Building a detailed client profile is an important part of the mortgage process. The more information the lender has, the more successful and straightforward the application will be. This is especially true when it comes to referring clients with a history of adverse credit, where soft facts are just as important as hard facts in determining the client’s borrowing needs.

A good referral should always include as much information as possible as this gives the lender greater insight into the circumstances surrounding the client’s credit profile. This is particularly important in situations where the client has built up a significant level of debt, taken out an IVA or debt management plan.

Supplying as much detail as possible at the outset will also help to prevent delays to the application process and avoid a series of back-and-forth emails and phone calls between the underwriter and the mortgage broker.

We often receive referrals from brokers where a client with a history of adverse credit is looking to secure a mortgage. The best referrals include soft facts that help to bring the client’s story to life and highlight how their circumstances have changed over time rather than solely focusing on the financial details.

A good example of the level of detail required was evident in a recent case where a husband and wife were looking to purchase a new property following the completion of an IVA.

The clients had £42,700.00 in unsecured debt and had entered an IVA in 2018 after the husband was made redundant after three years with his employer and only received a small pay out. Since then, all the payments under the IVA and the mortgage held on their existing property were fully maintained.

The clients had also taken out a credit card to rebuild their credit profile and were seeking to increase their borrowing amount from £90,000 to £150,000 to purchase a new home.

Although all the basic facts and figures regarding the client’s finances were included, very little information regarding the finer details of the clients’ situation before, during or after the IVA was taken out, were supplied.

For example, although it was clear that the client was made redundant, there was no information about whether the applicant found another job. This information is crucial.

Similarly, as it’s a joint application, the client’s wife’s employment history details should also be included and if she wasn’t employed, then an explanation for this is also needed. 

Including details such as the fact that the client was earning over £50,000 in his role before being made redundant is important in helping the lender understand the circumstances that led to the IVA, particularly as he was then unemployed for four months before securing a position paying £25,000.

While this helped to cover the mortgage payments on their existing property, the couple continued to struggle financially, prompting the wife to return to work on a part-time basis while also caring for two small children.

Delving into the reason behind the debt is crucial as it helps to eliminate lender concerns about the clients’ propensity towards debt.

One of the main reasons for the high level of debt was due to a £25,000 loan to cover the cost of a new kitchen, while credit cards were used to pay for Christmas, holidays and emergency expenses.

Although the applicants admitted to overspending in the years prior to taking out the IVA, the significant drop in income coupled with the wife staying home to look after young children severely impacted their finances.

However, five years after taking out the IVA, the couple were both working full-time and earning a combined salary of £53,000 per year. They have also been saving to buy a larger property as they need more space now that their children are older and in full time education.

Providing a detailed account of their story in the five years since taking out the IVA helps to create a clear and concise picture of the clients’ financial background. It also helps the lender understand why they are applying for a bigger mortgage.

Whilst this is a complex set of scenarios, it does help outline how speaking to a specialist lender about what information is required when referring clients with a history of adverse credit can help brokers achieve a more streamlined application process and enable them to service the needs of their clients quickly and more effectively.

The post Soft facts as relevant as hard facts in specialist lending cases appeared first on The Loughborough Building Society.

Rumours that Chancellor Jeremy Hunt planned to introduce a 99% LTV mortgage designed to help first-time buyers (FTBs) get a foot on the property ladder in the Spring Budget dominated headlines last month.

While the finer details of the supposed government-backed policy were rather scant, the news sparked a significant level of debate and criticism among commentators over its legitimacy but the idea was scrapped as quickly as it had apparently been conceived.

One of the major objections to the proposed scheme was that having a smaller deposit risked leaving buyers in negative equity if house prices were to drop significantly in the future.

Another concern was that, although it would ease the pressure on FTBs when saving for a deposit, it would not make the cost of buying a property any more affordable, especially in the higher interest rate environment.

Given the fact that the concept of a 99% mortgage was not too far removed from a product that already exists in the market – the 100% mortgage – the furore and attention surrounding the proposed scheme came as somewhat of a surprise.

Alongside many other lenders, we have been offering 100% mortgage products for quite some time, therefore, a government-backed 99% mortgage product did not seem such an unusual concept.

While it is certainly true that 100% mortgages have come under a fair amount of criticism over the years, this type of lending solution can offer a perfectly viable alternative for those borrowers who are looking to get onto the property ladder but are struggling to raise a deposit.

There are many different variations of this type of mortgage in the market today and understanding what they are and how they work is important when addressing the needs of a variety of clients.

For example, here at The Loughborough, we have a suite of family assist mortgage solutions including a family deposit product which enables the borrower to take out a 100% LTV mortgage and have another family member (typically parents) guarantee a deposit of up to 20% of the purchase price.

This can be done by placing a collateral charge against the depositor’s own property or as a cash lump sum into a savings account offering a 3% interest rate. In both scenarios, the deposit is released after seven years, or sooner if there is enough equity in the property when it is time to remortgage.

This can prove to be an attractive solution for parents and family members in the current higher interest rate environment where gifting a deposit may no longer be financially viable. Instead, a family assist mortgage not only means they will get their money back; they will also earn interest on their money while still helping their child buy a house.

A similar proposition is available through our Joint Borrower Sole Proprietor (JBSP) Deposit Guarantee product which enables a family member to provide a 20% security against their house or as cash held in a deposit guarantee account, while also boosting the applicant’s borrowing capacity by using family members’ income for affordability purposes.

Again, in most cases, this tends to be the borrower’s parents, but other family members such as grandparents, siblings and aunts and uncles can also be listed on the application, although the property will only be legally owned by the occupier.

As with all forms of borrowing, there will always be an element of risk involved and family members should ensure they seek legal advice to understand what would happen if the borrower failed to keep up with mortgage payments.

Given the level of complexity involved in these applications, it is important to note that each one is individually assessed and underwritten to ensure maximum affordability for the client. This also enables brokers to get answers to any questions they may have regarding the application process.

Not only does this help to provide surety of service and outcome, it also allows brokers to help their clients explore every avenue of getting on the property ladder and achieve their homeownership aspirations in an innovative yet responsible manner.

The post Why reading beyond the headlines is crucial for 100% mortgages appeared first on The Loughborough Building Society.

The retirement landscape in the UK is undergoing significant change.

