Discount mortgages are a frequently misunderstood area of the mortgage market, but for the right borrower, they can be a useful financial tool offering greater flexibility over their monthly mortgage payments and future needs.

While it’s true that many borrowers tend to prefer the certainty of a fixed rate product, especially in a period of economic instability, there are circumstances where a discounted mortgage product may prove more attractive and better suited to clients’ needs.

A common misconception around discount mortgages is that the interest rate can fluctuate wildly on a regular basis, leaving borrowers with the risk of being unable to cover the cost of the mortgage.

While, of course, it’s important to stress test affordability at the highest possible level to ensure borrowers can continue to repay the mortgage, it’s also important to note that the discounts on offer are directly related to a lender’s SVR and not the Bank of England base rate.

This means that any decision to increase or decrease the SVR is made by the lender. It also means that if the Bank of England increases or decreases the base rate, it doesn’t mean the lender will follow suit.

Discounted mortgages can offer greater levels of flexibility for those borrowers who may find themselves in a position to regularly overpay. This can be an ideal solution for borrowers with more cash at their disposal or those who can afford to absorb any fluctuations in payments that may occur over the mortgage term.

Unlike fixed rate products, it can be the case that there are no limits or penalties for overpaying, which can help those borrowers with potentially more irregular income streams who may be looking to clear their mortgage faster. This can be particularly useful for borrowers who know they are coming into a large amount of money during the mortgage term, perhaps due to selling other assets or coming into some inheritance.

Although paying off a mortgage before the end of the deal often comes with an early repayment charge (ERC), these ERCs can be much less onerous with a discount mortgage, ensuring that borrowers can make further savings should they need to exit the loan early.

For example, here at the Loughborough, the ERC on our discount product range is currently set at 0.5% in the first year and 0.25% in the second year. The equivalent of only £1,000 on a £200,000 loan in the first year of the mortgage and £500 in the second year, depending on the total balance and term left at the time of redemption.

This can be an attractive proposition for those borrowers who may require an option to leave the mortgage before the end of the current term or those who may benefit financially from moving early to another mortgage product due to expected or unexpected positive market movement.

Admittedly, a discount mortgage may not appeal to every borrower, and while there will always be situations where a discounted mortgage will not represent the best fit for the client, there will also be cases where the flexibility of a discount mortgage can be of great benefit. Key factors to underline how discounts are playing an increasingly prominent role in the advice process for many borrowers.

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Loughborough Building Society has announced a criteria change to its lending in retirement proposition which will allow borrowers to raise capital in order to bolster their savings pot.

Cases will continue to be assessed on an individual basis with applicants potentially able to raise funds for a combination of purposes including home improvements, debt consolidation, gifts to family, new car, care home fees, holidays, deposit on a second home/buy-to-let property and/or to replenish their savings.

This improvement is designed to further strengthen The Loughborough’s unique approach to later-life lending and its comprehensive product offerings. It follows a significant enhancement to its lending in retirement proposition in September 2024 when the Society moved to assess income at 4.5x up to the applicant’s retirement age, marking a notable increase from its previous 3.5x income assessment.

For applicants already aged 80 or over, The Loughborough will continue to consider applications with a maximum income multiple of 3.5x for both single and joint applicants.

Ashley Pearson, Head of Intermediaries at Loughborough Building Society, commented:

“As a Society, we continually strive to adapt and evolve our product offerings to better meet the needs of borrowers throughout their lending journey. This latest enhancement to our lending in retirement criteria demonstrates our ongoing commitment to providing flexible and responsible solutions, empowering borrowers to make the most of their later years and achieve their financial goals with the support they deserve.”

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The UK mortgage market has undergone significant change over the last few decades, with shifting social dynamics, high and rising house prices and stagnant wages all playing a major role in the changing mortgage landscape.

With the average UK home costing 8.8 times the average earnings last year, according to House Buyer Bureau research, many would-be homeowners are also struggling to save for a deposit to buy their first home. The impact of this has been a change in the average profile of the UK mortgage.

In recent years, there has been a significant amount of emphasis on intergenerational lending and the Bank of Mum and Dad, much of which has focused on the uptick in the growth of gifted deposits and sizeable loans to help younger generations buy their first home.

However, recent economic challenges have seen a new type of intergenerational borrowing begin to emerge, with more parents joining forces with their children to buy a home that they also own, or indeed, live in, alongside their children.

We’re often asked by brokers about how this type of mortgage works in practice, particularly given the age differences between parents and their children. In some cases, this generational gap can be anything up to 35 or 40 years.

Many of these questions specifically relate to how affordability is assessed, given the fact that the parents are often in, or approaching, retirement age, but may have more income or wealth than their children.

While each application is assessed on its own merit, as a general rule, we would typically assess affordability on the youngest person’s income, provided we do not need to include the older person’s income to secure the mortgage.

For example, we recently received an application from a mother and father aged 85 and 84 respectively who were looking to remortgage a property. Their 55-year-old daughter lived with them, and they decided they wanted to include her in the ownership of the house, so the property was remortgaged in all their names.

However, only the daughter’s income was used for affordability purposes on the mortgage as it was enough to satisfy lending requirements. In this situation, the parents were able to remortgage the property as required and remain living in it with their daughter, who is now one of three legal joint owners.

There was also a case where parents wanted to buy a bigger house with their son and daughter and their part of the deal was to finance the deposit. In this case, the income of the children was used for affordability purposes, but the parents were also named on the mortgage. This allowed them to buy a bigger house to live in together, so that the children can care for their parents in the future.

It’s also worth noting, however, that it’s not just applications from parents and their children where a significant gap in age can occur. We recently had an application from a husband aged 77 and his wife, aged 37, who were looking to remortgage away from their current lender.

As the affordability fitted with just the wife’s income, we could consider the loan to value (LTV) and term of the younger applicant and not the older applicant. However, the husband was still named on the mortgage and remained a joint owner of the home.

Given the affordability challenges facing many borrowers over the last few years, brokers are likely to see more applications from people clubbing together to buy a home. Some of the cases may well include applicants over the age of 50 or with a large gap in age between the borrowers.

