Mortgage Protection& News the Newsletter from HD Consultants

Winter 2015 Mortgage Protection& news The newsletter from HD Consultants

Much has happened in the mortgage »marketplace over the last year or so. Schemes have been launched to assist the homebuyer, and tighter lending rules have been introduced, meaning it may be tougher to get the loan you want. In spite of that, more money was loaned on mortgages in 2014, than the year before, and 2015 may trump 2014. All of this occurs against the backdrop of a Bank Rate that has sat at 0.5% (at the time of writing) for well over five years. (Sources: Council of Mortgage Lenders, December 2014 forecasts, - leave it to us Bank of England, January 2015) Relax Of course the strict lending rules remain, only apply to the part of the property Increase on the horizon? albeit the regulatory body - the Financial purchase price that falls within that tax band. The signals from the Bank of England show Conduct Authority - feels that some lenders The upshot of this is if you’re buying a that a Bank Rate rise could be on the cards. may have been over-zealous, in certain home for less than £937,500, you will pay So if you are thinking about improving (or circumstances, when applying the new less stamp duty, or the same. And looking increasing) your current mortgage deal, affordability criteria. So do take advice. more specifically at the average help-to-buy looking for a new one to support a home And whilst we don’t have a magic wand, scheme purchase price of £185,000, there move, securing funding for a buy-to-let we operate in this marketplace day-in, day- would be a saving of £650 under the new property, or simply after a mortgage loan for out and once we know your circumstances rules. As for the £275,000 cost of the average the first time; then now could be the time and requirements, we can then identify the family home, £4,500 would be saved. to review your situation. most suitable solution for your needs. (Source: HM Treasury, Autumn Statement, December 2014) If you’d like to hear more about this and Decent deals on offer Stamp duty changes where we could help with your borrowing Tighter lending rules introduced in April There may also be an extra benefit for needs, along with ways to protect you (and 2014, may have contributed to a slowdown you. Stamp duty, for residential properties, your family), then please get in touch. in quarterly growth. However, demand in has been cut for 98% of homebuyers who You may have to pay an early repayment charge Q1 2015 is expected to pick up, possibly as a pay for it. This was implemented with to your existing lender if you remortgage. reflection of the spate of decent deals on offer immediate effect, and the new stamp duty The Financial Conduct Authority does not as competition increases amongst lenders. rules now operate on a similar basis to income regulate most Buy-to-Let mortgages and (Source: Bank of England, Credit Conditions Survey, Q4 2014) tax - where each percentage rate charged will taxation advice.

Welcome.... to this newsletter, which covers what we believe are HD Consultants some of the key issues of the moment that affect mortgage, protection and insurance products - and sets out how we may help you. Head Office: 109 Maldon Road ■ H D Consultants is an Appointed Representative of Personal Touch Colchester, Essex CO3 3AX Financial Services Ltd, which is authorised and regulated by the (Branches in Colchester, Clacton, Laindon & North London) Financial Conduct Authority. Tel: 01206 577 266 Email: [email protected] ■ Your property may be repossessed if you do not keep up Web: www.hdconsultants.net repayments on your mortgage. 2 0

