A blue wall with a frame in the shape of a zero

New zero deposit mortgage set to hit the market

Getting on the property ladder can be a real challenge. One of the main reasons for this is because in order to secure a mortgage, typically a healthy deposit needs to be paid.

For some, saving for a deposit is a relatively easy thing to do. But many people find this to be extremely challenging. 

With the price of housing and the cost of living going up, for many people the chances of saving a decent amount for a deposit will inevitably take a hit.

This makes the prospect of the UK’s first ever zero deposit mortgage hitting the market a particularly interesting prospect.

In the latest Roots Mortgages blog, we take a look at what this is and what it could mean for potential buyers.

Who is behind this?

Proportunity is a London-based lender with an aim of making home ownership a possibility for everyone.

The company is looking to support 1 million people secure a home of their own by 2030, and has an ethos very much focused on keeping things simple in what can be a complicated industry. 

The company has to date helped finance over £100 million worth of property sales, and Proportunity is committed to harnessing innovation in the mortgage market.

Tell me about this zero deposit mortgage then

Essentially, Proportunity is working towards the release of a zero percent deposit mortgage product for home ownership. 

This means that a Proportunity loan would cover the entire value of the home a person is wishing to buy, rather than just a large percentage of the property’s cost.

The company says that people who can afford to pay rent can afford to pay a mortgage, and is encouraging people to make their money work for them and not their landlord.

According to the Proportunity website, ‘Our Proportunity Home Index (PHI) helps identify which homes are better or fair valued, so when we invest with you, we believe we’re investing together in a good thing – and that’s what enables us to give you the full loan value for your new home.’

There is a dedicated page on the Proportunity site where people can find out more and register their interest in the zero deposit mortgage opportunity.

Is a zero deposit too good to be true?

If you are struggling to put together a deposit but are keen to get on the property ladder as soon as possible, then the idea of zero deposit is naturally going to appeal.

What is less clear at this stage is what kind of properties may be available, and what kind of terms and conditions will apply when taking out a mortgage of this type.

It’s also important to note that at present, the zero deposit mortgage is still in development. But the fact that Proportunity has promoted the product makes it seem like it is something the company is committed to pushing out there.

Ultimately, it’s too early to tell if this is a gimmick or a genuine option for buyers. If it does take off and other lenders follow suit however, then this has the potential to be something of a watershed moment within the mortgage market.

For contractors and freelancers who have long faced challenges around proving affordability, a zero deposit mortgage is something many will naturally be curious about.

What’s not clear is how things might work in practice for those seeking a contractor mortgage or freelancer mortgage. In fact, a lot is yet to be clarified about how this will all work in reality.

Ultimately, the proof will be in the pudding with zero deposit mortgages, and whether they are here to stay or something of a publicity stunt. It’s good for lenders to be looking into ways to make homes more affordable, but whether this is a way to go about it remains to be seen.

Boris commits to home ownership review

Whatever you think of him, it’s fair to say it’s been a hell of a few months for Boris Johnson.

The British PM has found himself in hot water more than once. But for anybody with an interest in his mortgage and housing plans, there have been some interesting movements of late.

The UK government has made a commitment to help reverse what is currently a shrinking number of homeowners. A review and report are in the works, and will look at how to get more people into homes that they are able to say they own.

What is being planned?

Boris has made a commitment to engaging in a review of the mortgage market, with a view to enabling more people to own their own homes. 

Boris has said: “We have a ludicrous situation whereby plenty of younger people could afford to make monthly mortgage payments – they’re earning enough to cover astronomical rent bills – but the ever-spiralling price of a house or flat has so inflated deposit requirements that saving even just 10% is a wholly unrealistic proposition for them.”

“First-time buyers are trying to hit a continually moving target,” Johnson added. “And of course the global rise in the cost of living is only making life harder for savers. So we want it to be easier to get a mortgage.”

It’s fair to say the dynamic as it currently exists is a peculiar one. People are spending plenty on monthly living costs including rent, but are not able to save the kind of money needed to buy a home of their own. 

