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UK mortgage brokers are advising property owners to carefully check the terms and conditions of their mortgages following news that there could be a huge increase in rates by 2023. This, in real terms, means that monthly mortgage repayments will potentially rise by hundreds of pounds if the BOE’s baseline is to rise, as has been forecast by the Office for Budget Responsibility.

Currently sitting at an all-time low of 0.1%, the base rate is expected to rise in the coming months in order to tackle rising inflation. It is not yet known what the rise will be, but we have been warned of a “worst-case scenario” where decreased wages and increased energy costs may cause the baseline rate to rise to as much as 3.5% by 2023. This, in turn, could see mortgage repayments rise by as much as 33%.

Director at mortgage broker Your Mortgage Decisions, Dominic Lipnicki, said: ‘For many borrowers, the idea that the Bank of England base rate could increase to 3.5 per cent by 2023 is very scary indeed.

‘Those used to record low fixed rates would be shocked to see their payments balloon if such an increase became a reality.

‘The market has not seen rates as high as this since 2008 and many borrowers would find such an increase devastating.

‘Many borrowers who are either on the lender’s standard variable rate or a few months away from their fixed rate scheme expiring will be keen to secure a new deal now to avoid that risk.’

Considering we are currently experiencing some of the lowest rates on record, the expected rate increase has come as somewhat of a shock. Lenders are suggesting that sooner or later the rates had to increase substantially.

‘There are early signs of upward pressure on mortgage rates, with markets anticipating a base rate rise.

Competition cannot hold prices back indefinitely

‘At some point we will start to see movement, and the historically low rates that we have today may have a very short shelf life. We could see upward momentum as early as the first quarter next year’, commented John Eastgate, managing director of property finance at lender Shawbrook Bank.

Brokers are urging people to carefully check their mortgages, particularly those with standard variable rates, and are encouraging them to consider switching to fixed-rate mortgages. Fixed mortgage deals at lower rates will allow households to budget more effectively for the coming years, which is vital with other household costs rocketing.

Chief executive at The Mortgage Lender, Peter Beaumont, said:’ For some, depending on the deal they are on, the financial benefits of remortgaging could outweigh any charges, especially during this period of record-low rates.

‘For anyone tied to a standard variable rate, then the best bet is to refinance as soon as possible.’

It has typically been the policy of most major lenders to issue mortgages only to those able to repay the balance in full prior to their retirement. As of late, lenders have been acknowledging the UK’s skyrocketing average life expectancy, along with the desire of more people than ever before to work well into their 60s or 70s.

Consequently, more than half of all new mortgages issued are being allocated to borrowers who will still be repaying their debts after their 65^th birthdays. That’s according to new figures from UK Finance, which indicate that 52% of new homeowner mortgage lending activity involves borrowers planning to continue repaying long after turning 65.

The UK’s ageing population is spurring an inevitable shift in attitudes towards mortgage lending, reports UK Finance.

Growing demand from older applicants

The report from UK Finance indicates that this is the first time more than half of all new mortgages issued are going to those who will still be repaying their home loans after their 65^th birthday. Demand for mortgages among applicants aged 55 and over has been growing significantly for several years.

In 2014, less than one-third of all mortgages issued went to applicants who would complete their repayment obligations beyond the age of 65.

Speaking on behalf of UK Finance, director of mortgages Charles Roe said that the trend was only likely to continue gaining momentum indefinitely.

“There’s been growing demand for mortgages from those aged over 55, and this is set to continue as more people live and work for longer,” he said.

“For the first time since records began, more than half of all new mortgages are due to end after the homeowner’s 65th birthday, and lending to over-55s has grown even where mortgage lending in the wider market has remained subdued.”

“Later life lending, both now and in the future, will be imperative as existing homeowners look to later life products for accessing equity as they get older.”

Equity release products have also seen unprecedented demand from homeowners across the UK. However, decisions regarding equity release should only be reached after enlisting the support of an experienced broker or financial adviser.

While attitudes towards finance in later life are changing, the potential consequences associated with secured borrowing must always be carefully considered.

“UK Finance’s findings underscore the integral role that later life lending plays in consumers’ long-term security,” commented the chief executive of the Equity Release Council, Jim Boyd.

“Attitudes towards home finance in later life have changed, and homeowners are increasingly comfortable with mortgage borrowing into retirement and open to the benefits of realising some of their property wealth as they age.”

“Property wealth can play an important part in a holistic approach to funding retirement, and, as an industry, we must work together to ensure consumers get the information they need to weigh up increasingly complex financial decisions to do this.”

Purchasing any residential property with the intention of letting it out can be an appealing prospect. In the UK, estimates suggest there are now approximately 2.65 million landlords operating within the private rental sector.

Does this mean that buy-to-let is the right choice for you?

Before making any major decisions regarding BTL investments, it is important to ensure you understand the benefits and drawbacks of becoming a private landlord.

What is buy-to-let?

The term ‘buy-to-let’ is used when an individual or business invests in a residential property to be ‘let’ out to tenants.

Rental properties are purchased using a specialist mortgage, which differs from a conventional home loan by way of both qualification criteria and overall borrowing costs.

Buy-to-let investments generate profits through monthly rent payments from tenants, which cover the costs of the mortgage and leave at least a small amount left over. Depending on the type of property and its location, rent yields and profits can vary from modest to exceptional.

What are the advantages of buy-to-let property investments?

The biggest benefit of BTL is its potential to generate a regular source of income for the owner of the property. Typically, rent is charged at a rate that not only covers the monthly mortgage payment but also all potential maintenance requirements for the property.

Buy-to-let property owners may benefit significantly from capital growth over time. Average UK house prices have been skyrocketing for some time and are predicted to continue doing so indefinitely. However, again, gains by way of property value increases vary significantly from one property type and location to the next.

