The BoE Raises Interests Rates Raises Interests Rates to 5.25%

The BoE Raises Interests Rates Raises Interests Rates to 5.25%. Today, the The BoE Raises Interests Rates Raises Interests Rates to 5.25% and has announced that they are increasing the base rate to 5.25%. This rise is the 14th in a row by the BoE Raises Interests Rates as they seek to control inflation (the cost of living)1, by making it more attractive to save money and reduce consumer spending by increasing the cost of borrowing money. Latest data indicates that inflation is starting to reduce from the highs seen earlier this year, standing at 7.9% for the latest figures from June.2 The Bank of England Raises Interests Rates to 5.25%, How will this affect my mortgage? The overall cost of borrowing money may continue to rise further, so it is important to look at your individual circumstances to see whether you are affected directly by the change today, or whether you may start to feel the difference when your current mortgage term comes to an end. If you are on a fixed rate mortgage, your monthly repayments will be unaffected by the rate rise for the period that it is fixed for, however when it comes to finding a remortgage, there may be a significant increase in the monthly repayment amount.If you are on a variable-rate tracker mortgage linked to the Bank of England base rate, you will see an immediate impact on the amount you repay. If you are on your lender’s Standard Variable Rate (SVR), then you may see a rise in your monthly repayments, depending upon the decision of your lender. Let us see how we can help If you’re in any doubt as to what kind of mortgage you hold, or if you have any queries here, please do not hesitate to get in touch for our professional advice on your mortgage. There’s an overwhelming amount of information online, some of it is conflicting or not applicable to you, so we would recommend you contacting us to let us look at your individual circumstances to provide bespoke information to allow you to make educated decisions to meet your financial goals for now and the future ahead.  Contact us for a review   Mortgage rates could be better than you think. Despite the doom and gloom from the national headlines of prices and rates going up, in the mortgage world, things are starting to change, with some welcome announcements recently that certain lenders are announcing fixed-rate mortgage products at lower rates than seen earlier in the year.3 If you’ve been thinking of moving home, or if you have a remortgage coming up and you’ve been dreading what the potential costs could be, let us see how we can help. We have the ability to search across the market and can access deals that aren’t found on the High Street, matched to your exact circumstances and financial situation. You might be surprised at what we can find – so please don’t be put off by what you read online and book an appointment with us. Please note, your home may be repossessed if you do not keep up repayments on your mortgage.   All the information in this article is correct as of the publish date 3rd August 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. Sources: The Bank of England. 2023. Why have interest rates gone up?. Bankofengland.co.uk. Available at: https://www.bankofengland.co.uk/knowledgebank/why-are-interest-rates-in-the-uk-going-up [Accessed 01 Aug 2023].Office of National Statistics (2023) Inflation and price indices. https://www.ons.gov.uk/economy/inflationandpriceindices [Accessed 01 Aug 2023]The Guardian (2023) Mortgage rates ease as Bank of England’s bitter medicine shows signs of working. Available at: https://www.theguardian.com/business/2023/jul/30/mortgage-rates-ease-as-bank-of-englands-bitter-medicine-shows-signs-of-working [Accessed 01 Aug 2023]

Let us help you navigate this mortgage world. With the news this month that average mortgage rates have now reached their highest level in 15 years – 6.66%¹, and that over a million people are facing a hike of £500 a month in their mortgage repayments by 2026², it highlights the importance of seeking professional mortgage & protection advice in such a volatile market.

If you’re looking to move home, or have a remortgage coming up soon, then it’s highly likely that your monthly mortgage repayments will be much larger than what you’re used to, however, with the complexity of the deals available, we are ready to help find the most suitable deal for your circumstances, for when the time comes.

Plan ahead & speak to us

Given that mortgage repayments are likely to rise, the wisest thing you can do is to plan ahead to see how this impacts your finances, and identify if there’s anything you need to change now, which will benefit you much more when it’s time to move to the new deal.

You’ll most likely be contacted by your lender, offering deals and opportunities to change your mortgage, but we would recommend seeking our advice before making any decisions.

As your mortgage & protection advisers, we are here to support you through the challenging times. Book an appointment with us to review your existing deal, and we’ll be able to look across the mortgage market across deals from a wide range of lenders, and have access exclusive deals that are not available on the high street.