The latest review forms part of a series of commitments made by the Conservatives around housing in the UK. This includes an extension on Right to Buy, reforming the welfare system to turn ‘benefits into bricks’, and make it easier to access finance as a first time buyer.

A further promise covers the ‘unlocking of brownfield land’ and the removal of disincentives. The aim is to have 87% of people who want to own their own home supported in this ‘fundamental aspiration under this Conservative Government.’

What might the review uncover?

The kind of dynamic that Johnson has highlighted around rent and home ownership is certainly one that does not make a whole lot of sense as it currently stands.

The challenge is bringing about true change and genuinely enabling more people to buy their own home. 

There are initiatives out there to support first-time buyers, with Help-to-Buy, First Homes and Deposit Unlock all names you may be familiar with. But the declining home ownership rate shows that despite all the will in the world, something isn’t quite working. 

It may be that the issue is not so much with the mortgage market, but in the housing market. Houses cost plenty at present, and one way to stop that trend is for more housing to be built.

Are there any potential problems?

Johnson may choose to go down the route of unlocking brownfield sites and other moves to enable the creation of more homes. If building more homes takes the edge off prices, that’s when other initiatives such as Deposit Unlock can come into their own and hopefully allow people to buy their own homes.

One possible problem is the approach taken when it comes to the creation of homes. There has been criticism in some quarters regarding the number of developments that are unappealing and soulless, putting off potential buyers. 

If the government truly engages in building more homes, then throwing them up without thinking about the real desires of people when it comes to where they want to live is something to consider.

When will the review be completed?

Boris has said that the review should be available later this year, with Autumn given as the time it should be expected. A report is set to be issued with the findings.

Whether you are a freelancer, a contractor, or somebody keen on securing a standard residential mortgage, there is a possibility that a mortgage is something you are finding tricky to secure at present. Hopefully Boris will put some plans into action so that those wanting to home will find things a little easier sooner rather than later.

A key in a lock in a door

Government confirms Help-to-Buy Oct 22 deadline

They say that all good things come to an end. And within the UK’s property market, one good thing for people trying to get on the ladder is nearing that moment.

Help-To-Buy is going to be ending in March 2023. This week, the UK government has confirmed the month in which the final applications need to be made in order to capitalise on this initiative.

What is Help-to-Buy?

Help-to-Buy was introduced by the UK government in 2013 as a way to support people in buying a new build property. In particular, the scheme has offered a chance for applicants to make that all important step onto the property ladder.

What Help-to-Buy provides is the chance to secure a property with just a 5% deposit. This applied to both people seeking their first property or home movers in the original Help-to-Buy scheme, and just new buyers in the later, current version.

What has made this affordable is the equity loan covering 20% of the property’s value for houses outside of London. Within London’s borders, the percentages are a little different, with a 40% equity loan and a mortgage covering the other 55%. Still, a 5% deposit is all that is required for new builds that are listed under the Help-to-Buy scheme. 

When is the Help-to-Buy deadline?

Although March 2023 marks the official end of Help-to-Buy, the cut off date for applications actually comes later this year.

It has now been confirmed that October 2022 is the last month in which people will be able to apply through the scheme, with 31st October the final date. 

Why is Help-to-Buy ending?

There are some people who will not mind seeing the back of Help-to-Buy, as there is a feeling that the scheme may have inflated the cost of some new build homes.

With the government committing to culminating the scheme, it is bringing out a new flagship affordable home ownership scheme named First Homes. This initiative will see new homes available at discounted prices of 30% or more compared to market averages, with the discount being passed on to future sales. 

While this sounds like a great opportunity, the First Homes scheme is still in development and it’s not completely clear who will be able to take advantage of it, and where the homes included in the scheme will be located.

There are other schemes out there to consider too. This includes Deposit Unlock, which launched in England, Wales and Scotland late last year.

What does this mean for people?

If the Help-to-Buy scheme aligns with your personal situation well and is something you are interested in pursuing, then it’s time to get moving. 