BTL investments are considered among the simplest and quickest to exit, should it become necessary to do so at some point in the future. With demand for desirable homes at an all-time high, investors rarely encounter any difficulties selling their BTL properties for their full market value.

What are the disadvantages of buy-to-let property investments?

On the downside, qualifying for a buy-to-let mortgage is not quite as simple as qualifying for a traditional mortgage. There are higher deposit requirements and more extensive restrictions to take into account with regard to who is and is not eligible.

Interest rates and borrowing costs on a BTL mortgage are usually higher than those of a traditional mortgage. Prospective landlords must also take into account additional costs attributed to repairs, maintenance, and the general upkeep of their rental properties.

While demand for quality rental properties is insatiable across much of the UK, potential gaps between tenancies cannot be ruled out. During this period, the landlord is still required to make their monthly mortgage payments in the normal way, though without the benefit of rental income.

Independent expert advice

Before deciding on any BTL investment opportunity, it is essential to consult with an independent broker to discuss the options available. During your consultation, you will have the opportunity to determine your eligibility for BTL mortgage products and whether your financial situation qualifies you for life as a private landlord.

Call or e-mail anytime for more information on buy-to-let investments or to book your obligation-free consultation with a member of our team.

Medical professionals often run into a variety of unexpected obstacles when looking to apply for a mortgage. From doctors to dieticians to psychiatrists to surgeons, qualifying for a mortgage as a medical professional is not always as easy as it sounds.

With the help and support of an experienced broker, competitive deals can be found through an extensive network of specialised lenders.

Why Medical Professionals Encounter Issues When Applying for Mortgages

The medical profession is typically associated with high earnings potential, so why is it that so many encounter difficulties when looking to take out a mortgage?

1. A complex combination of revenue streams

Medical professionals routinely collect their combined annual income from multiple sources. This could include private practice, locum work, and positions within the NHS. With most conventional lenders, the revenue streams of a medical professional are somewhat fragmented, and you can immediately count them out of the running. Even if their total pay is significantly higher than that required to qualify for a mortgage, the complex nature of their revenue streams could stand in their way.

1. You may be looking to obtain consent to let

Some doctors and medical professionals, particularly those at the start of their careers, may find themselves spending much of their time away from home. In this case, a prospective homebuyer may be considering the option of letting out the property from time to time while they are not using it. In order to let out a home that has been purchased using a conventional mortgage, the borrower needs to obtain ‘consent to let’ from the lender. As this is not a standard facility offered by many high-street banks, alternative financing options may be necessary from specialist lenders.

1. Your work may take you overseas for significant periods of time

For many doctors and medical professionals, a property purchased in the UK can subsequently become a second home if their work takes them overseas for significant periods of time. This is also something that can bring complications into the mortgage application process, should the buyer wish to let out their UK home to private tenants or as a holiday home at a later date.

1. You’re a newly-employed doctor

Qualified doctors and medical professionals who choose to work for themselves are subject to the same restrictions as other self-employed mortgage applicants. This will typically mean providing a minimum of two or three years of tax returns and extensive proof of income in order to qualify for a mortgage. It may also be necessary to offer the lender a higher-than-normal deposit to qualify for the most competitive deals available.

The importance of independent broker support

Enlisting the support of an experienced broker at the earliest possible stage is highly recommended in order to both simplify the application process and pave the way for a competitive deal.

For more information on any of the above or to discuss the mortgage options available for doctors and medical professionals in more detail, call or email a member of our team today.

Self-employed workers have always had a tough time qualifying for a competitive mortgage. Today, things are only getting more difficult.

In the wake of the COVID-19 pandemic, lenders are scrutinising self-employed borrowers more intensively than ever before, to such an extent that even having received financial support from the government during the crisis could count an applicant completely out of the running.

This paints a fairly gloomy picture for self-employed workers looking to own their own homes. However, there are steps that can be taken to at least tip the balance slightly in your favour.

While there are no guarantees, each of the following could significantly boost your chances of qualifying for a competitive self-employed mortgage:

1. Provide comprehensive proof of income.

You can expect to be asked for extensive proof of income from the last few years, at least. The more evidence you can provide of income that is both stable and adequate to cover the costs of the loan, the more likely you are to qualify.

You may also need to provide evidence on future contracts, projects, and general assurances of long-term income.

1. Use an accountant.

An application submitted via, or at least endorsed in some way by, an accountant always carries more weight. Banks and lenders instinctively see applications, projections, and financial documents as more accurate and reliable when they come from an experienced accountant.

Even if this means paying for the services of an accountant for a few months, it is a small price to pay for the added credibility they bring.

1. Boost your credit score

Your credit rating will be taken into account as a major indicator of your worthiness for a mortgage. In addition, your credit score will heavily influence the interest rate that applies to your loan if your application is accepted.

It is advisable to do everything you can in advance to boost your credit score. Even just a few extra points added by tidying up your accounts and paying off a few smaller debts could work in your favour.

1. Save a bigger deposit.

The bigger the deposit you are able to provide, the more likely you are to qualify for a mortgage. Again, this is something that will influence the overall borrowing costs of the facility. Larger deposits mean lower-risk transactions in the eyes of the lender, plus a lower sum of money borrowed.

Offering a larger deposit could hold the key to getting your application through the door with many high-street lenders. If pulling together a meaningful deposit is proving problematic, you may need to consider alternative options away from the High Street.

1. Work with an experienced broker.

Consulting with an experienced broker before applying is essential. This will enable you to not only determine your eligibility ahead of time but also begin building the strongest possible case to support your application.

Many of the UK’s specialist lenders offer their services exclusively via broker introductions. As it may be necessary to direct your application to specialist lenders as a self-employed worker, broker support could hold the key to qualifying for a competitive mortgage.