Simon Carr, Sales Development Director
According to CML statistics, at the end of 2014 there were 1,630,600 buy-to-let mortgages outstanding.
That’s 1.63 million customers who are potentially considering capital raising.
That’s 1.63 million opportunities for you to generate new business or retain your existing customer.
We expect the buy-to-let market to reach £30m of gross advances by 2015, of which, 50% will be remortgages.
Now, not wishing to blow our own trumpet but we’ve developed a range of product lines which can help you and your customer.
Sizing the opportunity is a difficult one: we estimate a whopping 108,000 remortgage transactions this year. But here’s the opportunity – our products specifically target prime borrowers with corresponding fees and rates. We are not targeting your remortgage declines (although, you’ll be surprised how versatile our prime range is). We are targeting customers who should be offered a second charge buy-to-let loan as a suitable alternative to your normal remortgage option. Our product lines can be used in harmony with one another so you could raise a deposit, by way of a second charge on your clients residential or buy-to-let property, using one of our loan products and additionally organise the mortgage via our buy-to-let mortgage range.
Now what I’ve not mentioned are the rates on offer for our second charge buy-to-let range: starting at 5.95% on an interest-only or capital and repayment basis, our favourable rental coverage calculation uses the customer’s actual payment on the first charge rather than a nominal 5%, so if they are paying a lower rate on their first charge they may be able to achieve a larger overall loan than by remortgaging. This, coupled with our cheapest ever residential second charge rate of 4.55%, brings you compelling reasons to consider the Precise Mortgages product.
Many buy-to-let borrowers will have reverted to rates of Base Rate plus 1.5% and 2%. If they want to capital raise, a remortgage will land the customer with a reversion of between 5% and 6.58%. If the customer intends never to pay the reversion rate, they will have to enter a continuous remortgage cycle incurring the associated costs and fees along the way.
Additionally, a buy-to-let second charge is often quicker than a remortgage, with most customers expected to receive funds within a week from application.
So my call to action is:
How many buy-to-let mortgages have you arranged?
How many of those customers would you like to assist in building their current buy-to-let portfolio?
Look at our buy-to-let second charge product range – make some comparisons for yourself.
We are also excited to launch our brand new residential second charge product range which brings to you our cheapest ever pricing. Take a look – you know where to find us.
In summary, we want you to get excited about our buy-to-let products – we think you’ll like them!
Precise Mortgages, the specialist lender, has today refreshed its entire range of residential second charge loan products.
Rates start at just 4.55% and the products are targeted at Prime and Near Prime residential customers. The range is specifically designed to allow mortgage intermediaries an alternative solution to a remortgage and in many cases a second charge loan is more appropriate.
The continued development of Precise Mortgages’ second charge proposition re-affirms its belief that second charge loans should become a natural consideration for all mortgage intermediaries.
Additionally, customers with a less than perfect credit history can now benefit from a competitively priced, near prime range, where rates start as low as 5.55%.
Highlights of the new range include:
|Prime||Prime||Near Prime||Near Prime|
|£10,000 to £30,000||4.70%||5.70%|
|£30,001 to £200,000||4.55%||5.55%|
|£200,001 to £500,000||5.75%|
Alan Cleary, Managing Director of Precise Mortgages says: “We continue to drive good customer outcomes through product design. This latest change sees rates reduced across the entire second charge loan range. Mortgage Intermediaries trust what we do and know that loans of this type are now a viable option for many customers.”
He adds “We are delighted to offer the right solution for all customers that may be locked into their existing mortgage as a result of criteria changes or simply because they want to protect their current mortgage rate.”
Further product information and a list of authorised Master Brokers and Packagers is available at www.precisemortgages.co.uk
Alan Cleary, managing director at Precise Mortgages, argues the financial and legal framework for becoming a landlord has never been more complex.
My daughter is flying the nest and moving to The Big Smoke. Having qualified as a teacher last year, she has been working in the West Midlands, living at home while diligently saving for a deposit for her first flat.
Seeing her brother living and working in central London, she is longing for the bright lights of the city to replace the drudgery of suburbia. Having been young once myself, I understand the attraction.
I have been employed in the mortgage market for nearly my whole working life and like to think I know quite a bit about both products and housing. However, I have gained a new perspective on things since my daughter started to investigate where she would live come the start of term.
Even if she had saved her entire teaching salary for the past year and I had gifted her £75,000, the combined total would be insufficient to put down as a deposit on a property near the school she will be teaching at.
Of course, I knew that would be the case but, nonetheless, £500,000 for a doer-upper in Kilburn? I also notice just how far Hampstead has spread: when I lived in Kilburn 20 years ago, it was called Kilburn, not South Hampstead. This is surely a breach of the Properties Misdescriptions Act.
So I started pondering whether I should buy a property that both my son and daughter could live in.
After some thought, I was not convinced that buying in London right now was sensible. Probably better to wait until we knew what the impact of quantitative easing unwinding would be, as I have a suspicion that house prices (alongside many other assets classes) have been inflated as a result of loose monetary policy.
