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Buy to let landlords may have tax problems

[ Posted April 11th, 2012 ]

While those with money are complaining about how millionaires may be affected by Stamp Duty, it appears they may be bigger problems in store for those who took advantage of the best mortgage rates while they were available, because many accountants are now claiming that landlords are sitting on a potential ‘tax timebomb.’

The reason for this is that over the next six months landlords are going to become liable for two years’ worth of taxes and in many cases the income that they received from their properties may not be enough to cover the middle. This is due to the fact that the tax law surrounding buy to let landlords is a bit complex, while the ability to take advantage of the buy to let mortgage rates when possible was easy for those with a bit put away in the bank.

Therefore, the situation created was that those with enough equity or a bit of savings decided to jump into the rental market to take advantage of the new investment opportunity, but without proper knowledge of what they would have to pay in the future. Many of these new landlords are not millionaires or savvy investors, but lack of knowledge is not going to help them out when HM Revenue & Customs comes knocking on the door.

UHY Hacker Young partner, Geoff Davies, stated that a great deal of buy to let landlords that took advantage of the low buy to let mortgage rates and new ‘renters’ economy allowing them to profit for the tax year that ended this April. This means that the landlords could have to pay on their new profits that were earned over the last two year period, and will only have six months in which to do so.

Essentially, being of the timing of when the rates were cut and the timing of when landlords started to actually profit, most landlords are going to end up getting taxed just as they start to break even. The timing is incredibly inconvenient, but then HMRC is not really going to care about that factor since they will want their money when they want it.

As a result, landlords have better start preparing now for the heavy taxes they may find themselves slammed with very quickly otherwise they could lose what they thought they had gained.

Best buy to let mortgage rates for April

[ Posted March 30th, 2012 ]

Homeowners are aware that they should shop around for the best mortgage rates taken time to actually calculate the full costs of a mortgage before signing any contracts.  This includes looking at the mortgage rate and comparing any savings that may be made back by the bank due to extras such as signing fees, booking fees, or evaluation fees.

In fact, sometimes it is more beneficiary to pay a bit higher mortgage rate and avoid all of the fees for the best deal.  However, even though almost all homeowners know this, they tend to forget the rules when it comes to purchasing a buy to let mortgage where the trend among landlords has been to head to the lowest rate on the market.

While it can be assumed that most buy to let landlords are also homeowners, it seems that in their hurry to get in on the low buy to let mortgage rates that are now flooding the market they have forgotten some of the mortgage 101 tips. Given the fact that buy to let lending makes up the majority of the property lending market t the moment, it may be wise to take a step back and look carefully at all of the options before choosing one.

This is especially true for borrowers that only need a small loan to add onto their portfolio, because in this case a higher mortgage rate will be more beneficial since they can pay it off quickly whereas there is no way out of a high arrangement fee.  The fees are generally set in stone, so in this case it would be wiser to pay off a higher mortgage rate quickly versus paying a large fee upfront that is not refundable.  By shopping around sometimes you can pay a higher mortgage rate but in return get fee free buy to let mortgage deals as well.

A great example of this is the new Coventry Building Society buy to let mortgage deals which are based on the size of a loan.  The building society is offering a loan that is set at the low 3.75% but in return comes with fees that total up to £2,499 whereas the higher 4.25% offers fees of only £1,249.  For a small short term loan the latter is obviously the better choice.

Bank of England warns of borrowing pressure

[ Posted March 30th, 2012 ]

The Bank of England is warning mortgage borrowers that they soon may be hit with more problems a loan charges are expected to increase, lending criteria is expected to tighten even more, mortgage rates are set to increase, and the amount of credit given to average households is expected to be decreased.  Most lenders already are making plans that include releasing less credit to households over the next three months as the lending market tightens which will likely impede further economic recovery as the property market begins to flatten again.

The Quarterly credit conditions survey from the Bank of England reported that lenders will reduce the amount of credit they offer to households at the same time that they will increase their mortgage rates making it harder for anyone to purchase a new home, especially first time home buyer.  At the same time, the Bank of England also stated that over first quarter of the year there was a surprising decrease in the amount of mortgage approvals that were issued even though lending terms at the start of 2012 were still considered to be ideal until about March.