We’ll take time to look at your exact circumstances and build an understanding of your goals, which will help us to find the most suitable mortgage for you. In such a turbulent and fast-changing time, you need to be sure that you are making the most appropriate, well-informed decision for your situation, so we are ready to give you the advice you need for when you need it.

What to do if you’re struggling with Average mortgage rates

We know that times are tough right now, so if you are worried about meeting your existing mortgage repayments, then we want to do what we can to point you in the right direction to get help at the earliest possible opportunity.

Start by talking to your mortgage lender and make them aware that you are struggling. There are a range of measures that they may offer to help with a situation, such as switching the mortgage to interest-only for a temporary period or reducing monthly payments for a set timescale, for example.

At the same time, it’s worth bearing in mind that making changes, even temporary ones, may result in higher monthly payments in future or paying back more overall. Mortgage borrowers should carefully consider any steps they take and customers who can keep up with their payments should continue to do so.

For this reason, as well as speaking to your lender immediately, we also recommend contacting us at the same time to talk through anything related to your mortgage, your monthly payments or even if you are concerned about how you could be affected if rates were to rise further – we are here to help. We will be able to look at your specific circumstances, explain everything that you need to know and help you make decisions that are the most appropriate for you.

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. 

Sources

BBC News (2023). Mortgage rates soar to highest level in 15 years. Available at: https://www.bbc.co.uk/news/business-66153812 (Accessed 17 July 2023)

Is this a good thing? Since the 2008 banking crises, the need for a deposit have stopped renters from becoming homeowners as they could not get a mortgage without a deposit. With house prices and the cost of living rising, renters have been unable to pay their rent, keep up with bills and save large amounts for a deposit.

At last this is changing.  At least one lender is now introducing a Track Record mortgage – the first of its kind.

They looks at a renter’s history of making their rent payments, and if they meet affordability criteria, they can obtain a mortgage without a deposit.

This could turn a generation of renters into homeowners.

Key eligibility criteria for a mortgage without a deposit.

Each applicant must be a First Time Buyer Each applicant must be aged 21 or over The same people who are renting now (and have been for the last 12 months) must be the same people on the mortgage Must have proof of having paid rent for at least 12 months’ in a row, within the last 18 months Must also have 12 months experience paying all household bills within the last 18 months Each applicant will have no missed payments on debts / credit commitments in the last 6 months The monthly mortgage payment must be equal to or lower than the average of the last 6 months rental cost The deposit must be less than 5% Maximum loan size £600,000 Not available on New Build flats. For more information on a mortgage without a deposit, contact Colin at: co***@th*************.uk or ring 01273 857 024 or go to Brighton Mortgage Broker – The Finance House

If you are a landlord of an HMO (House in Multiple Occupation) or a tenant of part of a property designated as such, you might need to be prepared for a shock.

An House in Multiple Occupation is described as one rented out by at least three people who are not from one household (for example, a family), but share facilities, such as kitchens and bathrooms.

Local councils are seeking to have HMOs reclassified, so that council tax becomes liable on each of the tenancies, rather than on the single property itself. In one example, a five bedroom home had its council tax quadrupled from £1,300 per year to £4,890. It was reclassified as five one-bed homes, even though three of the bedrooms did not have ensuite bathrooms and none had kitchen facilities.¹

Normally, landlords receive a council tax bill for the one property, which is split between the tenants as part of the rental payment charged. Now that councils are asking the Valuation Office to revalue HMOs on the basis of separating out individual tenancies, landlords can only increase rents to take account of the extra charges.

This could cause financial hardship for many, coming as it does on the heels of cost of living rises, especially energy costs. Landlords will also be reluctant to pass on the extra costs because of the danger of having tenants in arrears or quitting tenancies altogether.

For councils who are cash strapped, this is seen as a good way to raise money in what they see as a painless way. Government figures show there are 500,000 HMOs in England² that could be affected. However, the likely effect will be to price more would be tenants out of the rental market and put more pressure on their own housing departments.

The viability of remaining a landlord of an HMO is now going to be called into question, with reports that at least one landlord has already filed for bankruptcy as a result of the recent changes³. If this money raising tactic by councils increases, it is very likely we will be seeing less rental property on the market at a time when there is already a shortage.