In addition, an interest rate rise is expected in the foreseeable future and I am interested to see what the outcome of that will be.
But my next chain of thought was that, if I was to treat this as a buy-to-let rather than a second property, and was to raise a mortgage that would be a regulated buy-to-let, this would drastically cut down the choice of mortgage products available.
OK, this might still be workable, but what about the summer Budget? The tax allowances available as a landlord are being phased out. While I do not believe the changes will have much bearing on whether buy-to-let is a good investment or not (and, as I am thinking about it as a home for my children, the tax issues become somewhat irrelevant), what matters is the notice the Chancellor has given to landlords. I doubt if the Government wants to manage the private rented sector but I believe the Treasury would like to enjoy the successes of the market, increasing its revenues in the process.
One of the last considerations I deliberated over was the fact that I did not want to be a civil servant. Never had, never would. However, the recent announcement that landlords will face tougher penalties (including prison) if they persistently allow illegal immigrants to rent their property effectively means they have become an extension of the Home Office in policing immigration.
By this point my motivation was waning. Buy-to-let has never been an investment that one should enter lightly but the financial and legal framework has never been more complex. Indeed, the case for taking professional advice before becoming a landlord has never been greater.
But I need not have worried. After I had spent days thinking about the pros and cons, my daughter told me she would much rather rent a room in a shared house than live with her brother.
*Some of the above has been exaggerated slightly for comic effect
Simon Carr, Sales Development Director
OK, in my last blog I discussed the imminent arrival of the ‘newborn’. In a little over seven months we’ll see the birth of MCD, the emergence of a new era. But right now you could argue that many firms in the mortgage sector are still in denial (is this really happening? YES) or simply recognise the embryonic stage they are at.
Definition: Embryonic is an adjective that means ‘of an organism prior to birth or hatching’. If something is described as embryonic, it's just starting to develop or come together.
By now you will have all obtained the relevant Interim Permissions and submitted (or shortly plan to submit) your application for full authorisation; or have prepared your application to vary your permissions to continue to offer products when the new arrival makes its appearance in March. FYI, this is one arrival that will be making its appearance on its due date – there will be NO prospect of a two week ‘overdue’ grace period. If you’re not ready your ‘pride and joy’ won’t be coming home aka you won’t be able to trade – that’s a fact - the reality of 21st March 2016.
In March 2016, the FCA will recognise a second charge as a loan secured on land largely in the same way as a first mortgage and will treat them pretty much the same. The advice and the way products are structured will be similar. The new ESIS illustration and binding offer documents will lay out information for the consumer in the same way for both a first mortgage and a second charge loan. Second charge loans will then be subject to MCOB (and not CONC) and the loans will be written as regulated mortgage contracts and not regulated credit agreements.
So, MCOB 4 should then be a crucial consideration for all serious practitioners in the mortgage intermediary space. In your initial disclosure you have to detail the scope of service and ensure the product providers cover a sufficient composition of products across the market. The selection of providers and associated products should not disadvantage your customer. Only if the product coverage is sufficient can you describe your proposition as unlimited, otherwise you have to detail your limitations.
Now consider the introduction of a second charge loan as a regulated mortgage contract, and consider the customer’s requirements as a facility – the customer does not know if a second charge loan or first charge mortgage is the most suitable solution – that’s down to the mortgage intermediary. And you will also be obliged to explain the availability of other alternative finance options (such as further advances and unsecured loans) and the basis of your remuneration.
So, in the next 3 months (the clock is ticking), what do you need to do? Plan, plan, and plan. Consider your choices and please, please discuss your birth plan.
Who should you discuss your plan with, I hear you ask? If you’re directly authorised, then discuss with your compliance function or if you are an appointed representative, engage your network.
Review Review the post-dated version of MCOB 4 here Develop your birth plan. Discuss your birth plan – get it right. Start considering the customer’s requirements as a facility and do not automatically default to a mortgage. Test the Master Broker market to determine the right solution for your customers.
Remember, 21st March is coming, don’t be surprised and PLEASE heed my warning...
A chaotic mad dash as you are racing towards the due date will be too late – people will not be impressed, you will not be prepared and, of course, no one wants to upset ‘Mother’!
Precise Mortgages, the specialist lender, has today launched a range of buy to let second charge loan products. Rates start at just 5.95% and the products are targeted at prime landlords wishing to raise capital from the equity in their buy to let portfolios. Up until now there have been very few options for these customers other than remortgaging, but in many cases it would make more sense to take a buy to let second charge loan. Precise Mortgages estimates that the buy to let market is to hit £30bn of gross advances this year and approximately 50% of that will be remortgages.
Highlights of the new range include:
Alan Cleary, Managing Director of Precise Mortgages says: “We expect to see approximately 108,000 buy to let remortgage transactions this year and many of these landlords may have been financially better off if they had access to a competitive buy to let second charge loan product instead. Now they have.”