#UK mortgages

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What is Loan to Value (LTV)?

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Sir Howard Davies: Not that difficult to buy a home, says NatWest chair - BBC News

Out of touch with reality...or just a Tory liar?

'Sir' Howard Davies, in his ivory tower at NatWest Bank, clearly has either no clue about the lives of ordinary people, or is cynically denying the truth.

Is he a Tory donor or supporter?

If the average UK house price is over £250k, how many working people can lay their hands on over £25,000 in cash for a deposit, or earn at least £60,000-£80,000 plus per year, to qualify for a big enough mortgage?

Earnings haven't kept pace with property prices for years:

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Those That Have Will Receive More

In December 2022, the Guardian carried this headline:

“Soaring rents making life ‘unaffordable’ for private UK tenants, research shows." (01/12/22)

A few months later and the BBC ran a news report informing us that rents had increased by over 11.1% compared to the previous year. And in June we read that official government figures showed:

“The median monthly rent in England between October 2021 and September 2022 was £800 – higher than at any other point in history, according to the Office for National Statistics.”  (The Big Issue: 19/06/23)

The government response to these massive increases in private rental charges has been to do NOTHING After all, people that rent are far more likely to vote Labour than Tory so there is no gain to be had by offering them rent relief. Indeed, government ministers have gone out of their way to insist there will be no rent price controls.

“Minister confirms government will not consider rent controls in England."  (propertyindustryeye: 16/11/22)

Fast forward to yesterday and the Bank of England’s 0.5% lending rate rise and everyone is suddenly concerned about the cost to house owners of future mortgage payments. Homeowners DO tend to vote Tory so Jeremy Hunt has summoned the heads of banks and building societies to a special meeting to see what can be done to help  property-owning householders. 

I do not for one second underestimate the financial hardship that can be brought about by increases in mortgage repayment loans. What I do object to is a Tory government who does absolutely nothing to help the poorest in society facing an 11% increase in rent rises, but who feign concern for house owners, many of whom are still on fixed rate mortgages, and therefore still protected from immediate increased costs.

Here are some simple facts and figures from the government.

61.5% of the UK population are house owners.

27.1% of the UK population are owner-occupiers without a loan or mortgage.

37.5% of the UK population are owner-occupiers with a loan or mortgage.��

34.9 % of the UK population are non-owner-occupants.

In other words the number of households facing massive rent rises is almost the same percentage as those facing higher mortgage repayments.

According to “Money”:

“The cost of renting appears to be significantly greater than mortgage payments throughout the UK. In England, the average monthly mortgage payment is £753 compared to a larger £795 average monthly rent payment.” Money: March2023)

So, renters are already paying a higher proportion of their income on rents than owner-occupiers, yet they are to receive no help.

The population of the UK, is estimated to be just below 69 million. If 34.95% of those are non-owner occupiers, that is a total of 24,080,999 who live in rented accommodation.

As stated earlier many of those who are owner-occupiers and paying monthly mortgage repayments are on fixed rate deals and therefore will experience no immediate rises in their monthly repayments.  According to government figures:

“1.4 million households facing bigger mortgage repayments in 2023”  (Mortgage Strategy: 09/01/23)

If we assume each household has five persons (an over-estimation) then the total number of people living in a property facing a mortgage increase this year is 7 million.  The number of people living in rented accommodation facing rent increases is, as already demonstrated, 24 million.

These 24 million are amongst the poorest in society and moral justice would demand they receive as much (if not more) help from government as owner-occupiers.

Today, (23/06/23) after meeting with the Chancellor of the Exchequer, Jeremy Hunt:

“Mortgage lenders and the UK chancellor, Jeremy Hunt, have agreed that people should be given a 12-month grace period before repossession proceedings start, following yesterday’s shock interest rate hike to 5%” (Guardian: 23/06/23). 

Meanwhile renters who fall behind on payments have been facing an entirely different reality:

“Rental evictions in England and Wales surge by 98% in a year… a survey by homelessness charity Crisis indicated that nearly 1 million low-income households across Britain feared eviction in the coming months.” (Guardian: 09/02/23)

The figures, and the government’s callous attitude towards renters, speak for themselves.

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HSBC withdraws mortgage deals for new borrowers - BBC News

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The burden of higher mortgage costs starts to arrive

Over the weekend it seems that the chattering classes and establishment caught up with something we have been noting for a while now. I recall us discussing the UK give-year yield passing 4% with the implication being that higher mortgage rates were on their way. We can also add in one of our longest-running themes. Jeremy Hunt, UK chancellor, has ruled out giving any direct fiscal support to…

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Commercial Mortgage Brokers: Navigating the Financing Landscape for Business Properties

In the realm of commercial real estate, acquiring financing can often be a complex and daunting task. Whether you're looking to purchase, refinance, or develop a commercial property, navigating the lending landscape requires knowledge and experience. This is where Commercial Mortgage Brokers UK come into play. These professionals specialize in connecting borrowers with lenders who offer commercial mortgage products tailored to their specific needs. In this article, we will explore the role of commercial mortgage brokers, the benefits of working with them, the types of loans available, and how to choose the right broker for your commercial property financing needs.

What is a Commercial Mortgage Broker?

A commercial mortgage broker is a licensed intermediary who acts as a bridge between businesses seeking financing for commercial properties and lenders willing to provide that capital. Unlike residential mortgage brokers, who focus primarily on home loans, commercial mortgage brokers specialize in a wide range of property types, including office buildings, retail spaces, industrial properties, multifamily units, and more.