October 2022 will come around quickly, and the end of applications for the scheme has surprised some with regards to the earliness of the cut off. 

As a freelancer or contractor seeking a mortgage of your own, Help-to-Buy does represent an opportunity to get on the ladder with a smaller deposit than you may have expected. 

While we would never advise rushing your plans, there’s now a level of urgency if you are committing to the Help-to-Buy route. So consider your options, and start to move to your goals when the time is right.

A woman walking past the Bank of England in London

What does the Bank of England’s Base Rate rise mean?

The current financial situation is not one that is likely to bring many smiles to faces. From big business to people simply trying to make ends meet, the cost of living is proving a challenge across the board.

As a homeowner, or as somebody wanting to be able to call themselves a homeowner in the near future, this current situation is one to keep an eye on for sure. 

A specific change has taken place recently which is worth knowing about, and it involves the Bank of England. They have increased their base rate, which has repercussions across the financial climate here in the UK. 

In this blog, we take a look at what this means, and what the effects could be for you as somebody who owns, or is looking to own, their own home.

What is the Bank of England’s Base Rate?

The Bank of England’s base rate is the rate it charges to other banks and to mortgage lenders when borrowing money. So with regards to a person’s mortgage, lenders will borrow money from the Bank of England and then that money will be used to cover the cost of purchasing a property. The homeowner then pays that figure back to the lender in the form of mortgage repayments.

Lenders themselves however have to cover the interest rates they are being charged by the Bank of England. One typical way in which they do this is by increasing their own mortgage rates for borrowers.

What increase has taken place?

The big news is that the Bank of England has recently increased the base rate of interest it charges. 

The rate was previously 0.75%. Unfortunately however, this rate has now been raised by 0.25% to 1%.

What effect will this have on my mortgage?

This depends on the type of mortgage you have. If you have a fixed rate mortgage, then no change should take place until the end of the fixed period for which you have signed up.

If you have a variable rate mortgage however, then you can expect to see some unwanted but unavoidable increases to your mortgage repayments in the near future.

If this applies to you, then this is some more unwanted financial news on top of all the other less than desirable headlines over the past few weeks and months.

What should I do?

If you are approaching the end of a fixed mortgage term, or entering the market and looking for a fixed mortgage deal, then opting for another fixed rate deal is not a bad option. This will at least provide stability and consistency in terms of your outgoings.

This will also be beneficial if the cost of living crisis and general financial upheaval continues for a sustained period, which many expect it to do. 

A variable mortgage at this point in time is a riskier option, as the economic market seems to only be moving in one direction at present. A variable rate is an option that leaves you susceptible to fluctuation and the potential of having to make repayments beyond what you had anticipated.

It is of course possible to switch from a variable rate to a fixed rate, and this is an option worth considering – provided you can find a deal that works for you.

Stick or twist when getting on the ladder?

If you are considering making the move onto the property ladder any time soon, then the cost of living crisis, base rate increase, and your own affordability criteria are all factors that need to be carefully looked into.

It is by no means impossible to get onto the property ladder at present, and there are ample reasons for doing so. But it should be stressed that doing so haphazardly and without the right level of planning and careful decision making could backfire.

For contractors and freelancers who are looking for a mortgage, our free mortgage advice can set you on the right path to find the kind of deal which will serve you well over time. But be sure to consider all factors before diving into a mortgage, as the current economic situation is one that needs a careful approach to say the least.

A plant growing from a vase of coins

Don’t let the cost of living ruin your mortgage plans

If you have noticed yourself taking a few sharp intakes of breath due to the cost of bills and other outgoings recently, suffice it to say you are not alone.

The cost of living crisis is the term being given to the current economic situation, and it will have been hard to miss the increase in costs for certain products and services.

If your finances were tight previously, then they are likely to be even tighter now. Equally, if you are looking to save up towards a specific goal, then being able to continuously squirrel away the amount of cash you desire can quickly get tough.

One reason for doing the latter is saving for a home. But finding the right balance between living in the present and saving for your future home can be a difficulty.