People are living and working longer than ever before, with socioeconomic factors such as the average age at which many people now buy a house and have children all playing a major role in this shifting dynamic.

Rising house prices over the last few decades have seen the average age of first-time buyers increase to 34 years old, according to the Office for National Statistics (ONS), with the knock-on effect being that many people are entering their 50s, 60s and 70s still carrying mortgage debt. 

Similarly, a growing number of the population are choosing to start a family later in life, which means many people are now entering what has traditionally been considered their retirement years with ongoing family commitments such as childcare fees. 

This is having a major impact on how consumers plan for, and live through, their retirement years, with the days of working for several decades and retiring at the age of 60 a thing of the past for many. Similarly, advancements in science mean people are now living longer, healthier lives and spending a greater amount of time in retirement and in the workforce.

Yet despite these shifting social dynamics, the mortgage market has been slow to respond to the changing needs of this demographic, with many product offerings failing to take into account the increasing demand for solutions that cater for these changing needs. 

Adapting to the times 

This is particularly true for those borrowers in their pre-retirement years, who, despite being healthy and able to work, face difficulty trying to secure a mortgage after the age of 55.

In many of these cases, these borrowers have been declined a mortgage on the high street due to their age. 

However, we continue to experience growing demand for this type of borrowing, with some of these individuals looking to downsize to a smaller property, while others still want or need to continue working to finance their mortgage, lifestyle and family commitments.

As our lending criteria have no upper age limit, these clients have been successful in securing an interest-only mortgage, as this option can be taken out for up to 35 years regardless of the client’s age at the time of application.

For example, this means that pre-retirees looking to downsize can use the sale of their property to secure an interest-only mortgage with a maximum loan to value (LTV) of 60 per cent, provided they have a minimum amount of equity in the mortgaged property. This ranges from £500,000 in London and £350,000 in the South East and South West to £225,000 in the Midlands and Wales and £200,000 in the North.

There is also the opportunity to combine this with a capital repayment option of up to 80 per cent LTV, subject to the client meeting the minimum equity requirements. In this case, the 60 per cent LTV limit will still apply on the interest-only part of the loan.

Income multiples of up to five-and-a-half times income and loan amounts of up to £750,000 are also available on interest-only mortgages, enabling borrowers to tap into a substantial amount of equity that may have been built up in the property over the longer term. 

In cases where the property is the applicant’s main residential home, interest-only is available up to 75 per cent LTV, with any lending above this limit available on a capital and interest repayment basis only.

If the client does not have enough equity in the property, they can use a percentage of their pension fund – for example, 25 per cent of a £300,000 pension fund (£75,000) – as a repayment vehicle, enabling them to take out an interest-only mortgage of up to £75,000. 

All these options demonstrate the growing flexibility required to support this growing demographic who, though approaching the traditional age of retirement, are not in a position to leave the workforce, remain undecided about the future or want to continue working for the foreseeable future.

And being aware of these options could result in more clients being able to continue working towards their retirement goals while simultaneously earning an income that will help to boost their retirement fund when they are ready to leave the workforce. 

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This facility will be available on loans up to 80% LTV across The Loughborough’s residential product range for purchase or remortgage purposes on the applicants main residence. It is applicable for those applicants who have previously been employed in the same line of work as their new business and is also available for newly qualified professionals with one year’s worth of accounts.

A year two projection may be considered on referral where the business has been trading for a minimum of 18 months and the projection has been prepared by a qualified accountant.

Each case will be assessed on an individual basis.

Ashley Pearson, Head of Intermediaries at Loughborough Building Society, commented:

“Securing a suitable mortgage continues to prove that bit more challenging for many self-employed people across the UK, with this demographic often falling foul of one-size-fits-all mainstream lending criteria.

“For brokers with self-employed clients, it’s never been more important to understand the breadth of available options and in recognising the flexibility of certain lenders when looking to place this type of business, even for those relatively new business ventures.

“We hope this positive criteria enhancement will help open up more avenues for this vital component within the UK workforce to access the type of mortgage product they need and deserve.”

The post Loughborough Building Society enhances self-employed criteria appeared first on The Loughborough Building Society.

The challenges facing first-time-buyers (FTBs) have been well documented over the years, with rising rents, limited housing stock, stagnant wages and the cost-of-living crisis placing additional pressure on the disposable income of many would-be buyers.

Most recently, these challenges have been further exacerbated by the higher interest rate environment and widespread economic uncertainty that has gripped the UK, all of which have combined to make saving for a deposit even harder than before.

It’s not just FTBs who have been feeling the pinch. Second steppers, buy-to-let (BTL) landlords and many of those approaching retirement age have also felt the impact of increased living costs, some of whom have seen their borrowing capacity reduced as they struggle to overcome affordability barriers. 

Against this backdrop, the number of borrowers turning to family members to help them get onto the property ladder has increased. In fact, research carried out by Legal & General shows the Bank of Family was expected to provide support for almost half (47%) of house purchasers under the age of 55 in 2023 alone.

However, given the recent economic challenges faced by all homeowners, gifting deposits and financial contributions may no longer be a viable option for many. In which case, a concessionary purchase mortgage could prove a suitable alternative by allowing family members to sell their home to another family member at a rate which is below market value.

In the majority of cases, lenders offering concessionary purchase mortgages will allow the sale of a property at a discounted price with no deposit, provided it is between family members. In some cases, this can also include step parents.

Concessionary purchases between family members means that applicants can use the equity within the property being sold to fund the deposit, which helps to make the purchase more affordable by reducing the overall price.

Some lenders, such as The Loughborough Building Society will also consider applications where the parents may want to sell their residential property to their son or daughter but would like to continue living in the property under a family BTL mortgage.

This can prove to be a useful solution for borrowers approaching retirement age who may have seen their disposable income significantly reduce as a result of increased living costs and can no longer continue with their mortgage.

In this case, a concessionary purchase of the property can be made by the owner’s son or daughter provided they are homeowners themselves and earn a minimum of £25,000 a year. Under these circumstances, seeking independent legal and tax advice is recommended as there could be some inheritance tax implications.

Concessionary mortgages can also be used by landlords looking to offload a property before the end of the current tax year by selling it to an existing tenant. This can prove to be a good arrangement for any FTB renting a property in an area they like, as it could provide them with a viable solution to get on the property ladder.

