The turmoil that followed Chancellor Kwarteng’s ill-fated mini-Budget last September continues to impact mortgage applications. Although the number and types of mortgages available are steadily increasing, they are nowhere near the volume and choice available 12 months ago.
According to an ONS report1, 1.4million households in the UK will face the prospect of interest rate rises when they renew their fixed rate mortgages in 2023. What’s more, 57% of those coming up for renewal had interest rates fixed at below 2%. The rise in mortgage rates, combined with huge increases in energy and food bills, will see more borrowers looking to lenders who can be more flexible and suggest innovative solutions.
Guarantor alternative
The Joint Borrower Sole Proprietor (JBSP) mortgage – or as we know it at the Family Building Society, Joint Mortgage Sole Owner (JMSO) – is a good option. Traditionally, the purpose of the product was for parents to assist their offspring to purchase or remortgage a property, with the major benefit of stamp duty only requiring to be paid by the owner of the property only, and not by all the mortgage applicants.
At Family Building Society, we can reverse the traditional scenario and allow the children to apply with their parents to buy a property for the parents, so that the parents can stay in their family home for longer. Rates can be found that are as competitive as standard mortgages.
Pension pots
Many lenders will take a percentage of a pension pot, typically 3%, and assume this as an income.
However, some will not consider pension pot income at all if it’s not already in drawdown. At Family Building Society, we take a different approach. We can take 80% of the value of a pension pot and divide it by the proposed mortgage term.
For example, take a £500,000 pension pot. 80% equates to £400,000. The customer might be looking for a 15-year term, allowing us to calculate a £26,000 income from the pension pot, which makes it affordable.
Another example is of a 74-year old who needed £300,000 to settle his divorce. His son joined the mortgage, allowing his father to carry on living in the property. The father did not have enough pension income, so his son became a joint applicant. We arranged the loan on an interest-only basis over 13 years, relying on the father’s state pension, private and other pension pots, and the son’s earned income.
Other acceptable income
Income from investment portfolios, stocks and shares ISAs, other ‘unearned’ or passive income streams such as rental income, state pension and any other annuities can be added to the assumed income. Remuneration drawn by limited company directors also qualifies.
A reminder of how we can help:
- We take into account earned income up to the age of 70, or even 75 if the client is in a non-manual role.
- We’ll consider pension pots, as well as fixed pensions, investment and rental income. Other income can be considered on a case-by-case basis.
- We lend in retirement with higher maximum ages than most lenders:
- Owner Occupier repayment mortgages, up to a maximum age of 95 at the end of term.
- Owner Occupier Interest-Only and Buy to Let mortgages, up to a maximum age of 89 when the loan commences.
- We have a common sense approach to lending and use human beings, not robots, to underwrite each case. This means we can tailor our solutions to each of your client’s needs.
This is how we, at Family Building Society, underwrite our mortgages. Case by case, story by story, so we can be flexible and help to use borrowers income, pensions and investments in the best way to improve affordability. We take great pride in the how we do things, and it works.
And see just how flexible we can be!
FAMILY BUILDING SOCIETY, EBBISHAM HOUSE, 30 CHURCH ST, EPSOM, SURREY KT17 4NL
Family Building Society is a trading name of National Counties Building Society which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. National Counties is on the Financial Services Register Firm Reference Number 206080.
1https://www.ons.gov.uk/peoplepopulationandcommunity/housing/articles/howincreasesinhousingcostsimpacthouseholds/2023-01-09