The credit conditions survey reported that approvals fell to just under 49,000 which is the lowest that they have been in the past eight months.  This prompted many mortgage brokers and market analysts to compare February of this year to the start of the 2008 bank crisis as the same conditions and trends are reappearing.  The one main difference is that SMEs and large companies have not seen such a large fluctuation in their mortgage rates and the amount of credit open to companies has remained the same prior to March.  However, most experts had expected to see the amount of lending available go up due to Government calls for better SME bank funding.

Lending data from the Bank of England reports that businesses were able to pay back about four billion of what they took out in new loans over the first quarter of the year which comes out to be a 7.9% average three month contraction.  This is another sharp decrease, and one that has not been seen since autumn of 2009.  In addition, commercial lending is expected to decrease over the next quarter although the buy to let market is expected to remain steady.

Yorkshire and Clydesdale Banks increase mortgage rates

[ Posted March 17th, 2012 ]

Yorkshire and Clydesdale banks are the latest mortgage lenders to increase their mortgage rates. Over the last two weeks many major lenders including the RSB and Halifax have announced rate hikes, and it is only expected that more banks will jump in. There are about 30,000 customers that will be affected by the increase announced by Clydesdale and Yorkshire, as they will see their standard variable rates jump about .40% starting on May 1st.  For most customers of the banks, this means that repayments are going to increase by about £30 every month adding up to an increase of £360 per year.

The SVR mortgage rates are increasing up to 4.95% from the lower current rate of 4.59%.  For someone that has a £100,000 mortgage set at a 25 term they will approximately now have to pay £582 per month for their mortgage which is about £20 more.  The pair of banks stated that this is the first time they have had to increase their SVR rate in the last three years, and that they were forced to increase their mortgage rates because of the higher costs of funding.

The last week has been rough on those with mortgage lenders as almost a million borrowers have been affected by news that their SVRs were going to increase.  Of course, those with fixed mortgages will not be affected by the announced changes, but when their term ends it may be harder than ever to find a suitable replacement as mortgage deals are quickly disappearing off of the market.  As buy to let landlords continue to purchase most of the available bank funding, it will only get harder for the average first time home buyer to get onto the property market and for those with a mortgage to find a good remortgage deal.

Clydesdale and Yorkshire banks announced last week that customers have until July 31st if they want to switch their provider due to the increase in their SVRs without paying any exit administration fees.  Bank retail director, Steve Reid, stated that they believe that even with the increase their SVR will still below the rates of many other UK mortgage providers.  He added that the change had to be made because of the rise in costs associated with the mortgage market and that the increase in rates will help them continue to help keep deposit rates low.

Banks offering more buy to let lending

[ Posted March 16th, 2012 ]

Nationwide and Lloyds Banking Group confirmed that most of their net lending is being released to landlords and not to homeowners.  As landlords continue to take advantage of buy to let mortgage rates they are flooding the mortgage market accounting for a large amount of borrowing.  At the same time, homeowners are choosing to sit on their current debts and remain uncommitted within the housing market.  As the lending continues to go to landlords over homeowners the market will become much tighter making it much harder for young first time home buyers to actually get onto the market.

A look at the ‘net lending’ figures which refers to what comes into and then leaves the mortgage system, reveals that at the close of 2011 net landlord borrowing had quickly overtook homeowner lending.  The last time that this occurred was during a brief period in 2010, but this time based on market analysis it is expected that lending will continue to favor landlords.  Prior to the financial crisis general lending and landlord lending tended to be equal, but now that the low mortgage rates and financial stability of the economy are gone, it seems that landlords will dominate the market.

Figures that were compiled using information from the Bank of England and the Council of Mortgage Lenders showed that homeowners are receiving £1 for every £1.11 that landlords receive.  Lenders such as Nationwide state that landlords are simply offering the highest amount of demand for their mortgage deals, and as a result they cater to this group by offering their best mortgage rates. Private buyers on the other hand often do not have the credit or the deposits required to purchase a mortgage therefore reducing their lending figures.

January figures show that net lending in the UK for all building societies totaled up to just £1m which is about seven mortgages total.  This new data has prompted market experts to ask the Government to help increase the tax burden on landlords and instead do something that will help younger people get into the first time home buying market.  The current age of first time buyers that do not receive help from their parents is now sitting close to forty; which is a large jump from the average of 28 in 2005.  4 out of 5 home owners that are under the age of thirty must ask for aid from their parents in order to purchase a home.