It can also help the landlord avoid the time and effort involved in putting the property on the market, as well as potentially saving them thousands of pounds in estate agency fees by carrying out a private sale.

In this scenario, the landlord is able to contribute to the deposit by offering a reduction on the price of the property as an equity gift, however, the applicant would also be required to put down a 5% deposit to secure the sale.

The mortgage rates and terms offered on a concessionary mortgage are usually similar to a standard mortgage, but it’s important to note that not all lenders offer them. Advisers with clients who may be interested in the concessionary purchase option should always ensure they engage with lenders who are experienced in such a transaction and have the capacity and capability to underwrite this type of mortgage application.  And for those borrowers who may not realise that this may be an option, this is an area in which well-informed advisers can really shine. 

The post Understanding concessionary mortgage purchases appeared first on The Loughborough Building Society.

Every January, the new year ushers in the chance for change, the opportunity to start afresh and set good intentions for the year ahead. For some, this may mean improving their exercise regime and their diet, while for others, it might involve moving house, changing jobs or getting their finances in order.

The last few years have proven to be extremely challenging for many UK households, with the cost of living crisis placing significant financial pressure on disposable incomes, causing some to run up debt, tap into savings or put their home improvement plans on hold as they wait for greater economy certainty.

However, as we begin 2024, the economic outlook does seem a little brighter and, as a result, the early months of the year may be the time for homeowners to consider their remortgaging options as they evaluate ways to manage monthly mortgage payments, start a home improvement project or pay off debt.

Aside from naturally coming to the end of their current deal, there are a number of reasons why a borrower may seek to remortgage with another lender, including for debt consolidation purposes, to capital raise or because of a change in their personal circumstances.

For example, those going through a divorce may find they need to remortgage and conduct a transfer of ownership during the settlement process in order to gain full ownership of a property. In this case, LTVs of up to 90% are offered by some lenders, providing borrowers with greater scope for achieving a clean break during a challenging and emotional time.

Most recently, easing inflation and a less volatile interest rate environment means now may be a good time for homeowners, who may have been holding off, to act as competition amongst lenders begins to heat up across the remortgage market.

Remortgaging can also prove to be a useful tool for raising capital as it allows homeowners to tap into any equity built up in their home by using this to consolidate and pay off any debt that may have accumulated or to carry out a home renovation project.

For example, Loughborough Building Society allows remortgages for home improvement purposes up to 95% LTV, provided details of any planned works at the higher LTV band are clearly outlined during the application process. For debt consolidation purposes, mortgages of up to 80% LTV are available, including for those people with a high debt to income ratio.

This means that someone earning £50,000 a year with a further £50,000 in unsecured debt may also qualify for a mortgage, provided there is proof that they are regularly servicing the debt. This can be done on an interest-only basis and on a term of up to 40 years.

Another example where remortgaging may prove a viable solution is for those Help to Buy clients who have taken out a five-year equity loan to get onto the property ladder and are now coming to the end of the interest free period in a higher interest environment.

Exploring their remortgaging options and raising capital to repay the loan and buy the property outright may make more financial sense in the current climate and mortgages of up to 90% LTV are available to help the borrower achieve their goals and take full ownership of the property.

Of course, brokers will always need to ensure that any fees or charges associated with leaving a mortgage early are factored into the advice process to ensure they are securing the best outcome for their clients. And, while remortgaging may not be a suitable solution for every client, the flexibility it offers means it should always be front of mind when advising clients throughout what could prove to be a busy year for this particular sector.

The post Flexibility through remortgaging appeared first on The Loughborough Building Society.

The last few years have proven to be somewhat challenging for many UK consumers, with rising living costs, soaring inflation and ongoing uncertainty presenting a significant number of challenges for many mortgage borrowers.

In the buy-to-let (BTL) sector, this has been further exacerbated by unfavourable tax changes such as the withdrawal of mortgage tax relief, the stamp duty land tax reform, a variety of increased regulatory demands, all of which have placed a squeeze on the profit margins of landlords.

For many smaller and accidental landlords, the combined impact of all these changes has been significant, with many finding themselves stuck with nowhere to go or having to move onto a less attractive product transfer deal.

Yet, as the end of another year rapidly approaches, there are signs that the UK economy is beginning to show signs of recovery. Inflation has fallen to its lowest level in two years, reaching 4.6% in October and the Bank of England base rate has remained steady at 5.25% since August following 14 consecutive hikes since December 2021.

This will come as welcome news for many BTL borrowers, particularly those who have seen their finances stretched and profit margins squeezed over the last few years and as such, will seek ways to reduce their costs and boost their borrowing power by seeking out the lowest rates when their current deal expires.

However, while it’s certainly true that interest rates are beginning to see a downward spiral, it’s important that any broker looking to address the needs of their BTL clients look beyond the headline rate when assessing affordability to ensure the product offers the best possible outcome for their clients’ needs.

For example, a broker may find that, in some cases, a lower rate mortgage product actually comes with a higher fee – even as much as 7% to 8% of the overall loan value – therefore making the cost of borrowing significantly more than if a client took out a product with a slightly higher interest rate. In comparison, a product with a slightly higher rate may have a lower fee and work out to be more cost effective over the term of the mortgage and save the client money.

Assessing the way in which lenders calculate affordability can also make a difference to the borrowing capacity of some BTL landlords, with features such as top-slicing proving a useful tool in maximising affordability among borrowers. Approaches to the offering of such a facility will also differ from lender to lender. Here at The Loughborough, we top-slice at 90% of a borrower’s disposable income, which can make a significant difference in those situations where a landlord’s rental income fails to sufficiently cover the BTL mortgage interest repayments. 

For example, a client with a net monthly income of £3,000 and a net disposable income of £1,002.70 after all mortgage payments, loans and essential expenditure costs are factored in, can use 90% of their disposable income towards the rental coverage, the equivalent of £902.43.

This can provide a substantial boost to their affordability, particularly when compared to a product where top-slicing occurs at 60%, as it can increase the client’s borrowing capacity and help them secure a more cost-effective deal for their needs.

Of course, there will always be situations where a lower rate higher fee product may better suit the needs of a client, in which case, recommending the product will be best advice. However, for any broker with a BTL client looking to secure a mortgage, looking beyond the headline rate and taking a broader look at how the true cost of a BTL product is calculated is an important consideration when determining the best and most affordable deal for their needs. 

