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This is our take on what is currently happening in the mortgage market. Our views are often cited in several national publications, including; BBC News, The Times, Telegraph, City AM, FT Adviser and Daily Mail, as well as a number of key trade publications, so this should keep you ahead of the curve. If you have any questions on any of these stories, or would like further information, please do not hesitate to get in touch.
IR35 causing mortgage issues for private contractors
It was thought that this change in legislation would be deferred, however it came into practice from the 6th of April. In short, the UK’s IR35 legislation ensures that contractors pay the same Tax and National Insurance contributions as an equivalent employee. These new changes are for private sector contractors, to bring them in line with the public sector where the reform was implemented in 2017. So, while this has been a long time coming for contractors, it creates issues for them from a mortgage perspective.
Lenders continue to increase flexibility
The trend for lenders to increase the flexibility of their criteria is continuing, and we have seen two significant changes of late from mainstream lenders. Firstly, TSB are making changes to their early repayment charges (ERCs) for customers making overpayments or porting <90% of the balance of their mortgage, with those on a fixed rate, and within the last three months of their product end date, no longer incurring an ERC if they make overpayments over the 10% threshold and those porting less than 90% of their mortgage balance will have the ERC waved in its entirety. HSBC have changed the 4.75x multiple salary threshold criteria for applications with an LTV of less than 85% from £50k to £30k meaning a greater number of potential and existing borrowers will now be eligible for a mortgage at higher income multiples.
Low interest rate environment leading to increase in wealthier borrowers
In the last few months, we have seen an increase in the number of wealthy borrowers enquiring about mortgages, both from a purchase and remortgage perspective. A number of these clients do not need a mortgage and could easily proceed to purchase comfortably in cash, but choose to take a mortgage given the incredibly low interest rate environment, especially at lower LTVs. Often this is on advice of wealth managers or simply because they have seen the rates available in the market.