All posts by marketing@fourfifteen.co.uk

Banks offer help to mortgage holders

Mortgages, ,

Banks offer help to mortgage holders

Following the latest rate rise that saw interest rates hit 5% on June 22 2023, bank bosses met with Chancellor Jeremy Hunt. Rates went up last month to try and tackle inflation which remains unchanged from the previous month at 8.7%

As a result of the meeting, banks have agreed to offer more flexibility to those struggling with their repayments in the wake of the latest rise in rates. Borrowers can temporarily change their mortgage term to allow them to make lower, interest-only repayments for a short time before reverting back to the original terms.

Moreover, those who opt for this change won’t adversely affect their credit score, which it may have done previously.

Anyone who misses mortgage payments or takes a mortgage holiday that pauses their repayments altogether (something commonplace during the pandemic) will still affect a borrower’s ability to secure lending in the future.

Along with agreeing to let borrowers switch to interest-only to help manage their finances, lenders will delay any repossession proceedings for 12 months.

Cost of living crisis explained

The result of high inflation is that we are still in a cost-of-living crisis; not only are mortgages rising for those on a variable rate or coming to the end of their fixed rate period, but energy prices and the cost of goods and services are stubbornly high.

Those who are renting, they may find that their rent goes up as Landlords’ mortgages rise. Some organisations, such as the National Residential Landlords Association (NRLA), lobby for government action. They are calling for the reintroduction of mortgage interest relief and the unfreezing of housing benefit rates and believe that the current interest rate of 5% will result in landlords selling off as many as 735,000 rental properties which will fuel the ongoing supply and demand crisis across the private rented sector, pushing up prices further.

What is the government doing to assist?

Currently, the government won’t step in to support borrowers as this could undermine the battle against inflation. The government instead aims to stick to the current plan and ‘hold its nerve’.

One of the reasons that interest rates have gone up is to reduce people’s disposable income. So offering more support for mortgage holders could be counterproductive and work against the Bank of England’s policy. Rising interest rates can also reduce economic spending by boosting the incentive to save money. However, this provides little comfort to those unable to make ends meet.

What does this mean for my mortgage?

The average two-year fixed-rate mortgage is currently at 6.19%. According to financial data firm Moneyfacts, the five-year rate is about to hit 6%.

Following the latest rate rise, the average two-year tracker mortgage rate rose to 5.66% from 5.49%. Compare this to June 2022, and rates were half that.

Recently MPs have criticised banks for failing to pass rate rises on in full to savers with easy-access accounts – something that we hope will change shortly.

These latest changes will make a big difference to those at risk of losing their homes because they fall behind in their mortgage payments.

In addition, it will help those who have to change their mortgage because their fixed rate ends, and they’re worried about the impact on their family finances.

Get in touch with Mortgage Hub to discuss your requirements

If you would like to find out about these latest changes and how they could affect you, contact our mortgage specialists at The Mortgage Hub. Our team are available Monday to Saturday on 01698 200050 or e-mail info@mortgagehub.co.uk

Interest Rates and Your Finances – what does the rise mean for you?

Mortgages, , ,

Interest Rates and Your Finances

Following the May rise in interest rates to 4.5%, many people are now wondering what that means for their mortgages.

Lenders regularly review the interest rates of their mortgage products, adjusting the deals available to those looking to buy their first home or remortgage their existing property.

The Bank of England (BoE) meets every six weeks to decide whether the Base Rate should go up or down or stay the same. Last month, the interest rate went up 0.25% percentage points, from 4.25% to 4.5%.

What does the interest rate increase mean for your mortgage payments?

This rate rise is unwelcome news for those with a mortgage on a variable rate – this could be a base rate tracker, discounted-rate deal, or a lender’s standard variable rate (SVR).

For those on a tracker mortgage, their deal directly follows the base rate, and at 5.25%, their repayments will rise by £21 per month if they have a £150k repayment mortgage with a 20-year term. Compare this to last year; that same homeowner will have been paying £776 a month, indicating a rise in the previous 12 months.

A Standard Variable Rate mortgage goes up at the lender’s discretion. However, these are likely to go up even if not by the total 0.25% percentage points.

For those on a fixed-rate mortgage, this news will not impact their mortgage repayments each month. This accounts for around six million households in the UK – but if their current deal is about to end, they will feel the impact of the increase in their monthly payments. If they are coming to the end of a 2-year fixed rate, they could be used to paying around 1.5 to 2% and will experience a big jump.

US investment group Goldman Sachs anticipates rates will rise to 5% this summer.

Mortgage rates are increasing by an average of 0.39% across all LTVs, and these latest interest rate changes hardest hit those with a 10 or 15% deposit. However, some lenders are trying to remain as competitive as they can.

