The Benefits of Using a Residential Mortgage Broker

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Expert Guidance for Homebuyers Navigating the property market can be complex, but enlisting the help of a residential mortgage broker can simplify the process. A residential mortgage broker offers expert […]

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Expert Guidance for Homebuyers

Navigating the property market can be complex, but enlisting the help of a residential mortgage broker can simplify the process. A residential mortgage broker offers expert advice tailored to individual financial situations, potentially saving clients both time and money. By understanding various mortgage products and lenders, brokers can provide access to a wider range of options than a borrower might find alone.

 

Brokers act as intermediaries between borrowers and lenders, negotiating favourable terms on behalf of their clients. Their industry expertise ensures that borrowers are matched with suitable mortgage products, often resulting in more competitive rates. This personalised approach helps demystify the mortgage process, offering clarity and confidence to homebuyers.

Working with a residential mortgage broker can also enhance the efficiency of the mortgage application process. With their extensive knowledge of lender requirements and paperwork, brokers can streamline the steps involved, maximising the chances of approval. This professional guidance can be invaluable, particularly for first-time buyers or those with unique financial circumstances.

What Is a Residential Mortgage Broker?

A person sitting at a desk, surrounded by paperwork and computer screens, speaking on the phone with a client while confidently explaining the benefits of using a residential mortgage broker

Residential mortgage brokers act as intermediaries between borrowers and lenders, offering a range of loan options and expert guidance throughout the home buying process.

Definition and Role

A residential mortgage broker is a licensed professional who assists homebuyers in finding and securing mortgage loans. They work with a network of lenders to find loans that suit the borrower’s financial situation. Unlike bank loan officers who represent one lender, brokers have access to multiple lenders and loan products.

They gather financial information from borrowers, such as credit reports, employment history, and income verification. Based on this data, they identify the best mortgage products available. Brokers also assist in completing applications and navigating the approval process, ensuring all paperwork is properly handled.

Differences Between Brokers and Lenders

A key difference between brokers and lenders lies in their roles and relationships with borrowers. While brokers act as intermediaries, working for the borrower to find suitable loan options, lenders are financial institutions that provide the money directly.

Lenders include banks, credit unions, and mortgage companies. They underwrite and fund loans, taking on the risk if the borrower defaults. Brokers do not provide the funds but help the borrower secure a loan from these institutions. Brokers typically receive a commission from the lender upon successful loan approval.

This distinction is crucial because it affects the range of options available and the borrowing process. Brokers can present multiple lender options, while a direct lender offers only their own products.

Advantages of Engaging with a Mortgage Broker

Mortgage Approvals

Engaging with a mortgage broker brings numerous benefits including access to a wide range of mortgage products, professional expertise, and potential cost savings.

Access to a Variety of Mortgage Products

Mortgage brokers have relationships with multiple lenders. They provide access to a diverse array of mortgage products that might not be available directly to the public. This broad selection helps buyers find tailored financial solutions that best suit their individual needs.

Moreover, mortgage brokers can offer specialised products for clients with unique financial situations, such as self-employed individuals. This variety ensures clients receive mortgage options that are most beneficial and relevant to their circumstances.

Expertise in the Mortgage Process

A mortgage broker’s in-depth knowledge streamlines the mortgage process. They handle the intricate details and paperwork involved, reducing the stress for clients. Brokers stay updated with industry regulations and lender requirements, ensuring compliance and smooth transaction flow.

Utilising their expert advice can help clients avoid common pitfalls. They also offer insights into the best mortgage terms available, based on market conditions and client financial profiles.

Potential for Cost Savings

Mortgage brokers can negotiate with lenders to secure competitive rates. Their relationship with lenders often results in more favourable terms than a client might achieve independently. This can lead to significant savings over the life of the loan.

Additionally, brokers may have access to exclusive deals and discounts. They assist clients in evaluating all fees involved, ensuring there are no hidden costs that could inflate the overall expense. This transparency helps clients manage expenses more effectively.

Navigating Through Mortgage Complexity

Navigating the mortgage process can be daunting due to intricate financial terminology and the need for customised mortgage solutions. Understanding these aspects can significantly ease the journey.

Understanding Complex Financial Terms

Mortgage agreements are filled with specialised terminology that can be confusing for many borrowers. Terms like LTV (Loan-to-Value), APR (Annual Percentage Rate), and fixed-rate or variable-rate mortgages are critical to grasp.

LTV is a ratio of the loan amount to the property’s value, influencing the mortgage’s terms and the need for private mortgage insurance. APR represents the true yearly cost of borrowing and includes interest rates, fees, and other charges. Fixed-rate mortgages offer a steady interest rate, whereas variable-rate mortgages can fluctuate.

Brokers play a vital role in clarifying these terms. They provide detailed explanations and ensure borrowers comprehend the implications, thereby facilitating informed decisions. This assistance helps mitigate the risk of misunderstandings and potential financial setbacks.

Tailored Mortgage Solutions

Every borrower has unique financial circumstances, requiring tailored mortgage solutions. Brokers assess each client’s situation by evaluating income, credit score, and debt levels to identify the most suitable mortgage products.

They offer options from a wide range of lenders, allowing borrowers access to competitive rates and terms. Customised solutions can include diverse payment structures, flexible repayment terms, and mortgages designed for various financial scenarios.

By leveraging their industry knowledge and connections, brokers can negotiate terms that may not be readily available to the general public. This bespoke service provides borrowers with the confidence that their mortgage aligns with their personal financial goals and capabilities.

Time-Saving Benefits

Leveraging a residential mortgage broker can significantly expedite the home loan process and help ease complex administrative tasks.

Efficient Application Process

A mortgage broker streamlines the application process by managing the paperwork and liaising with multiple lenders on behalf of the borrower. They gather all necessary documentation, submit applications, and monitor their progress. This ensures that the client only needs to provide their information once, saving numerous hours otherwise spent repeating the process with each lender.

They also leverage their industry expertise to identify and resolve potential issues quickly. By understanding specific lender requirements, brokers can anticipate and address problems before they arise, avoiding delays. This efficiency significantly reduces the time it takes to secure loan approvals.

Reduction in Administrative Burden

The administrative burden of securing a mortgage can be overwhelming. A mortgage broker alleviates this by handling all related tasks, including document verification, coordination with underwriters, and following up with lenders. This enables the borrower to focus on other essential aspects of the home-buying process.

Brokers keep clients informed about the status of their application and any additional requirements. Their role as a point of contact simplifies communication, reducing the need for borrowers to juggle multiple channels. This support minimises the stress and time associated with mortgage administration.

Finding the Right Mortgage Deal

Securing the right mortgage deal can make a significant difference in home ownership costs. A residential mortgage broker can help by comparing offerings.

Key factors to consider:

  • Interest rates
  • Loan terms
  • Fees and closing costs

Mortgage brokers have access to a wide range of products. They can identify options best suited to individual needs.

It is important to review each mortgage term carefully. Consider fixed-rate and variable-rate options.

Common mortgage types:

Mortgage Type Description
Fixed-rate Stable rate for the term of the loan
Variable-rate Rate changes with the market

Brokers can negotiate better terms due to their industry connections.

Tips for finding the best deal:

  • Check the broker’s credentials
  • Compare multiple deals
  • Ask about special offers and incentives

Using these methods ensures borrowers secure a favourable mortgage deal.

 

UK Mortgage Broker offer whole-of-market search with totally FREE mortgage quotes and advice, so Contact Us today.

First-time buyer mortgage market set to beat predictions and reach record highs in 2024

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Get in touch with Mortgage Broker UK today to discuss your Residential, First-time Buyer, Contractor and Buy to Let Mortgage requirements. The first-time buyer market has proven resilient this year, despite historic headwinds, analysis from Yorkshire Building Society […]

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Get in touch with Mortgage Broker UK today to discuss your ResidentialFirst-time Buyer, Contractor and Buy to Let Mortgage requirements.

The first-time buyer market has proven resilient this year, despite historic headwinds, analysis from Yorkshire Building Society has revealed.

UK Mortgage Broker offer whole-of-market search with totally FREE mortgage quotes and advice, so Contact Us today.

In partnership with business consultancy CACI, the society’s research found that first-time buyers make up a higher proportion of the home purchase market than at any time since the business consultancy began measuring such market statistics in 2016.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

The mutual has seen overall mortgage applications rise by almost a quarter in 2024, despite forecasts from UK Finance that gross lending would be lower in 2024 than it was in 2023.

To read the full article click the link below:

Source: The Intermediary

UK Mortgage Approvals Rise for Sixth Month to Highest Since 2022

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Get in touch with Mortgage Broker UK today to discuss your Residential, First-time Buyer, Contractor and Buy to Let Mortgage requirements. Britain’s housing-market recovery continued into March as mortgage approvals rose for a sixth month, Bank of England […]

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Get in touch with Mortgage Broker UK today to discuss your ResidentialFirst-time Buyer, Contractor and Buy to Let Mortgage requirements.

Britain’s housing-market recovery continued into March as mortgage approvals rose for a sixth month, Bank of England figures show.

UK Mortgage Broker offer whole-of-market search with totally FREE mortgage quotes and advice, so Contact Us today.

Banks and building societies authorized 61,325 home loans, up from 60,497 in February and the most since September 2022. Economists had expected 61,500. Unsecured credit, including credit card debt, rose £1.6 billion, slightly higher than forecast.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Buyers are being lured back into the housing market by a brighter economic outlook and increased affordability after a sharp fall in mortgages rates since last summer. However, a recent resurgence in borrowing costs has raised questions over whether the recovery can continue.

To read the full article click the link below:

Source: Bloomberg

Navigating the UK Mortgage Market in 2024: What You Need to Know

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Buying a home in the UK remains a dream for many, but navigating the current mortgage market can feel like sailing through turbulent waters. Interest rate hikes, a cooling market […]

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Buying a home in the UK remains a dream for many, but navigating the current mortgage market can feel like sailing through turbulent waters. Interest rate hikes, a cooling market and economic uncertainty have many asking: is now the right time to buy a UK property in 2024? While there are undeniable challenges, opportunities still exist for savvy borrowers. In this post, we’ll explore the current state of the UK mortgage market, offering insights and guidance for potential buyers, existing homeowners and those considering remortgaging.

Market Overview: Shifting Tides

The past year saw major shifts in the UK mortgage market. Following a period of historically low interest rates, the Bank of England began raising rates in December 2021 to combat inflation. This resulted in:

  1. Higher mortgage rates
    The average two-year fixed rate currently stands at 5.58%, while five-year deals average 5.22%. While these represent a slight decrease from peaks earlier in 2024, they remain considerably higher than pre-2022 levels.
  2. Mortgage lending decrease
    UK Finance predicts a fall in mortgage lending in 2024, with remortgaging activity anticipated to decline after a peak in maturing fixed-rate deals.
    Increased pressure on homeowners: Rising living costs combined with higher mortgage payments could strain finances for some homeowners.
  3. Challenges and Opportunities for BorrowersThis evolving landscape presents both challenges and opportunities for different borrower segments:
  • First-time buyers: Higher entry barriers due to stricter affordability checks and larger deposits required. However, a cooling housing market might present lower property prices, offering some balance.
  • Existing homeowners: Remortgaging to secure a better deal can be beneficial, especially for those currently on expiring low-interest fixed rates. However, careful budgeting is crucial due to higher monthly payments.
  • Buy-to-let investors: Stricter lending criteria and lower rental yields make buy-to-let less attractive. Alternative investment options should be explored.

Get in touch with Mortgage Broker UK today to discuss your Residential, First-time Buyer, Contractor and Buy to Let Mortgage requirements.

Key Considerations for Navigating the Market

  • Affordability: Conduct thorough budgeting to ensure you can comfortably afford monthly repayments with higher interest rates.
  • Deposit size: Aim for a larger deposit to reduce borrowing and secure better mortgage rates.
  • Fixed vs. variable rates: Weigh the stability of fixed rates against the potential flexibility of variable rates, considering your risk tolerance and financial goals.
  • Seek professional advice: A mortgage advisor can guide you through the complexities of the market, matching your needs with the most suitable products and lenders.

Beyond the Headlines: Hope on the Horizon

While the UK mortgage market faces challenges, positive developments offer hope for potential buyers and homeowners. Consider the following key points:

  • Mortgage rate stabilisation
    While interest rates remain higher than in recent years, they appear to be stabilising after initial hikes and it is highly predicated that the Bank of England base rate has now peaked after multiple months of no additional increases.
  • Government support schemes
    Initiatives like the Mortgage Guarantee Scheme can aid first-time buyers with smaller deposits.
  • A cooling housing market
    Potential house price softening in some areas of the UK could make property more affordable.

Crucially, the UK mortgage market is very dynamic and circumstances can change quickly. Staying informed, conducting thorough research and seeking professional advice are crucial for making informed decisions in this evolving landscape.

UK Mortgage Broker offer whole-of-market search with totally FREE mortgage quotes and advice, so Contact Us today.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

First-Time Buyers in the UK Property Market: When is the Right Time to Buy?

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Purchasing a property for the first time can be both exciting and daunting. As a first-time buyer in the UK property market, it’s crucial to consider various factors before making […]

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Purchasing a property for the first time can be both exciting and daunting. As a first-time buyer in the UK property market, it’s crucial to consider various factors before making this significant financial commitment. Timing plays a crucial role in ensuring a successful purchase. In this article, we will explore the optimal conditions for first-time buyers, helping you determine when is the right time to take the leap into homeownership.

Market Conditions

The UK property market is subject to fluctuations, making it essential for first-time buyers to monitor market conditions. Historically, low-interest rates tend to favor buyers, as they can secure favorable mortgage terms. Additionally, a buyer’s market, characterized by a surplus of properties and reduced competition, can provide excellent opportunities for first-time buyers to negotiate better deals.

Conversely, during a seller’s market, where demand exceeds supply, prices tend to increase, making it more challenging for first-time buyers to enter the market. Staying up to date with market trends and consulting with professionals, such as estate agents and mortgage brokers, can help you determine whether it’s a favorable time to buy.

First Time Buyer Mortgage

Financial Preparedness

Before purchasing your first property, it’s crucial to assess your financial readiness. Consider saving for a deposit, as a larger deposit will enable you to secure a better mortgage rate. Saving for other associated costs, such as legal fees, surveys, and moving expenses, is also essential.

Furthermore, reviewing your credit score is vital, as it affects your ability to secure a mortgage. Ensure you have a good credit history and take steps to improve it if necessary. This will increase your chances of obtaining a mortgage with favorable terms.

Government Schemes and Incentives

The UK government has introduced various schemes and incentives to support first-time buyers. These initiatives aim to make homeownership more accessible, particularly for those struggling to save for a deposit. Researching and taking advantage of these schemes can significantly benefit first-time buyers.

Best first time buyer mortgage broker

Some popular schemes include Help to Buy, Shared Ownership, and the Lifetime ISA. Help to Buy offers equity loans, allowing buyers to borrow up to 20% (40% in London) of the property’s value, interest-free for the first five years. Shared Ownership enables buyers to purchase a share of a property and pay rent on the remaining portion. The Lifetime ISA provides a government bonus of up to £1,000 per year towards a first home.

Personal Circumstances

Every individual’s circumstances are unique, and it’s essential to consider personal factors when determining the right time to buy. Consider stability in your job or career, as a steady income will increase your chances of securing a mortgage. Additionally, evaluate your long-term plans, such as starting a family or relocating, as these factors may influence your decision.

Conclusion

Timing is crucial for first-time buyers in the UK property market. By monitoring market conditions, ensuring financial preparedness, exploring government schemes, and considering personal circumstances, you can make an informed decision on when the right time is to take your first step towards homeownership.

Remember, consulting with professionals in the industry will provide invaluable guidance tailored to your specific situation.

UK Mortgage Broker are highly experienced in working with First Time Buyers so Contact Us today for totally FREE quote and no-obligation advice.

Understanding the Differences and Benefits of Fixed and Variable Mortgages 

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When it comes to obtaining a mortgage, one of the most crucial decisions borrowers face is choosing between a fixed or variable interest rate. Both options have their own unique […]

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When it comes to obtaining a mortgage, one of the most crucial decisions borrowers face is choosing between a fixed or variable interest rate. Both options have their own unique advantages and disadvantages, making it essential for homebuyers to understand the differences between the two. In this blog post, we will explore the features, benefits, and considerations associated with fixed and variable mortgage rates, helping you make an informed decision that suits your financial goals.

Get in touch with Mortgage Broker UK today to discuss your residential and Buy to Let Mortgage requirements.

Fixed Mortgage Rates

Fixed mortgage rates refer to a type of mortgage where the interest rate remains constant throughout the loan term. Here are some key benefits of fixed mortgage rates:

a) Stability and Predictability: The primary advantage of a fixed mortgage rate is that it provides stability and predictability. Borrowers can accurately budget their monthly payments since the interest rate remains unchanged. This feature is particularly beneficial for those who prefer a consistent payment plan and want to avoid any surprises.

b) Protection against Rate Fluctuations: Another advantage of fixed mortgage rates is that they shield borrowers from interest rate fluctuations. Regardless of market conditions, the interest rate on a fixed mortgage remains the same, providing a sense of security.

c) Long-Term Planning: Fixed mortgage rates are ideal for long-term planning. Homeowners who plan to stay in their property for an extended period benefit from knowing their mortgage payments will remain unchanged, allowing for better financial planning.

However, it is important to consider potential drawbacks as well. For example, fixed mortgage rates typically come with slightly higher initial interest rates compared to variable rates. Additionally, breaking a fixed-rate mortgage contract before the term ends may result in penalties.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division”

Variable Mortgage Rates

Variable mortgage rates, also known as Adjustable-Rate Mortgages (ARMs), are loans with interest rates that fluctuate over time based on market conditions. Here are some benefits of variable mortgage rates:

a) Lower Initial Rates: Variable mortgage rates tend to have lower initial interest rates compared to fixed rates. This feature can be advantageous for borrowers who want to take advantage of lower rates in the early stages of their mortgage.

b) Flexibility: Variable mortgage rates offer flexibility, allowing borrowers to take advantage of potential rate decreases in the future. This option is particularly suitable for those who plan to sell their property or refinance their mortgage before the rate adjustment period begins.

c) Potential Cost Savings: If interest rates decrease over time, borrowers with variable mortgage rates can enjoy significant cost savings in the long run. This can result in lower monthly mortgage payments, allowing homeowners to allocate funds towards other financial goals.

However, it is essential to consider the potential risks associated with variable mortgage rates. As interest rates fluctuate, borrowers need to be prepared for increased monthly payments if rates rise. This uncertainty may not suit individuals who prefer a stable and predictable budget.

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Conclusion

Choosing between fixed and variable mortgage rates is a significant decision that can impact your financial future. Fixed rates offer stability and protection against market fluctuations, while variable rates provide flexibility and potential cost savings. Consider your financial goals, risk tolerance, and the current market conditions before making a decision. Consulting with a UK Mortgage Broker can provide valuable guidance tailored to your unique circumstances. Remember, the right choice depends on your individual preferences and long-term financial strategy.

To find out more and speaking directly with a CeMAP qualified Mortgage Advisor, contact us today via either 03330 166 600 or fill in our simple contact form.

As the Bank of England puts rate rises on hold, what are the ups … and the downs?

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With Britain appearing to have hit peak interest rates, homeowners and buyers may feel like celebrating, while savers will be shaking their heads. The Bank of England’s decision to hold […]

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With Britain appearing to have hit peak interest rates, homeowners and buyers may feel like celebrating, while savers will be shaking their heads.

The Bank of England’s decision to hold rates at 5.25% for a second time came after 14 increases. So what does this mean for consumers? Are we likely to see more affordable mortgage deals? And can we no longer expect bumper savings rates from the banks?

What just happened?

It was widely anticipated that rates would be left unchanged at 5.25% – their highest level for 15 years.

Over the past two years, mortgage borrowers have seen the cost of a home loan spiral. At the same time, savers finally started to enjoy some decent returns after years in the doldrums. A number of accounts are currently paying more than 6% interest, particularly some of those offered by the so-called challenger banks.

But the Bank of England was keen to point out that dropping rates was not on the agenda yet. Governor Andrew Bailey said last week: “It’s much too early to be thinking about rate cuts.”

Damien Fahy, at website Money to the Masses, says that if we are at peak rates, what is important now is how long we stay there. “The worry is that most consumers seem to believe that rate cuts will be around the corner, but they are probably getting ahead of themselves,” he says.

Get in touch with Mortgage Broker UK today to discuss your residential and Buy to Let Mortgage requirements.

Are there any good savings rates?

After the highs of the summer, there has been a definite slowdown, with only a handful of providers offering fixed-rate savings bonds paying more than 6%.

But this does not mean there are no opportunities, says Sarah Coles at investment platform Hargreaves Lansdown. “We may well have passed the peak, with some of the best fixed rates gradually disappearing. However, there are still decent rates around that we’d have given our left arm for a year ago.

“So if you have savings you won’t need for the next year or so, it’s still worth taking advantage while you can,” she adds.

Fahy says people should move now to secure the best rates, as banks will not hesitate to pass on any decreases (even though many did dawdle when it came to passing on increases).

However Rachel Springall, at financial information site Moneyfacts, says challenger banks may continue to offer good deals as they aim for funding targets and not alignment with the Bank of England.

When comparing rates, considering the more unfamiliar brands is always wise, assuming they have the same deposit protections as a big high street bank, she adds.

Savers looking for a good deal may find some value in notice accounts – once they can plan how they may want to withdraw their money – which limit the number of withdrawals a year. For example, Monument Bank has increased the rate on its 35-day notice account to 5.22%.

But consumers must be able to move quickly. “Whichever deal is appropriate, they must be clear on the rules and eligibility an account sets from the outset, and need to be quick to apply for a deal when monitoring the best rates,” says Springall.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division”

What about mortgage rates?

The cost of new fixed rates – the vast majority of UK mortgage borrowers are on this type of deal – has been falling for some time. Figures from property website Rightmove on Thursday showed the average new five-year fixed-rate deal was 5.36%, down from 5.97% a year ago. The average two-year fix is 5.81%, down from 6.22% a year ago.

David Hollingworth, of broker firm L&C Mortgages, says borrowers can now look forward with a little more confidence, but adds that we will not see a return to the rock-bottom deals of the recent past.

“Remortgage borrowers shouldn’t fall into the trap of holding off from shopping around in the hope of dramatic cuts to rates, especially as the gap between standard variable rates [SVRs] and the best rates has only widened,” he says. “Getting a rate in place well before the end of your current deal still leaves flexibility to review it if they continue their downward trajectory.

“In the meantime, having a rate ready for a smooth switch will avoid being hit by a high SVR, which could prove costly, even for a short period.”

Fahy says borrowers should be aware of lenders trying to attract them with low interest rates but “eye-wateringly high” product/lender fees. “Consider the full cost of a mortgage and, if rates remain high for an extended time, we might see more of these types of deals.”

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And pensions?

If there is an end to volatility as a result of the decision to keep interest rates on hold, pensions – which rely on market stability – could benefit, according to Becky O’Connor of PensionBee, a company that helps people combine old pension plans into one new plan.

“For those approaching, or in retirement, who have found managing their retirement and withdrawal plans stressful because of market ups and downs, this potential change in monetary policy direction might offer some respite,” she says.

“For those with money tied up in savings, it will be important to keep chasing decent rates, as high-paying accounts may not hang around for long.”

However, the good returns offered by annuities, which typically pay out a set income for life to a pensioner, may be limited.

For years, rates on annuities had been derisory, leading them to be dismissed as an option for many approaching, or in, retirement. But with higher rates came better offers.

Chris Flower, at wealth management company Quilter, says: “For retirees looking to purchase an annuity, as interest rates level off, this may mean the level of income they can secure levels off, too.”

By Shane Hickey

Source: The Guardian

What do high rates mean for HNWIs seeking mortgages?

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Interest rates have dominated the headlines in 2023. As inflation remains sticky and well above its 2 per cent target, the Bank of England’s monetary policy committee has voted on […]

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Interest rates have dominated the headlines in 2023. As inflation remains sticky and well above its 2 per cent target, the Bank of England’s monetary policy committee has voted on 14 consecutive occasions to hike the base rate.

The impact on mortgage customers has garnered a great deal of political and media interest.

Understandably, the fate of high-net-worth individuals seldom enters the conversation, but within the mortgage market we cannot afford to overlook the issues affecting such borrowers.

Indeed, now is an opportune moment for lenders and intermediaries to take stock of the challenges that HNWIs face when looking to secure, and in the current climate repay, a mortgage.

Moreover, we must consider what can be done to ensure wealthier borrowers are offered suitable support in the higher interest rate environment.

Get in touch with Mortgage Broker UK today to discuss your residential and Buy to Let Mortgage requirements.

The challenges involved in HNW mortgages

It may seem entirely counter-intuitive to think that HNWIs will regularly struggle when it comes to securing a mortgage. Yet this remains the reality; they run a surprisingly high risk of being turned away by conventional lenders.

For context, Butterfield Mortgages conducted research in the past, surveying more than 500 UK adults who all had a net worth in excess of £1mn. We found that 12 per cent had been rejected for mortgages in the preceding decade.

But why are so many HWNIs turned down for a mortgage?

It comes down to the often complex and diverse nature of HNWIs’ wealth – their income, investments and liquidity.

As a rule of thumb, the wealthier an individual is, the more complicated their income structure and finances are likely to be.

For instance, HNWIs tend to have their capital locked up in illiquid assets, spread across multiple jurisdictions. Meanwhile, they may have irregular or no formal source of income, and perhaps have not built up an attractive credit profile by repaying regular debts.

As a result, the process of applying and being approved for a mortgage can be far more complex for these individuals.

The standard ‘tick-box’ methodology applied by many high street lenders can pose unexpected complications, simply because how HNWIs make, spend and invest their money typically differs significantly from most prospective borrowers.

Further, HNWIs may not be UK residents, and they may also differ in the reasons they want or need a mortgage, both of which would create additional obstacles.

Many lenders will not supply finance for a property that will not be an individual’s primary residence, nor to an overseas buyer.

As such, HNWIs seeking finance for a buy-to-let investment or a second home will often struggle to find a mortgage on the high street.

Lenders and brokers require skill and experience

HNWIs being rejected for mortgages remains a prevalent issue.

As noted, they are ill-suited to the methodology that many mainstream, high street lenders apply to assess mortgage applications.

Meanwhile, their desire for a loan to purchase an investment property naturally rules out a swathe of other lenders.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Clearly, HNWIs need to find specialist lenders and brokers who are well-versed in this type of client.

More specifically, they need lenders and brokers that have the skill, experience and resources to review each borrower and application on a case-by-case basis; to take in the full picture of the person’s financial profile, to understand the type of property they want to buy and why, and to assess their ability to repay a loan.

In essence, a more bespoke approach is required when working with HNWIs.

Lenders and brokers reliant on processing huge volumes of applications will, generally speaking, not have the structures and processes in place to operate in such a flexible manner.

Returning to the matter of rising interest rates – this economic shift over the past 20 months has only heightened the challenges that exist for HNWIs, thereby placing a greater onus on lenders and brokers to assist wealthier borrowers as they seek to navigate the mortgage market.

How higher rates affect HNWIs

For more than 13 years – between March 2009 and May 2022 – the BoE’s base rate resided below 1 per cent. It was never going to remain at such historic lows, which were largely indicative of economic turbulence stemming from the global financial crash, Brexit and the pandemic.

That rates would rise at some point was a given. As many who are longer in the tooth would also note, a base rate of 5 per cent or higher is also normal in the grand scheme of things – this was the general benchmark for much of the 1990s and 2000s, while the 1980s saw a base rate predominantly in double figures.

However, while a higher base rate is by no means atypical, the speed at which it has risen has undoubtedly created challenges for borrowers.

Jumping from an all-time low of 0.1 per cent in December 2021 to 5.25 per cent by August this year is a sharp rise, and coming after a prolonged level of such low rates, has placed a strain on many people who will have purchased properties with little consideration as to how such a shift could impact them.

HNWIs are no exception here. Again, while not featuring in the general discourse around higher rates and the impact on mortgage customers, HNWIs warrant attention and support.

Broadly speaking, HNWIs direct their investments towards high-value properties, such as those in prime central London. They may, for example, require a £5mn mortgage for the purchase of a £7.5mn townhouse in a prime central London postcode.

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Coupled with the size of the mortgages HNWIs take on is the length of their terms. HNWIs investing in a second home or BTL property may take on mortgages that have five or 10-year terms, unlike the 25 or 30-year terms that most UK homebuyers will be able to access.

If not on a fixed-term loan, the hikes to the base rate since the end of 2021 will have taken a notable toll on even very wealthy borrowers. With less time to spread out increased costs on an already large mortgage, some HNWIs will be struggling to make repayments.

Again, the complicated nature of their finances and investments comes into play. HNWIs might be asset-rich (owning all manner of assets) but have limited access to liquid cash.

Seeing their mortgage repayment skyrocket will require them to release equity from other investments or access cash from other sources.

As with the application process, it is important that preconceptions do not cloud the due attention that HWNIs require. Those lenders and brokers who are used to operating in this space will likely be acutely aware of this point.

Improving support for HNWIs

Butterfield Mortgages recently conducted a survey of mortgage customers in the UK. It revealed that just 44 per cent of borrowers feel they have received satisfactory guidance and communication from their mortgage providers since the initiation of the interest rate hiking cycle in December 2021.

This underscores the importance of lenders working with borrowers to recognise potential issues as they arise and, whenever possible, bringing forward solutions.

The necessity for this aid extends to HNWIs regardless of their affluence, and lenders must be unwavering in their dedication to aiding borrowers who need to continue to invest in property with a sense of assurance.

Alpa Bhakta is the chief executive of Butterfield Mortgages

By Alpa Bhakta

Source: FT Adviser

Average asking price falls by 1.9% in August: Rightmove

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Average asking prices fell by 1.9% in August, Rightmove’s latest housing price index (HPI) shows. House prices dropped by £7,012 to £364,895, the sharpest August fall since 2018, and above […]

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Average asking prices fell by 1.9% in August, Rightmove’s latest housing price index (HPI) shows.

House prices dropped by £7,012 to £364,895, the sharpest August fall since 2018, and above the average decline of 0.9% in the traditional summer slowdown.

Rightmove says lower asking prices, combined with the recent trend of lenders cutting rates, are ‘tentative steps’ towards improved buyer affordability.

However, average prices are still £59,000 (19%) higher than in the pre-pandemic market of August 2019.

The number of sales being agreed is now 15% lower than 2019, with higher interest rates causing people to ‘pause their moving plans for now’.

Meanwhile, the first-time buyer sector is still down by 10% compared to four years ago.

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In the typical first-time buyer sector of two-bedroom and fewer properties, average advertised rents are up by 12% compared to last year and by 33% compared with the same time in 2019.

Rightmove’s director of property science, Tim Bannister, says: “There are still significant challenges in saving up enough for a deposit and affording higher mortgage payments, however, would-be buyers are now likely to see greater property choice in their area and therefore a home more likely to suit their needs compared to during the pandemic.

“But while there is more choice there is no glut of properties for sale, with the number of available properties still lower than this time in 2019 and home still selling more quickly, with the average time to find a buyer now 55 days compared to 61 days in 2019.

“While a 1.9% drop in just one month seems dramatic, it’s in part an expected seasonal drop as sellers coming to market realise that they have to compromise on price due to the traditionally quieter summer holiday period.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

“Agents report that correctly priced homes in many areas are still attracting multiple prospective buyers competing to secure them, so if buyers see a home that could be for them and they can afford it, they may still need to act fast rather than sitting back.”

North London estate agent and a former RICS residential chairman Jeremy Leaf says: “Despite a larger-than-expected drop in aspirational asking prices as opposed to selling prices, in many cases this hasn’t generated an increase in sales agreed, which remain disappointingly low.

“On the ground, we’re seeing a similar picture. Realistically priced properties are still selling relatively quickly particularly to ‘cash’ or equity-rich buyers whereas those requiring reductions to attract more attention are sticking.

“Certainly, continuing strong employment and slightly more stable mortgage rates are helping to revive interest despite holiday distractions.”

MT Finance director of property lender Tomer Aboody says: “As affordability continues to be a huge strain on buyers, the lack of stock on the market is proving another stumbling block for would-be property purchasers.

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“Although stock levels have improved slightly on last year, they are still below pre-pandemic levels, resulting in competition for the best properties at the correct price.

“Hopefully, some market stability establishes itself soon, which in turn should bring some confidence and further stock to tempt buyers.”

Shawbrook’s managing director of real estate Emma Cox, says: “Conflicting data from what we saw last week from the ONS, which is unsurprising given the wider inflationary and interest rate pressures.

“Seasoned property investors will be keeping a close eye on possible opportunities, particularly given the situation where demand is outpacing supply within the rental market.

“As a multitude of ‘accidental’ landlords make their exit, astute investors stand to capitalise as opportunities open for channelling investments into high-quality rental assets.”

By Daniel Cooper

Source: Mortgage Strategy

Halifax to lower five-year fixed rates

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Halifax will lower select homebuyer five-year fixed rates, which includes first-time buyer, new build, large loans and affordable housing and green home products. The changes will come into force from […]

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Halifax will lower select homebuyer five-year fixed rates, which includes first-time buyer, new build, large loans and affordable housing and green home products.

The changes will come into force from Monday 21 August.

An example of rate changes includes its no-fee five-year fixed rate at 80 per cent loan to value (LTV) will decrease by 0.11 per cent to 5.48 per cent.

The lender’s no-fee five-year fixed rate at 85 per cent LTV will go down by 0.12 per cent to 5.48 per cent.

Get in touch with Mortgage Broker UK today to discuss your residential and Buy to Let Mortgage requirements.

Halifax’s five-year fixed rate at 80 per cent LTV will reduce by 0.11 per cent to 5.37 per cent and at 85 per cent LTV pricing will fall by 0.12 per cent to 5.37 per cent as well.

The loans are available between £25,000 and £1m.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

A positive boost for the market

Jamie Lennox, director at Dimora Mortgages, said that it was “great to see the UK’s biggest mortgage lender return with a further reduction on selected products”.

“This is a positive boost for the mortgage and property market given that markets are baking in further base rate increases following core inflation remaining sticky.

“It’s likely that the speed at which rates went up caused a firm halt in the number of new applications being received and we may now see lenders chasing their tails in the months to come to try and make up for being behind on their targets for the year. Only time will tell, but we hope to see more to follow,” he added.

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Peter Stamford, director and lead adviser at Moor Mortgages, said: “Halifax is making assertive moves to bolster its mortgage portfolio, a likely response to the subdued business volumes in recent months.

“With markets anticipating further base rate hikes due to persistent core inflation, the UK’s leading mortgage lender’s rate reductions may be short-lived. As the industry sees a slowdown in new applications, other lenders might soon follow Halifax’s lead. Borrowers should seize these opportunities, but with caution, as the financial climate remains unpredictable.”

By Anna Sagar

Source: Mortgage Solutions