Speaking to a flexible lender who is familiar with handling such cases can help to ensure the application is successful.

It can also help brokers gain an understanding of mortgage applications with large age gaps and ensure their clients get the financing they need to buy a home.

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This partnership grants Paradigm member firms access to The Loughborough’s diverse range of mortgage products, designed to meet various borrower needs, including home purchases, remortgaging, large loans, buy-to-let, borrowing into retirement, first-time buyers, family assist schemes, shared ownership, buy for university, holiday lets, and more.

The Loughborough recently introduced a new suite of intermediary-focused affordability calculators. These include a residential calculator that covers specialist products, such as high-income multiples and lending into retirement, alongside its core residential offerings. Its buy-to-let calculator includes solutions for let-to-buy, family buy-to-let, and holiday lets, in addition to its standard buy-to-let options.

Paradigm members can now register with The Loughborough to access its full product range, benefit from its online mortgage portal, and explore a comprehensive library of supporting documents.

For more information on Loughborough for Intermediaries, please visit: www.theloughborough.co.uk/intermediaries

For more information on Paradigm Mortgage Services, please visit: www.paradigm.co.uk/mortgages

Richard Howes, Director of Mortgages at Paradigm, commented:

“To say that the mutual sector now offers something of a one-stop shop for a huge variety of borrower mortgage needs would be an understatement. The Loughborough’s range is a prime example of this, covering off a vast array of products and criteria from options for first-time buyers to those taking mortgage debt into retirement. It’s therefore very pleasing to be adding the Society to our lender panel and to be providing Paradigm advisers and member firms with access to this excellent proposition. We’re looking forward to introducing these options to our membership and working with the Loughborough team to secure the right product solutions for borrowers.”

Ashley Pearson, Head of Intermediaries at Loughborough Building Society, said:

“Joining the Paradigm Mortgage Services’ panel allows us to offer our extensive range of specialist mortgage solutions to a wider network of intermediaries. Together, we are committed to delivering innovative, flexible, customer-centric options, and we look forward to working closely with Paradigm members to support their clients’ increasingly diverse borrowing needs.”

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Higher income multiple mortgages have historically been associated with certain types of high earning professions such as doctors, accountants, lawyers and dentists. For many individuals, this has meant that the chances of securing a more favourable income multiple than the standard 3.5 to 4 times income offered by the majority of lenders was extremely low.

Recently however, the evolution of this particular affordability equation has meant that those borrowers seeking a higher multiple must now satisfy an income threshold, rather than work in a specific profession. A shift which makes opens the affordability door to a wider group of borrowers.

Inevitably, lending approaches will differ when it comes to affordability attitudes and calculations. For example, our approach means that single applicants earning £50,000 a year or joint applications earning £75,000 a year, could qualify for a higher income multiple mortgage at 5.5 times their income, regardless of their profession. This also extends to self-employed borrowers provided they have a minimum of one year’s trading accounts. Other lender may still depend on key professions or have contrasting single or joint earning figures which need to be reached.

Many of the approaches of more specialist lenders in this area – who can adopt more common-sense underwriting processes – reflects a more modern approach to lending, and acknowledges the fact that high earners may require more borrowing flexibility than a traditional mortgage product may allow.

This could be because they have found a more suitable property for their needs; perhaps they require a larger home, one that is in a more desirable location, or one with features they value, such as an extra couple of bedrooms, a larger garden, or closer proximity to key amenities and transport links.

Higher income multiple mortgages can also help borrowers who may be planning for the long term and would like to move house before they have children and start a family. In some cases, they may also be thinking ahead to when they may need some extra space should they need to care for family members such as parents in their later years.

In recent months, we have certainly seen an uptick in the number of higher income multiple mortgage applications. Many of these have come from self-employed individuals who meet the income threshold and policy requirements needed to secure a larger loan.

All these individuals work in a variety of professions and in each case, satisfied the lending criteria required to secure a loan. They were also looking to buy a higher value home and take another step up the property ladder.

One thing that many self-employed borrowers seek is the ability for dividends or net profit – usually whichever is more favourable – to be considered from an affordability standpoint. This can prove a useful tool for improving affordability as it enables those individuals who meet the lending criteria to secure a higher level of borrowing of 5.5 times income with an LTV of up to 80%.

In the current higher interest rate environment, this could prove to be the difference between a borrower securing a property they want and can afford, or simply walking away. For brokers, it provides another tool to help high-income borrowers achieve their homeownership dreams by maximising their borrowing potential.

Providing personalised and flexible mortgage solutions that cater to the ever-changing needs of clients is crucial, particularly in a world of shifting social dynamics and employment.

Earning a higher income no longer equates to working in a certain profession and there are many people in the UK today who meet the salary threshold for a high-income multiple mortgage that work in technology or construction rather than finance or medicine.

For brokers with high earning clients, including those who are self-employed, exploring the breadth of available options from lenders will provide them with greater flexibility to help these clients and provide them with access to the type of mortgage product they need and deserve.

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Demand for self-contained annexes has grown substantially since the pandemic, driven by evolving work habits and the rising popularity of multi-generational living.

A 2021 study by Property Wire revealed significant increases in home improvement projects since 2018 – extensions by 50%, loft conversions by 112%, outhouses by 122%, and garden offices by 161%. However, annexes far surpassed these figures, with a 300% increase in properties adding an additional living space in their gardens. 

This trend has continued, partly due to second homeowners in England facing a potential doubling of council tax from April 2025. Earlier this year, data from Purplebricks showed that enquiries for homes with annexes reached 10,000 in the second half of 2023. 

Given rising living costs and house prices, it’s no surprise that properties with annexes are in high demand, especially as they can potentially boost a home’s value by an estimated 20-30%.

A rising trend in family purchases with annexes 

In recent months, we have observed a clear trend of family members purchasing homes together. Most commonly, this involves couples buying properties with annexes, where elderly parents or adult children returning from higher education and saving for a deposit can live while maintaining a level of independence.

