Mortgages

Your mortgage is likely to be your biggest financial commitment. It is therefore important that you know what your choices are and what is available to you.

The Bank of England has tightened mortgage affordability rules to prevent loosening underwriting standards, which it warns will cause some lenders to raise interest cover ratios.

The Bank formerly said that lenders should test affordability by checking how borrowers would react to a three per cent increase in base rate.

But the new rule says lenders should instead consider how borrowers would handle a 3 per cent increase in firms’ standard variable rates.

The Bank says lenders have been using different approaches and coming up with different stressed interest rates to test affordability, leading to “lack of consistency across the market”.

The old rule let some lenders choose between whether correct rate was the one at the point the mortgage was sold or the rate it reverted to.

The Bank’s latest Financial Stability Report says: “Indeed, there has been significant variation across lenders on the stressed mortgage rate used to assess affordability compared to their current SVRs.”

This difference in lender approach means that around 0.5 per cent of all 2016 mortgage approvals would not have met the requirements of the new rules.

The Bank says some lenders will have to increase their ICRs as a result of the new rule, though it expects the overall impact on mortgage lending to be small.

From 1 April 2018, new regulations state that Landlords, in England and Wales, who lease domestic properties must have a minimum performance rating of E on an Energy Performance Certificate (EPC). The new law, which has been put in place to reduce energy bills and reduce emissions also restricts Landlords from letting a property or renewing an existing tenancy if the rating is below E.

In 2020 all properties with existing tenants will also need to be E or above too. If the rules are not followed, there could be civil penalties, if the minimum requirement isn’t met.

 

Mortgage activity in the UK buy-to-let sector has halved since the introduction of a stamp duty surcharge, figures show.

Since April 2016, anyone buying a buy-to-let property or a second home has had to pay a 3% stamp duty surcharge.

Some 71,100 loans were advanced for house purchases by landlords in the year since the tax change, the Council of Mortgage Lenders figures show.

This compares with 142,100 loans in the previous 12 months.

To read more on the BBC Website Click here

 

Bank of EnglandThe Bank of England has held rates at the historic low of 0.25% despite expectations of a further reduction from some quarters.

Back in August the Monetary Policy Committee slashed its forecasts for growth and announced a package of measures to support the post-referendum economy.

The Base Rate was cut by 0.25% to its current level and the Bank and set in motion plans to expand its quantitative easing programme to a total of £435bn.

However speculation that further cut could occur today after a turbulent couple of months.

Since the last meeting of the MPC the Prime Minister has confirmed article 50 will be triggered by the end of March, the value of the pound has fallen sharply and there are increasing signs that inflationary pressures with import prices increasing.

Jeremy Duncombe, director of Legal & General Mortgage Club, said: “The Bank of England’s decision to keep the base rate at 0.25% will be welcomed by the industry.

“Together with Mark Carney’s recent resolution to stay in office until 2019, this announcement will help to maintain stability in the financial markets as the negotiations to leave the EU get underway.

“However, with the first Autumn Statement from a new government just three weeks away, there is still the potential for change in the mortgage market in the short-term.

Bank of EnglandThe Bank of England has left its main interest rate at 0.25% but says another cut is still a possibility.

The decision of the Monetary Policy Committee (MPC) to leave rates at their new, historically low, level was no surprise.

Last month the Bank halved its bank rate from 0.5% as it tried to ensure the stability of the UK’s banking system in the aftermath of the June Brexit referendum vote.

That was the first rate cut since 2009.

But the Bank said again that it might cut rates further in the coming months, even though the immediate economic after-shock of the Brexit vote now appears to be weaker than first thought.

“A number of indicators of near-term economic activity have been somewhat stronger than expected,” the Bank said in the minutes of its latest MPC meeting.

It added that if its economic forecasts in November were similar to those it had formulated in August, then “a majority of members expected to support a further cut in bank rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of the year.”

The Bank noted that a variety of economic indicators have suggested that the UK economy has shrugged off the post-referendum surprise in the short-term.

As a result, the Bank is not as gloomy about the short-term state of the economy as it was a month ago.

But it said that it still expects the pace of economic activity in the July-September period to have halved from the growth rate recorded earlier in the year.

BOEUK interest rates have been cut from 0.5% to 0.25% – a record low and the first cut since 2009.

The Bank of England announced a range of measures to stimulate the UK economy including buying £60bn of UK government bonds and £10bn of corporate bonds.

The Bank also announced the biggest cut to its growth forecasts since it started making them in 1992.

It has reduced its growth prediction for 2017 from the 2.3% it was expecting in May to 0.8%.

As part of the package of measures designed to boost growth following the UK’s vote to leave the EU in June, the Bank is also introducing a new Term Funding Scheme, which will lend directly to banks at rates close to the new 0.25% base rate, to encourage them to keep lending.

The exact rates they are offered will depend on whether the total amount they are lending has fallen. The scheme is designed to make sure that lower interest rates are passed on to businesses and households.

The money will be lent to banks for four years and the Bank has said the terms of the scheme will not become less generous for at least 18 months. It predicts that the amount of money lent through the scheme could reach about £100bn. Continue reading

Bank base rateThe Bank of England has held the UK’s main interest rate at 0.5% despite intense speculation that it would cut rates.

The Monetary Policy Committee voted 8-1 to leave rates unchanged, but minutes of the meeting showed most members think the Bank will act next month.

Interest rates have remained on hold since the Bank cut to the record low of 0.5% in March 2009.

The FTSE 100 lost some earlier gains in the wake of the Bank’s decision.

Financial markets had priced in an 80% chance of the Bank cutting rates this month

BOEThe Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target and in a way that helps to sustain growth and employment.  At its meeting ending on 13 April 2016 the MPC voted unanimously to maintain Bank rate at 0.5%.  The Committee also voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.

UK interest rates have been held at 0.5% once again by the Bank of England.

All nine members of the Bank’s Monetary Policy Committee (MPC) have voted to keep rates at their record low, where they have now been for seven years.

The decision to freeze rates comes amid worries about global growth and uncertainty ahead of the EU referendum.

The Bank said uncertainty in the run-up to the referendum on EU membership – to be held on 23rd June – had hit sterling, and that UK economic growth could slow.

“There appears to be increased uncertainty surrounding the forthcoming referendum,” policymakers said and

“That uncertainty is likely to have been a significant driver of the decline in sterling”, “It may also delay some spending decisions and depress growth of aggregate demand in the near term.”

Limited companies not exempt from 3% Stamp Duty: Budget 2016

In a shock move, a policy statement supporting the 2016 Budget confirmed investors buying residential property inside a limited company tax wrapper will still be hit by the 3% surcharge.

In a bid to sidestep the 3% premium, thousands of landlords have been placing residential property investments into limited company shells since the consultation was announced in the Autumn statement last November.

Today, the government confirmed only properties worth less than £40,000 along with houseboats and caravans will be exempt the surcharge, regardless of tax wrapper.

Chancellor George Osborne said in his speech, larger landlords would not be exempt the extra charge with many previously speculating that landlords with 15 or more properties may be exempt.

However, today’s policy statement quashed all speculation and said: “Companies purchasing residential property will be subject to the higher rates, including the first purchase of a residential property.”