantly provide you indicative mortgage options.


Insurance Cover – Online vs Human

January 18th, 2018 . Posted in Protection |

Life insurance isn’t the most engaging of topics at the best of times. If the thought of life insurance is making you want to sink in to an early grave, bear with us. Even if you come away with a half-smile, having learned something mildly interesting, it’ll be worth the read.

As the technological landscape changes, so does how we get around, how we communicate and how we source products. It used to be that we implemented technology to help us adapt to a more demanding market, but it seems of late it’s us who are now having to adapt to an ever evolving, unrelenting, technology-ridden culture. Technology has certainly made some things easier now. But does that mean they’re better?

With protection products, like anything from music to underwear, you can buy it online. It’s fast. It’s easy. And you can do it at your leisure. So, why not buy online?

If you know what you’re looking for and genuinely read the Terms and Conditions for everything you buy or subscribe to, there’s no reason not to buy protection products online – but at your own risk.

By buying life insurance, critical illness cover or income protection online yourself, it’ll mean you won’t have access to the Financial Services Compensation Scheme as the onus is on you to fully understand what you’re purchasing and its limitations. If, like 73% of people in 2014 (source: Guardian), you do not fully read the T’s & C’s, you could be in for a huge surprise when it comes to a claim.

If you misunderstood a question and accidently answered incorrectly when applying, the insurer could class that as ‘non-disclosure’. Simply put, it could mean they don’t pay out. This often adds to the myth that life insurance policies never pay out. To ease your mind with this regard, the Association of British Insurers (ABI) confirmed in 2015 98.2% of all term assurance policies (the most popular type of life insurance policy sold) paid out (source: ABI).

On critical illness policies, there are definitions the insurers use for illness covered. These definitions have a minimum standard laid out by the ABI. For example, the definition for stroke with some insurers will be such that the claimant will have to have been told by doctor (or medical practitioner) they’ll have permanent residual symptoms brought on by the stroke in order for them to pay out a claim. Other insurers may say they’ll pay out after 24 hours of the claimant having symptoms of the stroke.

When buying online, there is little material available and that which is available is cumbersome and non-specific. ‘Key facts’ documents rarely have the full definition in writing. You’ll have to have purchased the policy and had ‘the handbook’ sent to you via post for you to see the particular definition – or search it online, then compare with other insurers. Then, liaise with someone with a medical background to establish which definition is more robust. Even when this is done, you’ll be led to complete an application online and if you have a medical disclosure, family history of things like diabetes, cancer or Huntingtons Disease or your occupation requires overseas travel, you could be stuck with a price increase (known as a rating or loading) and/or have exclusions applied to your policy.

Sadly, most people will either just take it on the chin and keep the policy they applied for, as they don’t have time to go through another application, reapply with another insurer and get a similar situation, or they’ll give up on protecting themselves completely.

This needn’t be the case.

If you speak to a professional, preferably someone with an R05 qualification, they can ask about health, lifestyle, occupation etc up front. They can also speak to the underwriters to establish an accurate quote. Furthermore, they will have a good understanding of the quality of the policy (particularly with critical illness cover and income protection). They will also be able to give sound advice around how best to structure the cover to keep costs to a minimum.

Give one of our Protection Specialists a call today and we’ll do just that.

This article was created by Kish Gohil, senior protection consultant.


A fee-free mortgage brokerage service

January 16th, 2018 . Posted in News |

At Visionary Finance, we believe first and foremost in the importance of providing excellent customer service. It’s the foundation that we have built our business on, established since 2008. We understand that the house buying process is a stressful and expensive process, with various fees and charges payable along the way. Some of these fees include solicitor fees, search fees, estate agent fees, valuation fees and mortgage product fees. All these fees can amount to thousands of pounds and therefore to reduce the fee burden on our clients, we offer a fee-free mortgage brokerage service.*

We manage the entire process on our clients’ behalf, from the initial fact-find, product and research stage, right through to application submission until the mortgage offer has been issued by the lender. For this end-to-end professional service, we do not charge our customers any brokerage fee. We only recover a procuration fee from the lender on completion of our client’s mortgage transaction. That means that we will stay completely engaged with our client’s mortgage application from the first conversation, right up until the mortgage funds are secured and completion of the house purchase has taken place. As providing excellent customer service to our clients is paramount, we have our own mortgage processing team who keep our clients updated throughout the application process. This ensures speed and efficiency of service, resulting in queries and document requests from lenders being responded to promptly.