Many of these annexes are attached to part of a building or are a separate building near the main residential property. They also have a separate bathroom, bedroom or kitchen and living area but are on the same title as the main family home.

In the majority of cases, anyone living in an annexe does not have to be listed on the mortgage agreement. However, any occupiers in the annexe at the time of the application must be declared for legal purposes, alongside a written explanation to confirm how the annexe will be used and who it will be occupied by. 

While one of the main attractions of having an annexe is that it can be rented out to help generate some additional income for the owner, it’s important to note that those without an external entrance can only be used to accommodate family members. In contrast, depending on specific lending criteria, annexes with a separate external entrance can be let for a maximum of six months. 

For brokers with clients located in popular holiday spots, renting out an annexe on a short-term lease could be an ideal way to boost their monthly income, provided the borrowers’ intentions are clearly laid out at the application stage.

Although the growth in annexes has been triggered by the upward trend in the number of people working from home, it’s also important to note that many annexes cannot be used for commercial purposes such as running a retail business, or as an alternative office space for client meetings unless the right permissions are in place. But they can be used as a dedicated working space or place of business for the homeowner, provided they don’t have clients coming and going regularly from their home.

While no rental income generated by an annexe can be used in affordability calculations, purchasing a property with an annexe attached can help borrowers find a solution to multi-generational living or boost their monthly income in the short term.

For brokers with clients looking to secure a property of this kind, conducting the correct level of research and speaking to a lender willing to underwrite this type of application is essential in ensuring a positive outcome for their client.

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The recently appointed Labour government has announced that its set to impose a 20 per cent VAT charge on private school fees from January 2025.

While it’s unlikely that the decision will have an impact on the majority of primary and secondary school parents across the UK, it got me thinking about the increasing costs and financial burden that’s often associated with higher education.

According to student money website, Save the Student, the average student pays approximately £1,078 per month in living costs, with rent accounting for the biggest chunk in living expenses.

While the amount of rent paid by students varies across the country, from a high of £975 per month in London to £378 in Sheffield, the cost of renting accommodation was by far the largest monthly outgoing made by students in every university town in the UK.

In addition, Unite Group, the largest provider of student accommodation in the UK, has increased its rents by 7 per cent in each of the past two years. This, coupled with the rising costs of tuition fees, means graduates in England leave university with average debts of £44,940, according to data from the Student Loans Company.

For brokers with clients whose children are at university, this can be a huge concern as it means many young graduates will start their professional career owing large amounts of money.

With this in mind, it may be worth exploring the possibility of parents taking out a Buy for University mortgage to help their children get onto the property ladder.  Not only will this help them navigate the current problems of supply and demand, it may also relieve some of the financial pressure they face at a later date.

Many of these parents may already have plans to help their children get onto the property ladder once their course is complete. They may also not be aware that they could invest in their child’s future a little earlier by helping them purchase a property while they are still at university.

A Buy for Uni product works by allowing borrowers currently studying at a UK university to purchase a home to live in with the support of their parents. Any spare rooms are rented out to fellow students and friends to cover the cost of the mortgage.

One of the many benefits of a Buy for Uni mortgage is the borrower does not have to pay a great deal of rent on less than great accommodation. Instead, every penny paid in rent will go towards paying the mortgage.

A Buy for Uni mortgage also means the borrower will graduate from university as a homeowner and will not be at risk of being evicted during their time as a student because their landlord has decided to sell. 

Buy for Uni mortgages can be agreed up to a year in advance, which makes them ideal for parents whose children may be moving out of halls and into private accommodation.

Borrowers can take out a mortgage for up to 100% of a property’s value provided a security of up to 20% is made as cash deposit or as a collateral charge against the value of their parent’s house.

As the mortgage is taken out on a Joint Borrower Sole Proprietor (JBSP) basis, both the child and parents are responsible for the mortgage payments, but only the borrower/student is registered as the legal owner of the property. As a first-time buyer, they will also qualify for stamp duty relief. 

Once the borrower has graduated from university and is in full time employment, they can then remortgage onto a standard residential loan, sell the property on the open market or rent it out to other students.

The collateral charge against the parents’ home or cash deposit is then released and they no longer have responsibility for the payments.

Obviously, a Buy for Uni product will not be an option for every parent in the UK. However, with demand for rental property in university towns and cities high and rents even higher, it may present a viable solution for those parents who can afford to help their children out on the path to home ownership a little earlier than planned.

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This improvement is designed to further strengthen The Loughborough’s unique approach to later life lending and its comprehensive product offerings.

As part of this change, the lender will no longer require an additional assessment when the applicant reaches the age of 80. If the mortgage is deemed affordable based on a 4.5x pension income ratio at the time of retirement, and it extends beyond the age of 80, the applicant will remain eligible for the Society’s lending in retirement products.

For applicants already aged 80 or over, The Loughborough will continue to consider applications with a maximum income multiple of 3.5x for both single and joint applicants.

Ashley Pearson, Head of Intermediaries at Loughborough Building Society, commented:

“The later life lending sector is rapidly evolving as the lifestyles and financial needs of those aged 50 and over change, at pace. As a lender who remains committed to delivering tailored financial solutions that meet the diverse range of borrowing needs in retirement, we recognise the importance of continuously adapting and developing our offerings.

“This positive criteria change will enable our intermediary partners to provide a more personalised and accommodating lending experience for later life borrowers, and we anticipate this adjustment will be well-received across the market.”

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Owning a holiday let can come with any number of obstacles, yet if done well, the holiday let sector can provide investors with a steady and reliable income stream throughout the calendar year. 

As a holiday let owner myself, I’m well aware of the challenges the sector has encountered over the last few years. The Covid pandemic saw bookings dry up as the UK population was forced to stay at home, while the subsequent easing of these restrictions saw people immediately head overseas in search of a change of scene. 

More recently, rising interest rates and the cost-of-living crisis brought further trials and tribulations, with many households compelled to rein in their spending in an attempt to navigate an uncertain economic environment. 

