Chancellor Philip Hammond’s spring Budget raised the hackles of hard-working people across the country. Not only did he announce a tax hike for the self-employed in the form of increased National Insurance contributions but he also hit small business owners and pensioners by cutting the short-lived tax-free dividend allowance.
From a government that has repeatedly promised to support the so-called ‘JAMs’ (families ‘just about managing’ financially), it was slightly unexpected.
Within a week, Hammond had U-turned on the decision to raise NICs – prompted by an overwhelming public backlash and the apparently late realisation that the Tories had actually promised in their last election manifesto to leave NI frozen until 2020.
There was no such U-turn on dividend tax. And those hit by cuts to the dividend allowance are also largely self-employed. If newspapers are to be believed, they remain pretty bitter about what they perceive as a backhanded swipe at hard-working individuals who have provided jobs and incomes to hundreds of thousands of people.
There will be implications for homeowners, whose incomes will drop as their tax liabilities on dividends rise after April. This is already an issue for those who need to remortgage now because their income will be affected within the term of any mortgage they take today.
Lenders are obliged to consider affordability in the future as well as now, and the Government’s recent to-ing and fro-ing on taxes that affect this is unhelpful. It causes confusion and fear among borrowers.
In practice, I doubt it will make a huge difference for most borrowers – the tax-free allowance is falling from £5,000 to £2,000, meaning the loss of income will be only the tax payable on the difference. But it further muddies the perception thousands of borrowers have of today’s market: that variable income and self-employment make it more difficult to get a mortgage.
Good brokers know this is just a perception. It may take more experience and effort to place a case with a more complex income profile, but it is not impossible. In fact, I would argue that it is not even difficult.
In the three years since the MMR rules came in, specialist lenders and building societies have made leaps forward to offer self-employed borrowers mortgage finance they can afford. The perception that these borrowers are locked out is nonsense – a fire fuelled by those who rely solely on a rate-sorting sourcing system or going to their high-street lender, only to be turned away by an automated message.
It is true that underwriting mortgages for the self-employed and business owners is less straightforward – some lenders struggle to deal efficiently with the variety of borrower circumstances – but there are 5.5 million people in this position in the UK and they are not all living on the streets.
At lenders where there is experience of reading financial accounts and SA302 statements – and understanding a borrower’s business income – writing these loans is just another day at the office.
Brokers sit at the coalface of this, with the opportunity to help or hinder clients. In a market where reliance on technology is becoming more and more obvious, they have a responsibility to highlight just how many choices these borrowers have, even when technology does not always bring them up within a few seconds.
The Budget highlighted how hard done by the self-employed and small business owners are feeling at the moment. Inflation is rising, the pound is weak and we are on the brink of Brexit. But they continue to form the powerhouse of Britain’s economic growth. Some lenders are supporting them, so make sure your clients know it.
Precise Mortgages, the specialist lender, has welcomed Ian Scarrott to its sales team. Ian will work predominantly in the North West, providing expert support to their network of intermediaries.
Ian will work as Business Development Manager in the Blackburn, Bolton, Chorley, Crewe, Fylde, Liverpool, Manchester, Oldham, Preston, Stockport, Stoke-on-Trent, Warrington and Wigan areas.
Ian has joined Precise Mortgages from TFC Homeloans, where he acquired extensive market experience and developed a range of key broker contacts.
Jamie Pritchard, Precise Mortgages’ Head of Sales, said Ian was an outstanding new addition to the team.
“I’m delighted that Ian has chosen to join Precise Mortgages and support our network of brokers in the North West,” he said.
"Ian is a perfect fit for us. With his extensive knowledge of the industry and wealth of experience from his time at TFC Homeloans, Ian will be a real asset to the team.”
Charter Court Financial Services (CCFS) has been ranked third in The Sunday Times 100 Best Companies to Work For 2017.
CCFS employs more than 450 people at its headquarters in Wolverhampton. It offers an award-winning range of mortgages, and savings products which regularly feature at the top of the best buy tables.
The Sunday Times 100 Best Companies to Work For is an annual survey ranking the cream of Britain's happy and motivated workforces. Its appearance each year is now a highly anticipated event in the business calendar.
The survey is widely acknowledged as the most extensive research into employee engagement carried out in the country due to the methods of data-gathering and analysis it uses. Scores and ratings are based on employee opinions, and each year the questionnaires are revised and updated to reflect current workplace concerns.
Ian Lonergan, CEO of CCFS, commented: “We’re delighted to be named in the top ten of the Sunday Times 100 Best Companies to Work For survey for the second year running. We would not have been able to achieve this prestigious award without our fantastic employees. This accolade, which is voted for by our employees, is a great acknowledgement of the culture and working environment we’ve all worked so hard to achieve.”
Precise Mortgages, the specialist lender, has put its Buy to Let calculator online so that brokers can see how much their clients can borrow.
The introduction of new PRA rules on Buy to Let affordability has left some brokers confused as lenders publish their new criteria. Many lenders have used a ‘bucket’ approach which has seen Interest Coverage Ratios (ICRs) increased to 145%. It means that many landlords can no longer borrow as much money as they did before the rule change, and in some cases will lead to a decline.
Precise Mortgages has done something different in launching bespoke ICRs which take every customer’s individual circumstances into consideration. The lender claims that in many cases its ICR calculation will help landlords get the buy to let mortgage they want. One example cited is where joint applicants have different tax positions, such as one being a higher rate tax payer and the other being a basic rate taxpayer. Worked examples have been published on the lender’s website which show how a bespoke ICR will return larger loan sizes than the ‘bucket’ approach.
Alan Cleary, Managing Director for Precise Mortgages, said: “Our Buy to Let calculator allows mortgage intermediaries to know how much their clients could borrow from us before they start the application process.
“They will also be able to compare and contrast different ways of setting cases up in order to achieve the best outcome.
“The calculator is similar to the one used by our underwriters to assess cases so it will save intermediaries and us time and effort. We believe that in the majority of cases a bespoke ICR will be superior.”
To find out more about the calculator and how it could help your customer get the loan size they want, click here.
Precise Mortgages, the specialist lender, has launched its lowest-ever bridging rate of 0.54% per month.
The mortgage product is exclusively available through its Premier Panel members and is aimed at standard and light refurbishment deals up to 50% LTV. The lender has also reduced rates on deals up to 60% from 0.74% per month to 0.64% per month.
Alan Cleary, Managing Director of Precise Mortgages, said: “We had our best ever year on bridging in 2016 and we intend to keep the momentum going.
“These are great rates and we expect them to be popular.”
For more details, call 0800 116 4385 or click here.