The post Assessing the true cost behind the BTL rate appeared first on The Loughborough Building Society.

Loughborough Building Society has announced the promotion of Ashley Pearson from National BDM to the newly created position of Head of Intermediaries.

Ashley has over 20 years’ experience operating in financial services, predominantly working within the building society sector. He joined The Loughborough in 2017 as a BDM and, over the course of the past six years, he has been integral in building the Society’s intermediary proposition.

In his new role as Head of Intermediaries, he will join the senior management team and be responsible for all intermediary related activity and strategic planning. Within this, he will continue to manage a team of telephone BDM’s and drive further positive development throughout the broker and customer journey from a service and IT perspective.

He starts his new role with immediate effect.

Gary Brebner, CEO at Loughborough Building Society commented:

“Ashley has been a real driving force since the launch of our intermediary proposition and, alongside other key individuals, has helped to create some solid foundations on which we are looking to build. His market knowledge and relationships throughout the intermediary channels are second to none and we look forward to him and his team putting into practice the ambitious growth plans we have in place to further extend our lending reach in 2024 and beyond.”

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Following intermediary feedback, the Society will now accept newly qualified professional applicants who were previously in education/vocational training, who have not completed six months in the role, or have a contract of employment to start in the next three months. This applies across all product types, up to 95% loan-to-value.

Loughborough Building Society has categorised these newly qualified professionals as a medical doctor, medical consultant/surgeon, anaesthetist, optometrist, solicitor, barrister, dentist, veterinarian, pilot and accountant.

In another significant positive criteria change, the Society will now also accept between 50% and 100% of benefits income received, providing this income does not exceed more than half of the applicants total income and this can be evidenced through a confirmation letter and bank statements. Each case will be assessed on an individual basis and this change is applicable across its entire product range.   

Ashley Pearson, National BDM at The Loughborough said:

“Affordability, accessibility and availability are all ongoing issues for a number of borrowers in what remains a challenging period for the economy and the UK housing market. Therefore, it’s up to lenders to help break down some of these barriers of entry where possible, in a responsible manner.

“These criteria changes, which have been incorporated directly on the back of feedback from our intermediary partners, will help open more doors to credit-worthy borrowers from different professional backgrounds and with different income sources. And we are hopeful that they will prove popular among the target demographic.”

The post Loughborough Building Society implements criteria enhancements appeared first on The Loughborough Building Society.

Ever since the first building society was established in Birmingham in 1775, these institutions have held a special place in the local community. Initially conceived with the sole purpose of building houses for its members, many of the earlier building societies were often disbanded when each member had built a house.

Today, almost 250 years after the first building society was originally conceived, they are not only a key provider of mortgages and savings products in the local community and beyond but also in supporting regional initiatives which help to drive the local economy.

In the current economic climate, the personalised approach adopted by building societies and the investment taken in the social and economic well-being of local economies can’t be ignored and although the number of building societies in the UK has reduced greatly over the years, their role remains as relevant as ever.

The personal touch

When it comes to their influence in the current mortgage market, building societies are helping intermediaries and their clients to navigate ongoing uncertainty by offering a personal touch to mortgage applications and in providing a range of specialist mortgage solutions which can meet the ever-changing needs of the modern-day consumer.

Whether this means looking at solutions that draw on family support such as a family deposit mortgage or using the income from parents or family members for a Joint Borrower Sole Proprietor mortgage to help boost borrowing capacity, speaking to us directly will enable advisers to determine the best solution for their clients.

In addition to this personalised service, the fact that every building society is fully owned by its members means there is no obligation to pay out dividends to shareholders and every business decision made is always with their best interests in mind.

This means that all profits can be directly invested back into the business in the form of higher interest rates for savers, lower rates for borrowers and through the provision of better overall services within the business or in the wider local community.

For example, many building societies have a strong commitment to regional investment that extends far beyond financial services and are actively involved in initiatives that contribute to the development of the local economy.

This can include providing support to local charities, the provision of financial education programmes in schools and the sponsorship of community events such as festivals or the local football team.

Building a community

Most building societies also regularly take part in community engagement programmes to better understand the needs and priorities of local residents or have employee volunteer or grant and awards programmes in place that provide support to local start-ups or environmental initiatives taking place within their communities.

On 1 November, five Leicestershire-based building societies, including The Loughborough, came together to outline the different and complimentary products available through intermediaries to borrowers, as well as outlining the services we provide to the local community.

The event, held at the Leicestershire County Cricket Club, provided local advisers with the opportunity to better understand how building societies’ function, how they continue to play a vital role in the UK’s financial services landscape and why utilising the services available on their doorstep can help benefit their clients and the wider community as a whole.

Whilst we all maintain our individual approaches to this, we also have a common goal when it comes to providing specialist lending solutions which can make a real difference for a range of borrowers in what remains a challenging economic environment. In short, it’s a real demonstration of mutuality and collaboration working in practice to champion a localised approach with a much bigger goal in mind.

The post How the mutual model can navigate the mortgage maze appeared first on The Loughborough Building Society.

The subject of a 100% mortgage tends to generate some heated debate, which is only natural given its somewhat chequered history. A fact which was certainly evident when Skipton Building Society launched the first-of-its-kind 100% mortgage product aimed at renters in May this year.

While some welcomed the move as a much-needed innovative solution to help address the specific needs of renters and first-time buyers (FTBs) looking to get a foot on the property ladder, the reception from others was a tad lukewarm to say the least. However, it remains important to remember that there is often more to this type of mortgage than meets the eye. After all, this 100% figure can be achieved in many different ways, from many different sources.

Helping to debunk the myths surrounding the product and keeping up to date with market developments, is where brokers play an increasingly crucial role in helping to educate FTBs and other borrowers struggling to raise a deposit about the many different variations of the product that exist in the market today.

For example, Loughborough Building Society has a suite of family assist mortgage products which includes a family deposit mortgage that allows a borrower to take out a 100% LTV mortgage product and have another family member (typically parents) guarantee a deposit of up to 20% of the purchase price.

This can be done by placing a collateral charge against the depositor’s own property or as a cash lump sum into a savings account offering a 3% interest rate, both of which are released after seven years or sooner if there is enough equity in the property when it’s time to remortgage.