In the latest Roots Mortgages blog, we have put together a few ideas to help you stay on track with your savings, while not having to suffer too badly in the present. Take a look.

1 – Shift your cash around straight after payday

Payday is something we all look forward to, and it’s nice to see your accounts fill back up after a few weeks of spending.

If you are planning on putting money aside in order to save for a home, we recommend getting a fixed amount in mind and doing this as soon as your pay cheque comes in. 

This way, your saving is less likely to be based on what’s left at the end of the month, and you get a consistent stream into your saving pot by being proactive.

You also have the option of taking money back out of your savings pot if absolutely needs be, but hopefully that won’t be the case!

2 – Look at your monthly spending and make some decisions

If you are serious about saving up, we recommend going through your monthly spending with a fine comb and finding the areas where you can avoid some expenditure.

Things like the places you shop and finding cheaper alternatives, and cutting back on your household energy use, are a good place to start.

Another popular option many people are choosing to do is cut back on their streaming service subscriptions. There may be other things you are paying for each month, but rarely or simply never use anymore. The only reason they’re still on your outgoings is that you’ve just not got around to ending them or cannot be bothered!

That kind of approach will only elongate the amount of time it takes for you to get your dream home sorted. So make some positive changes now and start saving.

3 – Cut back on treats, or find different ones

Saving for a home comes with an element of sacrifice, as you could be spending your money on other things. But you have a choice about what and how many things you give up in the name of saving.

If there are a few personal treats that you like – be it a fancy dinner with your partner or a mini break for example – then this chunk of money could be spent elsewhere if you were willing to give such luxuries up for a few months.

And that’s not to say you can’t do nice things. Used to fancy hotels? Camping’s a good alternative and will give you all the more motivation to save and get a proper roof over your head sooner rather than later!

4 – Consider getting fit on your commute

Petrol prices have been one of the biggest risers during the cost of living crisis. And while post-pandemic, many of us are working at home more frequently, plenty of us are still guzzling up the miles, potentially on the commute.

Public transport can also be a big drain on your finances over the course of time while commuting. So finding ways to keep this as cheap as possible is a great idea.

Asking for more time working from home is a good idea, while cycling to work is a great option if you are not too far from your office. In fact, many places of work these days have initiatives in place to support cycling to work, with some having shower facilities to ensure you don’t stink out that morning meeting. And what’s more, cycling is a great way to lose some excess pounds.

Walking or running to the office, if feasible, are equally excellent ways to save some cash, move closer to your goals, feel better within yourself and lose some weight. What’s not to like!

5 – Get a clear idea of what you need to save

One really good way of arranging your savings is for you to take the time to set a clear goal to work towards. That way, you can more easily plan out your monthly savings goal, and get a clearer idea of when you will be able to start looking seriously for a mortgage.

Planning and being conscientious is a really positive trait when it comes to getting your mortgage sorted. The more information you have and good advice you get, the better stead you stand yourself in.

We at Root Mortgages are specialists in contractor mortgages and freelancer mortgages, as well as having plenty of experience of dealing with residential mortgages. We are therefore in a great position to provide you with free mortgage advice and give you a clear idea of the path you want to be taking in order to get the home you need.

Saving for a home is not always easy but it is hugely worthwhile once you get hold of the keys to a place you can call your own. Getting in good habits despite the adversity of the cost of living crisis can turn your vision into a reality sooner rather than later.

A person using credit cards to buy

Credit score putting you off applying for a mortgage?

There are a few things that you ideally don’t want to be associated with in life. Financially speaking, one of the main ones to avoid is a poor credit score.

A credit score is an important figure that will be used by anybody who is in a position to lend you money. Be this a bank, a payday lender or a building society, a credit score is something that will be factored in.

New research has found that concerns around poor credit scores are putting a significant proportion of people off applying for a home. 

So in an attempt to offer advice to contractors and freelancers who may share these concerns, we have taken a look at what is afoot.

What exactly is a credit score?

