Boom time for commercial property buyers?

Figures released by the Bank of England reveal that an unprecedented £175bn has been lent to UK commercial property companies. This has resulted in a buying boom throughout the country. Read more…
Martyn Roberts from Accredit doesn’t necessarily think that the credit crunch of the kind now facing homeowners, will happen in the commercial property market in Manchester. Much of the lending can be justified by rising property values and improved earnings from commercial property, thanks to rising rents. Despite calls for banks to be more cautious, most Manchester lenders still feel fairly upbeat thanks to lending policies which have remained quite strict" he adds.

Impacts following rate rises

Over the past 12 months, interest rates have increased which will impact on the ability of banks to fund investment deals. These changes are reflected in the returns on commercial property returns, down to around 9.9%, according to the IPD.
Despite this, certain areas of the country are still confident about the future.

Confident Manchester markets

"Manchester’s property market remains vibrant and there are no signs of anything other than continued growth, according to our major lenders" states Martyn "We still have a relatively stable market environment across the North West and this is reflected by the attitudes of bankers throughout the region" he adds.
There are many examples of large banks providing funding packages to major property investors enabling them to acquire more development sites and further improve upon their existing portfolios.

Cause for concern?

Due to the strength of relationships with commercial property lenders, Accredit are well placed to provide advice on the current state of the market and advise on the options available to each individual company.

"Our customers will benefit from our close and continued relationships with our lenders" states Martyn "It is at times like these, that our expertise really makes a difference" he adds.
Should you have any concerns about the current state of the commercial property market or your ability to fund property developments, please contact Martyn Roberts for further assistance.

To Cert or not to Cert

May 2007, and interest rates went up again. BANG, more cost to homeowners on variable type mortgages. The cost of borrowing has risen 4 times in nine months.
Our first thoughts are usually towards first time buyers, struggling to reconcile the difference between today’s salaries and today’s cost of living. And rightly so.
But what about the hundreds of thousands of self employed people in the UK, with more joining everyday with the attraction of working for themselves and getting out of the rat race. What price do they pay for that freedom?
Self-Certificated mortgages are more popular today than they were 10 years ago, as it seems an easy route to get funds for your next home. But using this type of mortgage is not right for everybody. The reality is that many people do not understand what a Self Cert mortgage should be used for and why. A Self Cert Mortgage is for people who have multiple income streams or have difficulty in proving their income. For this they pay a premium. The interest rate available will be slightly more than standard mainstream mortgages for someone with a similar credit score. So why take that route?
For a mortgage provider to advance funds they need to know what your income is.
It is usual for them to ask applicants to provide wage slips, a P60, Bank statements and so on to verify their income. If you can do this, and you fit that lender’s criteria, you could be on your way to a new home… Great! If you can’t do this, you may need to consider the Self-Cert option. To Self Cert is to make a declaration of affordability; although you cannot prove your income, you know you can afford the repayments on the loan. For this type of mortgage you will pay a higher price than for the equivalent mortgage for an employed person.
The question to consider might therefore be, do you have to take the Self-Cert option? You may have had to take out a Self-Cert mortgage in the past, but don’t just assume that you won’t get a mainstream mortgage now. For instance most mortgage providers will advance a mortgage on a mainstream deal if you have accounts for the last three years or more that demonstrate the required level of affordability. Also, there are lenders who will accept other forms of evidence in support of an application; so it is well worth contacting a mortgage adviser who can guide you through the process.
The mortgage market is more diverse than it ever has been and the constant change of products makes it a minefield for those who do not understand the market or follow its changes. But then for most people, changing mortgages is not something they do on a regular basis so they don’t invest time keeping abreast of the market. This is understandable; however it can lead to wrong choices when a decision is made on a mortgage without taking advice.

