Last weeks budget raised a few eyebrows as the Chancellor included a surprise change to pension withdrawal requirements. From April 2015, there will be no requirements to purchase an annuity (providing ongoing monthly income) from built up pension contributions. This was an interesting amendment as effectively the Chancellor is allowing and trusting the consumer to invest their life investment wisely! However, the immediate response is that many will put their funds in to property and this could lead to a Buy to Let boom. Details are still not confirmed, but customers will need to take professional advice as this could lead to a number of different tax implications if the full funds are withdrawn in one go. Nevertheless, the move should also create competition across both sectors as the annuity market will need to become a choice compared to a Buy to let, as it will no longer be an obligation.
Gross mortgage lending was up 43% in February compared to the same time in 2013 report the Council of Mortgage Lenders. Lending in the region of £15.2bn was advanced to customers, although this was slightly down on January’s £16.1bn.
Finally, we’re just a month away from MMR. The Mortgage Market Review comes in to effect on April 26th and will fundamentally change the way a lender looks at a mortgage application.
One area being reviewed is affordability, a key element when arranging a mortgage. The MMR takes this a step further in also requiring a lender to predict affordability into the future. Will any material changes occur in the next five years; how much will you spend on seasonal commitments this year; will you need to consider an increase in property size to meet family requirements? These are just some of the more intrusive questions that are to be explored when budgeting for a mortgage.
But this also means that from April onwards, what was once an affordable mortgage may suddenly become unaffordable due to the perception the lender has on consumer spending habits, both historically and projected for the future.
We are also noticing the phasing out of income multiples and the introduction of affordability models. So, no more 4 x income discussions. The amount you can borrow will depend on your monthly net income against expenditure and living costs.
Lenders are just starting to release their new systems and income and expenditure calculation models to us. I will update you on any progress over the coming weeks. However do be advised that the time in research and recommendation for a suitable mortgage product might just start to increase as each lender advises their differing requirements!