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Sources

1 – Lawford, M. (2022) Council Tax on my Buy-to-let has quadrupled to £7,000. Available at: https://www.telegraph.co.uk/property/buy-to-let/council-tax-buy-to-let-has-quadrupled-7000/ (Accessed 29^th March 2022)

2 – Wilson, W., Cromarty, H (2019) House of Commons Library: Houses in Multiple Occupation in England and Wales. Available at: https://researchbriefings.files.parliament.uk/documents/SN00708/SN00708.pdf (Accessed 29th March 2022)

3 – Central Housing Group (2022) Wave of ‘unfair’ HMO council tax revaluations revealed that can quadruple bills. Available at https://centralhousinggroup.com/wave-of-unfair-hmo-council-tax-revaluations-revealed-that-can-quadruple-bills/ (29^th March 2022)

The future of Interest rates and House prices – what could the future hold?

The cost of living increases, especially energy, prompted by the economic costs of two years of Covid-19 are also being accompanied by interest rates increases, while would-be home buyers watch asking prices for property continue to increase Interest rates and House prices.

To all intents this is a perfect storm for consumers, but likely first-time home buyers and those wishing to trade up are going to find it harder to make the transition. According to the Nationwide, a typical property now costs a record £29,162 more than it did a year ago, which represents the largest cash increase since the Society started collating property data in 1991.¹

The rise, which equates to a 12.6% increase across the housing market, is continuing to surprise industry experts. It would be expected that with pressure on household budgets along with rising inflation, the housing market would have quietened down, but in reality, property values are being driven by an imbalance between the meagre size of property supply being outstripped by the demand from prospective buyers, which is still as positive as it was last year.²

How long it can continue is still a matter of conjecture.  As household cost increases begin to bite, demand is likely to subside. The other factor is the rise of interest rates. After the rise in inflation, the Bank of England has had to raise the bank base rate, which of course has had a knock-on effect on the availability of continuing low mortgage rates².

According to Moneyfacts, standard variable rate mortgages have seen the largest single monthly rise since they began recording statistics. Opting for a fixed rate mortgage is becoming a real alternative to keep costs under control, but even fixed rates are also showing rate increases too, with 2-year fixed rate deals showing their largest increase since 2015.³

At the same time, product choice is shrinking with lenders revising and condensing their product ranges. While there are still over 4,800 products on the market, a monthly fall of 518, if continued, would represent a significant reduction in choice.⁴

For those readers who are still on their lenders’ standard variable rate or are coming to the end of their fixed rate period, now is a good time to seek professional mortgage advice and let us talk you through the options available to suit your circumstances and look at Interest rates and House prices.

Find a Brighton Mortgage Broker here

Sources

1 – BBC (2022) House prices see record cash rise, says Nationwide. Available at: https://www.bbc.co.uk/news/business-60585947 (Accessed 29th March 2022)

2 – Bayliss, J (2022) RICS Residential Market Survey. Available at: https://www.rics.org/uk/news-insight/research/market-surveys/uk-residential-market-survey/new-listings-slump-fails-to-meet-demand-driving-up-house-prices/ (Accessed 29^th March 2022)

3 – Williams, E (2022) Moneyfacts: SVR Mortgage Rates Post Biggest Ever Monthly Rise. Available at: https://moneyfacts.co.uk/news/mortgages/svr-mortgage-rates-post-biggest-ever-monthly-rise/ (Accessed 29^th March 2022)

4 – Financial Conduct Authority (2022) Mortgage Lending Statistics 2022. Available at: https://www.fca.org.uk/data/mortgage-lending-statistics (Accessed 29th March 2022)

Energy crisis – how it affects you and your family

Will the Energy crisis affect me. We take for granted that the lights will always come on when we press a switch and that the central heating will work as summer gives way to the colder days of autumn. However, those certainties seem a little less so in the wake of the news of wholesale price surges in energy costs.

At the heart of the issue is not a shortage, but a lack of gas being produced in sufficient volumes, unexpected extra demand as the country gets back to work after the pandemic, and the shortage of storage capacity. With demand across the world increasing and production not yet back at pre-pandemic levels, inevitably prices have rocketed.

Wholesale prices have increased by approximately 250% since the start of the year and that has caused a ripple effect as many energy firms have had to pay the higher price because they did not buy enough gas at lower prices before prices went up. For many of their customers who are on fixed rate tariffs or where the cost of wholesale gas is exceeding the government controlled price cap, this means that inevitably those firms will cease trading.

The past eight weeks have seen a number of smaller energy companies go bust and Ofgem, the energy regulator, has ensured that customers of failed energy companies have been moved to larger suppliers. However, there is no guarantee that the tariffs offered by replacement suppliers will mirror what consumers had with their old supplier.

