Bridging loan firm launches products for landlords

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Property landlords in the UK wanting to access bridging loans quickly have been offered a range of products by Keystone.

The firm says it has a range of bridging products which will deliver quick finance for landlords to buy properties, refurbish them and refinance them.

There are six products which have been priced in accordance with the applicant’s credit profile with prime borrowers enjoying better rates than applicants with an adverse credit history.

For bridging loans of up to £1 million, Keystone rates start from 0.85% per month with a 70% LTV – though this rises to 75% LTV on referral.

The credit line is being funded by Lancashire Mortgage Corporation

Decisions on bridging loans

Keystone’s managing director, David Whittaker, said: “Decisions on bridging loans are made within hours and funds released in five working days.”

He added that the products have no exit fees and that the costs and fees for borrowers have been kept intentionally low.

There is an assessment fee which is a one-off £199 cost with a bridging loan facility fee of 2%.

The bridging loans for landlords are available now via various broking firms.

Remortgages hit record peak

Meanwhile, new data has revealed that homeowners in the UK are cashing in on rocketing property values by pushing the average remortgage loan value to new heights, according to the Mortgage Advice Bureau (MAB).

The firm says that the typical remortgage value in June was £166,100 which grew by 2% in July to £170,094 – this is the highest figure since 2009 when data was first recorded.

MAB point out that the average value being remortgaged in the UK is now worth £300,898 – the highest since October 2014.

The research also reveals that homeowners are opting not to take smaller loans which would decrease their mortgage repayments but to use property price gains to generate cash.

The net result is that the average house equity has fallen to stand at £130,804.

Using property for releasing extra funds

MAB’s head of lending, Brian Murphy, said: “Many homeowners are using their property for releasing extra funds and they have benefited from house price rises.”

However, Mr Murphy pointed out that by opting for higher LTV ratios means that the borrowers are also opting for higher mortgage repayments.

He added too, that the average price of property in the UK has risen by a third in five years, according to the Office for National Statistics.

The MAB data has been put together from responses given by 900 estate agents and 700 mortgage brokers which revealed that remortgages have risen by 35% year-on-year.

Applying to remortgage

Most of those applying to remortgage are doing so ahead of an expected interest rate rise in the coming months and mortgage experts predict a growing number of homeowners will remortgage in the next few months.

Those who are remortgaging are opting for fixed rate deals and can enjoy some excellent deals being offered by lenders currently.

Mr Murphy added: “Mortgage interest rates have tumbled since the beginning of 2015 and many lenders are offering low rate deals.”

He also pointed out that some lenders have increased their rates in recent weeks which means that the peak for low remortgage deals is coming to an end.

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Bridging loans in the UK rocket 30%

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The UK’s bridging loan sector has rocketed in value by 30% in the year to June with lending nearly reaching the £3 billion mark, according to an index.

The figures come from the latest bridging index from West One Loans which show that lenders provided £2.8 billion of finance, which is up from the previous year’s figure of £2.1 billion.

The amount being loaned has also increased and is now averaging £747,000, which is a third up on last year.

However, the average loan to value has dropped from 50% to 48.5%, while the average interest rate has risen slightly – it is up from 1.1% to 1.2% in June.

A director of West One Loans, Duncan Kreeger, said: “The appetite for bridging loans continues to grow and it’s been doing so for some time.

“Loan volumes are growing, as are typical loan sizes.”

Borrowers are confident with short-term lenders

He added that one reason for the growing popularity of bridging loans for businesses in the UK is that borrowers are confident that short-term lenders can meet their needs.

Indeed, he said, businesses are reassured about the sector’s ability for funding larger projects.

Mr Kreeger added: “Lenders are granting larger loans and have faith that they will be repaid. The sector’s real driving force is the increase in big-ticket loans.”

Mortgage boom in Wales and Scotland

Meanwhile, figures have revealed that the housing market in London is cooling while there is a mortgage boom in Wales and Scotland.

Indeed, across the UK there has been a surge in house buying and property experts believe the market is starting to perk up.

Figures published by the British Bankers’ Association reveal that a total of £11.8 billion of mortgages were approved by lenders in July – that’s up by 15% on July 2014.

Home purchases funded by mortgages grew by 11% to total £7.8 billion while remortgaging has rocketed by 29% to £4.1 billion.

The figures reveal that homeowners are now rushing to get better finance deals before a predicted interest rate rise.

Scotland has become a big driver of the lending surge

Over the last quarter, Scotland has become a big driver of the lending surge with property buying jumping by 39%, according to the Council of Mortgage Lenders (CML).