NatWest introduces new mortgage range aimed at corporations

[ Posted February 25th, 2012 ]

NatWest Intermediary Solutions announced new commercial mortgage rates today for their range of corporate products that may help make corporate deals a little more achievable for those in the business world.

Among the new products were two exclusive deals and slashed rates on their core ranges of offerings. Lower fees have also been attached to many of their ordinary corporate deals, which is a significant saving for those that are looking for the best deal before making an investment in a new property for development or other business use.

Among its corporate ranges, NatWest introduced a new two year fixed mortgages scheme that is set at a 60% LTV, and aimed at those who want to remortgage a product at a better mortgage rate. The interest rate attached to the loan is 3.39% and is not exclusive to remortgages, although it is expected that this is where most of the interest will come from.

The company also introduced an 18 month variable mortgage that comes with an attached 75% LTV that is set at 2.99% initially, which could remain a great deal if the base rate remains low. Also offered is a two year tracker purchase mortgage without an LTV that is set at 4.39% for qualified candidates.

Outside of their general loan opportunities, NatWest is also offering two deals for designated AR firms that also featured slashed mortgage rates. The first product is a two year fixed mortgage that is set at 3.59% with an LTV of 75%.

Also being offered to designated firms is a 90% LTV package, aimed at purchase mortgages, that comes with the initial variable rate of 5.79%. While this may seem high, the low deposit may help many corporate firms actually get back into the property market.

In addition to these offerings, NatWest has also slashed its rates within its core range, offering a two year fixed mortgage with an 80% LTV that is set at 3.95% but comes without any fees attached. Within its normal corporate range, the two year tracker offered by the company will come with an 85% LTV and the set rate of 4.39%. Finally, its remortgage two year fixed rate product will remain the same but there will be a £999 fee attached to it.

Buy to Let Mortgage market grows in 2011

[ Posted February 14th, 2012 ]

If 2011 was any indication, the buy to let market is continuing to gain strength as the housing market in the UK continues to become a rental market instead of a buying market.  High mortgage rates, uncertain economic times, and increasing deposits are all reasons why many people are now choosing to rent instead of buy and landlords are taking advantage of it.

Savvy landlords have been checking out the strong buy to let mortgage rates and are increasing their portfolios, anxious to cash in on the new emerging rental market. The Council of Mortgage Lenders  reported that the amount of people that took advantage of low buy to let mortgage rates increased by a whopping 84,000 over the course of 2011 which is pretty astounding.

Even more astounding is the fact that during the fourth quarter of last year there were about 35,000 of these completed, showing that throughout the year the amount of landlords seeking new properties was steadily increasing. Therefore, it can be expected that the upwards trend of buy to mortgage purchases will be continued throughout 2012 as more landlords reach out to lenders.

The high in 2007, before the housing market collapsed, was actually 97,000 buy to let products in one year, so if the mortgage rates stay somewhat stable this year, and the amount of applicants continue to rise, there is a chance that buy to let lending will get back on track.

This is ironic given the fact that the housing market is actually considered stale and the average house price is falling, but it seems that for landlords there is no better time to get out there on the market. In fact, the CML stated that buy to let mortgages actually made up about 13% of all mortgage values for last year.

The CML also reported that during the last quarter of 2011 buy to let mortgage deals that were completed made up 11% of the gross lending for mortgages.  Therefore, it seems as if the road to recovery may actually be comprised of successful buy to let lending, even if it does keep new home owners off the market for some time. Lenders would do well to notice this trend and capitalise on it while they can before the base rate increases.

TMBC offers discounts for commercial mortgage products

[ Posted February 13th, 2012 ]

TMBC, the commercial mortgage and buy to let lending specialists, have launched a new deal in conjunction with Hinckley & Rugby Building Society that will see their mortgage rates drop by as much as 0.5% for those who take up their new two year offers.

The new rate will be set at 3.25% for mortgages that come with a free valuation for those who can manage a 60% LTV or better.  In addition, there are no charges for early repayment for those who rush to take advantage of the market.

The low commercial mortgage rates do have an attached £999 completion fee and £250 arrangement fee which is common place with high buy to let or commercial investments.  Therefore, those that want to take advantage of the low property prices on the market right now will want to take a look at the TMBC deal which the chief executive of the company, Andy Young, states is designed to help make it an attractive product for those that want to remortgage or purchase new rental properties.