Key Responsibilities of a Commercial Mortgage Broker

1. Assessing Borrower Needs: Brokers start by understanding the client’s business goals, financial situation, and specific project requirements. This initial assessment helps them identify suitable financing options.

2. Market Research and Loan Comparison: Commercial mortgage brokers have access to a diverse network of lenders. They research various loan products and market conditions to find the best financing solutions available.

3. Preparing Applications: Once a borrower selects a potential loan option, the broker prepares the necessary documentation and submits the application to the lender, ensuring all requirements are met.

4. Negotiating Loan Terms: Brokers negotiate with lenders on behalf of their clients to secure favorable terms and rates, leveraging their relationships and industry knowledge.

5. Providing Guidance Throughout the Process: From the initial consultation to closing the deal, brokers offer expert advice and support, answering questions and alleviating concerns throughout the financing process.

Benefits of Working with a Commercial Mortgage Broker

1. Expertise in Commercial Financing

Commercial mortgage brokers possess specialized knowledge of commercial real estate financing. They understand the intricacies of different loan products, lending criteria, and market trends, allowing them to provide valuable insights that can help borrowers make informed decisions.

2. Access to a Wide Network of Lenders

Brokers often have established relationships with various lenders, including banks, credit unions, private equity firms, and alternative lenders. This broad network enables them to present borrowers with multiple financing options, increasing the likelihood of finding the best fit for their needs.

3. Time and Cost Efficiency

Navigating the commercial mortgage process can be time-consuming, especially for borrowers unfamiliar with the landscape. Brokers streamline the process by handling paperwork, communication with lenders, and keeping track of deadlines, saving clients valuable time and effort.

4. Tailored Solutions

Every commercial financing scenario is unique. Commercial mortgage brokers take the time to understand a borrower’s specific situation and objectives, providing personalized recommendations that align with their goals—be it cash flow management, payment flexibility, or maximizing investment potential.

5. Negotiation Leverage

Having a knowledgeable broker on your side can enhance negotiation leverage with lenders. Brokers understand market dynamics and can advocate for better terms, lower interest rates, or reduced fees based on comparable deals and their existing relationships with lenders.

For more details, visit us:

Bridging Loan for House Purchase

Second Charge Mortgages Online

Development Finance Lenders UK

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What is Loan to Value (LTV)?

Understanding Loan to Value Ratio

Loan to Value (LTV) ratio is a key concept in the mortgage world. It represents the percentage of the property’s value that you are borrowing through a mortgage. For example, if you’re purchasing a home worth £200,000 and have a £20,000 deposit, your mortgage would be £180,000, making your LTV 90%. LTV is a crucial factor for lenders as it helps determine the risk associated with the loan.

How to Calculate LTV Ratio

To calculate the LTV ratio, divide the amount of the mortgage by the total value of the property and then multiply by 100 to get a percentage. For instance:

Property Value: £250,000

Deposit: £50,000

Mortgage Amount: £200,000

The calculation would be:

LTV=(200,000250,000)×100=80%\text{LTV} = \left( \frac{200,000}{250,000} \right) \times 100 = 80\%LTV=(250,000200,000​)×100=80%

This means the LTV is 80%, indicating that the mortgage covers 80% of the property’s value.

Why is LTV Important?

LTV is significant for both lenders and borrowers. For lenders, a lower LTV indicates a safer loan, as the borrower has more equity in the property. For borrowers, a lower LTV can mean access to better mortgage rates, as they present less risk to the lender. High LTVs, typically above 80%, often come with higher interest rates because they represent a greater risk to the lender.

Impact of LTV on Mortgage Terms and Rates

Lenders categorize mortgages into different LTV bands, influencing the interest rates offered. Generally, the lower the LTV, the lower the interest rate. For instance:

60% LTV or less: Access to the best mortgage rates.

61%-80% LTV: Generally favorable rates but higher than those with lower LTVs.

Above 80% LTV: Higher interest rates due to increased risk.

Borrowers with higher LTV ratios might face challenges, such as higher monthly payments and increased interest costs over the life of the loan. It’s important to understand these dynamics when choosing a mortgage.

Improving Your LTV Ratio

There are several strategies to improve your LTV ratio:

Increase Your Deposit: Saving more for a deposit reduces the amount you need to borrow, lowering your LTV.

Negotiate a Lower Purchase Price: Reducing the property’s price decreases your mortgage amount, improving your LTV.

Enhance Your Property’s Value: Home improvements can increase your property’s value, thus lowering your LTV.

Consistently Pay Your Mortgage: Regular payments reduce the mortgage balance, increasing equity and lowering LTV.

LTV and Equity

Your equity in the property grows as you pay down your mortgage or as the property value increases. For example, if you buy a house for £250,000 with a £50,000 deposit (LTV 80%) and later pay off £50,000, your equity increases. If the property’s value also rises, your equity grows even more, potentially lowering your LTV significantly.

LTV’s Role in Remortgaging and Moving Home

LTV is crucial when remortgaging or moving home. If your property value has increased or you’ve paid off a significant portion of your mortgage, your LTV decreases, potentially qualifying you for better mortgage rates. Conversely, a high LTV could limit your options or result in less favorable terms.

For more detailed discussions on mortgage terms and types, you might find our articles on Understanding the Different Types of Mortgages and What Are the Current UK Mortgage Rates? helpful.

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Your record for tanking the pound due to a disastrous mini budget? Your record for being the shortest serving PM in the country's history?

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