The 25 year fix

It is common for people to compare mortgage deals over 25 year terms. The actual length of your mortgage can be more or less than this, but it seems to be the starting point. Halifax has just brought out a mortgage deal that is fixed at 6.39% for 25 years. There are restrictions as to who can borrow on this deal, and there are other lenders who offer long term fixed deals. But just imagine taking out a fixed rate deal and never having to remortgage again! It sounds excellent.
With five interest rate rises in the last year, you might be concerned about the impact of future increases. The Monetary Policy Committee decided not to raise the base rate this month, but historically rates are still low.
According to the Bank of England’s website; in the 80s the base rate was never below 8%, and in the 90s never below 6% but was often much higher.
There is always the possibility that rates will go up as well as down, so why doesn’t everyone take out a long-term fix? The Halifax deal is portable, which means you have the option of moving house and keeping the same deal, subject to certain criteria being met. Long terms deals like this have some attractive features that will appeal to many borrowers in the market. However, long term fixed rate deals have been around for some time and are not the most popular of those available.
For instance, there can be long tie in periods. In this case with Halifax, you will face an early repayment charge of 3%, if you pay back your mortgage within the first 10 years. That could be a significant penalty if you took out this deal and had to end it early. To take out a long-term deal like this you would have to seriously consider what the future holds for you in the long run. This could be extremely difficult. Consider the first time buyer at the start of so many journeys: a career, a relationship, a family - never mind property ownership!
If the security of a fixed rate mortgage appeals to you, you must consider how long you can commit yourself to one mortgage provider.
How likely is it that your employment status, your family and social circumstances will remain unchanged? Always remember, what represents a good mortgage deal for some people might not be a good deal for you. A good mortgage adviser will help you determine what the most suitable deal types are by asking you the right questions.

Do you have 100% Faith in your Mortgage provider?

It is something of a British tradition to buy a house as soon as possible? Owning your own home is more important to us than it is to our European neighbours. Even if we don’t “own” a single brick because we have borrowed 100% to buy the house... it is still “ours”.
But there is more to buying than just the pride of ownership, and the feeling of reaching a personal milestone. There are significant pressures on first time buyers simply because they don’t have a home of their own. For instance mortgage brokers meet many first time buyers who don’t necessarily want to buy a house yet, but feel that if they don’t do it now, they just wont be able to do it in the future because of increasing house prices. It’s understandably ironic that people feel forced to put more pressure on themselves financially as a matter of prudence.
In such circumstances, many first time buyers have no alternative but to borrow 100% of the house price because their savings will be used to cover other related costs such as legal fees, stamp duty, furnishings and so on. The 100% mortgage was developed to assist those with insufficient savings for a deposit, and those who haven’t the time to save for a deposit. But there are a few things to consider.
You will only qualify for a 100% mortgage if you have sufficient income and a good credit history. From the mortgage provider’s perspective, a 100% loan of house value represents a greater risk than a loan of 50%. If they have to repossess, it could be more difficult to get their money back on the 100% loan. For that reason, they will want to know that an applicant for this type of mortgage has kept to previously agreed credit commitments. What’s more, if you borrow 100%, you will repay at a higher interest rate. Again, from the lender’s perspective, you as a customer represent a greater risk, so there should be a greater reward for them.
The most serious consideration should be what might happen if your circumstances change. If you default on the mortgage and your home is repossessed, there is the possibility that your house will be sold for less than you owe on the mortgage. You will still owe this outstanding balance, and you will have lost your home too. To protect them, some lenders require you to pay a Higher Lending Charge. This goes towards an insurance policy that will pay the mortgage provider the difference between the forced house sale price and outstanding mortgage. However, the sting in the tail is that after the insurance company pay off the outstanding balance to the mortgage company, they then come after you for it! The insurance policy that you pay for is to protect the mortgage company, not you.
There are ways that you can reduce the risk of this ever happening to you, and it starts with getting serious about what you can afford, and assessing how secure your employment and finances are. A good mortgage adviser will discuss your budget, explain the risks and demonstrate that there are insurances that you can use to protect your finances. Most people never go through such a harrowing experience as having their home repossessed, but it does happen. Therefore the best advice is to be realistic about your budget and be open and honest with a mortgage adviser from the beginning.