Alongside mortgage lending in Scotland, mortgage lending in Wales also grew quickly by 29% to £1.2 billion in the quarter to June.

Most of that was fuelled by remortgaging whereas mortgages for London property buyers have fallen by 9% to £2.8 billion over the same period.

The CML said: “It’s good to see house buying bounce back in Scotland finally with the highest number of loans since early 2008.

“With better affordability and competitive mortgage deals, a stamp duty replacement and a new taxation system means conditions are favourable for those in Scotland looking to buy a property.”

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Borrowers look for longer low rate mortgages

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With a much mooted interest rate hike on the horizon, growing numbers of new homebuyers are looking for 30 year mortgages in a bid to keep their repayments low.

According to the broking firm, the Mortgage Advice Bureau (MAB), the number looking for longer terms has doubled in just 12 months.

One reason for the increase is that house buyers are looking to keep their mortgage repayments at an affordable rate.

One in five buyers were looking for longer term loans between April and June which is an increase on the 8% who did so last year.

With the Bank of England warning homebuyers to be aware of a potential base rate rise, now set to take place before next spring, which will see mortgage repayments increase.

Borrowers looking to extend their mortgage

However, many borrowers looking to extend their mortgage past their retirement age may find lenders unwilling to give them a loan because many want the mortgage repaid by the time the borrower is 65.

MAB is also warning those who extend their mortgage that the full lifetime of their loan will mean having to repay a higher amount in total.

The value of an average mortgage taken out between April and June was £151,000, says the MAB.

The firm points out that while that term over 30 years would equate to repayments of £551, it would be £83 a month less than the same loan spread over 25 years.

However, that same 30 year loan will be nearly £24,000, or 25%, more expensive in total.

Homeowners looking to re-mortgage want shorter term loans

The figures also reveal that current homeowners looking to re-mortgage are looking for shorter term loans.

A spokesman for the Mortgage Advice Bureau said: “As we get closer to a base rate rise it’s a good time to take advantage of deals which could save homeowners money every month.

“Homeowners should also not be put off from remortgaging if they fear it’s a complex process.”

SME bridging loan provider enjoys rapid growth

Meanwhile, GLI Finance which specialises in providing bridging loans to SMEs in Europe and the UK has seen the total amount loaned rocket by 120% in the last year.

The firm says it now has made £227 million in loans to June, compared to £103 million in the year previously.

GLI is also revealed that the number of new loans has grown by 45% to 3,300 and the average value of the loan has risen to £69,000 from £45,000.

The finance firm has enjoyed strong success since starting out and they have now made 6,400 loans worth £444million.

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Low mortgage rates lead to fewer home repossessions

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The number of people in the UK having their homes repossessed has dropped again to a new record low, according to the Council of Mortgage Lenders (CML).

According to the latest figures, 2,500 properties were repossessed by mortgage lenders in the second quarter of this year which is down from the 3,000 homes repossessed in the first three months of 2015.

However, this is a big drop from the 5,400 repossessions which took place in the second quarter of 2014.

Lenders say that the low mortgage interest rates are helping to keep the numbers down but they are warning that homeowners must prepare now for a potential interest rate rise.

The organisation’s Paul Smee, said: “This is a welcome trend and low interest rates are supporting homeowners in general. They are also helping to put off low levels of arrears for households that are stretched financially.”

He added: “We are urging borrowers to plan ahead for interest rate rises and contact their lender if they are in difficulty without delay. To help prevent problems worsening, prompt action will help.”

Bank of England warns of mortgage rate rises

The governor of the Bank of England is also among those warning householders to prepare for a rate rise later this year or early next.

In addition, a rate rise will come as a shock to many householders – a survey out this week has also revealed that more than one million householders have never experienced an interest rate rise while owning their property.

For some people this will come as a major surprise and have a big impact on their finances.

According to the CML there are more than 11 million mortgage holders in the UK who owe more than £1.3 trillion to lenders.

When the repossession figures are scrutinised, it’s clear that 1,800 private homes were repossessed, and lenders have also repossessed 700 properties from buy to let landlords in the second quarter of 2015.

The same figures also reveal that the number of home owners falling into mortgage arrears has also dropped between the second and first quarters of this year.

To underline the CML’s report, the Ministry of Justice has also revealed this week that the number of homeowners facing legal action for repossession dropped in the second quarter also.

Bridging loan lender Amicus continues growth

Major bridging loan lender, Amicus, has announced that its growth plans for this year are ahead of their expectations.

The firm has just announced a record performance for July with completions worth more than £39 million.