However, with interest rates now starting to fall and the economy showing increased signs of stability, 2024 has seen a return to form for the UK holiday let sector, with research from Mintel showing that over half (55%) of UK holidaymakers have chosen to holiday at home instead of abroad this summer. 

With the summer holiday season slipping beyond its peak, some potential investors might be inclined to dismiss the idea of purchasing a UK holiday let in 2024. However, it’s important to remember that holiday lets can be a viable and profitable investment throughout the year.

Whether it’s a last-minute winter weekend getaway, a half-term break with the kids, or a celebratory few days with family and friends, demand for holiday lets remains strong and is an option always worth considering for any property investor. Many lenders remain committed to this market and are well-positioned to assist brokers with clients looking to purchase a new holiday let or refinance an existing one.

With some holiday let products allowing up to 60 days a year for personal use, investors could use this time to carry out or oversee renovations. For those nearing the end of their current mortgage term, remortgaging to raise capital could be a smart move, as it allows investors to tap into the equity in the property to cover any renovation costs. Renovations which could range from general repairs and maintenance to more extensive projects such as installing a new kitchen or bathroom.

This approach can help property owners maximise occupancy rates during the rest of the year, increase profitability, and boost demand, particularly if the property receives five-star reviews from guests.

Balancing the individual needs, demands and financial circumstances of any holiday let owner is crucial, which is why we assess and underwrite each application on its own merit. 

Not only does this enable us to get a clear idea of the borrower’s unique situation, but it also allows us to answer any questions the broker may have to ensure they remain well informed. 

This can prove particularly useful in terms of understanding the requirements relating to rental assessments and holiday letting management companies, such as the number of lettable weeks and total expected rental income amount. 

For example, if a property is rented out for 45 weeks of the year and makes a return of £30,000 annually, we could use the rental income calculation in an affordability assessment, rather than the number of weeks it’s occupied. 

Obviously, these factors will vary between each applicant and each property, which is why we work so closely with our intermediary partners to determine the specific needs and demands of every client. By speaking to a lender that specialises in holiday let mortgages, brokers can ensure they get the best deal for their client’s specific circumstances while also helping them to maximise the return on their investment. 

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Joint Borrower Sole Proprietor (JBSP) mortgages are often associated with first-time buyers (FTBs) struggling to get a foot onto the property ladder. Yet, the truth is that these products can actually help all types of borrowers looking to buy a home.

This is particularly true in the current economic environment, where higher interest rates and increased living costs are causing a growing number of borrowers to fall short of meeting mainstream affordability requirements.

JBSP mortgages work by combining the incomes of up to four family members, which can significantly help boost the borrowing potential of many customers who may otherwise be unable to purchase a property on their own. While in most cases, the additional family members are often considered to be parents supporting their FTB children, JBSP mortgages can be used in various situations. Other close familial relationships, such as brothers, sisters, and stepparents, can also be considered on applications.

Although all supporting borrowers are named on the mortgage deeds, they have no legal ownership of the property itself. This also means they have no potential stamp duty surcharge liability, as they are only named on the mortgage to maximise borrowing power.

Over the last few months, we’ve seen increased demand for this type of product among second-time buyers and borrowers facing a change in circumstances, such as those going through a divorce or relationship breakdown.

In each of these cases, the applicants were struggling to meet affordability requirements to buy out their partner at the remortgage stage. This resulted in the applicant having to enlist the help of their parents or siblings to increase their purchasing power to get the deal over the line.

As a lender, we were able to help these borrowers find a solution, as our lending criteria means we will consider JBSP applications from borrowers looking to do a transfer of ownership and buy out their partner with a family member stepping in as a supporting borrower at up to 90% LTV.

A JBSP mortgage can also be used in many other situations, such as when an applicant may be looking to make home improvements. In this situation, applications from borrowers will be considered with support from a family member at up to 95% LTV.

With an increasing number of people taking their mortgages into and past the traditional age of retirement, there’s also the option for borrowers to consider a reverse JBSP, which enables children or grandchildren to help their parents or grandparents struggling to meet affordability.

This can prove particularly useful in cases where Mum and Dad are on an interest-only mortgage which is coming to the end of the term and need to remortgage onto another deal.

By adding their son or daughter onto the mortgage as a JBSP, the parents may be able to secure borrowing at up to a maximum of 60% LTV and can take the mortgage past the age of 80.

In all JBSP mortgage borrowing cases, a maximum of four borrowers are allowed per application, which equates to two owner-occupiers and two supporting borrowers. Joint borrowers cannot reside in the property, and all applications are credit checked, not credit scored. The owner-occupier must be employed, self-employed, or in receipt of a pension income. They must also be able to cover a minimum of 25% of the loan based on income multiple, which is calculated at up to 4.5 times all incomes before retirement.

Applying for a JBSP mortgage is a straightforward process that opens up enormous potential for all borrowers facing affordability challenges in the current economic climate, not just FTBs. Brokers with clients struggling to meet affordability at the remortgage stage or going through a meaningful change in financial circumstances would be wise to explore JBSP as a possible borrowing option to help their clients secure the financing they need in what remains a challenging mortgage market.

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Luke has accumulated 17 years’ worth of financial services experience having previously worked at Halifax, Santander, and Connells Mortgage Services. He joined The Loughborough in 2018 as a mortgage adviser within the direct advice team before transferring over to the intermediary team in 2019 where he worked his way up to become a telephone BDM prior to his promotion.

In his new role, when required, he will assume additional responsibility in the absence of the head of intermediaries and will be heavily involved with supporting key intermediary partners and developing new relationships.

Ashley Pearson, head of intermediaries at Loughborough Building Society, commented: “Luke has played an integral part in the growth of The Loughborough’s intermediary channel over the past five years. He has thoroughly earned this promotion and he will continue to play a key role in developing new intermediary relationships, as well as in strengthening existing ones, as we look to further extend our intermediary proposition in H2 2024 and beyond.”

Luke Berrington added: “Working with brokers across the UK for the past five years, alongside the team here at The Loughborough, has been incredibly rewarding. I’m looking forward to becoming even more heavily involved in growing our intermediary offering and better servicing the ever-evolving needs of our key partners and their clients.”

