What's in this edition?
- Paradigm Compliance Update - The Chancellor’s Autumn Statement Highlights
- Virgin Money- Reasons to grow your remortgage business
- Coventry for Intermediaries- Keeping success simple
- The Mortgage Lender- An introduction
- The Right Equity Release- The benefits of a lifetime mortgage
- Paradigm's Upcoming Events
The Chancellor's Autumn Statement Highlights
The Chancellor Philip Hammond's first Budget speech was heard on the 23rd November 2016, just after Theresa May had finished with Prime Minister’s question time. In a different style from George Osborne, he cracked a few jokes about Boris Johnson not getting the top job and asking John McDonnell, Shadow Chancellor, whether he could dance as well as Ed Balls.
Aside from the jokes, the main points from his budget speech were around improving two areas.
- The Productivity Gap in the UK
- The lack of affordable housing
I want to highlight the main areas where this Autumn statement could affect the clients you talk to on a daily basis:-
- A new Housing Infrastructure Fund of £2.3bn to support the building of up to 100,000 homes in areas where there is the most demand
- £3bn Homebuilder’s Fund for 200,000 new homes and £2bn to build on public sector land
- £3.15bn to build 90,000 affordable new homes in London
- £1.4bn to deliver 40,000 additional affordable homes
- Private rental – up front letting fees charged to tenants will be banned as soon as possible
- Continuation of the Right To Buy and Right to Acquire Schemes from Council and Housing Associations as well as Equity Loan Help to Buy and Help to Buy ISA.
All of the above makes some good reading in terms of certain areas of the market that you may not be currently trading in, such as Right to Buy and New Build. In these areas, you may need some extra training and CPD focus, which you can detail in your Training & Competency Schemes for 2017. Paradigm will also be looking to support these areas via our 2017 Lending Workshops, Newsletters, Compliance Bulletins and Hints and Tips emails.
Personal taxation, Pension and Savings
- The basic rate of tax band rises to £11,500 and will be at £12,500 by the end of this Parliament
- The higher rate of tax band will rise to £50,000
- From April 2017, employers and employees will pay National Insurance contributions from the same threshold of £157 per week
- Salary Sacrifice – from April 2017, the tax and employer NI advantages on salary sacrifice will be stopped except for arrangements involving pensions, child care and cycle to work and ultra-low emissions cars.
- Pensions – Money Purchase Annual Allowances to be reduced to £4,000 from April 2017 but there is a consultation paper which closes on the 15th February 2017
- Taxation on foreign pensions will be more aligned to UK pensions
- Consultation on how to tackle pension scams. Cold calling pensioners will look to be banned and it will make it harder for scammers to abuse Small Self-Administered Pension Schemes
- ISA – will increase to £20,000 from April 2017
- Junior ISA and Child Trust Fund will increase to £4128 from April 2017
- NS&I – A new 3yr bond is to be launched with a rate of 2.2%. Open to anyone over the age of 16yrs. Minimum of £100 and maximum of £3000. Will be available for 12 months from Spring 2017
- Property held indirectly by a non-domiciled individual through an offshore structure such as a company or trust will be charged inheritance tax from April 2017
- Once the Finance Bill gets Royal Assent, IHT relief for donations to political parties will be extended to parties with members in the Scottish Parliament, the National Assemblies for Wales and Northern Ireland and as well as parties that have won by-elections.
- Insurance Premium Tax rises from 10% to 12% in June 2017 and whiplash claims will be no longer covered
Next April, changes to income tax bandings will come into force which could help save money for landlords and may give them a little extra leeway, particularly where they are close to the limits on tax bands. The downside of the increase on Insurance Premium Tax will be the financial effect on clients wanting to take non-exempt insurance products such as buildings and contents, car or travel insurance. The Government have regularly increased this since it was introduced by Ken Clarke in 1994 and brings it even closer towards the VAT threshold.
If you would like further information on the Autumn Statement and changes that might effect areas of your business or you want to discuss getting into new business areas then please contact me using the details below.
Mortgages Technical Director
Mobile 07824 708956
Reasons to grow your remortgage business
Making an active effort to build remortgage volumes could reap rewards. Despite this, remortgaging still accounts for 33% of all mortgages, according to the CML’s August 2016 figures. Remortgaging has not always been the easiest sell, with falling interest rates meaning even borrowers on a SVR have seen their mortgage costs come down, removing a major incentive to switch. Helping your clients to remortgage can be a no-brainer. It’s the right thing to do for many clients and it’s good for your business.
Retention proc fees
Many lenders now offer procuration fees on product transfers, meaning that you can assess your clients’ needs and if they are better off, or prefer to stay with their existing lender, you still get paid for your work. Once you have discussed with your client and advised them on the right product for them, the actual product transfer process can be quick and retention procuration fees can make it a valuable source of business. For example, Virgin Money pays 0.38% gross.
Get precious client referrals from happy customers
Client referrals are free and are likely to bring in clients who have already believe you offer a great service. Targeting existing clients who you think you can save money by remortgaging is a great idea. They will recognise that you are looking after their best interests, making them more likely to refer you to friends.