Abacus is this year’s Bridging Lender of the Year and has also used the announcement to highlight the fact it cannot grow as quickly as it wants without taking on more quality experienced staff.

To that end, the firm is busy recruiting and has just announced that it’s taken on two senior executives to help deal with its growth plans.

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New phone app offers mortgage decision in 15 minutes

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The Halifax has launched a mobile phone app which will give an applicant a decision within 15 minutes of whether they are eligible for a mortgage.

The bank has called its tool, a mobile Agreement in Principle, and is also available for desktop and tablet computers.

The agreement to lend by the Halifax is based on an initial assessment of the applicant’s circumstances which includes their income and outgoings.

There’s no need to enter the property value or deposit and is simply based on the applicant’s own information.

Once the decision has been granted, the applicant can then edit the mortgage term deposit amount using a calculator to illustrate how much their monthly repayments will be and how much they need to set aside for legal fees and stamp duty.

Phone app will provide a quick mortgage decision

The idea is that the applicant can demonstrate to a vendor that a mortgage lender would be willing to provide them with a mortgage and the app will also detail how much they can afford to borrow.

The Halifax says it will be particularly useful for first-time buyers as it will highlight all of the associated costs when buying a property.

The decision from the application can be emailed to the applicant or sent to a family member or estate agent.

Now experts in the mortgage industry are predicting that other lenders in the UK will also begin to offer similar tools.

Bridging loan firm breaks monthly lending record

Meanwhile, bridging loan firm West One Loans has broken its monthly lending record in July by agreeing more than £45 million of loans.

Its previous best was £37 million set in June which means the firm has seen a 22% increase in activity over the month.

However, West One has already enjoyed a particularly strong start to 2015 and has already written more than £80 million of business to make it one of the leading short time finance providers in the country.

Indeed, its position is underlined by the latest publication of its Bridging Index which reveals that the sector is averaging around £500 million of business on a bi-monthly basis – a large chunk of which is generated by the firm itself.

A director of West One, Stephen Wasserman, said: “We are confident that the bridging loan sector will have a strong second-half and that West One will be a major player for clients looking for bridging loans.”

 

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Mortgage lending in UK bounces back

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Homebuyers around the UK are taking advantage of a mortgage war between lenders to help the amount loaned bounce back to pre-election levels.

The Bank of England has revealed that banks approved 66,582 loans in June, following a dip in approvals in May.

The rise in loans has been credited to the traditional spring buying season and a mortgage price war.

However, the Bank of England is again warning that interest rates look set to rise later this year and those taking out mortgages should prepare for this.

Financial experts have predicted a rise in rates by February 2016 but they too say that rates will now rise later this year.

Number of mortgage approvals for June

The number of mortgage approvals for June were slightly below the figure for April but they remain the second highest peak since March last year.

The lowest number of approvals recorded occurred last November which marked a 17-month low but the upturn in the economy has helped to fuel home buying.

The head of lending at brokerage Mortgage Advice Bureau, Brian Murphy, said: “It’s likely we will see a burst in the number of transactions continue following the bank’s comments about a rate rise.

“People are looking for a loan before the ear of low cost mortgages ends.”

UK’s property market is ‘heating up’

The British Bankers’ Association (BBA) has also announced that the UK’s property market is ‘heating up’ again.

They say the reason is low mortgage rates and the ending of political uncertainty which has boosted confidence in property.

The BBA’s chief economist, Richard Woolhouse, said: “Housing is beginning to heat up again though we have seen a jump in the number of people remortgaging which could be borrowers keen to take advantage of fixed-rate mortgage deals.”

Shawbrook sees profits rocket by 94%

Meanwhile, the growing strength of the UK’s bridging loan industry has been underlined with news that Shawbrook Group has made profits of £34.8m – a rise of 94% – in the first half of 2015.

The bank’s CEO, Tom Wood, said their loan book has also increased by 38% and that the volumes of applications and completions was also increasing.

He added that Shawbrook was well-placed to deliver yet more growth and they are prepared for the ‘changing regulatory environment’.

He said: “Competition is high and there was a slowdown in volumes before the election but we are on target to deliver £1.6billion of originations this year.”

Shawbrook is also on course to have an annual net loan book growth of nearly £800million.

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UK’s mortgage industry to make lending more transparent

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The mortgage industry is teaming up with the Government to ensure that home loans in the UK are available for applicants regardless of their age.

This move will make the mortgage application process more transparent in a bid to counter the confusion that followed changes made last year.

One issue for applicants is the questionnaire they now have to fill in which details their spending plans and calculates affordability.

Critics say that applicants are not always honest in their answers and fear giving details will scupper their mortgage application.

