Monday, 29 February 2016 20:42

How has the mortgage industry changed in the last 12 months

Most of the changes in the mortgage industry in the past 12 months have been reacting to laws and regulations that will come into effect in the future. Some observers will think that these won’t have mattered in the past 12 months but the industry is aware of future implications and of the need to be ready for the impact caused by these changes and developments in the mortgage industry.

This means that some of the most pertinent changes in the mortgage industry in the past year relate to changes which haven’t actually taken place yet.

The Stamp Duty changes have greatly impacted on the mortgage industry

Although the stamp duty changes don’t come into effect until April 2016, they have understandably had an impact on the mortgage industry and many lenders. The government hopes that the long term impact of this change in tax will see fewer homes being made available in the buy to let market but it seems as though the beginning of 2016 has been marked by lenders having a strong start to the year.

Many investors have been looking to complete property purchases before the changes come into effect. Mortgages approved by lenders rose by a third in January with respect to the year on year figures. This is partly driven by the stamp duty changes coming soon but it needs to be remembered that the beginning of 2015 saw a slow start to property sales and the mortgage industry alike. This was down to many people and investors waiting until the elections in May 2015 before deciding whether to invest in property or not.

In January of 2016, over 80,000 mortgages were approved, which is the highest figure in two years. The average loan value for property purchases rose to £178,900.

Another change scheduled for April 2016 is the removal of the “wear and tear allowance” which means landlords will no longer be able to claim up to 10% of their rental income for maintaining their property, regardless of whether they made any upgrades or improvements at all.

The mortgage industry is also facing up to the fact that there will be a change in the mortgage interest relief from 2017. Currently, a higher-rate taxpayer is able to claim up to 40% tax relief on mortgage interest but in 2017, this figure will drop to 20%.

The latter of these two changes are likely to impact on the overall yield a landlord or investor can receive, which means that they may have been instrumental in some people deciding against investing. The stamp duty changes may have that impact from April 2016 onwards but if it has had any effect on recent trends in the industry, it has helped facilitate mortgage applications.

The Mortgage Credit Directive will soon be in effect

As of March 2016, the new EU Mortgage Credit Directive will come into effect and this is also likely to impact on the mortgage sector as the application process will become tougher. The industry is being asked to carry out tougher tests with respect to affordability and income, and this has seen many of the leading mortgage lenders increase training for staff members in recent months to meet the new requirements when they come into effect this year.

Another factor in the mortgage industry in the past year has been the fact that mortgages have fallen to record levels. This is linked to the Bank of England base rate of interest, which has been historically low. If you want to have a look at some of the great mortgage rates presently in the market have a look at www.conranfinancial.co.uk/mortgage-search

More buy to let mortgage options are available in the market place

With a wide array of mortgages on offer to clients deemed to be a good fit for a lender, it is easy to why landlords and buy to let investors have been able to find a competitive deal that fits their needs. There are more than 1,000 buy to let mortgages to choose from the current market. This time 12-months ago, there were just over 800 on offer and back in 2012, there were less than 500 to choose from. We have lots of great information and video guides on our home page at www.conranfinancial.co.uk


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