Mortgages
Google, one of the most successful companies in recent years, has given up its mortgage comparison site in the UK – before it properly got started.
The trial version, UK Compare Mortgages, was suspended last year and completely axed this month. The closure follows the shutting down of a US version that ran for 2 years.
A spokesman for Google said that the UK site had ‘not been as successful as we would have hoped.’
The problem with comparison sites for mortgages
The mortgage market does not need another comparison website. Because comparison sites always starting with the lowest rate, they are flawed. To qualify for the eye-catching deal, applicants usually have to meet 10 to 20 minor hurdles before getting to the stage of worrying about the rate itself.
When looking at comparison sites there is always a tempting and impressive offer, the equivalent of a Rolls Royce or Aston Martin gleaming on the forecourt. But, as with these cars, the standout mortgages are supremely exclusive. They are only available to the very few. It is not until you get to the second or third page in the table that you start to find the products that the bulk of clients require, and for which they are eligible.
Hidden costs
Comparison sites list mortgages by rate. But the rate isn’t the only financial consideration. Fees and redemption penalties are also factors in finding the best product for each individual client.
Most of the comparison sites only take you so far before referring you to an adviser – an adviser who has bid for that business. Why not cut out the hassle and talk straight to an independent financial adviser? Limetree can find you the best mortgage, from the whole market, considering everything, not just the rates.
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The Financial Services Authority (FSA) has closed the sale-and-rent-back markets temporarily due to widespread poor practice.
The FSA found that most sale-and-rent-back products, sometimes called sale and leaseback, were either unaffordable or unsuitable and should never have been sold in the first place. The decision came after a year-long review of 22 firms.
Sale-and-rent-back transactions allow struggling property owners to stay in their own homes, by selling them to a company at a discount price. The company then rents it back to them at market rate.
The most common failings found in the review included poor assessment of appropriateness and affordability, bad ordering and timing of disclosure and inadequate record keeping. The FSA also highlighted incorrect information in the rent-back agreements, financial promotions that broke FSA rules, and badly structured sales processes that did not give customers enough time.
A study by Which? In February last year criticised the advice given to sale-and-rent-back customers as ‘woefully inadequate’.
Not in the interest of the homeowner
As I recently commented in the Financial Adviser, the main problem with sale-and-rent-back is that homeowners’ interests are left far behind. A product that should have helped vulnerable households often ended up stinging them. They should have been treated better by the firms involved, but most sale-and-rent-back companies just sell the properties on to maximise their own interests.
The closure of the markets is a good move in that it will protect desperate households from being affected by a product that is not designed in their interests.
If you need any more information about the closure of sale-and-rent-backs, or advice about what to do in your financial situation, don’t hesitate to call us.
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If you could invest in rental property anywhere in the country, where would you choose?
London, for the high demand and premium prices? Somewhere in the South East, where buy-to-let activity has always been high?
Well, both of those would be good choices, but neither compare to the leading location, in terms of return on investment.
According to haart, the best place to invest is Peterborough. Haart’s monthly Yield Index reveals that yearly returns on one to three-bedroom properties in Peterborough are the highest in the country. The yield can be as large as 9% per annum, for a two-bedroom apartment.
It’s no surprise then, that the East of England as a whole, including Cambridge, currently offers the best rental yields out of any area in the country, followed by the East Midlands and South Yorkshire. A bit more surprising that London comes fourth, although that’s still high on the list.
It’s not just the recent stats from haart that commend Peterborough to prospective landlords. I can speak from personal experience. I spent five years living in the town, and own two buy-to-let properties there. Want to know how I have found it?
Both my properties have been serviced well. I have never had a void period longer than two weeks, and both rental income and capital value have increased over that period. Also, with the price being a lot lighter, I got a bigger property for my money than I would have in a lot of other places.
So it’s thumbs up from me for Peterborough as a place to buy-to-let. If you want any help getting started as a Landlord – in the East of England or anywhere – don’t hesitate to get in touch.
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We always stress the importance of involving your accountant as early as possible in the house buying process. This has not changed – if anything it has become even more essential for the self-employed.
Now, when you apply for a mortgage, there are even more back office checks being done. For example, the Mortgage Verification Scheme (MVS) kicked in fully this month. Under the MVS, mortgage lenders send details of borrowers to HM Revenue and Customs who crosscheck it against their tax returns.
It is a good thing that a variety of fraud systems, such as the MVS, are in place. Our only worry is that a mortgage lender might be fixated on a self-employed person’s net profit, without understanding their income situation properly.
For example, a client might have a contract go wrong and end up losing £50,000 of her net profit, but this could clearly be a position that will not repeat itself the next year.
As a general rule if you are self-employed it helps to request an SA302 in advance of your mortgage appointment. This is your tax calculation from HMRC.
Individual circumstances are the reason to involve an accountant early on. An accountant may be able to shed some light on your ongoing financial situation where the black and white of a computer system fails.
For more information contact Limetree Financial Services.
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We have had an increase recently in enquiries regarding military mortgages. If you work for the armed forces, the good news is that lenders are finally beginning to understand your situation when it comes to property.
Because of the amount of time spent on service overseas, lenders can be dismissive of the needs of the military. One Army member expressed the problem this way:
I recently wanted to remortgage my family home but was frustrated to find that, because I am presently letting it due to service overseas, that most mortgage lenders would only offer buy-to-let products, which incur far inferior terms (rate and LTV).
I argued that it was my main family home and as only my military service compelled me to let it for a short period, I should qualify for residential terms.
Lenders are beginning to get it, however. We have found a number of lenders that allow armed forces personnel who are posted overseas on operational duties to rent out their property, or remortgage it, without change or having to switch to a buy-to-let mortgage.
It is also apparent that these very same lenders also accept deposits via the Long Service Advance of Pay scheme – a long-established MoD scheme under which the government provides a loan for the deposit on a property.
If you are in a similar situation and would like to know which lenders can help you, give Limetree a call.
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