In our experience, plenty of people know the term credit score, but many aren’t sure exactly what it means.

Put simply, a credit score is a number between X and Y. Differing providers of credit scores use slightly different scales, but lets say they use a scale of 300 to 850. Your score indicates how worthy of financial credit you are to a lender. The closer to 850 a person’s credit score is, the more likely the lender is to proceed with their application. 

Factors that influence a person’s credit score include their repayment history, the length of their credit history, the types of loans they have taken in the past or are currently repaying, and the total debt that a person has. 

Do I need to know my credit score?

If you have plans to apply for a home in the next year or so, then knowing your credit score is very useful.

Your credit score will be an important statistic throughout the application process, and will be factored in by brokers and lenders to help evaluate what kind of mortgage you might be able to get.

My credit score is not great – Is that a problem?

According to new research from The Mortgage Lender, one in every ten people in Britain has been put off applying for mortgages due to fears about low credit scores.

However, a low credit score is not the end of the world by any means. If you have plans to buy a home in the coming years, there are things you can do to improve your credit score.

Paying your bills on time is an important step to take for certain, while an obvious one is looking to pay off as much debt as you can. This can seem challenging when saving up for a deposit, but will be very beneficial if you are able to do so.

Also look to stay on top of your credit report, and see if there may be any errors contained within it. If something’s been miscalculated, then amending this could see your score move in the right direction quickly.

If you have unused credit card accounts, look to get rid of them as soon as possible. And also aim not to max out on available credit, as this will hamper your attempts to improve your credit score.

It’s all about being more savvy with your money and taking a stable and mature approach to your financial situation.

Is not knowing my credit score a bad thing?

It’s not ideal if you are looking to apply for a mortgage soon. But you certainly are not alone if you find yourself in this boat. 

The research from The Mortgage Lender has found that 62% of UK adults surveyed didn’t know their credit score. Interestingly, half of those surveyed who were looking to buy a house in the next year did not know their credit score.

Additionally, only 18% of those surveyed had taken steps to improve their credit score. 

So all in all, if this is you then you shouldn’t feel out of the loop. But if you have aspirations to get a property of your own in the near future, getting to grips with your credit score is a very good idea.

Getting on top of your credit score

If you are a contractor or freelancer with ambitions to get on the property ladder, your credit score might not be something you have overly thought about.

If you do not know it, then getting clarity on what it is at present is a great first step. Then following some of the suggestions outlined above to help enhance your credit score is certainly worthwhile.

By improving your credit score sooner rather than later, you give yourself a better chance of securing the home you want.

Another consideration is that there are plenty of products out there in the mortgage market which can meet the requirements of people with low credit scores, so don’t lose hope simply because your credit score is not perfect.

Trusting a contractor mortgage broker or freelance mortgage broker such as Roots Mortgages can be the first step towards finding your dream home with the perfect mortgage.

A man in a dark suit with his thumb up

Vida makes positive changes for contractors

We at Roots Mortgages specialise in working with contractors and freelancers to help them negotiate the mortgage market.

In case you are new to contracting or freelancing, or work in this way but have not previously thought about buying a home, then it’s important to know that it isn’t always a straightforward process.

In truth, buying a home is rarely a simple thing, regardless of your profession. But over the years, many contractors and freelancers have found it particularly problematic.

We are dead set on turning that tide however, and our goal is to help as many contractors and freelancers achieve their property dreams as we can. 

With this in mind, it is always satisfying to see others in the industry making it easier for contractors and freelancers too. This week, a specialist lender has made enhancements to their affordability criteria for contractors. So we wanted to take a look at what’s on offer.

Which lender is this?

The lender in question is Vida Homeloans. This is a relatively young company, only founded in 2016.

However, Vida has developed a reputation in that time thanks to its commitment to helping every person find a home ‘no matter their circumstances’.

What are the new lending criteria for contractors?

Vida has made a series of changes to its affordability criteria with the aim of making it easier for contractors to land a mortgage deal that works for them.