He added that the free valuation will help reduce the standard upfront costs that come with securing a new mortgage or remortgage. It is expected that it will be most popular among those looking for low buy to let mortgage rates as the housing market is quickly becoming a rental market.

Intermediary development consultant Gill Vernau for Hinckley & Rugby stated that last year was an excellent year for the buy to let market and with more improvements and great deals such as the one they are offering with TMBC, 2012 looks like it will also be a great year. He added that the company is looking to offer more buy to let products to interested investors.

Vernau also stated that the aim of Hinckley & Rugby right now is to increase the amount of loans they have available at the low 60% LTV rate to help encourage landlords to take a second look at increasing their portfolios.

He added that the building society expects to see a rise in the amount of new applicants that take a second look at the product offer simply because of the low LTV and the fact that it will allow those who already have properties to reduce their mortgage rate and potentially afford more properties in the future.

Eurozone crisis hits commercial property market

[ Posted December 30th, 2011 ]

Over the last few months the shape of the housing market has changed drastically, as it has shifted from looking as if it would stabilise to a future that matches the current state of economic uncertainty. In fact, just a few months ago, consumers were looking at the best mortgage rates in the last few decades and mortgage lending was at an all time high.

Now, however, with the eurozone crisis impacting the banks lending abilities and increasing the interbank Libor, rate the housing market looks poised to take another dive back down. However, this time as the housing market dives, the mortgage rates are not going to be so great as banks are finding themselves forced to increase their rates in order to make up for the higher costs of wholesale lending between each other.

Many major banks have already increased their standard variable rates while other major lenders have taken off their best mortgage deals and replaced them with much higher rates and put many associated mortgage fees back in place that they were previously waiving in order to cover their expenses.  In addition, most banks are expected to tighten their mortgage lending criteria again.

This time around not only the average home buyer is likely to be affected by the increase in the mortgage rate, as many worry that the commercial mortgage market is also going to take the brunt of the recent economic troubles. With many construction projects stalled during the recession due to a lack of funds experts fear that the rising interest rates could hurt those who hold commercial property that they have not yet been able to develop.

For these commercial owners sitting on vacant property that is now even more expensive to afford, this may simply be the straw that breaks their back. In addition, as European banks are choosing to sell their assets outside of the region, many international developers are taking a step away from investing in commercial property within the UK, which will also hurt both development and the economy in major metropolitan areas such as London and Manchester.

Overall, the Eurozone crisis is expected to continue to wreak havoc on the state of the housing market in England, until it is resolved and with no clear ending or resolution in sight, it is likely that the housing market and the commercial property market is going to become much more unstable again.

Commercial mortgage movement increasing in several regions outside of London

[ Posted August 1st, 2011 ]

For quite some time now, the commercial mortgage market in London has been climbing upwards after a few years of stalled activity due to the recession and the credit crunch.  This has been seen as a stepping stone to more employment, but the increase seen in London has not been reflected in many other areas of England.  However, now several regions are seeing their commercial property markets start to increase in a move that is welcomed by plenty of workers and developers who see the switch as a sign that the economy is started to stabilise and broaden.

Regional commercial mortgage rates are starting to get a bit better outside of London due to the low Bank of England base rate which has helped make property purchases a bit more attractive in regional areas of the country.  While performance of the commercial market is still at its height in London, there are several other areas that are beginning to see that as the amount of renters continues to increase now is the time to act to cash in on the high market value of rental properties.

Chief executive officer and capital market head Ezra Nahome of Lambert Smith Hampton stated that most of the focus of commercial mortgage activity has been in London over the past few years but still compared to a few years ago the regions are starting to see their commercial property get a bit more attention and higher performance figures as well.  He added that in Scotland there has especially been a high amount of focus on the office sector market and that office space in the cities in particular has been the focus of a great deal of activity.

He also added that the Thames Valley market is seeing a great deal of tenant demand driving  a lot of commercial products as well, because as the need for rental properties increase property developers that are savvy on investments are going to get them built to accommodate.  This has also been reflected throughout most of the UK as larger cities such as Manchester, Edinburgh, and more have seen their rental rents sharply increase as more people are seeking rental properties due to an inability to get a mortgage or fear of taking a mortgage in the uncertain economic times.

 
 
 
 
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