In the current market, this could prove to be a viable alternative for parents and family members gifting a deposit as not only will they get their money back; they’ll earn interest on their money and still help their child buy a house. This represents an attractive proposition considering recent figures from L&G which highlighted that the average amount of money gifted by family members is expected to reach £25,600 this year.

This type of mortgage is also available through our Joint Borrower Sole Proprietor (JBSP) Deposit Guarantee product which enables a family member to provide a 20% security against their house or as cash held in a 3% deposit guarantee account, while also boosting the applicant’s borrowing capacity by using family members’ income for affordability purposes.

In most cases, this will be the borrower’s parents, but other family members such as grandparents, siblings and aunts and uncles can also be listed on the application, although the property will only be legally owned by the occupier.

The post Debunking the 100% mortgage myth appeared first on The Loughborough Building Society.

First-time buyers (FTBs) are facing a tough time at the moment as higher interest rates and rising living costs continue to place increased pressure on monthly budgets, further squeezing affordability levels and reducing FTB purchasing power in a somewhat underperforming housing market.

Limited housing stock and continued uncertainty around the wider economy are also adding fuel to the fire, with houses prices remaining relatively high as demand continues to outstrip supply, all of which only serve to place the dream of homeownership further out of reach for many FTBs.

According to recent figures from UK Finance, there were just over 370,000 FTBs in the UK in 2022, 9% less than in 2021 when they hit their greatest number since 2006. Lending to FTBs in Q1 2023 also hit its lowest level since 2015, excluding Spring 2020 when the market was effectively closed during the first national Covid lockdown.

Tackling the challenges faced by FTBs is essential given the importance of this demographic to the health of the housing market; without FTBs, second- and third-time buyers can’t move up the property chain and the entire home buying process comes to a halt.

With market conditions likely to remain difficult, and interest rates forecast to stay at a higher level, brokers are going to have to remain on top of their game when helping FTBs get a foot on the property ladder and it is here that the shared ownership scheme can really come into its own.

Over the last few months, The Loughborough has seen a significant uptick in shared ownership enquiries as affordability constraints continue to squeeze FTB budgets. This is no surprise given one of the main attractions of the shared ownership scheme is the fact that deposits are typically between 5% and 10% of the share purchased, which makes saving for a deposit far more achievable.

Loughborough Building Society, for example, offers LTVs of 95% on new build and 80% on new build flats across our shared ownership range. This means the amount needed for a deposit is significantly less than what would be expected on the open market. Many new build developers also offer discounts such as stamp duty savings or a percentage off the asking price, which means that in some cases, further savings may be had.

Given the financial challenges many consumers have faced in recent years, it’s also worth noting that shared ownership mortgages can also be an option for those purchasers with irregular income streams or previous credit issues, including FTBs.

For example, we’ll consider the most recent year’s financial figures, rather than the last two, for self-employed applicants while those working zero-contract hours only need a minimum of six months’ proof of income with no more than a two-week gap in earnings to apply.

Applicants with previous credit issues such as a mail order, utility or telecom default that was satisfied three months prior to the application, would also be considered for a shared ownership mortgage, while those that remain unsatisfied would be considered by referral.

Options are also available through The Loughborough’s Shared Ownership Prime Plus product, for those clients with more significant unsatisfied defaults such as a CCJ, IVA or a DMP, which enables borrowers to purchase a property through the shared ownership scheme provided they have a 30% deposit of the share they are buying. This can prove to be a useful way for applicants to get on the property ladder while also repairing their credit record.

For those FTB clients keen to purchase a property in the current economic climate but unable to save a large deposit or restricted by affordability constraints, or even those FTB clients with previous credit issues, shared ownership may offer the lifeline they need by providing them with a more affordable path to buying their first property and setting them on the road to homeownership.

The post Providing a more affordable FTB path appeared first on The Loughborough Building Society.

In the current economic climate of higher interest rates and rising living costs, dealing with clients with credit issues such as arrears, defaults, adverse credit or even CCJs, is becoming increasingly commonplace.

Household budgets are starting to feel the effect of rising living costs as the shift from a historically low interest rate environment, to one that saw the base rate increase 15 times to 5.25% in August 2023, begins to take hold.

The impact of this change on consumer finances has been significant. Figures from the FCA show the number of people struggling to meet bills and credit repayments rose by 3.1 million in the year to May 2023, while the number of people who missed a bill or loan payment has also gone up by 1.4 million in that time.

The growth in the number of consumers encountering some form of financial difficulty means the chances of mortgage brokers handling a query from a client with credit issues is now somewhat inevitable, so understanding the options available to them is imperative.

There are a number of reasons why your client may have an impaired credit history. Perhaps they missed a payment due to a simple oversight such as moving house or changing jobs, or maybe they experienced more significant financial challenges which resulted in an IVA or CCJ.

Either way, a credit blip doesn’t necessarily mean the client is no longer credit worthy, so it’s important that brokers work with their clients and specialist lenders to understand the life events surrounding the default so that they can find a suitable solution for their clients’ needs.

Loughborough Building Society for example, offers a Prime Plus range of mortgage products on a fixed rate, shared ownership, buy-to-let and borrowing into retirement basis, all of which are aimed specifically at borrowers with a history of impaired credit.

Customers with arrears over two months, or any default, in the last two years as well as those with no more than three CCJs not exceeding a combined maximum of £1,000 are eligible to apply, as are those who have been subjected to an IVA or DMP within the last three years.

Those who have been discharged from bankruptcy or repossession for more than three years or those that have had three or more payday loans in the last 12 months would also be considered provided a full explanation for the credit issues experienced by the customer is outlined in all applications.

Recently, we received an application from a client with an IVA who was looking to remortgage and take on some additional borrowing for home improvements but was unable to secure a new interest rate with their current lender.

The client entered the IVA as a consequence of Covid as he was self-employed with his own building company but couldn’t access properties to do the work due to government enforced lockdowns.

As a consequence, he suffered a huge loss of earnings, which had an impact on his ability to meet repayments on some unsecured debt. He has subsequently left the industry and retrained as a health and safety officer and is now in full time employment in the rail industry.

As this was the first time the client had ever had a credit issue, had maintained all his IVA payments over the last two years and had not taken on any additional borrowing, we, as a lender, were comfortable to lend to the client and he secured a mortgage with a lower rate of interest. He was also able to complete essential home improvements on his property.