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The Society has teamed up with local Leicestershire-based tech provider Provident IT to develop web-based tools offering comprehensive affordability calculations across the Society’s extensive range of residential and buy-to-let mortgages.

The calculators were developed in collaboration with selected intermediary partners, ensuring the inclusion of key broker-friendly features and functionalities. They feature an intuitive interface with straightforward instructions for smooth navigation and enhanced accuracy.

Designed to provide a seamless user experience across all devices, the tools respond in real-time, offering immediate and accurate affordability assessments and allowing brokers to test hypothetical scenarios before final submission.

The residential calculator includes specialist lending products such as shared ownership, lending in retirement, high-income multiples and self-build, in addition to the lender’s ‘standard’ residential offerings.

The buy-to-let calculator covers let-to-buy, family buy-to-let, and holiday buy-to-let, alongside the Society’s ‘standard’ BTL product.

Provident IT is also developing a Joint Borrower Sole Proprietor (JBSP) calculator for The Loughborough, expected to be completed later this year.

Ashley Pearson, Head of Intermediaries at Loughborough Building Society, commented:

“As a Society, we are continually evolving from a tech perspective and place immense trust in our intermediary and tech partners to ensure we are heading in the right direction.”

“Following a comprehensive engagement, development and testing process, we are pleased to launch affordability calculators that encompass unique areas of the specialist lending marketplace. These areas have become essential for borrowers and the intermediary community in today’s increasingly complex lending environment.”

“Both calculators provide a function that allows for the affordability assessment to be sent directly to the broker in a PDF format. We believe this feature will have a positive impact by ensuring brokers obtain clearer and quicker lending decisions, meeting a broader range of client needs.”

Harvey Bolton, Managing Director of Provident IT, added:

“We’re delighted to partner with Loughborough Building Society on this innovative project. At Provident IT, we focus on leveraging technology to create practical solutions for our clients – whether that’s through web-based applications or comprehensive IT infrastructure.”

“We look forward to continuing our collaboration with The Loughborough and exploring new ways to push the boundaries of what technology can achieve in the financial services sector.”

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The use of stipend and bursary income for mortgage affordability purposes is a relatively niche and unknown area of the mortgage market.

Yet, every year, thousands of people are in receipt of this type of income as they embark on their studies and begin to lay the foundations for their future career.

For many of these people, studying may be a requirement of their chosen profession, while for others, it may be that they’re returning to further education or opting to take another career path later in life.

Whatever the circumstances, many of these professionals are likely to harbour homeownership aspirations at some point, and the ability to use stipend or bursary income to get on the property ladder can make all the difference in helping them achieve their goals.

Understanding the income 

A stipend is a form of income commonly given to groups of certain workers in place of a traditional salary. This includes PhD students, members of the clergy and charity workers. The purpose of a stipend is to cover essential expenses such as food, transport, phone bills and rent while the individual gains experience, training and education in a certain area. 

A bursary is similar to a stipend, in that it’s generally given to eligible students to help them fund their studies. They tend to be dependent on a student’s household income and other financial information. In some cases, bursaries are provided by companies to encourage students to study in certain underrepresented fields.

Although this area of the market can be quite niche, there are a handful of lenders in the market who will accept stipend or bursary income for affordability purposes for those borrowers who fall into this category and wish to apply for a mortgage.

Obviously, borrowing criteria vary between each mortgage lender, but at Loughborough Building Society, for example, we can use 100% of the income received for affordability purposes as long as there are 12 months remaining on the bursary or stipend agreement.

Real-life scenarios

As a result, we receive and process a lot of applications from brokers with clients in receipt of this type of income, the most recent being from a 57-year-old man who had recently gone back to university to study engineering and was in receipt of a bursary.

With two years left to go on his course, the client wanted to raise money from his buy-to-let (BTL) property and use his bursary income to purchase a static caravan to live in while studying. While this situation is certainly unique, it does show how bursary income can be used towards a property purchase, even in more unusual circumstances.

Another example includes professional athletes such as Team GB students in receipt of stipends to help them finance their living costs while they study and train. In this situation, earning a stipend or bursary income would not exclude the client from taking out a mortgage, provided they met the lender’s borrowing criteria.

It’s also worth remembering that all these higher and further education borrowers will eventually come to the end of their studies and become newly qualified professionals. At which point, they’ll have the option to move onto another mortgage product with an enhanced income multiple.

In this situation, we’ll consider applications up to 95% LTV from newly qualified professionals previously in education or vocational training who have not completed six months in their new role or who have a contract of employment to start in the next three months.

For example, if the applicant has no employment history but qualifies as a medical doctor in May and has a contract of employment within the occupation to start in August, then this would be accepted. Other professions considered would be a surgeon, anaesthetist, barrister, dentist and pilot.

I hope these examples outline that earning a stipend or bursary income is not a barrier to taking out a mortgage, and brokers with clients that fall into this category should ensure they speak to a lender familiar with this area of the market who can guide them through this process.

The post Helping clients with stipend and bursary income appeared first on The Loughborough Building Society.

Building a detailed client profile is an important part of the mortgage process. The more information the lender has, the more successful and straightforward the application will be. This is especially true when it comes to referring clients with a history of adverse credit, where soft facts are just as important as hard facts in determining the client’s borrowing needs.

A good referral should always include as much information as possible as this gives the lender greater insight into the circumstances surrounding the client’s credit profile. This is particularly important in situations where the client has built up a significant level of debt, taken out an IVA or debt management plan.

Supplying as much detail as possible at the outset will also help to prevent delays to the application process and avoid a series of back-and-forth emails and phone calls between the underwriter and the mortgage broker.

We often receive referrals from brokers where a client with a history of adverse credit is looking to secure a mortgage. The best referrals include soft facts that help to bring the client’s story to life and highlight how their circumstances have changed over time rather than solely focusing on the financial details.

A good example of the level of detail required was evident in a recent case where a husband and wife were looking to purchase a new property following the completion of an IVA.