Ride out market fluctuations
Having a good balance between purchase and remortgage activity can be a smart move, it means your business has a buffer against market dips, leaving you less exposed to peaks and troughs in purchase volumes.
It's a smoother process
Purchase business can come with a whole host of frustrations. By contrast remortgage business can be easier and less likely to fall through.
Plus, if it’s an existing client of yours that is remortgaging, you should have most of the information already, so a lot of the time-consuming work is already done.
The Coventry for Intermediaries - keeping success simple
With more than 90% of their mortgage business generated by Intermediaries, here are just a few useful facts that you may not know about the Coventry:
The Coventry for Intermediaries offer a competitive range of products*:
- Fixed rates for 2, 3, 5, 7 and 10 yrs with reducing ERC’s
- Flexx for Term, Flexx Tracker and Flexx Fixed are all ERC-free across our Residential, Offset and BTL range
- Their simple Offset repayment mortgage provides an instant access savings account
- A standard mortgage valuation is included on all their Residential, BTL & Offset products (up to a property value of £1m.
(*Subject to availability)
They deliver on their pledges:
- They give you 48 hours notice of product withdrawals
- They’re open and honest about their service times, which are published online and updated throughout the day. Over the year to date:
- Their average call waiting time has been less than 30 seconds
- 80.3% of AIPs received have been worked the same day
- 87.5% documents have been processed within 24 hours
- Their average time to offer is 13 days
They make submitting business easy:
- Online AIP and application submission for up to 4 applicants
- Document upload facility
- Online Case Tracking and useful Copy Case facility
- Online standalone affordability calculator which matches the application
- Standard valuations are instructed on day one (booking fees may apply)
They’re always doing more:
- Discounted family sales are acceptable on residential and BTL applications
- For limited company directors who own 20% or more of the company shares, they’’ll accept the applicants share of net profit after corporation tax plus their salary
- BTL mortgages are available to self-employed applicants where the business has been trading for a minimum of one year, with one year’s proof of income
- There's no minimum ownership period for Residential remortgage applications.
The Mortgage Lender- An Introduction
The Mortgage Lender reduced their tracker rates a few weeks ago and they’re now offering rates as low as 1.98% for a two-year fix. A pretty competitive rate, whichever way you look at it, and one that introducers are more likely to expect from traditional High Street lenders.
The Mortgage Lender’s products cater for contract workers, the self-employed, people who want to borrow beyond retirement, those who might just miss the affordability criteria for High Street providers, or have a minor blip in their credit file, which means traditional lenders won’t consider them. Some well-known high street lenders in particular have realised there is an ageing population in the UK and identified the same under-served segment and will now lend into retirement up to the ages of 80 and 85 respectively.
TML don’t think it will be long before other traditional providers start to eye up these segments of the market and tailor their products to meet the needs of the modern customer.
The difference for introducers is that, as a new lender, TML started from scratch with their systems, their underwriting and their product criteria. TML also underwrite cases individually. As such, they are not hampered by legacy systems and automated processes that were designed for a different time and a different customer profile.
Don’t forget that TML will be paying firms a £300 bonus on top of all proc fees for applications received between 3rd October – 31st December 2016 that subsequently complete. Paradigm will pay the FULL £300 to the broker during this offer.
Are you still unaware of the benefits of Lifetime Mortgages?
“I’m surprised that many people are unaware of the benefits that a Lifetime Mortgage can provide. Over the 25 years I’ve worked in financial services there are many incorrect perceptions, ‘I will lose my home’ or ‘my house will no longer be mine’. Huge improvements and safeguards have been added to protect clients. With increasing house prices, competitive fixed interest rates, perhaps now is an ideal opportunity to take a look at how a Lifetime Mortgage could benefit your client.
There are various reasons why clients take out these plans ranging from paying off credit card debt to carrying out much needed home improvements. As we live longer, many people are finding it difficult to ‘just survive’ and having considered and discounted alternatives such as moving home, they are struggling to find a long-term solution.
Recently I visited a client in her early 70s who was finding it impossible to look after her home, now having to employ both a cleaner and gardener. Are any of your clients in this category?
A main advantage of ER is that the amount your client can borrow is based not on income, but on the value of their property, min £60,000 and their age 55+ also they retain full ownership of their home, free to live in as long as they wish.
Improvements to these plans mean your client can choose to take their money as a one-off lump sum or smaller amounts, having a reserve which they can draw on in the future. There are plans that your clients can make payments to if they want to reduce the loan amount borrowed”
Rob Brennan is a director of The Right Equity Release a leading Equity Release specialist. Their team are happy to help you spot opportunities and provide you with a market leading Equity Release referral proposition. For help and advice, please feel free to call them on 0800 612 6755 or visit www.therightequityrelease.co.uk.
Paradigm's Upcoming Events
Throughout the year, Paradigm will be running a series of Mortgage and Protection round table events and Specialist events which we hope will be extremely rewarding and contribute to our member firms’ Continued Professional Development. Structured & Unstructured CPD points will be provided for these events and can count towards the 35 hours needed under the RDR rules. See below for our final upcoming events for 2016: