Royal Institute of Chartered Surveyors (Rics)
August sees biggest dip in buyer’s interest since Covid, says Rics
Homebuyer demand fell sharply in August, at a rate not seen since the start of the Covid pandemic, but a continued shortage of available housing stock is helping to support prices for now, according to the Royal Institute of Chartered Surveyors (Rics).
Its latest monthly report shows how the cost of living crisis and higher interest rates are impacting buyer demand, with both buyer enquiries, sales and new instructions all falling in August.
Rics says that this is the fourth consecutive month of negative readings for new buyer enquiries, with figures falling more sharply in August. Its report showed a net balance reading of -26% in July, but this has widened to -39% in August.
In relation to agreed sales, a net balance reading of -22% was posted in August, which also indicates the market is continuing to soften. This measure was just -13% in July. Rics says that sales have now fallen for five consecutive months, with this latest feedback implying this downward trend is becoming further entrenched.
Sales prediction for the three months ahead also slipped further into negative territory, while the predictions for the year ahead have now hit a record low , with the most downbeat forecast since Rics began collating this data in 2012. A figure of -45% was recorded for this indicator last month, down from July’s -35%.
However despite this market pessimism, a lack of housing supply continues to underpin house prices. A net balance of +53% of respondents reported an increase in house prices during August. While this figure is also down on July’s report (of +62%), Rics says it remains comfortably above the long term average of +13%.
In the lettings market, tenant demand continues to rise, with a headline net balance of +50% of contributors seeing an increase in tenant demand over the month. Alongside this, the latest net balance for landlord instructions came in at -13%, with falling supply across the rental market an ongoing theme over much of the past five years. Given this excess of demand over supply, rents are expected to rise in the near term. When viewed over the next twelve months, rents are anticipated to rise by close to 4% at the national level.
Rics senior economist Tarrant Parsons says: “Concerns over the economic backdrop and rising interest rates continue to take their toll on market momentum, with strong activity early in the year now giving way to a more subdued picture.”
MT Finance director Tomer Aboody adds: “The simple economic equation of supply and demand is maintaining steep house prices, with ready buyers still looking to make a move and take advantage before interest rates rise even higher.
“With so much uncertainty over the next 12 to 24 months, the market will start to stabilise but whether there is a crash remains to be seen. There would need to be high sales volumes at lower prices for that to happen, but with inflation rising there will be worried homeowners who bought in the past few years. Let’s hope Liz Truss’ appointment results in some quick assistance to manage the pain.”
Former Rics residential chairman and north London estate agent Jeremy Leaf says: “It’s becoming increasingly clear – and not just at the coalface – that the shortage of stock is continuing to support prices but at the same time disguising the impact of the rising cost of living on the rest of the market.
“Another problem is that demand can disappear if not satisfied fairly quickly so prices may soften further.
“Nevertheless, we’re not seeing widespread renegotiations or buyer withdrawals so don’t expect a significant correction yet although the market is certainly more price sensitive than a few months ago.”
*The Mortgage Finance Gazette
Halifax
Income verification changes
On Monday 12 September we are making changes to our requirements for the keying and verification of some incomes.
Standard Income
Our standard income verification requirement for employed customers with basic income only will change from ‘The latest payslip’ to ‘The latest month’s payslip(s)’. There is no change for anyone paid monthly (or 4-weekly) where the latest payslip will still be all that is required. Only if a customer is paid weekly (or fortnightly) will we require additional payslips (4 payslips if paid weekly, 2 if fortnightly).
For any other incomes that are verified to payslips, the same new requirements will apply if paid weekly i.e. latest payslip becomes ‘latest month’s payslip(s)’ and ‘latest 3 payslips’ becomes ‘latest 3 months’ payslips’.
Additional income – Bonus, overtime and commission income
For these incomes our income verification requirement will change from ‘The latest 3 payslips’ to ‘The latest 3 months’ payslips’. If a customer started a new job less than three months ago these incomes cannot be used.
There is no change to our verification requirements if these incomes are paid monthly (or 4-weekly) and we only require additional payslips if paid weekly/fortnightly (12 payslips if weekly, 6 if fortnightly).
If bonus, overtime or commission is paid quarterly, half yearly or annually we will now require proof of the latest 2 years’ income e.g. all payslips showing the bonus paid for the last 2 years.
The bonus/overtime/commission income to be keyed will be the lower of either (a) the total additional income earned in the last year or (b) the average of the income earned in each of the latest 2 years.
It is important the 2 year average is keyed when this applies as changing the figure when we verify the income could affect the loan amount available. If an income type was not paid in the previous year, or the customer has only been in their current job one year, a zero figure would be used for the previous year when calculating the two year average.