In this case, identifying the reasons for the credit issue was crucial in determining the client’s borrowing suitability. While credit related issues are not always an easy conversation for brokers to have with their clients, understanding life events and determining the reasons behind any financial difficulties could prove critical in helping your client get back on track.

For those brokers unsure of how best to approach these situations, or are unclear about the solutions that may be available for their client, enlisting the help of a specialist lender familiar with this area of the market should be a top priority.

The post Mortgage solutions for clients with credit issues appeared first on The Loughborough Building Society.

Every September, the start of a new academic year sees thousands of students up and down the country move out of their parents’ home and settle into life in a new town or city. For some, it’s their first time away from the family home, while for others, it’s as a returning student to a place they now call home.

This rite of passage is an exciting time for many young adults and lays the foundations for the start of their careers and the rest of their adult lives. However, it can also prove to be quite daunting as they navigate the challenges of balancing their studies with the financial commitments of independent living for the very first time.

In the current economic climate of high inflation and a cost of living crisis, the financial pressure felt by many students looks set to increase with the continued squeeze on landlords coupled with growing demand for accommodation likely to drive up competition for housing and force up rents.

In fact, according to figures from UK student landlord, Unite Group, the cost of student accommodation in university towns and cities is expected to rise by 5% in the 2023-2024 academic year alone, as waiting lists for accommodation reached record levels.

For parents with the ability to help their children get onto the property ladder, exploring options such as a Buy for University mortgage could not only help address the current problems of supply and demand, but it could also prove to be a fruitful investment and an ideal route to a way to help them achieve their homeownership aspirations.

A Buy for Uni mortgage works by allowing students to use the financial support of their parents to purchase a property, live in aforementioned property, and be in a position to rent out any spare rooms to fellow students to cover the cost of the mortgage. Meaning they may not have to pay a great deal of rent on less than great accommodation and that they will graduate from university as homeowners.

Borrowers can take out a mortgage for up to 100% of a property’s value provided a security of up to 20% is made as cash deposit or as a collateral charge against the value of their parent’s house. As the mortgage is taken out on a Joint Borrower Sole Proprietor (JBSP) basis, both the child and parents are responsible for the mortgage payments, but only the borrower is registered as the legal owner of the property.

The benefits of taking out a Buy for Uni mortgage can be clearly seen in a recent case study from Loughborough Building Society in which a 21-year-old medical student with three years remaining on his course, bought a three-bedroom property in Bristol for a purchase price of £302,500.

The borrower took out a 100% Buy for Uni mortgage with a 20% collateral charge on his father’s house, equivalent to £60,500.00. While the borrower is the legal owner, his 57-year-old father, who is also a doctor, will be listed on the mortgage as a JBSP.

The mortgage was taken out on a variable rate discount basis and has monthly repayments of £1,484.82, which the borrower plans to pay by renting out the two spare rooms at a rate of £600.00 each, leaving him responsible for the £284.82 shortfall.

Once the borrower graduates and is earning a salary, the collateral charge against his father’s property can be released and he can then remortgage onto a standard product, sell the property on the open market or rent it out to other students should he decide to move away.

As with all BTL investments, a Buy for Uni product is not for everyone, but with demand for rental property in university towns and cities high and rents even higher, it presents a viable solution for those parents who can afford to help their children out while also setting them on that all-elusive homeownership path.

The post Buying for university appeared first on The Loughborough Building Society.

Client expectations have always been difficult to manage, However, for many, these expectations have become even more challenging in a higher interest rate environment where they are being placed under greater inflationary pressure.

These conditions have resulted in something of a lull in the housing market, with many customers choosing to put their plans to buy a house, or move to a new one, on hold while they wait for the dust to settle in the hope that the cost of borrowing becomes more affordable.

For brokers, navigating this new operating environment can prove both frustrating and concerning, particularly after such a period of high growth and even higher demand experienced across the housing and mortgage markets.

However, in times of change lies opportunity and now, more than ever, brokers have the opportunity to proactively look at different ways in which they can add value -while simultaneously growing their business – by tapping into the potential offered through their existing client bank.

Many brokers will have built up longstanding relationships with their clients. This means they have a wealth of information about their personal circumstances at their fingertips. Information which could prove useful for future business opportunities, particularly if these circumstances have changed or are about to change.

Perhaps a particular client now has older children who are about to leave home either to enter higher education or move to a different city for work? Given the rising cost of rent and shortage of rental properties, it may be worth having a conversation with them about the ways in which they could help their children buy a property using existing equity in their home.

For example, products such as a Buy for University or Joint Borrower Sole Proprietor mortgage can help younger people get onto the property ladder with the help of their parents by placing a collateral charge on an existing property or by using savings or the equity built up in their own home as a deposit.

Maybe you have clients approaching retirement who are considering downsizing to a smaller property to be closer to family or buying a holiday home to enjoy once they finish work. Products such as a holiday buy-to-let mortgage or those specifically aimed at borrowing into retirement could help them to get the ball rolling on the retirement planning process.

Tapping into an existing client bank could also help brokers identify any niche or specialist areas of the market that are specifically common to their clients. Perhaps you live near a hospital and have a lot of clients that are doctors or medical consultants? Or maybe you live close to an airport and have a client bank made up of lots of pilots, stewards and flying staff?

Identifying patterns in an existing client book can help brokers carve out a niche for their business and help to associate themselves with a particular area of the market which can hold them in good stead when the market is less buoyant and help to lay the foundations for being a specialist in that field.

So, maybe now is the time to dig a little deeper into existing client banks to identify some new opportunities and solutions which could not only help brokers to get the right results for their clients; but also help maximise business opportunities which may already be under their nose.

The post Tapping into client potential appeared first on The Loughborough Building Society.

Back in February, I wrote a piece about the first few months of the year presenting an ideal time for landlords to weigh up any potential renovation work and diligently plan ahead to ensure their holiday lets are in full working order prior to the onset of the summer season.

Well, the summer season is now firmly upon us and holiday let owners up and down the country are working harder than ever to maximise occupancy rates and profitability whilst maintaining those all important five star reviews. I know that as I’m one of these holiday let owners and, not only that, but a holiday let owner who is nearing the end of my mortgage term and having to assess my options accordingly in light of current market conditions.

Which made me think – what might I be looking for from an adviser to support me in this decision making process?

