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How Does the Market Affect Different Mortgage Types?

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As first seen in our May 2nd 2023 market update newsletter.

Residential Mortgages

We keep being promised that inflation is on its way back down but at the current 10% level the cost-of-living squeeze on incomes continues to bite.

The good news is that mortgage rates have been coming down ever-so-slightly and certainly our First-Time Buyer clients are finding that their mortgage outgoings are favourable to renting.

Property values are holding up just fine and with all things considered I would say the mortgage market is functioning well with Lenders having a keen appetite to lend now where possible.

Later Life Lending (Age 55+)

Working with clients looking to take out equity often involves helping people to achieve their long-term goals or sees them supporting their children, or even grandchildren onto the property ladder.

The advice process is very wide ranging and often also helps people to identify shortfalls in their finances which they may not have considered. The obvious area is in estate planning for clients who don’t have wills or lasting powers of attorney, but the one which causes the most concern (and later the most relief) is when talking to a couple about what would happen to their income of one of them were to die.

This is not the nicest thing to think about and it isn’t surprising that many couples have not considered this aspect of their financial planning. The gender pay gap is hot news now, but it has long been the case that women frequently have significantly less retirement income than men.

Our process identifies any shortfalls like this and in most cases, we can advise on a solution whether that involves using a drawdown facility, minimal life insurance or a downsizing plan.

Sometimes it is enough to create some breathing space for the partner left behind before they need to act, but it is always good to know what your options are as soon as possible.

Remortgage Deals / Options

Is your mortgage deal ending in the next 6 months?

The key to snagging a competitive deal is not fixing back in with your lender directly, as they tend to write to you early to get you locked in.

Also, doing this will cut us out of the chain.

We can compare what your existing lender is offering to what is available on the market so you can get a flavour of things. Additionally, you don’t have to lock in right away.

We have other products available such as tracker deals, if you don’t feel ready to fix right now.

Also, if the right thing to do is to stay with your existing lender, we’ll do this for free and get you the same, if not a better deal, than you were being offered direct.

The next Bank of England meeting to discuss interest rates is 11th May. It would be great if we can get you a rate secured ahead of this to protect you against any future rises.

We’ve had 11 consecutive interest rate increases in a bid to tackle UK inflation, which is not decreasing as quickly as predicted.

Buy to Let Landlords

Landlords continue to get a rough ride and further to stamp duty reforms, reductions in tax breaks and rising interest rates, the latest thorn in their sides is ensuring their properties are energy efficient.

After a consultation in December 2020, the Government have announced proposed changes to the Minimum Energy Efficiency Standards for England and Wales. They state that all rental properties will need an EPC rating of ‘C’ or above by 2028.

In 2015, new laws set Minimum Energy Efficiency Standards (MEES), stating that private rented property in England and Wales must have an EPC rating of E or above. These came into force on 1 April 2018 for new tenancies, and on 1 April 2020 for existing tenancies. The fines can be onerous for non-compliance.

We are starting to see Landlords look into raising funds to get their investment properties up to scratch in terms of energy efficiency. We see this as a growing market over the coming years.

Income Protection

It doesn’t bear thinking about how badly some people’s finances might have been had the Government not brought out Furlough pay during the first lockdown. So how would you cope if you were to lose your income now due to a long-term absence from work due to illness or injury?

If you are not sure whether your Employer offers you anything in addition to SSP (£109pw) then you can speak to your Line Manager or HR department. Some smaller firms say their policy is “discretionary” which means you won’t know for sure if you will receive anything over and above state benefits.

If you are concerned about your ability to pay your bills in the event of something going wrong, you are allowed to take out a kind of furlough of your own, namely Income Protection insurance. The way it works is that you decide how much income you need in the event of being off sick and insure yourself for that amount and any claim is paid into your bank account tax free. The longer you are happy to wait before making a claim (for example if you can get by for a while) the cheaper the cover will be.

If you would like a quote, please do not hesitate to get in touch.

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Author Image of Malcolm Davidson - Managing Director of UK Moneyman Ltd.

About the Author

Malcolm Davidson

Managing Director of UK Moneyman LTD

Malcolm is one of the UK’s most well-known and respected Mortgage Advisors. He is passionate about providing a 5* customer experience and he has also trained and mentored dozens of fellow Advisors in a career that is now in its third decade.

In addition to his day to day duties as Managing Director, Malcolm still gives out mortgage advice and feels lucky that his job is also very much his hobby.

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UK Moneyman Limited is Registered in England, No. 6789312
Registered Address: 10 Consort Court, Hull, HU9 1PU.

Authorised and Regulated by the Financial Conduct Authority.

We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk

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