Where we have a minimum income threshold within our policy e.g. for interest only lending or for non-UK nationals, if the 2 year average is being used this would also be the figure included towards the threshold.
Contract types
Three new options are being added to the ‘Contract type’ dropdown menu in Halifax Intermediaries online. These are Construction Industry Scheme (CIS), Junior/Locum Doctor and Zero Hours Contract.
There is no change to the income verification requirements for these incomes but these new options will allow us to provide you with the next steps message to reflect the specific income verification required for each as below:
• Construction Industry Scheme (CIS) – ‘The latest 3 months’ payslips or invoices plus corresponding bank statements’ (if paid weekly 12 payslips required)
• Junior/Locum Doctor – ‘The latest 3 months’ payslips’
• Zero Hours Contract – ‘The latest 12 months’ payslips’
There are no other changes to our income keying or verification processes and no changes to self-employed income verification.
These changes will help us to lend responsibly by ensuring the incomes to be used are regular and sustainable.
These changes apply to all full applications submitted from 12 September. If a Decision in Principle (DIP) was keyed before 12 September but the full application submitted on or after 12 September, the new requirements would apply.
The ‘Guide to keying employed income’ calculator on the Halifax Intermediaries website Tools page will be updated to show the changes in the number of payslips required from 12 September. The website Criteria ‘Income Types’ section that shows our income evidence requirements will also be updated from this date.
Precise Mortgages
Withdrawal of Help to Buy products
As you may be aware, the Help to Buy Equity Loan scheme will close in 2023.
To ensure they have sufficient time to process cases before the scheme closes, Precise Mortgages will be withdrawing their Help to Buy products for purchases in England, Scotland and Wales on Friday 30th September 2022.
To secure a product you must fully submit your applications by 5pm on this date.
If you’ve got a question about the withdrawal of Precise Mortgages’ Help to Buy products or want to find out more about the end of the scheme, a member of the sales team is always here to answer your questions.
West One
Maximising Rental Income with Limited Companies
With increasing interest rates and inflation impacting landlord profit margins, it is essential that landlords are aware of the different ways in which they can maximise their income. Analysis of Companies House Data found that 47,400 buy-to-let companies were set up in 2021 – a record high and a rise of 14% on 2020 alone. In fact, buy-to-let companies now account for 29% of active buy-to-let mortgages. Here we look at why growing number of landlords are using limited companies for their buy-to-let portfolios.
In 2017 HMRC began to phase out, over a period of 4 years, the costs that landlords could deduct from their rental income when calculating their taxable profit. For many private landlords, this made their investments significantly less profitable.
Landlords, particularly those that owned a portfolio of properties, began to move their properties into a limited company structure. A limited company can allow landlords to benefit from certain tax benefits, for example instead of paying tax on rental income a landlord will pay corporation tax, which as of the 2022-23 tax year stands at 19%. Another benefit is that landlords are able to deduct certain expenses that they incur through their limited company.
With the cost of managing a buy-to-let property increasing, incorporation is proving to be a popular option for landlords, and not just those with large portfolios. However, there are considerations that landlords need to be aware of including no capital gains tax allowance for properties sold that are held in a limited company, additional costs of running a company and potentially higher mortgage rates.
Landlords are advised to seek tax advice on the pros and cons of limited company holdings and how they apply to each individual scenario.
How can West One help?
At West One, we offer a flexible approach to borrowers. Our specialist underwriting team, can consider applications from across the spectrum and work closely with brokers to find the right product for their clients.
Here are a few reasons to consider West One…
- Day one Limited Company cases with no rate loading
- Flexible approach towards portfolio landlords
- Portfolio lending up to £7.5m per borrower – more than 20 applications or £3m lending by referral
- Leasehold block exposure to 20 units with up to 100% exposure possible – over 20 by referral
- Max LTV 80% up to £750k for purchase and remortgage cases
- Applications are not credit scored – each case assessed on its merits
To discuss a case please contact your BDM or the broker support team on 0333 123 4556 or btlbrokersupport@westoneloans.co.uk
Register as an introducer here: https://www.westoneloans.co.uk/buy-to-let-mortgages#introducer
Impact Specialist Finance
Residential Bridging Loans available through Impact Packaging
Octopus are on hand if a client urgently requires finance, or they may have long-term refinancing in place, but need more time before their other lender is ready. They can also provide a loan on a property that your client lives in, plans to live in or cannot sell before completing a new purchase.
Residential Bridging Loans:
- Regulated up to 70% LTV
- Unregulated up to 75% LTV
- Loans up to £1M
- AVM (Automated Valuation Models) available
When can Octopus carry out an AVM?
- Regulated and Unregulated bridging
- Confidence level 5 and above (out of 7)
- Houses, bungalows and flats not within a block
- Open market purchase or refinance
Download Octopus Real Estate’s latest product guide
Take a closer look at Octopus’ product guide to help find a solution for your residential bridging cases.