Unless consumers are on a fixed tariff the price they pay will increase and at the end of any fixed price tariff they will find it difficult to avoid a large increase in cost. In addition this is likely to have a knock on effect on electricity costs, as much electricity is generated by plants powered by gas.

At the time of writing, there is no clear indication when prices will stabilise and start to fall. In the meantime, the government is working with suppliers and Ofgem to ensure that customers whose suppliers go bust are placed with an alternative supplier.

What can householders do?

• If your supplier goes into administration, don’t panic. A new supplier will take over your account.
• If you have not got a fixed price tariff, your exposure to higher costs is limited by the ‘energy price cap’ set by Ofgem in consultation with the government. However, the energy price cap rose to £1,138 from 1 April – a £96 rise for “medium” energy users. From 1 October, another 12 per cent increase will come into effect, with the cap rising to £1309. This will affect around 11 million households.
• Consumers can still switch suppliers but the number of alternative sources is now quite limited and it is likely that lower fixed price tariffs and cheaper deals will not be available for some time.
• The important thing is to stay calm and not to do anything in haste. Price rises are inevitable in the short term, however it is likely that as the supply side is scaled up, prices will fall. We just cannot predict when.
• For people experiencing payment difficulties, there is help available. The Warm Home Discount – https://www.gov.uk/the-warm-home-discount-scheme is there for those that qualify from 18^th October, as well as winter fuel payments for those on the state pension or in receipt of another social security benefit.
• If you are in any doubt, contact your supplier who will be able to talk you through available options.

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Older relatives can qualify for a free TV licence if they qualify for Pension Credit

Much has been written about the BBC’s decision to halt the right to a free TV licence for the over 75’s and the general outcry that has arisen since it was introduced in August 2020. Clearly it has been seen as a divisive move and has undoubtedly had an impact on pensioners already struggling on fixed incomes.

The current licence costs £159 per annum and the fee must be paid by anyone watching live terrestrial television such as BBC, ITV and Channel 4. Those watching digital channels exclusively do not have to pay.

However, it is reckoned that 1.5 million over 75’s are still eligible to pay nothing. To see whether this applies to anyone in your family, families should check with the Department of Work & Pensions to see if older relatives are receiving Pension Credit. If they are, then the licence is free.

Pension Credit provides extra money to help with living costs for anyone over state pension age and can also help with housing costs. Separate from the state pension, anyone living in England, Scotland and Wales are eligible to apply, and the criteria for receipt of Pension Credit depends on income and savings. There are no automatic payments, eligible pensioners or their families must apply on their behalf to see if they qualify.

You will need :-

The individual’s national insurance number.
Information about income, savings and investments.
Bank account details.
Applications can be made online (https://www.gov.uk/pension-credit/how-to-claim) if the person is already claiming the state pension, by phone, or by paper application, but the earliest an application for pension credit can be made is four months before reaching state pension age.

Pension Credit can top up weekly income to £177.10 for single people, and joint weekly income to £270.30 for married or co-habiting couples.

This could be an opportunity to help older relatives approaching or already in retirement to top up their income with Pension Credit, with the added bonus of a free TV license for the over 75’s who qualify.

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No time like the present to teach children money management skills

These are unprecedented times in which to bring up children and one of the vital lessons we can pass on to them is to teach them how to understand and manage money. Without a real appreciation of how to handle finance, without children money management skills, so many adults end up in debt – often because no one ever taught them how to manage money when they were young. 

We are all bombarded with slick advertising for ‘must have’ products or experiences that are backed up by ever increasing access to easy credit or ‘buy now, pay later’ schemes, tempting us into instant gratification. It is therefore vital to give our children a grounding in personal finance to help them appreciate how money can work for them, rather than against them.

Show them by example – when you take them shopping, show them how much you spend on food and that money is a tool and enables you to purchase items. Explain that having £10 in your hand does not mean you can buy something worth £10.01.

Do they know where money comes from? – explaining the concept of working for pay should be emphasised from an early age.

A piggybank – start the savings habit early. Cash might be going out of fashion, but making the connection to value is helped immeasurably by understanding coins and notes and what they represent.

Pocket money – in exchange for chores done around the house, pocket money is a good practical demonstration of the connection between work and reward.

