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November 2015

Finding which lenders will be more generous than others can be a challenge and an understanding of how they work behind the scenes is essential.

AFFORDABILITY IS KEY

Affordability is key and this is the lender’s perception of how much one can afford, not the borrower’s. The new regulations are there to ensure that anybody who takes out a mortgage in 2015 will still be able to afford it in the future, when interest rates have risen, and this is determined by using a ‘’worst case’’ test.  This basic rule will differ between lenders and has created a ‘’pecking order’’ that varies from one month to the next, governed by changes imposed by the lenders themselves.

MAXIMUM TERM OF MORTGAGE

The length of time over which one can repay a mortgage, usually up to age 67 for employed individuals and 70 for self employed, has a big influence over how much a lender will offer, and many people who are in their 50’s will sometimes struggle to raise the level of funding that they need.

Many borrowers are fortunate to receive annual bonuses or profit shares, whilst others receive call out payments and are required to work overtime, with basic incomes being increased substantially as a result. Some lenders will not take any of these extra payments into account, whilst others will consider using just fifty percent, so enabling borrowers to achieve a much higher level of borrowing.

GREATER COMPETITION IS NEEDED

All lenders admit that they would welcome greater competition, as we have only five banks who can offer mortgages in Jersey and this could result in their having to accept a greater level of exposure than they might feel comfortable with. Despite all of these restrictions, it is still possible for most people to obtain the funding that they need to buy in Jersey, and this has been most apparent this summer where there has been a significant increase in activity across the market.

THE CURRENT STATE OF THE PROPERTY MARKET

any property type?  Property prices would appear to have bottomed out, although it is still sometimes possible to negotiate a modest reduction in the asking price, but don’t expect to see the huge discounts that were available several years ago.

Good quality one and two bedroomed flats seem to be in short supply, as are houses in the middle range of the market, whilst many people wishing to trade up from this range are saying that there is insufficient choice of property over £1m.

BANK OF ENGLAND BASE RATE

Bank of England base rate continues to grab the headlines, although there are many pressures that might hold back the first increase, which is currently predicted to be between June and September 2016.

Mortgage Product rates have again fallen this month, although the bias is always directed to those who have a deposit of 15% or more, whilst the First Time Buyers who can least afford higher costs have to soldier on with higher rate options.

If you would like to find out more about the content of this article, or should you have any queries, then please contact kerrie@mortgageshop.je

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