Have a case you would like to discuss? Call the impact packaging team now on 01403 272625
Scottish Widows
Income verification changes
On Monday 12 September we are making changes to our requirements for the keying and verification of some incomes.
Standard income
Our standard income verification requirement for employed customers with basic income only will change from ‘Latest payslip’ to ‘Latest month’s payslip(s)’. There is no change for anyone paid monthly (or 4-weekly) where the latest payslip will still be all that is required. Only if a customer is paid weekly (or fortnightly) will we require additional payslips (4 payslips if paid weekly, 2 if fortnightly).
For any other incomes that are verified to payslips, the same new requirements will apply if paid weekly i.e. latest payslip becomes ‘latest month’s payslip(s)’ and ‘latest 3 payslips’ becomes ‘latest 3 months’ payslips’.
Additional income – Bonus, overtime and commission income
For these incomes our income verification requirement will change from ‘Latest 3 payslips’ to ‘Latest 3 months’ payslips’. If a customer started a new job less than three months ago these incomes cannot be used.
There is no change to our verification requirements if these incomes are paid monthly (or 4-weekly) and we only require additional payslips if paid weekly/fortnightly (12 payslips if weekly, 6 if fortnightly).
If bonus, overtime or commission is paid quarterly, half yearly or annually we will now require proof of the latest 2 years’ income e.g. all payslips showing the bonus paid for the last 2 years.
The bonus/overtime/commission income to be keyed will be the lower of either (a) the total additional income earned in the last year or (b) the average of the income earned in each of the latest 2 years.
It is important the 2 year average is keyed when this applies as changing the figure when we verify the income could affect the loan amount available. If an income type was not paid in the previous year, or the customer has only been in their current job one year, a zero figure would be used for the previous year when calculating the two year average.
Where we have a minimum income threshold within our policy e.g. for interest only lending or for non-UK nationals, if the 2 year average is being used this would also be the figure included towards the threshold.
There are no other changes to our income keying or verification processes and no changes to self-employed income verification.
These changes will help us to lend responsibly by ensuring the incomes to be used are regular and sustainable.
These changes apply to all full applications submitted from 12 September. If a Decision in Principle (DIP) was keyed before 12 September but the full application submitted on or after 12 September, the new requirements would apply.
The Scottish Widows Bank website Criteria ‘Acceptable income types’ section and Mortgage Lending Guide document will be updated with the new verification requirements from 12 September.
United Trust Bank
Latest Criteria Guides
Lendinvest
Why will service be the most important factor in your Buy-to-Let deals this winter?
As rate changes have become an increasingly regular part of the Buy-to-Let space, brokers and clients have moved away from securing a headline rate and looked to lenders who can assist with criteria and delivery. Here’s the things you should be paying attention to in the coming months.
Bluestone Mortgages
See how we are turning contractors’ vision to value
More people than ever are exploring working as contractors and we totally get why! With independence, flexibility, and money playing a major role, it’s no wonder that the United Kingdom is ranked second on the top 10 list of freelancing countries – with a 59% year-on-year revenue growth1.
The truth is, getting a mortgage as an independent contractor can be complex, but not impossible. The type of contract your customers are on, the consistency of their work, and how long they have been in the industry for are just some of the varying factors that play a role in finding the right lender. Also, contracting comes in all sorts of shapes and sizes- from fixed-term, short-term, temporary, zero-hour, IT and even subcontractors!
Over the next two weeks, we will focus on how you can deal with complex contractor cases and will provide you with a breakdown of some of our key features relating to contractors. Stay tuned!
In the meantime, if you are looking for a hassle-free solution for your varying contractor cases, take a look at our products for more information, give us a call on 0800 368 1833, or alternatively request a call back here.
1according to Payoneer.
LV=
Looking forward: a horizon view of later life lending
The later life lending sector is booming, despite wider inflationary pressures and recession woes.
So what does the rise and increasing relevance of later life lending mean for mainstream financial planning? And how is LV= shaping its later life lending products and service to better serve the needs of tomorrow’s retiree?
Join senior leaders from LV= to explore these questions and more in our webinar – ‘Looking forward: a horizon view of later life lending’ on Friday 23 September at 9.30am.
Speakers:
- David Stevens, Savings & Retirement Proposition Director
- Jo Noone, Director of Customer and Adviser Experience
- Georgina Oxton, Divisional Sales Manager – Equity Release
- Chris Smyth, Partnership Development Manager – Equity Release
Ask the experts
We want to hear from you. Submit your question to our expert panel in advance via the registration form. They’ll also be an opportunity to submit questions during the live session.