An important part of this is contractors being able to borrow up to 48 times their weekly rate. This provides greater clarity for contractors when it comes to understanding the kind of figures they can borrow to support their homebuying goals.

Contractors will be considered from the first day of their contract, provided they have at least one year of employment in a similar line of work.

Furthermore, contractors will still be able to apply for a mortgage even if they only have three months left on their current contract.

This is all to create a smoother and easier process for contractors seeking the support they need to get the home they want. 

According to Vida’s director of mortgage distribution, the changes are all part of an effort to make the plans of contractors easier to fulfill.

Richard Tugwell said: “We are determined to provide attractive, accessible products that support contractors and the wider self-employed market, who have been cut out of traditional high-street lending. We continue to see strong demand from our intermediary partners and want to continue growing our lending and offering a great service to brokers and customers.”

Greater awareness of contractor needs

These changes from Vida are a concerted effort to make life easier for contractors, in a space which has not always been friendly to them. 

Securing mortgages has proved challenging for many self-employed workers over the years, so seeing options such as the one Vida has available within the wider market should be something appreciated by contractors.

Having said this, Vida’s offering may not be the right option for you, and we as contractor mortgage brokers can help provide you with the guidance you need to find that perfect choice. 

But Vida should be congratulated for making positive changes within a market where ‘playing it safe’ can all too often be the name of the game for lenders.

A box with white paint and a white paintbrush

Big increases to the cost of improving your home

We all dream of living in the perfect home. And with so many home improvement programmes on the television and the risk of ‘Insta-interiors envy’ when scrolling through social media, it’s hard not to start imagining what you might be able to do with the space you live in.

Something that might quickly bring you back to reality however are new findings about the cost of home improvement projects at present.

Rapid People has released a new report which shows just how much the cost of home improvement projects have jumped in the past couple of years.

We take a look at what the report shows us, and what to consider if planning on buying your own home in the near future.

What does the Rapid People report show?

Titled Home Improvement Trends Report 2022, Rapid People has explored some of the trends around home improvement that have been prominent over the past couple of years. 

According to the report, 49% of residents in the UK made improvements to their home in 2021, while demand for tradespeople for such projects rose by 32%.

Many of these projects involved painting and decorating jobs, as people sought to spruce up their homes. Other projects that were popular in 2021 included creating home offices or home gyms.

As would be expected, the report found many of these projects were instigated because of the amount of time people were spending within their own four walls. Other reasons cited included making it easier to work from home, and to improve the value of a property.

What about costs?

The report contains an interesting section in which tradespeople provided information on their costs. 89% said their costs increased in 2021, and on average this increase was by 15%.

Most prices rises were relatively small, with close to 4 in every 5 tradespeople putting their prices up by less than 20%. Just 3% put their costs up by more than 50%. 

However, it is clear that costs have been very much on an upward curve.

Will these rises continue?

The report suggests so.

86% of tradespeople said they expected to be busy in 2022, while 97% of builders and 91% of gas and heating engineers expected their prices to rise in 2022.

Interestingly, the cost of major renovation projects are also set to see a big rise in 2022 compared to pre-pandemic prices.

The report indicated that the cost of a loft conversion and kitchen renovation would be 25% higher, the cost of a general extension 23% higher, and the cost of a bathroom renovation a mammoth 40% higher than these projects would have cost in 2020.

How might this affect house buying plans?

If you are on the lookout for a dream property at the moment, the trends and costs outlined here are worth bearing in mind.

Many people will purchase a ‘fixer-upper’ or a ‘house with potential’, and accept that they will need to invest in renovations in order to achieve the kind of outcome they ultimately want.

If this was the plan that you had in mind, then be sure to factor in the kind of costs and rises that are being talked about in this report from Rapid People.

Such renovation costs should be considered as part of your overall budget, At the very least, it should be accepted that you may need to save up a little more than previously expected in order to carry out the renovations you wish.

As with any property purchase, having a clear understanding of what kind of costs you are looking at from the outset, and factoring in any additional projects you may want to proceed with, is wise.