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Mortgage Market News 
 

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Mortgage Market News 

Whats in this edition?

  • Santander's view on the recent Buy to Let changes 
  • Virgin Money will help you zone in on first time buyers
  • Affordability stress testing 
  • Accord Mortgages launch an innovative discounted reversion rate to improve affordability for landlords
  • Rental stress rates
  • Coventry for Intermediaries launch four new dedicated pledges to support it's intermediaries
  • Upcoming Paradigm events 


Santander’s view on recent Buy to Let changes and the effect on the market in 2016
Buy to Let (BTL) accounts for about a third of the Private Rental Sector (PRS). The role of the PRS and BTL are both fundamental to meet the requirements of our growing population who need flexibility in their living arrangements.
 The recently announced changes to Stamp Duty Land Tax (SDLT) combined with the phased reduction in tax relief (and removal of the wear and tear allowance) will have a direct financial impact on both landlords and tenants. We expect the market to absorb these additional costs through a combination of increased rents, landlords adjusting their business models, and a reduction in net profits. Although we’ll likely see a small reduction in purchase activity from Q2, we don’t expect to see a drastic reduction, as 60% of BTL new business is remortgages.
 
HM Treasury look likely to grant powers of direction to the Financial Policy Committee (FPC) by Q2. These powers could reflect what has recently happened in the residential market. The FPC’s tools could see tightening of interest cover ratios (ICR) and a review maximum LTV limits. This could be individual lending limits, or as a percentage of lenders’ BTL books.
 The number of BTL mortgage applications through a limited company tripled in September 2015 versus September 2014, but still remains relatively low. The SDLT consultation process suggests measures so that the increased rate will also apply to limited companies.
 The BTL market has grown significantly over the past few years and we expect it to remain healthy this year, with growth slowing from 2017 as the phased reduction of tax relief begins.  The market has matured in the last two years giving it a more stable base from which it can adapt to the planned change and uncertainty ahead.



Build your business with their fabulous First Time Buyer Zone
With initiatives like Starter Homes and Help to Buy schemes, it’s expected that the first time buyer market is set to flourish in 2016. And with most first time buyers needing financial advice, there is a big opportunity for you to grow your client base.
Check out Virgin Money’s First Time Buyer Zone
They have created a dedicated First Time Buyer Zone packed with tools, tips and guides for you and your first timers. From home-buying hints for them, through to email and letter templates for you, they want your first time buyer business to go from strength to strength.
Products to please your first timers
  • Deals available up to 95% LTV with cashback up to £1,500.
  • Help to Buy: Equity Loan Products available including Stamp Duty Buster range with cashback up to £2,500.
  • New Build deal available exclusively to intermediaries.
Virgin Money know your new clients want to get their offer quickly, so they are proud to say that 96% of fully-packaged first time buyer applications that went to offer did so in 10 days.*
And remember, as a registered intermediary you get exclusive access to Virgin Group discounts –also available to your clients when they become a Virgin Money customer.
To find out more, visit Virgin Money’s First Time Buyer Zone or talk to your dedicated BDM.
There are partnerships and there are Virgin Money partnerships

*Statistics based on intermediary first time buyer mortgage application data from 1 July 2015 to 22 January 2016.


AFFORDABILITY STRESS TESTING 
Please find below my updated tables on affordability.  I have been comparing these Lenders quarterly since MMR day in April 2014 using exactly the same scenarios each time.  As you can see, some of the lenders have moved around in the tables since the last review. Nationwide and Halifax remain within the top three for first time buyer lending, Skipton and Platform both rose in the tables. For the next time buyer affordability Virgin Money topped the table whilst Natwest and Platform also climbed up places.
 
Scenario 1 –  Joint First time buyer at 90% LTV – no dependants. Student loan and credit card debts.  Incomes £28,000 and £25000 + car allowance £500 pcm respectively (wishing to borrow £225,000)
Nationwide – £280,300
Halifax – £280,250
Barclays - £276,802
Leeds – £269,773
Skipton – £269,750
Santander- £260,902
Virgin – £264,910
Platform – £264,910
NatWest - £250,700
Accord – £245,401
Kensington – £226,567
Coventry – £204,917
 
Scenario 2  Joint Next time buyer 70%LTV – 2 dependant children, car loan and nursery fees.  Incomes £55,000 + £6000 car allowance and £45000 respectively (wishing to borrow £300,000)
Virgin Money - £454,500
Platform - £453,490
NatWest - £451,700
Kensington - £433,980
Halifax - £418,700
Nationwide - £417,300
Santander - £395,880
Skipton - £379,500
Leeds - £376,893
Barclays - £365,858
Accord - £354,497
Coventry - £352,216

 
 

ACCORD MORTGAGES OFFERS LANDLORDS FLEXIBILITY WITH INNOVATIVE REVERSION RATE
 
Accord Buy to Let has launched an innovative discounted reversion rate to improve affordability for landlords following the fixed rate period of their mortgage.
 Landlords coming to the end of a two-year or three-year fixed or tracker rate mortgage can benefit from a new reversion rate of 4.04% until the fifth anniversary of their mortgage – a 1.75% discount from Accord’s standard variable rate (SVR) of 5.79%.
 Landlords on the discounted rate won’t have to pay any early repayment charges after their initial term, and can redeem their mortgage at any time.
 
 Accord Mortgages are also giving residential first-time buyers a boost by offering them an extra £500 cashback when they complete on a mortgage.
 
All first-time buyers completing on a fixed rate residential mortgage with Accord at 90% or 95% LTVs will be eligible for the extra cashback, which will be applied on top of all other existing incentives for the specific fixed rate they choose.
 For example, under the new offer, a first-time buyer who took out a 2.59% two-year fixed rate with a 10% deposit, which has a £845 product fee, free standard valuation and £250 cashback on completion, would receive an additional £500 cashback, taking the total cashback on completion to £750.
 The extra cashback is designed to help first-time buyers with the upfront costs of moving into their first home.

RENTAL STRESS RATES 

I have collated rental stress rates for all BTL lenders on our panel, you can view this here. Kent Reliance have recently brought in new rental rates and a handful of other lenders have tweaked theirs

    
                                           

The Coventry for Intermediaries value their relationship with you – you’re an integral part of their business and one they value highly. In fact, for over eight years they’ve vowed to support you through their dedicated intermediary pledges. That’s why they’re launching even greater pledges to support you and your clients every day with their four pledges - focussed on you. Take a look here
 

Paradigm workshops and seminars 
14th April - Southampton - MCD & Mortgage MasterClass 
19th April - Exeter - MCD & Mortgage MasterClass
5th May - Cobham - MCD & Mortgage MasterClass 

GET IN TOUCH

If you would like more information on any of the items detailed in this bulletin then please get in touch on the numbers below or visit our website: www.paradigmmortgages.com

Mike Allison (Head of Protection) – 0775690340
Christine Newell (Mortgage Technical Director) – 07824708956
Catherine Kennedy (Mortgage Technical Assistant) - 07741314769
Birmingham Office: Riona Mulherin – 0121 781 7338/7337

 
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