CPD eligible
Don’t forget, by registering you become eligible for a recording of the session and CPD certificate.
If you have any further queries, contact the equity release team:
0800 028 8974 (option 1)
equityrelease.sales@lv.com
Royal London
Essential Maintenance Sunday 25th September
Royal London need to carry out some maintenance to their Pensions and Protection On Line Service website on Sunday 25 September.
Please note that online service will be unavailable all day from 5am to 10pm approx.
Advisers will be unable to produce quotes etc. during this period. You may wish to communicate this to your members.
If you have any queries regarding the above please do not hesitate to contact me.
Leeds Building Society
We’ve enhanced our Holiday Let criteria
We’ve expanded our Holiday Let product criteria, putting us in reach of more of your clients
We’ve made some key changes to our Holiday Let criteria that will provide improved affordability assessments to your holiday letting clients. Enabling you to offer our Holiday Let products to even more people.
Increased affordability
Rental income will now be assessed using an average of the High/Medium/Low rent over a 30-week period, a significant increase from the 24-week period used previously. This will improve affordability for your Holiday Let clients, increasing the amount we could lend by around £50,000 based off an average rental income of £640 p/w.[1]
Use of all letting agents
We now allow the use of all letting agents for rental income valuations – no longer just those on a specified list. This removes another potential hurdle in allowing your clients to do business with us.
Martese Carton, Director of Intermediary Distribution, said: “Holiday lets are generally properties that require occupancy for at least half of the year, providing essential income to areas that often rely on tourism. Many of these are in purpose-built holiday villages which prohibit owners from living at the property. Improving our Holiday Let criteria will increase our product reach and provide opportunities for investors to enter a buoyant UK holiday market, ultimately supporting our brokers so they can offer the best solutions for their clients.”
View our Holiday Let products here.
[1]See the latest LBS Criteria Guide for the updated worked example here.
Hinckley & Rugby for Intermediaries
Explore our Affordability lending pillar
We hope you have enjoyed our series on the Six Pillars of lending – exploring the six key aspects our mortgage experts consider when assessing your mortgage cases.
To conclude the series, we would like to introduce you to our Affordability pillar:
As with all lenders, the chances of us approving the application will ultimately depend on whether the client can realistically afford the monthly repayments. As a responsible lender, it’s important that we have a realistic view of a borrower’s finances, particularly their remaining income after paying their commitments. Be sure to discuss your client’s income thoroughly with them and gain as much information as possible about their income and outgoings.
Case Study:
Below is an example of a case involving some complex income, with strength in the rest of the application:
- First Time Buyer/First Time Landlord requested £245,000
- The applicant was a non-UK national who had recently been granted indefinite leave to remain in the UK
- He had two part-time job roles – a self-employed carpenter and a second supermarket role
- His carpentry income was projected to be significantly more in his current trading year
- Clean credit record
The applicant had struggled to secure a mortgage with other lenders as they would only take 50% of his income from his second job role into account. From an affordability perspective, we used 100% of his income from his supermarket role, plus a projection of his carpentry income to meet our minimum affordability requirements. With all other pillars securely in place, we were able to offer the applicant his first mortgage.
The Loan Partnership
Second charges are booming
Second charges are coming into their own with the current economic climate. Consolidation can make such a difference to clients who have found they are now struggling with their monthly outgoings. It really is an option you should consider for your client. It’s all about spotting the opportunity, if you’d like me to do a session on this for you or your team, please feel free to contact me. You may have clients who cannot arrange funds due to. Heavy ERC on a fixed rate, adverse causing a problem, insufficient income, tight on equity….I can go on, just give us a call. Here’s our USP’s that lead to increased conversions, satisfied clients and extra income. Have a look and give us a call.
- Income multiples up to 6x based on net disposable income
- No ERC on many plans
- Up to 100% LTV
- BTL 2nd charge 90% LTV
- 50/50 split on all fees & commission
- All 30 staff CeMap qualified, we give the advice
- Loans for any purpose
- Only 50% of cases need a valuation. Other 50% on AVM’s & drive by
- Self employed, 1 year up to 100% LTV
- 3rd charges, shared ownership
- Adverse ignored after 12 months. Recent adverse accepted with a satisfactory explanation
- Fair fee scale
- Whole of market on second charges. New Selena limited availability Drawdown product, ideal for school fees
- Recent mortgage arrears accepted on a rate for risk basis
- Equitable charges can be used where consent for a second is a problem
- Follow us on Linkedin and Twitter to receive product updates as soon as we do
- Bridging rates from 0.43% p/m with no ERC
- Any type of Commercial/ Semi Commercial/HMO/ BTL enquiry considered
- Call 01923 250090 or email info@theloanpartnership.co.uk . 9.00am-8.00pm Mon-Fri