to remortgage, there could be good news through the ‘transitional arrangements’ under the Financial Conduct Authority’s rulings. This means that as long as the borrower does not increase the mortgage amount (unless REMORTGAGING it’s for essential repairs) and has a good payment history, an affordability assessment may not be required. Whilst the decision will ultimately sit with the lender, it may Time to enable the borrower to move to a better deal. REMORTGAGE? Interest-only According to the Financial Conduct The enthusiasm to seek out a new mortgage deal whilst Authority there are around 2.6m interest- remaining in your home has been fairly subdued of late, but only mortgages still in place. with a Bank Rate increase on the horizon that may change. (Source: Financial Conduct Authority, August 2013) Should those in this group want to The decision for many is to decide fund much-needed home renovations. remortgage, then they may have to revert »if it makes sense to wait until the ■ Looking for a more suitable deal than to a costlier repayment mortgage, which increase occurs (and see how things pan an existing SVR arrangement. delivers the discipline of paying off both out); or opt to act sooner when there’s less With those issues in mind, interestingly the interest and part of the capital amount of a rush and, perhaps, better deals could (as reflected in a Bank of England report), each month. However, the chart below be on offer. the price war across the last quarter of 2014 shows that the increased payments may The additional element to throw into the is expected to continue into Q1 2015, as not be as much as possibly thought, mix is that many have sat with their existing lenders fight for market share. particularly if an SVR of 4% (or greater) is arrangement, or on their lender’s Standard (Source: Bank of England, Credit Conditions Survey, Q4 2014) being compared to some of the better rates Variable Rate (SVR) for a good few years currently on offer. assuming it might be difficult (or not Some possible benefits for you If you’re interested to see how remortgaging beneficial) to remortgage. However, with If the current monthly payments are may work for you, then do get in touch. recent house price growth, this could mean affordable then one route to adopt (if you You may have to pay an early repayment that the loan required may now represent secure a better interest rate deal) is to try to charge to your existing lender if you a lower percentage of the home’s value, maintain your existing payments, enabling remortgage. enabling them to get access to deals, or to you to pay off your mortgage earlier than benefit from the better loan-to-value (LTV) planned. Alternatively, you could use the ones on offer. money you’ve saved to invest elsewhere. Mortgage Calculator And there are plenty of reasons why it Or perhaps put an amount towards the cost Here’s how to use the mortgage payments calculator: may make sense to remortgage, such as: of insurance policies that help protect both A £100,000 mortgage over 25 years, charged at a 2.5% interest rate would cost 100 x £4.49 ■ Coming to the end of the current deal. you and your family against the unexpected. (for Repayment) = £449 per month. ■ Wanting to raise extra money to help Even if you feel you may struggle Monthly payments for a mortgage per £1,000 borrowed over 25 years Interest rate Interest-only* Repayment % £ £ 1.00 0.83 3.77 1.50 1.25 4.00 The TYPICAL borrower 2.00 1.67 4.24 2.50 2.08 4.49 Opting for the security of a fixed rate As for the purpose of the loan, the vast 3.00 2.50 4.74 3.50 2.92 5.01 mortgage seems to be the route that majority in the first ten months of 4.00 3.33 5.28 4.50 3.75 5.56 many are taking these days. Back in 2010 2014 (69%) have used it for house 5.00 4.17 5.85 fixed rate deals accounted for 50% of all purchase, resulting in remortgaging 5.50 4.58 6.14 6.00 5.00 6.44 mortgage loans, by volume. In 2014 (up accounting for 31% of new loans. 6.50 5.42 6.75 7.00 5.83 7.07 to October) around 90% are fixed. A far cry from 2008, when the share * Excludes any payments to a separate savings scheme, was largely reversed, where 63% of all to help pay off the capital amount borrowed. And, pretty much all deals (almost 95%) loans were applicable to remortgaging. This calculator only provides a guide to monthly payments and does not guarantee eligibility for a mortgage. The are on a repayment basis - where both actual amounts that you may have to pay may be more or less than the figures shown. Please contact us for a the capital and interest are being repaid. (Source: Council of Mortgage Lenders, data to Oct. 2014) personalised illustration.

■ Your home may be repossessed if you do not keep up repayments on your mortgage. Healthy living Help-to-Buy The two Help-to-Buy schemes have Life cover and health protection need not be products now been with us for a while and have that you sign up for and file away, as there may be some delivered a decent degree of support, largely for the first-time buyer sector of incentives on offer, along with the peace of mind it delivers. the marketplace.

Life is complicated enough in the consequence of a death or ill-health. Over this period, first-time buyers »current climate, if you’re healthy Yet it’s remarkable how few actually represented 45% of all house and have a regular income. So imagine have this type of cover in place. Industry purchases, but across the two schemes they accounted for more than 80% of what it might be like if you (or your research showed that only 37% of those take up - a reflection of the smaller family) had the additional financial and surveyed had life cover, 11% had critical deposit that’s required to get onto the emotional problems that death, a major illness, and 7% had income protection. property ladder (from as little as 5%). illness or long-term injury may bring? (Source: The Syndicate, January 2014 release) Help-to-buy already accounts for That’s why it’s important to try to However, it’s not as if most people around 6% of all house purchases, protect yourself against these events - don’t understand the benefits that where the schemes have been used with the various insurances on offer having insurance cover can bring to their almost exclusively to buy moderately such as life cover, critical illness (which lives; such as claiming for a dent in the priced homes in all regions of the pays out if you suffer from a range of car, a burst pipe, a lost mobile, a travel UK, with no undue focus on any specified serious illnesses) and income claim, or a sick pet. Whilst it doesn’t particular area or price bracket. protection (which pays out a regular lessen the importance of being covered (Source: Council of Mortgage Lenders, Help-to-Buy release, Treasury and DCLG data, September 2014) income should you be ill or injured and for those outcomes, it does demonstrate off work from beyond a certain period). that less tangible events, like a critical illness, may be way down the list of Incentivising you priorities - until it unfortunately occurs! Whilst ill-health or early death could hit anyone, the insurers are also aware that So, is it the cost? those who live a healthier lifestyle may When asked about expected life cover shift some of the odds in their favour. costs, the same research showed that It’s for that reason that some plans on among 18-24 year olds, in particular, they offer these days are far more innovative felt life cover would cost £105/month, with a decent degree of encouragement on average (the overall mean was £66). to live more healthily, by providing But, more specifically, if an 18-24 year old support in areas such as health checks, took out £150,000 of life cover over 25 incentives for gym membership, or a host years the average premium would have of offers to help get you out and about. been under £10 a month! (Source: The Syndicate, January 2014 release) However, these schemes won’t be the only option to consider, and in some But, is it a grudge purchase? If you recognise the peace of mind HELP-TO-BUY cases there may be more suitable deals Unsurprisingly, some of the most protection cover could bring, and want elsewhere. That’s why it makes sense grateful (and gratifying) testimonials an to identify an affordable route for your to have a chat with us to identify adviser will see are from clients who needs (which may even deliver added what’s out there for you. took their advice, ensured they had benefits), then do get in touch. ■ suitable protection cover in place - and As with all insurance policies, terms, Your home may be repossessed