What does the increased interest rate mean for savings rates?

 The Bank began raising interest rates at the end of 2021, and at this time, the best easy-access savings rate was 0.67%. Following the rate rises, the rates for savers have improved, and the highest easy access savings rate is now 3.71% – this is significantly below the inflation rate of around 10%. Following the recent rate rise, several savings providers have raised rates to be competitive and attract new customers.

For those who don’t need an easy access account, rates of 4.91% are available – but this means tying up funds for two to five years.

The Commons Treasury select committee has recently campaigned to encourage high street banks to increase the savings rates offered to loyal customers. While the online accounts above pay relatively attractive interest rates, easy-access accounts at many big banks still provide meagre returns.

How does the increased interest rate affect credit card and loans?

When interest rates go up, so do the rates on borrowing via credit cards and loans. If you already have a loan, it’s likely to be on a fixed rate, so your repayment won’t change. If you have a credit card, it may be worth moving it to an interest-free offer. However, you will need to pay a transfer fee.

Are house prices falling as a result of the increased interest rate?

According to the latest House Price Index from Zoopla, buyers and sellers are pressing ahead with their plans despite the rate rise. Recent inflation figures might still put a brake on market activity however.

The Index shows that:

  • UK house prices have dropped 1.3% over the last two quarters but this is now a slow reduction.
  • Lower mortgage rates in the first half of this year supported an increase in housing market activity.
  • Confidence is improving.
  • Housing market conditions vary across the country with weaker demand in areas where house prices have risen the most.
  • The likelihood of further interest rate rises may weaken demand and market activity at the end of 2023.

House prices are currently falling slower than they did at the end of last year, indicating some improved confidence from both buyers and sellers. In fact, the number of property sales in the UK has increased due to lower mortgage rates over recent months. The strong labour market has also prevented prices from falling further.

The annual rate of house price growth is 1.9% for the UK – down from 9.6% last year – ranging from -0.2% in London to 3.6% in Wales. House prices are expected to remain broadly the same for the rest of the year despite inflation data currently being higher than predicted. Mortgage rates could rise in the coming months which will impact house prices.

Looking for more information/ mortgage advice?

If you want to know how the recent interest rate rise might affect you, talk to the team at The Mortgage Hub. We can help you with your new mortgage or find a deal if you are coming to the end of your existing deal.

How Does Conveyancing Work?

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How Does Conveyancing Work?

If you’re looking to buy or sell a property, it’s important to understand that the conveyancing process in Scotland has some unique elements that differ from the process in other parts of the UK. Conveyancing is the legal process of transferring ownership of a property from one person to another. It is typically carried out by a conveyancing solicitor or chartered conveyancer.

One of the key differences in Scotland is that estate agents often handle the conveyancing process, which means that conveyancers are more involved in the selling process than they are in other parts of the UK. The responsibility for providing the Home Report lies with the seller, not the buyer.

The documentation involved during conveyancing in Scotland

Instead of exchanging contracts, as is done in the rest of the UK, the process in Scotland involves a series of letters known as “missives” between the solicitors representing the relevant parties.

In Scotland, there is also a “Note of Interest”. This document notifies the selling agent of the buyer’s interest in the property, as well as the fact that Stamp Duty Land Tax has been replaced with Land Buildings and Transaction Tax.

Gazumping is when a seller accepts a higher offer for their property from a different buyer after already accepting an offer from another buyer. Essentially, it means that the original buyer has been “outbid” by a new buyer, even though their offer had already been accepted. This practice can be frustrating for the original buyer, as they may have already invested time and money in the conveyancing process, only to have the sale fall through due to the seller accepting a higher offer from someone else. In Scotland, guidelines from the Law Society aim to reduce the risk of gazumping, as once a conveyancer accepts an offer on behalf of the seller, they are not permitted to accept subsequent offers from other buyers. If another offer is made, and the seller wishes to accept it, their solicitor must withdraw from acting on their behalf, and they must find another conveyancing solicitor to complete the sale.

This can prolong the time it takes to buy or sell a house and potentially increase the cost of selling the property.

How do you begin the conveyancing process?

When find a home you would like to buy in Scotland, you must engage a solicitor to formally note your interest with the selling agent. This action does not obligate you to make a purchase, but it will enable you to remain informed about developments such as when an offer should be made. You will be notified of the closing date, which is the date when the seller stops accepting offers on the property. The seller will subsequently decide which offer to accept.

The seller needs to supply a Home Report when a potential buyer shows interest. This report is a legal requirement and provides crucial information about the property. Sellers must take the cost of producing a Home Report into account when preparing to sell their property. It’s important to note that the process is different in Scotland than in England, so individuals moving from England to Scotland should be aware of this.

What’s included in a home report?