The first one is obvious, what kind of rate could I get and for how long. Working for a lender who is active in the holiday let product arena, it’s my job to know what else is on offer from a pricing and criteria perspective across the market. Meaning I have a little bit of a head start here. Although, despite this still being a relatively small proportion of the overall mortgage market, recent levels of product-related activity have really made me appreciate just how tough it is for advisers to keep track of the huge swathe of changes experienced across all sectors.

However, while pricing has risen, it’s prudent to remember that lenders maintain different approaches to policy and criteria and incorporate unique features which have largely been retained despite the market turbulence. For example, here at The Loughborough, we can use the rental income yield rather than the number of weeks occupied as part of our affordability assessment.

Beyond the products, criteria and policy, I hope that an adviser would also take the opportunity to explore their clients experience or, lack of, when it came to such an investment. Of course, this is a delicate balancing act. Advisers shouldn’t be expected to undertake due diligence on behalf of their clients but ascertaining what kind of research their clients have done in regard to their understanding of the holiday let market, especially in the area in which they’re planning to purchase, is a pertinent question.

After all, factors such as location, income potential, outgoings (both in terms of committed costs and variable costs), maintenance, how to market the property and the importance of reviews are all important considerations.

Even for the most experienced of landlords, engaging with an independent mortgage broker should always be their first port of call when it comes to generating any kind of funding, and exploring their options.

My personal experience of being a holiday let owner over the past few years has largely been a positive one although, despite purchasing this with an already established client base, this still involves spending far more time than I anticipated on it and certainly more than it would on a traditional buy-to-let.

Inevitably the margins can be bigger but with increasing fixed costs to take into account then I, like all holiday let owners who are nearing the end of their mortgage terms, need to carefully reevaluate the pros and cons of continuing from a time and financial perspective. And the intermediary community will play a key role in the decision-making of all those people who purchased a holiday let over the course of the pandemic and are now having to review their sums and expectations accordingly.

The post Helping holiday let owners to review their sums and expectations appeared first on The Loughborough Building Society.

Financial literacy is the cornerstone to building wealth. It gives people the confidence and ability to make smart decisions when faced with financial choices by providing them with greater insight into how to budget, save money and avoid getting into debt.

Having these skills has never been more important than in the current economic climate where fast-changing interest rates and rising living costs are forcing many people to reassess their household budgets as they learn to prioritise financial demands and make some sacrifices along the way.

Recently, I was invited into a local pre-school to talk to 17 three-year-olds about how to save money and I started by giving the children a Loughborough Building Society piggy bank and four pence each. I also had some sweets for sale at a rate of two pence per sweet. 

The children were given free rein on how to spend their money and could either save the four pence with opportunity to gain another four pence; buy one sweet, save two pence and gain another two pence; or buy two sweets and spend the lot.

Unsurprisingly, 10 children spent all their money, but seven chose to hold back leaving them with the option of purchasing some bigger sweets at four pence each. At this stage, six of the remaining children decided to spend all their money on the larger treats, leaving them with nothing. At the end of the game, only one child had money left and had managed to turn four pence into 16 pence by saving her money.

The experiment taught the children an extremely valuable lesson about basic money management skills and though it had to be simplistic given the children’s age group, the underlying message about the importance of saving money was clear.

Conducting this experiment made me think about the importance of financial education in schools and why basic money management skills such as savings, debt, tax and mortgages should be taught in the classroom. It also made me acknowledge the current changing financial landscape and its impact on the role of the broker from order taker to educator.

Over the course of the last 15 years, historically low interest rates meant mortgage deals were plentiful and finding a suitable product for the majority of clients was a relatively simple task. However, in the current climate, this is no longer the case and brokers are having to work harder than ever before to secure a good rate for their clients in a rapidly changing and frustratingly volatile mortgage market.

Brokers are also having to manage and reset the expectations of many of their clients about why operating in this new normal means their money may not go as far as it once did and how this may impact their homeownership aspirations.

Conversations like this can be very difficult, particularly if a basic understanding of the fundamentals of finance is lacking. As the initial point of contact for borrowers looking for a mortgage, brokers have involuntarily become the educator, which means they’re under more pressure to help borrowers understand every single aspect of their finances and how it relates to their mortgage application.

As lenders, we have a duty to step up and support brokers in this new role by seeking out ways to help customers understand the basic principles of financial literacy and mortgage borrowing. Brokers come to us to discuss the best solution for their clients, so working with brokers to identify the challenges they’re facing and any gaps in consumer knowledge is imperative.

Like many other building societies, Loughborough Building Society plays an active role in the community and was established with the aim of helping people in the heartlands to save money and buy a home. While this ethos still rings true today, my recent visit to the local pre-school reminded me of the importance of giving back to the community and highlighted the ongoing responsibility of the industry to ensure that we educate consumers on all aspects of finance.

While instilling these values early can help to lay the foundations for more financially savvy consumers in the future, for those borrowers currently facing an immediate increase in their monthly mortgage payments, the industry needs to find ways to educate consumers on changing mortgage dynamics and the impact of this on their finances going forward. And the intermediary market remains at the forefront of this.

The post From order taker to educator – the ever-evolving role of the mortgage broker appeared first on The Loughborough Building Society.

In my previous piece, I evaluated the importance of location and in taking a step back to really take the time to crunch the numbers.

So, we’ve now found a property in a place which should prove attractive to visitors and the sums seem to stack up but how do we set about getting people through the door to cover these outgoings and, importantly, to generate some profit?

Marketing

Appointing an agent or DIY advertising both have pros and cons.

As my main marketing tool, I opted for an unlimited booking contract with cottages.com – other sites are available. I chose this particular route as it provides me with the flexibility to also take my own bookings via other smaller sites or direct from social media channels such as Facebook.

A booking via cottages.com can incur up to 20% commission rates, although arguably the reach of a specialist website is far, far greater than a DIY option. The system with cottages.com operates on a corridor of supply versus demand i.e. a start price which can go 50% above to as much as 20% below the starting price dependant on availability in the area.

I liken this to booking a flight. If there are lot of seats available, then the price comes down. If there are fewer available seats, then the price increases. Over the course of the year it hopefully balances itself out.