if you do not keep up repayments 0 then sadly had to make a claim as a conditions and exclusions will apply. on your mortgage. 3 04 BUY (Source: Council of Mortgage Lenders, Q3, 2014 figures) 2014 Q3, Lenders, Mortgage of Council (Source: all outstandingmortgageloans! now accounts forover oneinseven of 100,000 inthepastyear -thissector in place-anincrease ofalmost With around 1.6mBuy-to-Let mortgages 02 atyasse ysm fthefollowing factors: assistedby someof 2032, partly allhomesby to35%of with projectionsthatthePRSwillgrow help facilitateactivity inthebuy-to-letmarketplace. to thosefundsmightbeusedasadeposit of example, thatpart theirpensionfundfromApril2015may mean,for some, orallof up forahousepurchase deposit. population. growing for a deposit: Scottish Widows, Savings Report, released April 2014) April released Report, Savings ScottishWidows, for adeposit: forNationalStatistics;Housingsupply:HomeBuildersFederation,Office 2014;Saving March Mortgage LendersAssociation,May2014;Population: Intermediary 2032projection: (Sources: ■ ■ ■ *FTSE100,31December2014) (Source: » with the former, butthelatter shouldbe a commercialdecision. with the former, ‘investment love) You property’. canfallin love (orenjoy alabourof Tip 1 landlord, inparticular. homework, andhereareafewtipsthatmay helpthebudding continued success, soit’s thatyou always important doyour course, there’s noguaranteethatyou’ll besuccessful,orhaveOf Do your research better return fromthePrivatebetter return Rented Sector(PRS). a theycanget theirmoneyandseeif would rathertake controlof onsavings remainslow.return Soit’s understandablethatsome has now recovered slightlytositataround6500.*Elsewhere, the FTSE100 hitting7000,hasseenitsvalue dropinrecenttimesand continue rising. late)will remain andthathouseprices(albeitslightlytemperedof theyareconfidentthatrenterdemandwill if advantage, particularly an existingonethatwishestoincreasetheirportfolio? So whatdoesthismarketplace offerthebuddinglandlordoreven Flexibility offeredby renting. continuing difficultiessomerentershaveThe tosave intrying a Not enoughhomesarebeingbuilttosatisfythedemandsof Into thefuture, thissectorisexpectedtocontinue expanding, Additionally, theplannedrelaxationonhow the55+scanaccess h Ksokmre hr hr a uhtl fthe UKstock marketThe -wheretherewas much talkof work factorsmay currently tothelandlord’s A number of - Differentiatebetween your own ‘residential home’andan financial collapseback in2007/8,continues itsrecovery. u-oLt hc ufrdbdya h usto the Buy-to-Let, which sufferedbadlyattheoutsetof - t o - E LANDLORD LET

