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​Self-Employment in the Current Mortgage Market

27 March, 2017

​Self-Employment in the Current Mortgage Market

The recent Spring Budget threw up several questions, not least for its announcement of a tax increase for those who operate as self-employed. Despite the plans since being dropped, the announcement has shone a spotlight on the treatment and rights of those who are self-employed in the UK. At the beginning of this week, the PM could be accused of almost doing a U-turn with regards to her treatment of self-employed workers, with speculation mounting that the Government will now look to ensure that the group are better protected. In light of these recent discussions, we thought it about time that we highlighted the stance of the mortgage market with regards to this sector of the workforce.

Preconceptions of Self Employed Workers

Ever since the onset of the recession, it has been the case that self-employed workers are seen as a riskier portion of the workforce for lenders. They have no contract that ties them to an employer for an infinite period and are responsible for submitting their own tax returns. As they are not tied to an employer, they are also not entitled to common employee benefits such as pensions, sick pay and maternity leave. Again, this presents a risk to lenders who are looking to ensure that mortgage payments can be covered in any eventuality.

However, the reality is, more of the British workforce is made up of those who are self-employed than ever before. Many companies are now using self-employed workers in order to dodge paying pensions, sickness and maternity contributions, something which the PM is open to overhauling. Aside from this, a significant number of the UK workforce are defined as contractors.

View of the Mortgage Market

Historically, as mentioned above, self-employed workers have faced significant barriers when attempting to secure a mortgage on a property. In a recent survey by Aldermore, 62% of respondents believed that they would never manage to buy a house. A third of respondents had even admitted to giving up being self-employed in order to secure a mortgage. Unsurprisingly, a significant portion (39%) would like to see better mortgage products hit the market.

Changing Market

Banks are notoriously stringent when it comes to lending to self-employed workers. Many lenders will look for at least two years of trading records and accounts, put together by a chartered accountant. Some will even look for three. Furthermore, a higher deposit is often required. Whilst much of the market is making its way to back to 95% mortgages, this is often not the case for those who are self-employed.

However, times are beginning to change. In light of previous discussions and the more recent spotlight on self-employed rights, some lenders have begun accepting one year of tax returns. The Mortgage Lender and Newcastle Building Society are two of these. Other lenders offering mortgage products to self-employed workers include Halifax and Nationwide.

If you are self-employed, you shouldn’t automatically write off the idea of getting a mortgage. There are options out there. Here at Money Sense Matters, we are not tied to any lender or bank. Thereof, we are in prime position to assess the whole market to find the best solution for you- as we have done for several of our self-employed clients. For further information, get in touch.

As a mortgage is secured on your home your home maybe repossessed if you do not keep up repayments on your mortgage.

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Buying vs Renting; A Savings Gap Breakdown

27 February, 2017

Buying vs Renting; A Savings Gap Breakdown

According to figures released this week by the Bank of Scotland, first time buyers in Scotland are now estimated to be £862 better off annually than their renting counterparts. The gap between renting and buying has narrowed slightly in recent years, thanks to the rising cost of homes. However, more affordable mortgage products mean that buying a home remains the significantly more cost-effective choice overall.

Rise in First Time Buyers

These figures are consistent with the significant rise in the number of first time buyers seen last year. During 2016, first time buyers made up 49% of the total mortgage market. This is a significant improvement, rising 35% from the beginning of the recession. This can largely be attributed to the rise in costs associated with renting. The buying market in comparison, has remained relatively unchanged.

Geographical Impact

Whilst Scottish buyers are enjoying £862 in annual savings, those in other parts of the UK are also seeing the difference. Where you in live in the UK dictates just how large the disparity is. As is to be expected, those purchasing property in London are likely to see the greatest difference in their monthly outgoings. Figures show that there is on average a difference of £1929 per annum between the cost of renting and the costs associated with a mortgage.

The high cost of property in the capital, along with the highly-publicised shortage of council housing has driven the increase in the cost of renting in Greater London.

Elsewhere in the UK, more moderate savings can be seen. Buyers in Yorkshire and Humber are £204 a year better off, whilst those in East Anglia save just £84.

Preparing to Buy

At present, there are several options available to first time buyers in Scotland. The Help to Buy Affordable Build scheme has been established, with applications still able to be made on purchases of £200,000 and under.

The Help to Buy ISA is also a fantastic option for those still at the saving for deposit stage. It allows would-be buyers to save and receive a bonus from the Government for doing so. Although there is no limit on the amount you can save in a Help to Buy ISA, the Government bonus is capped at £3,000 and is given as soon as you save £12,000.

It’s clear that buying is a significantly more cost-effective option in the long-term. Costly private rentals and the shortage of council houses have made it so. Whilst the journey to accumulate a deposit and buy may seem daunting, the above options provides some assistance. If you are looking to purchase a home and are in need of simple and transparent advice on your best options, get in touch. Having no ties to any providers on the market, we can assess the mortgage products without bias and help you choose the right path for you.

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Brexit Means Brexit? A Future in Property

26 January, 2017

Brexit Means Brexit? A Future in Property

The formal triggering of Article 50 by the UK government edges ever closer. With notice set to be served by the end of March 2017, it’s no surprise that Prime Minister Theresa May has been hounded with questions surrounding her plans. Recently , the PM finally opened up on these plans, detailing how she sees a post-Brexit Britain operating. ‘No deal is better than a bad deal’ says May. In this blog, we’re taking a look ahead at the possibilities for the future and how this could impact the property market.