The clients had £42,700.00 in unsecured debt and had entered an IVA in 2018 after the husband was made redundant after three years with his employer and only received a small pay out. Since then, all the payments under the IVA and the mortgage held on their existing property were fully maintained.

The clients had also taken out a credit card to rebuild their credit profile and were seeking to increase their borrowing amount from £90,000 to £150,000 to purchase a new home.

Although all the basic facts and figures regarding the client’s finances were included, very little information regarding the finer details of the clients’ situation before, during or after the IVA was taken out, were supplied.

For example, although it was clear that the client was made redundant, there was no information about whether the applicant found another job. This information is crucial.

Similarly, as it’s a joint application, the client’s wife’s employment history details should also be included and if she wasn’t employed, then an explanation for this is also needed. 

Including details such as the fact that the client was earning over £50,000 in his role before being made redundant is important in helping the lender understand the circumstances that led to the IVA, particularly as he was then unemployed for four months before securing a position paying £25,000.

While this helped to cover the mortgage payments on their existing property, the couple continued to struggle financially, prompting the wife to return to work on a part-time basis while also caring for two small children.

Delving into the reason behind the debt is crucial as it helps to eliminate lender concerns about the clients’ propensity towards debt.

One of the main reasons for the high level of debt was due to a £25,000 loan to cover the cost of a new kitchen, while credit cards were used to pay for Christmas, holidays and emergency expenses.

Although the applicants admitted to overspending in the years prior to taking out the IVA, the significant drop in income coupled with the wife staying home to look after young children severely impacted their finances.

However, five years after taking out the IVA, the couple were both working full-time and earning a combined salary of £53,000 per year. They have also been saving to buy a larger property as they need more space now that their children are older and in full time education.

Providing a detailed account of their story in the five years since taking out the IVA helps to create a clear and concise picture of the clients’ financial background. It also helps the lender understand why they are applying for a bigger mortgage.

Whilst this is a complex set of scenarios, it does help outline how speaking to a specialist lender about what information is required when referring clients with a history of adverse credit can help brokers achieve a more streamlined application process and enable them to service the needs of their clients quickly and more effectively.

The post Soft facts as relevant as hard facts in specialist lending cases appeared first on The Loughborough Building Society.

Rumours that Chancellor Jeremy Hunt planned to introduce a 99% LTV mortgage designed to help first-time buyers (FTBs) get a foot on the property ladder in the Spring Budget dominated headlines last month.

While the finer details of the supposed government-backed policy were rather scant, the news sparked a significant level of debate and criticism among commentators over its legitimacy but the idea was scrapped as quickly as it had apparently been conceived.

One of the major objections to the proposed scheme was that having a smaller deposit risked leaving buyers in negative equity if house prices were to drop significantly in the future.

Another concern was that, although it would ease the pressure on FTBs when saving for a deposit, it would not make the cost of buying a property any more affordable, especially in the higher interest rate environment.

Given the fact that the concept of a 99% mortgage was not too far removed from a product that already exists in the market – the 100% mortgage – the furore and attention surrounding the proposed scheme came as somewhat of a surprise.

Alongside many other lenders, we have been offering 100% mortgage products for quite some time, therefore, a government-backed 99% mortgage product did not seem such an unusual concept.

While it is certainly true that 100% mortgages have come under a fair amount of criticism over the years, this type of lending solution can offer a perfectly viable alternative for those borrowers who are looking to get onto the property ladder but are struggling to raise a deposit.

There are many different variations of this type of mortgage in the market today and understanding what they are and how they work is important when addressing the needs of a variety of clients.

For example, here at The Loughborough, we have a suite of family assist mortgage solutions including a family deposit product which enables the borrower to take out a 100% LTV mortgage and have another family member (typically parents) guarantee a deposit of up to 20% of the purchase price.

This can be done by placing a collateral charge against the depositor’s own property or as a cash lump sum into a savings account offering a 3% interest rate. In both scenarios, the deposit is released after seven years, or sooner if there is enough equity in the property when it is time to remortgage.

This can prove to be an attractive solution for parents and family members in the current higher interest rate environment where gifting a deposit may no longer be financially viable. Instead, a family assist mortgage not only means they will get their money back; they will also earn interest on their money while still helping their child buy a house.

A similar proposition is available through our Joint Borrower Sole Proprietor (JBSP) Deposit Guarantee product which enables a family member to provide a 20% security against their house or as cash held in a deposit guarantee account, while also boosting the applicant’s borrowing capacity by using family members’ income for affordability purposes.

Again, in most cases, this tends to be the borrower’s parents, but other family members such as grandparents, siblings and aunts and uncles can also be listed on the application, although the property will only be legally owned by the occupier.

As with all forms of borrowing, there will always be an element of risk involved and family members should ensure they seek legal advice to understand what would happen if the borrower failed to keep up with mortgage payments.

Given the level of complexity involved in these applications, it is important to note that each one is individually assessed and underwritten to ensure maximum affordability for the client. This also enables brokers to get answers to any questions they may have regarding the application process.

Not only does this help to provide surety of service and outcome, it also allows brokers to help their clients explore every avenue of getting on the property ladder and achieve their homeownership aspirations in an innovative yet responsible manner.

The post Why reading beyond the headlines is crucial for 100% mortgages appeared first on The Loughborough Building Society.

The retirement landscape in the UK is undergoing significant change.

People are living and working longer than ever before, with socioeconomic factors such as the average age at which many people now buy a house and have children all playing a major role in this shifting dynamic.

Rising house prices over the last few decades have seen the average age of first-time buyers increase to 34 years old, according to the Office for National Statistics (ONS), with the knock-on effect being that many people are entering their 50s, 60s and 70s still carrying mortgage debt. 

Similarly, a growing number of the population are choosing to start a family later in life, which means many people are now entering what has traditionally been considered their retirement years with ongoing family commitments such as childcare fees. 

This is having a major impact on how consumers plan for, and live through, their retirement years, with the days of working for several decades and retiring at the age of 60 a thing of the past for many. Similarly, advancements in science mean people are now living longer, healthier lives and spending a greater amount of time in retirement and in the workforce.