I also manage a Facebook page which requires constant attention and content. I often spend 1 -2 hours per week creating batches of posts for the coming week. So far, I’ve managed to grow the page to just over 500 likes and have received a number of direct bookings via this approach but this has not been an easy task and there has been plenty of trial and error involved. I’ve also joined a number of Facebook groups which offer late deals to people looking for accommodation. Again you have to be very proactive in responding and continuing to post content in order for this to work.

Reviews

It’s all about the reviews. If someone stays at your cottage you want them to provide a review. This encourages further bookings from other people who are looking to visit the area.

Cottages.com operate a scheme where your reviews are accumulated over a year and, provided you achieve over 9.5, you then receive a “Customer Choice” banner above your property.

In my particular case, my property has won this award for the last five years running and not many cottages around my location have this accolade. A big factor in getting these constantly good reviews is something as simple as having a good reliable cleaner.

Fortunately for me, a family member lives close buy and takes great pride in ensuring that our property is spotless at all times. You can appoint contractors, but you need to continually monitor the quality of the cleaning. After COVID people expect a clean and fresh property as a bare minimum.

Overall, my experience of being the landlord of a holiday let has been positive and the rewards are certainly higher than a residential buy-to-let property. However, I would stress that – depending on your holiday let business model – you can spend a lot more time than you would on a traditional buy-to-let.

Looking forward, the industry faces challenges both now and in the coming years. For example – new licensing laws could be adopted in certain parts of the UK, there is growing opposition to people buying holiday lets in some areas and although EPC ratings haven’t filtered into the holiday let sector yet, it will only be a matter of time once the buy-to-let EPC rules come into play.

Which leads to the big question – would I buy another holiday let?

All I will say is that I keep my ear to the ground and eyes wide open for another holiday let property in the location where I already have one.

The post Owning a Holiday Let – The Reality – Part 2 appeared first on The Loughborough Building Society.

There’s been a huge amount of talk about the holiday let market in recent times and, working for a building society who remains committed to lending in this space, it’s fair to say that some of these conversations have been easier than others due to a host of individual financial circumstances, approaches and attitudes. However, for the purpose of this two-part article, I’m going to take my lending hat off for a little while and put my holiday let landlord one firmly on.

Whether for pleasure, business or a mix of the two, holiday lets have become hot property in recent years and with demand of UK staycations remaining strong, this appeal remains evident. But what is the reality of owning such a property?

After owning a holiday let for a few years, I’ve put together a few pointers for potential investors or landlords looking to diversify who may be looking to enter this market.

It sounds obvious but the location of the property is key. Is it near any attractions, landmarks, beaches, national parks and local amenities?

I purchased a property 100 metres from a pub thinking guests would appreciate the option of having somewhere to eat out and have a drink without the need to drive or get a taxi. I also knew that dogs are allowed in the pub.

Research suggests that allowing your holiday cottage/house to be dog friendly achieves 13% more bookings, though consideration needs to be taken if you’re turning the property into a high-end specification type holiday let. Carpets and interior furnishings also need to be extra hard wearing to reduce odours and constant heavy-duty cleaning is needed. Our property has wood flooring, and the furniture is hard wearing with a number of throws available to use.

Of equal importance is to really crunch those numbers. For those who need a mortgage, engaging with an independent mortgage broker should always be the first port of call as they will have access to a range of holiday let solutions from a host of lenders, including Loughborough Building Society. It’s also prudent to point out that there is the option to use an interest only facility on such borrowing.

Ongoing costs. Aside from the mortgage element, there are a number of ongoing costs to consider such as buildings & contents insurance, gas, electric, water, broadband, cleaning, gardening, arrival gifts, tea and coffee along with setting aside money for new items such as microwaves, pots and pan, bedding and towels which will wear and tear over time and will need replacing. This all adds up. There’s an old saying, buy cheap, buy twice. So, make sure whatever items you buy for your holiday let will last the course of time until you inevitably have to replace them.

Maintenance. If the property has a garden, you’ve got to think about hiring a gardener unless you’re able to do this yourself. In the summer, a large garden can take time to maintain and can be even more challenging if there are short periods between changeovers – which is ultimately what you are aiming for. Maintenance tends to take place out of season or if we get any small gaps in bookings, so you need to consider having someone on call if you’re not near by the property because if something goes wrong your guests will want certain issues resolved within 24 hours, if not sooner.

I like to break my costs down into two elements.

Committed costs – mortgage repayments, buildings insurance, broadband and gardener. These costs are based on no occupancy for a week/month.

Variable costs – gas, water and electric. Although I’ll still need to factor in some of these payments even with no occupancy,

If the property is occupied, the energy consumption will increase which needs to be incorporated into my modelling. Gas and electric prices have seriously impacted costs per stay in recent years and you have to remember your guests are on holiday so any thoughts of saving energy are out the window. Cleaners are required when the property is occupied as are condiments, wood for the log burner (which I have), toiletries etc.

Many of these may seem obvious, but you’d be surprised how quickly costs can mount up and how many people don’t take these committed and variable costs into account when purchasing their first holiday let.

In my next piece, I’m going to move on from outgoings to focus more on incomings and share some of the things I have learned from a marketing perspective, the role of the  review and the importance of cleanliness…

For part 2 click here

The post Owning a Holiday Let – The Reality – Part 1 appeared first on The Loughborough Building Society.

The addition will give the Club’s Directly Authorised firms’ advisers access to a wider range of specialist mortgage products suitable for consumers with more complex financial circumstances who may be in need of more tailored solutions.

Loughborough Building Society offers buy-to-let products up to a maximum loan size of £500,000 and residential products up to a maximum of £750,000.

Clare Beardmore, Director, Legal & General Mortgage Club, said: 

“Giving advisers access to more product choice and more specialised solutions is absolutely essential to ensure borrowers get an outcome that is right for them. It’s also a vital component of the new Consumer Duty’s fair value requirements, which we know are an important priority for advisers.

“Offering Loughborough Building Society’s specialist residential and buy-to-let products to the broker network at Legal & General Mortgage Club will support more borrowers, and also the advisers who serve them.”

Ashley Pearson, National Business Development Manager, Loughborough Building Society, said: 

“Working with Legal & General’s team and joining the Mortgage Club panel is a welcome opportunity for us to address specialist requirements in the residential and buy-to-let sectors. This collaboration will allow us to help more borrowers who otherwise might have been overlooked.”

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