In addition, self-employed people and pensioners have also found it much more difficult to find a mortgage.

Mortgage industry leaders meet with the Treasury

Leading members from the mortgage industry recently met with the Treasury to discuss this issue and how they can develop the success of schemes such as ‘Help to Buy’.

The Council of Mortgage Lenders’ (CML) director general Paul Smee said: “We hope the improvements on charges and fees will make it easier for people to understand mortgage costs.

“We are pleased that the mortgage market can have a real effect on peoples’ lives.”

In addition, the CML has also announced that its members – who advance more than 90% of lending in the UK – will improve the advice given to clients.

This follows a Financial Conduct Authority review which declared that there was room for improvement.

Mr Smee said the changes brought in under the mortgage market review (MMR) led to a huge workload for everyone in the mortgage industry.

He added: “Those changes saw little disruption for consumers but there’s more to be done to refine how firms operate.”

Planned MCD changes confuse bridging loan brokers

Meanwhile, a survey of bridging loan brokers has found that 39% of them do not understand the Mortgage Credit Directive (MCD).

The report from United Trust Bank says these brokers do not appreciate the impact that MCD will have on the bridging sector.

The survey also revealed that 44% of bridging loan brokers will not have much of an effect on their industry while 39% said they didn’t have enough knowledge of its framework.

MCD will regulate how mortgage firms operate

The MCD will regulate how mortgage firms operate across the EU and comes in next March.

The head of bridging at the bank, Alan Margolis, said: “The MCD will fundamentally change how loans are processed and will have a significant impact on the second charge market.”

The survey has also revealed the strength of the UK’s bridging loan sector with 68% of brokers stating they will be completing more business this than they did last year.

 

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Bridging loans continue growth

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The UK’s bridging loans sector had a strong second quarter performance in 2015 which was fuelled by lending decisions taking longer for residential mortgages, according to research.

The Bridging Trends data takes information from bridging loan packagers and lenders to compile statistics of the industry.

Perhaps the most interesting aspect to the latest data is that in the second quarter of 2015 around a third of all bridging loan applications were caused by the delays in approving mortgages.

That’s a big rise from the 8% seen in the first quarter.

In addition, the total amount for bridging loans granted in the second quarter rose to £100 million from £80.5 million, according to the index provided by Brightstar Financial.

One reason for the big increase in delayed lending decisions was worries over the general election outcome which led to buyers delaying house purchases.

LTV ratio on bridging loans falls

The number of regulated bridging loans rose to 47% though the LTV ratio fell slightly to 45.9% with the turnaround times rising to 39 days.

Brightstar Financial’s director of bridging, Kit Thompson, said: “The bridging loan sector is in good health with continued demand and it’s pleasing to see lending grew by nearly £20 million between quarter one to quarter two.”

He added that another explanation for the increasing delay in completing a bridging loan was also down to issues with legal problems and surveyors struggling to keep up with seasonal demand.

The report also reveals that the second best performer for bridging loans was for property refurbishment while business demand for bridging loans dropped from 24% to 16%.

The average term for a bridging loan granted in the second quarter was for 11 months and the average interest rate being charged is dropping as low as 0.91%.

Mortgage rates will rise – Bank governor

Meanwhile, the UK’s mortgage industry has been put on alert that the Bank of England base rate will rise at the turn of the year.

Since March 2009, interest rates have been running at a record low of 0.5% and the Bank’s governor, Mark Carney, said households should begin preparing for rate rises.

For those with a £150,000 lifetime tracker mortgage, a rate rise to 0.75% would increase their mortgage by £18 a month.

Rates could rise over the next three years to 2% and someone with the same mortgage who saw their mortgage repayments increased by 2.5% would be repaying nearly £1,900 a year more.

This growth in mortgage rates could, several debt advice charities are warning, lead to many indebted households being plunged into financial turmoil.

Mortgage borrowing hits a new record

The Bank’s announcement came on the same day that the Council of Mortgage Lenders (CML) said that June had seen the best level of mortgage borrowing since July 2008.

Homebuyers borrowed £20.5 billion which is a rise of 29% compared with May, and it’s up 15% compared with June last year.

The CML is also predicting a modest pick-up in house prices though the demand for buy to let mortgages is predicted to decline with higher earning landlords no longer being able to claim tax relief on their mortgage interest repayments, a move revealed in the Budget.

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Mortgages in UK being paid off in record time

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With historically low interest rates on mortgages being available is leading to many UK households using spare cash to pay off their loans, says the Bank of England.