Yet despite these shifting social dynamics, the mortgage market has been slow to respond to the changing needs of this demographic, with many product offerings failing to take into account the increasing demand for solutions that cater for these changing needs. 

Adapting to the times 

This is particularly true for those borrowers in their pre-retirement years, who, despite being healthy and able to work, face difficulty trying to secure a mortgage after the age of 55.

In many of these cases, these borrowers have been declined a mortgage on the high street due to their age. 

However, we continue to experience growing demand for this type of borrowing, with some of these individuals looking to downsize to a smaller property, while others still want or need to continue working to finance their mortgage, lifestyle and family commitments.

As our lending criteria have no upper age limit, these clients have been successful in securing an interest-only mortgage, as this option can be taken out for up to 35 years regardless of the client’s age at the time of application.

For example, this means that pre-retirees looking to downsize can use the sale of their property to secure an interest-only mortgage with a maximum loan to value (LTV) of 60 per cent, provided they have a minimum amount of equity in the mortgaged property. This ranges from £500,000 in London and £350,000 in the South East and South West to £225,000 in the Midlands and Wales and £200,000 in the North.

There is also the opportunity to combine this with a capital repayment option of up to 80 per cent LTV, subject to the client meeting the minimum equity requirements. In this case, the 60 per cent LTV limit will still apply on the interest-only part of the loan.

Income multiples of up to five-and-a-half times income and loan amounts of up to £750,000 are also available on interest-only mortgages, enabling borrowers to tap into a substantial amount of equity that may have been built up in the property over the longer term. 

In cases where the property is the applicant’s main residential home, interest-only is available up to 75 per cent LTV, with any lending above this limit available on a capital and interest repayment basis only.

If the client does not have enough equity in the property, they can use a percentage of their pension fund – for example, 25 per cent of a £300,000 pension fund (£75,000) – as a repayment vehicle, enabling them to take out an interest-only mortgage of up to £75,000. 

All these options demonstrate the growing flexibility required to support this growing demographic who, though approaching the traditional age of retirement, are not in a position to leave the workforce, remain undecided about the future or want to continue working for the foreseeable future.

And being aware of these options could result in more clients being able to continue working towards their retirement goals while simultaneously earning an income that will help to boost their retirement fund when they are ready to leave the workforce. 

The post Interest-only options for pre-retirees appeared first on The Loughborough Building Society.

This facility will be available on loans up to 80% LTV across The Loughborough’s residential product range for purchase or remortgage purposes on the applicants main residence. It is applicable for those applicants who have previously been employed in the same line of work as their new business and is also available for newly qualified professionals with one year’s worth of accounts.

A year two projection may be considered on referral where the business has been trading for a minimum of 18 months and the projection has been prepared by a qualified accountant.

Each case will be assessed on an individual basis.

Ashley Pearson, Head of Intermediaries at Loughborough Building Society, commented:

“Securing a suitable mortgage continues to prove that bit more challenging for many self-employed people across the UK, with this demographic often falling foul of one-size-fits-all mainstream lending criteria.

“For brokers with self-employed clients, it’s never been more important to understand the breadth of available options and in recognising the flexibility of certain lenders when looking to place this type of business, even for those relatively new business ventures.

“We hope this positive criteria enhancement will help open up more avenues for this vital component within the UK workforce to access the type of mortgage product they need and deserve.”

The post Loughborough Building Society enhances self-employed criteria appeared first on The Loughborough Building Society.

The challenges facing first-time-buyers (FTBs) have been well documented over the years, with rising rents, limited housing stock, stagnant wages and the cost-of-living crisis placing additional pressure on the disposable income of many would-be buyers.

Most recently, these challenges have been further exacerbated by the higher interest rate environment and widespread economic uncertainty that has gripped the UK, all of which have combined to make saving for a deposit even harder than before.

It’s not just FTBs who have been feeling the pinch. Second steppers, buy-to-let (BTL) landlords and many of those approaching retirement age have also felt the impact of increased living costs, some of whom have seen their borrowing capacity reduced as they struggle to overcome affordability barriers. 

Against this backdrop, the number of borrowers turning to family members to help them get onto the property ladder has increased. In fact, research carried out by Legal & General shows the Bank of Family was expected to provide support for almost half (47%) of house purchasers under the age of 55 in 2023 alone.

However, given the recent economic challenges faced by all homeowners, gifting deposits and financial contributions may no longer be a viable option for many. In which case, a concessionary purchase mortgage could prove a suitable alternative by allowing family members to sell their home to another family member at a rate which is below market value.

In the majority of cases, lenders offering concessionary purchase mortgages will allow the sale of a property at a discounted price with no deposit, provided it is between family members. In some cases, this can also include step parents.

Concessionary purchases between family members means that applicants can use the equity within the property being sold to fund the deposit, which helps to make the purchase more affordable by reducing the overall price.

Some lenders, such as The Loughborough Building Society will also consider applications where the parents may want to sell their residential property to their son or daughter but would like to continue living in the property under a family BTL mortgage.

This can prove to be a useful solution for borrowers approaching retirement age who may have seen their disposable income significantly reduce as a result of increased living costs and can no longer continue with their mortgage.

In this case, a concessionary purchase of the property can be made by the owner’s son or daughter provided they are homeowners themselves and earn a minimum of £25,000 a year. Under these circumstances, seeking independent legal and tax advice is recommended as there could be some inheritance tax implications.

Concessionary mortgages can also be used by landlords looking to offload a property before the end of the current tax year by selling it to an existing tenant. This can prove to be a good arrangement for any FTB renting a property in an area they like, as it could provide them with a viable solution to get on the property ladder.

It can also help the landlord avoid the time and effort involved in putting the property on the market, as well as potentially saving them thousands of pounds in estate agency fees by carrying out a private sale.

In this scenario, the landlord is able to contribute to the deposit by offering a reduction on the price of the property as an equity gift, however, the applicant would also be required to put down a 5% deposit to secure the sale.