The Home Report comprises two main parts: the Property Questionnaire and the Energy Report. The Property Questionnaire contains information about the property, including the council tax band, while the Energy Report rates the property’s energy efficiency and environmental impact. It also provides an estimated cost for heating, lighting, and hot water in the property. The Energy Report also includes details for seeking advice on how to make the property more energy-efficient and reduce fuel costs.

While the Home Report is available to potential buyers, they may still opt to arrange an individual survey at an additional cost. Missives, a series of letters exchanged between the buyer’s and seller’s solicitors, are used to negotiate and agree on the final terms of the sale. These letters include terms and conditions, and the seller formally accepts the buyer’s offer. The process is equivalent to the exchange of contracts in England and Wales.

The letters go back and forth between parties until a qualified acceptance is reached, known as “the conclusion of missives.” It’s essential to note that if a buyer wishes to pull out of the sale, it must be done before the conclusion of missives. Once missives are concluded, neither the buyer nor the seller can withdraw from the transaction.

While there is no exact time frame for conveyancing, the process in Scotland is generally quicker than in the rest of the UK.

How does Stamp Duty work in Scotland?

LBTT is the equivalent of Stamp Duty in Scotland, having replaced the previous Stamp Duty Land Tax in April 2015. Administered by Revenue Scotland with support from Registers of Scotland (RoS), LBTT is typically paid by the solicitor on behalf of the buyer. Like Stamp Duty and the Land Transaction Tax in Wales, LBTT applies to both residential and commercial land and building transactions above a certain value, with tax payable at varying rates for each portion of the purchase price within specific tax bands.

  • 0% on properties up to £145,000
  • 2% on properties between £145,001 and £250,000
  • 5% on properties between £250,001 and £325,000
  • 10% on properties between £325,001 and £750,000
  • 12% on properties over £750,000

For commercial properties, the LBTT rates are as follows:

  • 0% on properties up to £150,000
  • 1% on properties between £150,001 and £250,000
  • 5% on properties over £250,000

It’s important to note that these rates and bands can change over time with government budget announcements. Your solicitor will be able to provide you with up-to-date information on LBTT rates and how much you will be required to pay.

For more advice on the home buying process, talk to us at The Mortgage Hub.

Confidence Returns to the Property Market

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Confidence Returns to the Property Market

The high property prices and the sharp rise in prices from 2021 to 2022 weren’t sustainable. With rising mortgage rates over the last 18 months, we expect a natural tip towards a more stable and realistic property market. We hope that as the market stabilises, many buyers will be encouraged to implement their moving plans. Although there may be a slight house price fall in some localised areas, it’s important to remember that many homeowners have seen a sharp rise in the value of their homes since the pandemic.

Despite the recent rise in the Bank of England base rate to 4.25%, mortgage rates are steadying. In addition, Zoopla has reported that there are currently 65% more homes for sale than in March 2022 – and this lack of demand was driving house prices to record high levels. With many more buyers and sellers active in the property market, 11% more sales are being agreed across the UK than in 2019.

Increased sales volumes

The mini-budget in October 2022 caused panic in the UK markets, and in the days following the budget, many lenders pulled their mortgage products, making buyers and sellers nervous to proceed with their plans. However, after the autumn statement, the market stabilised; since then, we have seen cautious improvements.

Sales volumes are increasing slowly in recent weeks at the same as in October. At present, agreed sales are 11% higher than in 2019, and demand from buyers is 16% higher. Homes are now selling faster in all regions of the UK.

This means that we are seeing more normal pre-pandemic market conditions after the post-pandemic property boom between 2020 and 2022.

Preferred property types

Those looking to move to a larger family home are in an ideal position because there is currently a high level of demand at the lower end of the property market. In addition, there’s more choice at the upper end, with many sellers pricing their properties much more realistically and a 4% drop in the asking price, which equates to £14,000. Homes at the bottom of the market are seeing 5% more sales than the upper end.

Those who are upsizing need to carefully consider the higher mortgage costs that will be inucrred. Until the economic outlook becomes more apparent and mortgage rates start to fall, there may be a slight fall in agreed sales this year.

On average, each estate agent lists 25 properties for sale – this is currently nine higher than last year.

Rental rates

There has been a spike in rental rates over the last year, with an 11% rise, continuing to support demand from first-time buyers. This group accounted for 1 in 3 sales last year.

Rental inflation further pushes first-time buyers to move to property ownership, despite the challenges of depositing and the higher mortgage rates.

This year, we expect rental growth to continue, with mortgage rates below rental costs in most regions of the UK, even with the recent rise in rates.

High property demand in Scotland

When looking at the property market in the UK, Scotland is one of the most affordable areas to buy a home. If you are considering moving and want to ensure you get the best deal, talk to our friendly team.