exclusions will apply. As withallinsurancepolicies, terms,conditionsand taxation advice,andmostBuy-to-Let mortgages. The Financial Conduct Authority doesnot regulate legaland You may alsorequire advice onthelegalandtaxissues. can godown aswell asup. The value ofyour andincomefrom Buy-to-Let it property tomeetthecostsofmortgage. will besufficient continuous lettingoftheproperty, northattherental income There isno guaranteethatitwillbepossibletoarrange insurancecover. withthenecessary together intouch. Sopleaseget deals, plans, whenlookingatthe buy-to-let mortgage short-term accountant orsolicitor, we canhelpyou toassessyour longand need tobedisciplinedinyour approach tobuy-to-let. in May, allshows rules. that you This toimmigration andanyreforms theGeneralElection alongside politicalissues, such astheoutcomeof anyBankRaterise, theimpactof You’ll also need tobeaware of Take advice the processyourself, orappointalettingagent. check you want outprospective tohandle tenants. Also, decideif issues(bothfromtheUKandEurope),needto regulatory Tip 5 andmaintenancecosts.repair still have bills, tomeetproperty-related such ascounciltax,and 4 Tip repayments. your monthlymortgage least 125-130%of at back. Mostlenderswillwantget toseearentalincomeof out how much you willneedtoborrow, andwhatyou expectto 3 Tip suchwant asyoung totarget; professionals, students, orfamilies. renting andhow much rentyou canexpect.Anddecidewhoyou 2 Tip

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And together withanydiscussionsyou mayAnd together have withyour Yourproperty repossessed be may keep not do you if eaaeo thelandlordinsurancesrequired, - Beaware of - Planforvoid periods, whenyou willhave noincome, but - Dothemaths. Onceyou’ve locatedasuitablearea,work - Speak to letting agents about areas that are good for aboutareasthataregood - Speaktolettingagents 05 FAMILY P oattlpyu f 3000(ftherewas noindex-linking). £380,000(if to atotalpayout of family would receive £20,000/yearforthe next19years, equating afteroneyear,£20,000/year anditwas claimedagainst then the whichSay was you setup to pay took outa20-yearterm, out How itworks lifecoveraddition toanygeneral you may have. thechildren, in place aspecificplantohelpmeettheneedsof you’re aparentwithchildren, thenitmay make sensetohave in If Family Income Benefit January 2014) aChildreport, LV=,(Source: Costof » into the policy term, the totalpayout wouldinto the policyterm, be£40,000. Andif, policyhasnocash-invalue atanystage. note thatthistypeof whatever isappropriateinyour circumstances. Although,please have up, grown soit’s oftentaken or outover a10to20-yearterm, topay outuntilthechildren idea isthatitshouldbearranged theplanterm. of theclaimtoend payment -fromthetimeof forthedependants should you die, itprovides aregular, tax-free, monthly(orannual) value protectionplansonoffer. Ratherthandelivering alump-sum income streamendduetoanuntimelydeath. more than£200perweek! It’s aprettysoberingfigureshouldan standsatover 21.This £227,000-equatingto of child totheage raisinga findings fromanLV= thatlooked atthe cost of survey holidays andbirthdays? as food,clothes, utilitybills, childcare, orotherexpenseslike behind haschildren andneedstoprovide foreveryday itemssuch left thepartner Butwhatif themortgage. place tohelppay off It’sthe emotionalturmoil? possiblethattheremay belifecover in 18-44, dieevery day. average, almost47adults,aged improving medicalknow-how, on In spiteofhealthier lifestylesand (Source: Office for National Statistics, 2013 figures) 2013 Statistics, National for Office (Source: oee,i forthesameplan, therewasn’tHowever, aclaimuntil18years if That’s why it’s well-suited tothosewithyoung families, asthe thebetter In which case, Family IncomeBenefitmay beoneof fyou thinkthismay notadduptomuch, thenconsiderthe If would thefamilybeabletocopefinancially, from quiteapart ftheunthinkablehappenedandbreadwinnerdied, If r o t e c t