The mortgage rates and terms offered on a concessionary mortgage are usually similar to a standard mortgage, but it’s important to note that not all lenders offer them. Advisers with clients who may be interested in the concessionary purchase option should always ensure they engage with lenders who are experienced in such a transaction and have the capacity and capability to underwrite this type of mortgage application.  And for those borrowers who may not realise that this may be an option, this is an area in which well-informed advisers can really shine. 

The post Understanding concessionary mortgage purchases appeared first on The Loughborough Building Society.

Every January, the new year ushers in the chance for change, the opportunity to start afresh and set good intentions for the year ahead. For some, this may mean improving their exercise regime and their diet, while for others, it might involve moving house, changing jobs or getting their finances in order.

The last few years have proven to be extremely challenging for many UK households, with the cost of living crisis placing significant financial pressure on disposable incomes, causing some to run up debt, tap into savings or put their home improvement plans on hold as they wait for greater economy certainty.

However, as we begin 2024, the economic outlook does seem a little brighter and, as a result, the early months of the year may be the time for homeowners to consider their remortgaging options as they evaluate ways to manage monthly mortgage payments, start a home improvement project or pay off debt.

Aside from naturally coming to the end of their current deal, there are a number of reasons why a borrower may seek to remortgage with another lender, including for debt consolidation purposes, to capital raise or because of a change in their personal circumstances.

For example, those going through a divorce may find they need to remortgage and conduct a transfer of ownership during the settlement process in order to gain full ownership of a property. In this case, LTVs of up to 90% are offered by some lenders, providing borrowers with greater scope for achieving a clean break during a challenging and emotional time.

Most recently, easing inflation and a less volatile interest rate environment means now may be a good time for homeowners, who may have been holding off, to act as competition amongst lenders begins to heat up across the remortgage market.

Remortgaging can also prove to be a useful tool for raising capital as it allows homeowners to tap into any equity built up in their home by using this to consolidate and pay off any debt that may have accumulated or to carry out a home renovation project.

For example, Loughborough Building Society allows remortgages for home improvement purposes up to 95% LTV, provided details of any planned works at the higher LTV band are clearly outlined during the application process. For debt consolidation purposes, mortgages of up to 80% LTV are available, including for those people with a high debt to income ratio.

This means that someone earning £50,000 a year with a further £50,000 in unsecured debt may also qualify for a mortgage, provided there is proof that they are regularly servicing the debt. This can be done on an interest-only basis and on a term of up to 40 years.

Another example where remortgaging may prove a viable solution is for those Help to Buy clients who have taken out a five-year equity loan to get onto the property ladder and are now coming to the end of the interest free period in a higher interest environment.

Exploring their remortgaging options and raising capital to repay the loan and buy the property outright may make more financial sense in the current climate and mortgages of up to 90% LTV are available to help the borrower achieve their goals and take full ownership of the property.

Of course, brokers will always need to ensure that any fees or charges associated with leaving a mortgage early are factored into the advice process to ensure they are securing the best outcome for their clients. And, while remortgaging may not be a suitable solution for every client, the flexibility it offers means it should always be front of mind when advising clients throughout what could prove to be a busy year for this particular sector.

The post Flexibility through remortgaging appeared first on The Loughborough Building Society.

The last few years have proven to be somewhat challenging for many UK consumers, with rising living costs, soaring inflation and ongoing uncertainty presenting a significant number of challenges for many mortgage borrowers.

In the buy-to-let (BTL) sector, this has been further exacerbated by unfavourable tax changes such as the withdrawal of mortgage tax relief, the stamp duty land tax reform, a variety of increased regulatory demands, all of which have placed a squeeze on the profit margins of landlords.

For many smaller and accidental landlords, the combined impact of all these changes has been significant, with many finding themselves stuck with nowhere to go or having to move onto a less attractive product transfer deal.

Yet, as the end of another year rapidly approaches, there are signs that the UK economy is beginning to show signs of recovery. Inflation has fallen to its lowest level in two years, reaching 4.6% in October and the Bank of England base rate has remained steady at 5.25% since August following 14 consecutive hikes since December 2021.

This will come as welcome news for many BTL borrowers, particularly those who have seen their finances stretched and profit margins squeezed over the last few years and as such, will seek ways to reduce their costs and boost their borrowing power by seeking out the lowest rates when their current deal expires.

However, while it’s certainly true that interest rates are beginning to see a downward spiral, it’s important that any broker looking to address the needs of their BTL clients look beyond the headline rate when assessing affordability to ensure the product offers the best possible outcome for their clients’ needs.

For example, a broker may find that, in some cases, a lower rate mortgage product actually comes with a higher fee – even as much as 7% to 8% of the overall loan value – therefore making the cost of borrowing significantly more than if a client took out a product with a slightly higher interest rate. In comparison, a product with a slightly higher rate may have a lower fee and work out to be more cost effective over the term of the mortgage and save the client money.

Assessing the way in which lenders calculate affordability can also make a difference to the borrowing capacity of some BTL landlords, with features such as top-slicing proving a useful tool in maximising affordability among borrowers. Approaches to the offering of such a facility will also differ from lender to lender. Here at The Loughborough, we top-slice at 90% of a borrower’s disposable income, which can make a significant difference in those situations where a landlord’s rental income fails to sufficiently cover the BTL mortgage interest repayments. 

For example, a client with a net monthly income of £3,000 and a net disposable income of £1,002.70 after all mortgage payments, loans and essential expenditure costs are factored in, can use 90% of their disposable income towards the rental coverage, the equivalent of £902.43.

This can provide a substantial boost to their affordability, particularly when compared to a product where top-slicing occurs at 60%, as it can increase the client’s borrowing capacity and help them secure a more cost-effective deal for their needs.

Of course, there will always be situations where a lower rate higher fee product may better suit the needs of a client, in which case, recommending the product will be best advice. However, for any broker with a BTL client looking to secure a mortgage, looking beyond the headline rate and taking a broader look at how the true cost of a BTL product is calculated is an important consideration when determining the best and most affordable deal for their needs. 

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