A ‘Hard’ Brexit

Brexit has provoked uncertainty, of that we can all agree. Its possible effect on the pound has many of us fearing for the future. Should Brexit indeed manifest as a ‘hard’ Brexit, it could mean that goods and services will begin to cost more. Having access to the EU single market has afforded the UK deals on goods, which will no longer be available. Thus, the cost of imports could rise. In the property market, this may mean that the cost of building materials rises which could then impact the cost of labour, resulting in a greater cost to build housing. To cover the cost of these increases, property developers may pass them on to buyers. In theory, at least, the cost of buying a house could rise.

The Buy to Let Market

There is a flip side, on which Bank of England chairman Mark Carney has speculated on. The buy to let market is changing. It has been ever since last year’s changes to stamp duty. As a result, many ‘accidental’ landlords are now questioning the profitability of maintaining a buy-to-let property.

Accidental Landlords

An accidental landlord is described as a person who has purchased an additional home and is now letting out their previous residential property. Circumstances may include setting up home with a new partner or relocating. These landlords are now finding that the time and cost tied to renting the additional property is too cumbersome. As a result, many are now looking to offload these additional homes. Therefore, we may see a rise in the number of homes available for sale. So, whilst the cost of building could rise, a flooding of properties being offloaded could stem the impact.

Brexit is a massive variable that we are all having to consider. The move will have repercussions, some of which we are already seeing. Many big city firms are now making plans to relocate staff. More recently, Mr Carney has chosen to highlight the impact of Brexit on the EU. It is his view that the EU will suffer more from the removal of London as its financial centre, than the UK will as a result of high cost imports. As spectators, we must wait for further information. Although the PM has laid out her plans, negotiations still have not begun. However, should the view of the BOE chairman prevail, changes will take place but the UK will not become the wounded soldier that many of us had expected.

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Why Consider Remortgaging?

09 December, 2016

Why Consider Remortgaging?

Remortgaging can make great financial sense for many homeowners. After all, for many of us, our mortgage is our single biggest outgoing. So, it stands to reason that we’d all like to save money on it where we can. Choosing to remortgage can lead to significant savings, under the right circumstances. However, it’s not always the best course of action. Here, we’ll be discussing what it means to remortgage, when it is advised and when you should stay where you are.

What is Remortgaging?

Remortgaging is the act of changing your mortgage deal. You don’t even have to move home. In fact, in some circumstances, you don’t even have to change lenders. The main aim of remortgaging is to source a better deal and save money. If remortgaging will not save you money then it is not the right option for you.

When to Remortgage?

Most mortgages come with an introductory deal. At the end of this period, you have the option to remain with this mortgage on a variable rate. Or, you could choose to remortgage and move onto a rate which is more competitive. You are not under any obligation to stick with the same lender. That said, it is always a good idea to check with your current lender before switching. They may offer you a more competitive deal. After all, your custom is valuable to them.

However, should their offer fall below par, then looking into other options on the market is a forward thinking move. You should note that if you opt to move lenders then you must undergo checks to assess your affordability and creditworthiness. These will be the same checks that you originally underwent to be accepted for your initial mortgage. They will assess any change in circumstances and will adjust your suitability accordingly.

When Not to Remortgage?

As we mentioned above, the main aim is always to save you money. If remortgaging will not accomplish this then it’s not your best option. Choosing to terminate your existing mortgage is likely to incur fees, so you’ll have to take this into consideration. Also, many lenders will levy processing fees for setting up the new mortgage. Again, this is a cost that you must account for.

In the instance that the costs associated with remortgaging, such as those listed above, outweigh the savings then you should stick with your current deal.

When it comes to the end of your introductory period, you should always explore the possibility of remortgaging. Even if you stay where you are, you’ll be able to rest easy knowing that you’re in possession of the best deal for you. By failing to assess the options, you could miss out on some hefty savings. Get proactive about your mortgage options this winter.

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Trump – 45th American President – What does it mean for my mortgage?

11 November, 2016

Trump – 45th American President – What does it mean for my mortgage?

Against all the odds, Donald Trump was elected as the next President of the USA. America will be required to sort issues that have been highlighted during the electoral campaign – that is interesting, but more importantly, how will this affect us, living in the United Kingdom.

The effects will be reduced compared to our American cousins, but there will be some consequences here. The first and immediate occurrence was the volatility and instability of the financial markets. When the markets realised that Mr Trump had a real possibility of becoming President, the stock markets started falling. They were anticipating a more challenging business environment and bigger obstacles to investment and wealth creation. Some even mentioned an expected recession. Once the result was absorbed, markets rallied and normal trading activities resumed.

So, what? Well it does matter. Volatility in the market brings uncertainty, which means less liquidity. Higher expected returns for the same level of risk which usually results in higher expected future rates. This taken in isolation, has the potential of higher mortgage rates.

In the U.K. the bigger issue is Brexit, or more importantly the weakness of the pound against its main economic partners. The level of the pound means that we, as a country, will be more competitive for our exports. This should help our economy, except, our manufacturing sector is a small portion of our economy. Therefore, the impact on the economy will be minimal. What will happen, for you and me, is that the cost of our basket of goods will rise, it will be more expensive to import goods, meaning it will cost more to the end user: you and me. This in turn will feed into inflationary pressures with the National Institute for Economic and Social Research (NIESR) expecting inflation to be a 4% by late 2017, 2% above the target rate. All these factors are indicators of a possible rise in interest rates, which may result in higher mortgage rates and increases in monthly mortgage payments.

One of the factors that could help reduce interest and inflation pressures is if the government puts in place a support mechanism such as quantitative easing and or/grants to companies.

If you are on a variable rate mortgage, I would urge you to speak to your mortgage broker to discuss your current arrangements.

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New website!

18 April, 2016

New website!

Your one-stop shop for expert financial advice, Money Sense Matters, has launched a new website.

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