Saving – insist that a percentage of their pocket money goes into savings; perhaps a piggybank for the very young or helping older children to open a savings account either online or via an app or passbook, in which they can see their money grow.

If children want to buy a specific item or service, or set a savings goal, this can help them learn how to budget and to understand that saving, rather than just instant acquisition via the Bank of Mum and Dad, fosters independence and recognition that saving leads to better outcomes.

As children move into their teen years there is now a range of debit cards linked to apps

which can also help them to see what they are buying, how much they spend and how much they have left. Spending limits can be applied by parents, but spending limits are not a substitute for parental guidance from an early age.

The world is becoming an increasingly difficult place to navigate, especially for the young. So, a basic grounding in managing money can be one of the best gifts you give to youngsters.

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Planning permission for Garden rooms – what you need to know

Many of us have sheds in our gardens. Some were probably inherited when we moved house and are versatile enough to be a gardener’s store, a hobby sanctuary or just a place to keep bicycles and other items that won’t fit anywhere else. But do you need Planning permission for Garden rooms

However, there has been a rise in the number of structures for our outdoor spaces, which provide for less utilitarian purposes. Garden rooms provide an extra space which, when kitted out properly, can become a home office or a second room for relaxation.

After the initial enthusiasm to adopt a garden room and extend the versatility and usefulness of your property, there are several things to consider.

Most garden rooms don’t require planning permission. Being classed as outbuildings, you are permitted to build one as long as you comply with certain rules.

Permitted development rights
Most properties have this automatically. However, if the property is in a National Park, a World Heritage Site or a conservation area, it could be in a designated area where development of a property or the erection of outbuildings are not permitted, or require separate permission. It is a good idea to check with your local planning office. Maisonettes and flats don’t have permitted development rights because of the communal aspect. The rules are the same whether you live in England, Northern Ireland, Scotland or Wales.

Planning rules
Under permitted development, there are rules to follow:-

• The garden room must not be at the front of the house
• The total area of all external structures including sheds, extensions and outbuildings must not exceed 50% of the outside area surrounding the house
• The room or cabin must be single storey and less than three metres in height. The eaves must be no more than 2.5 metres above ground level.
• The room must not be for self-contained living accommodation
• The room must not have a balcony, veranda or raised platform.

Garden rooms as offices
Using a garden room as an office also presents no issues, provided it is for incidental use for working alone at a computer, for example.

However, being mindful of changing the character of a neighbourhood, councils will not approve garden offices where business meetings or appointments will be hosted.

Retrospective planning permission can be applied for, but councils can order the removal of a garden office if the rules are not met.

In summary, garden rooms rarely require planning permission, provided the basic rules on size and usage are observed. However, if in doubt, check with your local authority.

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Abolition of ground rents on new properties moves a step closer but only on new property

Currently a Leasehold Reform Bill is being debated in parliament that will abolish ground rents on new properties charged.

Not to be confused with standard monthly rent paid to the owner of the property, ground rent is a rental charge attached to the ground on which the property sits. It is paid annually or half yearly, and failure to pay can result in the freeholder seeking to obtain possession.

The Leasehold Reform (Ground Rent) Bill will put an end to ground rents for new, qualifying, long residential leasehold properties in England and Wales. This is part of the most significant changes to property law in a generation.

It will be the first of two part legislation to reform the leasehold system. This Bill will mean that if any ground rent on new properties is demanded as part of a new residential long lease, it cannot be for more than one peppercorn per year (notional value) meaning that future leaseholders will not be faced with financial demands for ground rent. The Bill also bans freeholders from charging administration fees for collecting a peppercorn rent. Fines of up to £5,000 will be levied on freeholders that charge ground rent in contravention of the Bill. 

Some leaseholders have experienced ground rents doubling every ten years on top of their mortgage and any service charges, with no prospect of ever selling the property on. Their only way out has been to buy the freehold, only to discover this is yet another area targeted by the profiteers.

Developers, including some household names, have been selling newly built flats (and houses) as leasehold, creating high annual ground rents and including provisions in leases for the rent to be increased – sometimes doubled – after a certain period of time.  A number of buyers of this type of property have, quite often, been told by the builder that they would be given the opportunity to buy the freehold at a later time before the builder developing the site, only to find that, when they try to buy the freehold, the builder has already sold it to an investment company. Critics of the bill are rightly complaining that it does not go far enough, because existing leaseholders are not included in the new Bill as it is currently structured.
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