The result is that mortgages are being repaid at a record level and British households have reduced their mortgage debt by £13 billion in the first three months of this year alone.

This is the reverse of what happened in the run-up to the financial crash when households were using the equity in their homes to finance new cars, extensions and holidays.

Now the Bank of England says that the first quarter was the 28th successive quarter that saw the injection of equity into homes – since June 2008 it has totalled £313 billion.

Economists say that the low interest rates are encouraging households to reduce their mortgage levels rather than save money in low paying deposit accounts.

However, three years after interest only mortgages practically vanished from the British marketplace, it appears they are now making a comeback.

Interest only mortgages are making a comeback

Interest only mortgages were popular in the early 2000’s as people struggled with affordability criteria.

In 2007, one in three mortgages were interest only, according to the UK’s lenders, with most of those borrowers having no repayment plan on how to repay the outstanding capital at the end of the term.

Research shows that borrowers were hoping that their property would grow in value to help repay the loan.

Among the latest lenders to enter the interest only mortgage market, is Barclays who have followed Santander and Leeds building society.

Essentially, Barclays is offering an interest only loan with an LTV of 75% where the sale of the property is the repayment vehicle.

The new mortgages are restricted to applicants who have a joint income of more than £100,000 or a sole income of £75,000.

Interest only mortgages are not ‘bad’

A spokesman for mortgage brokers Coreco said that interest only mortgages weren’t bad but had been ‘used badly’ previously.

He added: “We have said that lenders should offer interest only mortgages for the right borrower.”

Leeds building society has revealed that 80% of people taking out interest only mortgages are doing so on a remortgaging basis.

The society’s spokesman Martin Richardson said: “This is a useful way for someone with an interest only mortgage who has not made progress in paying down capital to start reducing this without the payment shock of moving to a full repayment mortgage.”

Other lenders are also looking at resuming interest only mortgages in the coming months with similar tight lending criteria.

Bridging loan legal guide launched

Meanwhile, two new legal guides aimed at bridging loan brokers have been launched to help them understand the legal processes.

They have been published by Shawbrook Bank to help solicitors understand a bank’s legal procedure for such purchases.

The hope is for the transaction times to be speeded up between the borrower’s solicitors earlier in the process before the bank has to instruct its own solicitors.

The bank’s marketing director, Karen Bennett, said: “We have released guidelines to help clarify our requirements across the industry.”

The guides will deal with common questions about the process to help smooth potential issues and are available to Shawbrook’s broker partners and sit alongside their other published guides which include HMO valuations and FCA permissions.

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Availability of admin fee free mortgages rocket

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The growing competition within the UK’s mortgage market has been underlined with news that the number of mortgages that are admin free has quadrupled in five years.

That’s the revelation from moneyfacts.co.uk who say that around 25% of mortgages currently on offer are fee free as mortgage providers improve their products in a bid to win business.

Moneyfacts say that there are 902 fee free mortgages available today; which is a rise from the 220 that were available in 2010.

This growing trend has been explained by the fact that mortgage rates are at a record low and many low rate deals come with hefty admin fees.

Cheap mortgage deals might be more expensive

Consumers, the organisation says, have realised that what appears to be a cheap mortgage deal is actually more expensive once the fees have been calculated.

A finance expert at Moneyfacts, Charlotte Nelson, said: “Borrowers still focus their attention on the lowest possible rates without considering the cost of the deal where fees have a significant impact.

“To ignore the fee free option could be a costly mistake because at the end of a mortgage term they may have thrown away money that would have been better spent on paying off their mortgage.”

According to the organisation, a borrower could save around £1,500 by using a low fixed rate fee free deal – regardless of its length when compared to the cost of taking out the best low rate deal.

Financial Conduct Authority launches fees consultation

Meanwhile, the Financial Conduct Authority has launched a consultation on the question of whether finance firms, including bridging loan and mortgage companies, are giving enough detail of their fees and charges.

The FCA has published a discussion paper which highlights their worries in a bid to kickstart a debate on how consumer groups and finance firms deliver their information in a smarter way.

One of the issues being raised by the FCA is a better definition of fees and charges, particularly how they differ between each other.

Consumers find it difficult to compare the deal costs

The financial watchdog is also concerned that consumers are finding it difficult to compare the total costs of a deal.

The FCA’s director of strategy, Christopher Woolard, said: “Customer communication is very technical and even the most astute will struggle to understand the information.”

He said the way in which firms communicate with their clients is a fundamental part of their operations and it was important that they and the FCA ‘get this right’.

The consultation ends in September and the FCA is also looking at the wording in terms and conditions and how finance firms deal with client complaints.

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