Parental Support

Parental support common for first-time buyers

Getting onto the property ladder is on many people’s to-do list. But securing that first mortgage is not always simple and straightforward.

Read More

A person discussing mortgages with a broker in a meeting

Many brokers not discussing second charge mortgages

Large numbers of mortgage brokers are keeping the fact they offer second charge mortgages under their proverbial hats.

This is according to new findings from Brightstar Financial.

This may not be a term you are familiar with. But as a contractor or freelancer, second charge mortgages should be something you are aware of.

What are second charge mortgages?

Second charge mortgages are a type of secured loan which sees an applicant use their current home as security. So if you have already paid off £100,000 on your first mortgage, this can be used as security for your second mortgage. When looking to move to a new home for example, the equity of the home you are moving from can help you to secure the kind of second mortgage you want. If successful, you then have two mortgages to pay off.

This can often be cheaper than remortgaging. This is because remortgaging typically comes with a substantial early repayment charge that many applicants will want to avoid.

This model is advantageous for contractors or freelancers who may be struggling to get unsecured borrowing due to the nature of their work. This kind of borrowing might include a personal loan for example.

Why haven’t I heard of second charge mortgages?

Recent research from Brightstar Financial indicates that only a relatively small number of mortgage applicants are being presented with the option of second charge mortgages.

Brightstar Financial spoke with more than 1,000 intermediaries as part of their research. This included broker firms, directly authorised brokers, independent financial advisors and appointed representatives.

Their research found that just 26% of brokers even mentioned second charge mortgages to mortgage applicants. This is despite brokers being obliged by law to consider various forms of capital raising. This would include a discussion around second charge mortgages when consulting with an applicant.

From any applicant’s perspective, second charge mortgages are another card to consider playing when it comes to looking to secure a new mortgage. But these are seemingly an underused weapon.

What can I do to find out if a second charge mortgage is for me?

Roots Mortgages has experienced advisors who can explain the benefits of second charge mortgages further and how they work in practice. We can help identify whether this is a good option for you and your current situation.

To start a conversation with our team, simply get in touch. You can also get an estimate on how much you can borrow using our mortgage calculator.

covid support

FCA confirms mortgage borrower support changes

The Financial Conduct Authority (FCA) has released details of the next stage of support for mortgage borrowers facing COVID-19 related payment difficulties. 

The authority’s new guidance means lenders will prioritise support for borrowers who face the greatest difficulties or are at most risk of harm. 

The latest guidance will be of interest to anybody who has had to defer mortgage payments and take a ‘payment holiday’ over the past few months due to COVID-19 related financial problems. On the contractor and freelancer side, this guidance will be of particular interest to workers who have struggled to secure work during the pandemic and as a result, may have had to defer mortgage payments. 

The guidance helps to ensure support and guidance will still be delivered, even after their payment holiday ends.

It also means firms should deliver outcomes on the basis of an individual borrower and an individual case. This is to prevent companies adopting a ‘one size fits all’ model which could neglect or not be favourable for some vulnerable borrowers. 

Lenders will also be required to guide borrowers to the best sources of financial management, such as money guidance, debt advice or through self-help resources. 

To ensure firms adhere to this guidance, the FCA will be monitoring firms and lenders to make sure borrowers are treated fairly.

This is the latest set of FCA-issued guidance related to mortgage payments and the COVID-19 pandemic. In June, the FCA enabled borrowers affected by COVID-19 to take a first or second three-month payment deferral until 31 October 2020. From 16 September onwards however, the guidance will shift to the newly updated version, with a more subjective take on mortgage payment situations tailored to those who need help most. 

On the business side of things, the FCA has also released guidance for companies still facing financial difficulties, or companies who may be newly affected by coronavirus after the current guidance ends. 

The FCA has stated that its guidance is under continuous review and that if circumstances change significantly, such as a damaging second wave for example, then further measures will be considered. 

The full FCA guidance can be accessed here.

A series of arrows representing jumps in mortgage rates

Significant jump in fixed-rate mortgage rates

If you have been considering trying to secure a fixed-rate mortgage, the time to move may be sooner rather than later.

Why? Because rates on fixed deals have seen a significant jump over the course of the past month.

These rates naturally fluctuate, but the jump from 1 August to 1 September was one of the largest rises in years.

Statistics from Moneyfacts Treasury Report indicate that August saw average rates leap upwards across both two-year fixed rates and five-year fixed rates.

August 2020 saw the average two-year fixed rate, including all products and LTVs, at 2.08%. This however leapt to 2.24% for September 2020 – the largest such increase since July 2009.

A similar thing happened in the five-year fixed rate field. August 2020 saw rates at 2.34%, but this had jumped to 2.49% by September 2020. This 0.15% jump was the largest since March 2011.

Moving back to pre-lockdown levels?

This kind of news would ordinarily be very surprising. But given the global circumstances, it is not quite as much of a surprise.

These rises are all taking place on the back of the historic lows seen during the summer this year. This was a time when the market was feeling the effects of the COVID-19 pandemic and all manner of industries were thrown into a state of flux.

Rates pre-lockdown were still higher than what they were recorded as being for both two-year and five-year fixed rates in September 2020.

The average two-year fixed rates in March 2020 were as high as 2.43%, while five-year rates were 2.74% according to Moneyfacts Treasury Report.

But the recent rises likely indicate that rates are set to return to the kind of levels seen in the early part of this year.

Time to move? 

The rises seen over the course of August are likely indicative of this being the dominant flow within the market as the mortgage industry looks to bounce back from the effects of the COVID-19 pandemic.

The pandemic also led to a major drop in mortgage products available on the market, from more than 5,200 products to fewer than 2,600 by the start of May 2020 according to Moneyfacts Treasury Report.

This combination of factors means that now could be the time to move if you are seeking a mortgage and want to secure a fixed-rate to your liking.

If the current trends continue, then by October 1 the rates could be higher still and return to pre-pandemic levels. This could mean you miss out on the opportunity to secure the lower rate you seek.

The tumultuous market and fewer mortgage products out there also means getting mortgage advice from experts such as our team at Roots Mortgages can prove truly advantageous.

A small toy house with key and padlock symbolising a successful contractor mortgage sale

Getting your mortgage plans back on track

Unless you are a hermit living on a remote island somewhere, you have probably found the last few months to be a little challenging. And to be fair, being a hermit brings its own challenges anyway.

Read More

Privacy Settings
We use cookies to enhance your experience while using our website. If you are using our Services via a browser you can restrict, block or remove cookies through your web browser settings. We also use content and scripts from third parties that may use tracking technologies. You can selectively provide your consent below to allow such third party embeds. For complete information about the cookies we use, data we collect and how we process them, please check our [privacy-policy-2]
Consent to display content from Youtube
Consent to display content from Vimeo
Google Maps
Consent to display content from Google