t h e exclusions willapply. As withallinsurancepolicies,terms,conditionsand Why nottalktousfindoutmore. insurance ornot. could make thedifferencebetween you beingabletoaffordthe potential payout throughthepolicyyou get), decreasesthefurther withoutanypayout. thewholeterm the policysimplyruns fortunately, therewas noclaimatallwithinthe20-yearperiod,then Consequently, theresultinglower premiumcost(becausethe than you needtocover the costofyour protection policy. across amonth. And, inmanycases,that’ll bemore of theabove items,then you could surprised tofindouthow quicklyitalladdsup. like theodddrinkoramagazine.In fact,you might be consider allthoselittleitemswe maytakeforgranted, ai5.00 7.00 security. 2.50 afford tosetaside alittleextratoimprove your financial But, by keepinganeye onyour spending,you could 1.00 1.75 We don’t expectyou togive upalloflife’s littleluxuries. 7.00 3.50 1.00 3.50 Take-away meal Cigarettes (packof20) Taxi Glass ofwine(175ml) £Cost/unit(estimated) Pint ofbeerorlager Coffee Magazine Snack Soft drink Treats find themoneytopayforprotection. You mightfeelyou’re already stretched tothe limitto protection cover How toafford For example,ifyou However, itmaybeeasierthanyou thinkwhenyou Total = cut outjustoneuniteachweek £32.25 save around £140 06 o’ iet ics orfnnilnes Tel: 01206 577 266 Email:[email protected] Web: www.hdconsultants.net you’d like todiscussyour financialneeds: ■ ■ ■ only needtopay intereston£120,000. £30,000 inyour savings accountwiththesamelender, you will loanis£150,000,but you haveIf, forexample, your mortgage How itworks » to good useviaanoffsetinthe interimperiod. to good aside alump-sumtopay thetaxman,which theymightwant toput bonuses. Orperhaps, thosewhoareself-employed andhave to set earnings, commissions and also appealtopeoplewithfluctuating higher ratetaxpayers forthetaxbenefitsmentioned above. It interestto consider thisoption.Morespecifically, itmay beof anyone whohasadecentamountinsavingsIn general, should Who it’s targetedat beneficial tohigherratetaxpayers. thesavings,against thenthereisnotaxtopay, which isparticularly loan. to helpreducethemonthlypayments onamortgage received fromsaving money, itcanmake sensetousethosesavings moneywilltendtobehigherthantherate rates forborrowing onthosesavings overreturns thepastfewyears. Andasinterest reasonable amountinsavings andhave experienced low interest capital. themortgage ‘offset’ against remain thesame. remains thesame, butyou pay back lesseach month. to usetheirown savings tohelpoffsettheirchildren’s mortgage. there may forparents(orgrandparents) even betheopportunity you withdraw anysavings. interestpaidincreasesif mortgage just sitsalongsideit.Allthathappensistheamount of it your mortgage, wanted, asit’s notusedtoactuallyrepay anyof The BALANCING The BALANCING you, thenan If you’re lookingforawaytogetyour savingstowork harder for Or you have a shorter mortgage term, whereyour payments term, Or you have mortgage ashorter You have lower monthlypayments, term whereyour mortgage We covermortgages, insuranceandprotection products alongwith anumberofotherfinancial areas, sodocontactusif n ihtepretg fthose whoareself-employed atthe of And withthepercentage At which pointyou canchoose how tobenefitintwo mainways: The additionalbenefitisthatasnointerestwouldThe bereceived theyhave a routecouldbebeneficialfortheborrower if This There areotherbenefitstoo.There For example, withsomeproducts, And thebeautyisthatyou canhave accesstoyour savings, if and mortgage withyour lender, wherethosesavings arethen and mortgage An Offset Mortgage allows you topoolbothyour savings An OffsetMortgage Offset Mortgage Offset Mortgage loan may betheoption. could value threshold. enter thenextpercentage deals, shouldyour loanto the betterstandardmortgage some of deliver attheoutset,which thedeposit may even you accessto get it’s besttohave aconversation withustodothemathsyou. product.Inwhich case savings optingforthistypeof towarrant view isthatthedifferentialinratesofferedmay benarrowing. loan.Although,thegeneral offered foraconventional mortgage historically, theinterestratesmay belesscompetitive thanthose willnotbeforeveryone, and course, offsetmortgages Of Are there downsides? forNationalStatistics, Office Self-employed(Source: workers intheUK-August2014release) The Financial Conduct Authority doesnotregulate taxationadvice. not guaranteedandmaybesubjecttochange. dependent oncurrent legislation,individualcircumstances are Information regards taxationlevels andbasisofreliefs are lender ifyou remortgage. You mayhave topayanearlyrepayment chargetoyour existing Mortgage isabeneficialroute foryou. talk tousseeifanOffset As you needto weigh upthevarious options,itmakessenseto 5 fthoseinwork indemand. (4.6m),offsetcouldseeagrowth 15% of highest it’s beenatanypointover thepast40years, accountingfor making anydecisions. seek professionaladvicetailoredto yourneedsandcircumstancesbefore ■ before enteringintoanytransaction. make enquiriesandcheckdetailsand, wherenecessary, seeklegal advice information andfiguresaresubject tochangeandyoushouldalways News ■ publication (January2015). ■ would be£500. amount willdependonyourcircumstances. Atypicalfee We normallychargeafeeformortgageadvice.The r ut ipy o ol s oeo thosesavingsOr, tohelp quitesimply, you couldusesomeof you didn’tAn obvious have drawback would enoughin beif The contentsofthisnewsletterarebelievedtobecorrectatthedate Every careistakenthattheinformation in The informationinthisnewsletter is ofageneralnature.You should up repayments onyourmortgage. ■ Your homemayberepossessed ifyoudonotkeep publication isaccurateatthetime of goingtopress.However, all A C T Savings The Mortgage&Protection