We provide our customers with honest and impartial advice. We have got access to over 50 different high street and specialist mortgage lenders, some of whom aren’t available directly and only available via mortgage intermediaries like ourselves. This provides our customers with exposure to the whole of the mortgage market, giving us the ability and flexibility to service all personal circumstances and mortgage types.

We are approved by some of the largest new-build housing developers in the country. If you are looking to secure a new-build property, we can provide you with some excellent new-build mortgage options. We also provide specialist advice for the government help-to-buy mortgage schemes. If you’re seeking to get a foot on the property ladder, our vastly experienced mortgage consultants can discuss your options.

Our knowledge in the buy-to-let sector is unrivalled and we work with numerous experienced and professional landlords to help facilitate mortgage funding. Due to recent changes in the buy-to-let lending sector this area of mortgages has become very specialised. We are confident that by working with us you can be sure to be receiving the best buy-to-let mortgage advice, all for zero brokerage fee.

We’ve built our business on the firm foundations of providing a service we can be proud of. If you’d like to begin the process of securing a mortgage without having to pay a broker a fee and receiving unrivalled customer service then please get in touch with our team.

Please read our customer testimonials, demonstrating our credibility and give us a call on 01908 465100 if we can help secure a fee-free mortgage.*

* There may be a charge applicable for foreign mortgage applicants.


Investment Choices for Landlords in 2018

December 18th, 2017 . Posted in Landlords |

There’s no denying that 2017 has been another challenging year for property investors. With more obstacles to overcome and inevitable changes in the pipeline, specialist Landlord Insurance provider Just Landlords looks at the investment choices that landlords have going into 2018…

 

Be prepared to change your strategy

The buy-to-let sector has faced a barrage of legislative and regulatory changes over the past couple of years, which could have left your portfolio a little worse for wear. In a changing market, you may find that you need to make changes to your investment strategy, in order to make your portfolio more profitable.

To be as prepared as possible for a potential change in strategy, start assessing how well your portfolio has performed over the past year and highlight any areas that need addressing. If you find severe issues, for example, if one of your properties is making a loss, then you know that you need to make changes in the New Year.

 

Consider moving to a limited company 

One change that you could think about making is moving your property portfolio into a limited company structure. This particular adjustment relates specifically to the Government’s reduction in tax relief on landlords’ finance costs. If you operate as an individual landlord, then you may be aware of the changes, which have been brought in on a gradual basis from April 2017.

Next year, further reductions will be applied, so you should start looking at your taxes on a long-term basis, considering whether moving onto a limited company structure could be the best bet for you – limited companies are exempt from the changes.

 

Think about your whole portfolio 

Furthermore, the Bank of England’s Prudential Regulation Authority (PRA) introduced some additional underwriting standards on portfolio landlords – those with four or more mortgaged properties – at the end of September this year. This could make it more difficult for you to expand your portfolio using mortgages in the future.

In addition, buy-to-let landlords also have the Government’s 3% Stamp Duty surcharge to consider when purchasing more properties. However, you must think about whether these short-term hurdles are significant enough to damage your portfolio in the long-term.

 

Look at how your portfolio is managed

While the Chancellor appeared to give landlords a break in his latest Budget announcement, 2018 is still set to bring with it some regulatory changes in the private rental sector, most notably a ban on letting agent fees for tenants. This could see agents pass these costs onto their landlord clients instead.

If your finances aren’t as healthy as they used to/should be, one option to think about is managing your properties yourself, rather than using a letting agent. However, you must ensure that you have enough time and knowledge to fulfil all of your legal obligations as a landlord before choosing to self-manage.

 

In such uncertain and shifting times, it can be difficult for investors to stay completely on top of all of the regulations and financial changes that they face. Remember that it’s wise to always seek professional advice before making financial decisions.