100% Mortgage Lending Back!
Before I get onto 100% mortgage lending I just want to give my take on the Pandora Papers.
For anyone familiar with the Greek Myth of Pandora’s Box, it is actually a way more complex tale than simply regretting finding out what is in forbidden places. Look up Stephen’s Fry’s excellent book (which is amazingly narrated by him on Audible) Mythos, which really looks at this story in the greater depth it deserves. But the beauty of all Greek Myths is that you can simply take the face value lesson or dig deeper to find the hidden meanings and greater complexity.
Therefore in a week where the International Consortium of Investigate Journalists broke the story of the Pandora Papers was a very timely reminder of that basic lesson – do we really want to know what is in the box?
Specifically, in this example, it isn’t actually a box, but various Limited Companies and complex offshore structures hiding the wealth of some of the richest (and in some cases quite questionable) people in the world.
There is a lot of Deja Vu about this, so this week I have looked at this in some depth, and also some other developments, as there could be some timely reminders of painful lessons not learned from the past:
As touched on in the intro, the release of the Pandora Papers has lifted the lid on how some of the richest people in the world use various vehicles and structures to avoid paying tax and disguising their true wealth.
Particularly implicated was the UK property market, and more specifically, high-value properties in London. The BBC’s breakdown here goes into that in more detail.
My overriding feeling on this is – What’s new?
This has gone on forever, and multiple leaks over recent years all amount to the same – nothing.
Why is that the case? It is perfectly legal.
It may be extremely distasteful to some, and you can argue the case that it is immoral very well indeed. But when people are using legal loopholes and highly paid advisors in order to achieve this (which forms a very significant industry in itself in terms of tax planning and financial advice, as little Islands like the British Virgin Islands, really would not be so significant if this was not the case), there is very little the average Joe can do about this.
Moreover, nearly every government I can remember has run its election campaigns on the basis of shutting down Tax Loopholes for the rich, recouping the money to funds schools, the NHS, etc, but then go very quiet once in power. In fairness, the UK Government has done a lot in recent years to try and tighten up its approach on this sector, but as these papers show, you simply move the issue to another jurisdiction.
As ever, I try and focus on the root question – what impact does this have on me/my work? The reality is – very little.
These transactions on property aren’t just in the millions, they are often in the tens of millions, so any argument around inflating house prices for the average person does not really resonate. Back in 2018 Zoopla estimated that the London Property Market alone was worth £1.5 trillion. So while the numbers in the papers look big, it is harder to argue it pushes up prices for the average person, but it does undeniably create areas of super-prime property that only the uber-rich can afford. Gentrification on steroids if you will.
There is a very big argument that we should dig deeper to uncover money launderers. This I back wholeheartedly, but sadly action has been woeful in our sector for decades. You just need to look at the scandal that broke a few years back around HSBC knowingly banking Mexican Cartels. What has happened since then? Very little indeed which is both worrying and scary.
So while this is all very distasteful, especially at a time where the squeeze on ordinary folk following the fall out from Covid has never been greater, I suspect very little will be done. The people implicated will simply keep their heads down until it all blows over, they’ve been here before. Sadly these days a new social media-fuelled outrage will be along shortly, so the wind is out the sails of this one until anything can actually be done.
100% Lending Back!
Last week a new scheme was launched, which is backed by Nationwide Building Society that will facilitate 100% mortgage lending.
This new scheme called Deposit Unlock, which has been introduced by the Home Builders Federation, will allow buyers on new build property to borrow 95% of the property value, but then accept up to a 5% cashback from the builder, creating a new purchase without the need for the buyer to put in any of their own funds for a deposit. They will need to pay stamp duty and any other related costs (legals, survey, etc where applicable).
There are quite a lot of controls and stipulations around this scheme as you would expect, but fundamentally it opens the door to genuine 100% mortgage lending for the first time since about 2009.
As this is a relatively small scheme, in a very targeted area of the market, it won’t make huge waves in the property industry as a whole, but it does show you very clearly which way the wind is blowing with lender appetite.
Money markets moved up significantly again last week. 5 year money is now over 1% for the first time since the onset of the pandemic, so how much longer until we start seeing mortgage rates go up? Their margins have come down significantly in recent weeks so unless this changes, they can’t hold out much longer.
Therefore, our default position stands, unless you have any specific needs, we would most likely recommend a longer-term fixed rate if you have a 25% + deposit/equity, but keep it short term or flexible if less than that figure.
In the last week:
3 Month Sterling = down by 0.005 at 0.081%
2 Year SWAP = up by 0.121% at 0.710%
5 Year SWAP = up by 0.134% to 0.983%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 0.85%
2 Year Fixed Rates from 0.79%
5 Year Fixed Rates from 0.91%
BTL Rates from 1.00%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec October 2021
Please speak to one of our London Mortgage Broker advisers so that they can guide you through the 100% mortgage lending process, or help you with any other mortgage lending. We are one of the highest-rated London mortgage brokers on Google.
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