Demystifying The Mortgage Market: From New Speed Limits in Wales to Interest Rates and Self-Employed Mortgages

Embark on a journey to demystify the complex terrain of the mortgage market while getting up to speed on the new 20 mph limits in Wales. We delve into the potential ramifications of these speed limits on electric vehicles and public transportation, not overlooking the Bank of England's recent interest rate bump and its implications on inflation. Amidst this, we examine an unsettling trend - individuals resorting to loans for bill payments rather than for luxury purchases. 

In the latter half of our discussion, we focus our attention on the world of self-employed mortgages, underlining the necessity of thorough due diligence and the significance of experienced mortgage brokers. Navigate through the murky waters of agreement gray areas involving buyers, financial advisors, and estate agents. Uncover possible motivations behind estate agents pushing their own financial advisors and solicitors, and how to tackle scenarios when attractive rates surface online. Stay tuned for our next episode for a deeper exploration of the mortgage market's labyrinthine pathways.

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Chapters

• 0:00 Mortgage Market and 20 MPH Limits
• 8:15 Important Considerations for Getting a Mortgage
• 18:00 Navigating Self-Employed Mortgages

Transcript

Speaker 1: 0:00

in this episode of the podcast I'm going to be covering off some stuff around the mortgage market and how that's going at the moment. I can answer some kind of key questions. Some of our clients ask us about mortgages and that we see being asked all the time. They'll be right at the end. So stick around right at the end to listen to the kind of frequently asked questions we get and it'll be a little bit of a rant around the 20 mile an hour limit that's coming into Wales at the moment. Welcome back to the podcast Flying solar.

Speaker 1: 0:36

Today Shane is wearing his hollybabs somewhere on a cruise in France. I think it's France. Yeah, he is on a Disney cruise. He's probably enjoying himself. Don't know whether where there's like mine, because it looks a bit rough out in Europe at the minute but yeah, I'm sure he's enjoying himself. So, yeah, it's just me on the podcast today.

Speaker 1: 0:55

So we're going to kind of cover off a few kind of things I mentioned in the beginning and the mortgage market, because that's a big one we're kind of hearing a lot about the moment. But I want to have a bit of a rant Well, kind of I say rant, it's more so on the way to work this morning 20 mile an hour limits. They're coming into Wales thick and fast. Can't remember exactly when they're coming in, but if you ever driven a 20 mile an hour it is literally like you're going backwards. It is so slow and it's really weird because from what I kind of read is all to do with noise pollution and emissions and things. But I'm sure my car is louder when I'm in lower gears, kind of going really slow. And how does that affect things like electric cars, because they're quiet all the time so they're not actually given permission, so they still have to drive a 20 mile an hour. Are they going to change that kind of rule? I'm not really sure where they're trying to go with this, but it kind of feels like they're trying to reduce the amount of cars on the road and expect you to kind of get public transport and get your bike to work. Well, that's not going to work for the vast majority of people because I'm not going to cycle 11, 12 mile to work, then 11, 12 miles back home when I've got to pick my kids up, I've got to be home for certain times, got to go to client meetings, I have to take my car to work and we also have an electric car as well. So it might be impenalised because I've gone down that route. I don't know. But I'd be interested to know what Mr Drakeford has to say about that, because I think there's a different motive beyond what they're doing, because our public transport in Wales is certainly not geared up to deal with that.

Speaker 1: 2:29

I went to catch our train from home in the Cardiff recently and three trains got cancelled on the bounce, so I had to take my car in the Cardiff. So I tried my best, mr Drakeford, to use public transport, but sadly it's flawed, so I don't know why. The parts are kind of UK, this is kind of coming in, but it is in Wales at the moment and it's being rolled out a lot of places, and they've got their speed cameras out already trying to catch you doing more than 20 mile an hour. The funny thing is, though, actually I was behind a learner driver today. Now, whenever you're behind a learner driver, they generally do sort of five mile an hour under the speed limit anyway. So if it's a 30 mile an hour, they're only doing 25. What I kind of found this morning was that I was second learner driver. It was doing about 10, 12 mile an hour in a 20 mile an hour zone. So that was really slow. I'm sure I saw a few people walking past me quicker, but that's another thing.

Speaker 1: 3:25

But the mortgage market, let's talk about it. It's an interesting place at the moment. It's been a pretty interest in times. Since kind of last year, interest rates have been rising rapidly. The Bank of England put it up again this month and I do think we've got a potentially a couple more rises. I think we're going to get ourselves close to 6% because they have this idea that what they're doing is going to reduce inflation.

Speaker 1: 3:54

But I'm not convinced it will. I'm not sure we're looking at the right dynamics that are actually affecting the inflation at the moment, because one of the big couple of the big things which are affecting inflation is the price of fuel. You know the kind of running our house which would not really feel the effects of it. That so much at the moment because we're in the summer, but as soon as we have the winter, which I think is going to be a pretty golden one, judging by the state of our summer this year and it was a few people had kind of heating on, I think near us you see the boilers going pretty fast around the houses. But I think these bigger things that are causing the inflation is cost of fuel, general cost of livings going up with regards to food, what you can buy and all that type of stuff. And I know what they're trying to do. They're trying to increase the interest rates on the mortgage to try and stop people spending money.

Speaker 1: 4:46

But what they're not taking into account and we've seen this. So we've spoken to a few people about this. We've actually seen it in real life. We've had people actually coming to us asking for help. It's not something we particularly help with, but we've sort of direct it in the right direction. But people are actually taking loans out now in order to pay their bills and using their credit card to pay their mortgage and their rent.

Speaker 1: 5:09

But I don't think the government are taking this into account. I think they're seeing that people are still taking finance out, taking loans and all those type of things to actually go and buy luxury goods, but I'm inclined to say that isn't the case in all cases. I think a lot of people are actually taking finance out now so they can actually go and pay their bills Now. That's a real problem and if that's what the government are not picking up on by increasing the interest rates, it's not going to help anything. All we can have is a huge wave of repossessions and people not paying their mortgages, and I do think that is the bigger picture. I think, in reality, the government, without having a crystal ball, is trying to force us into a bit of a recession, a bit of a reset, because they like a reset and if we reset, we can rebuild, which is not a great way to treat us in this country.

Speaker 1: 5:56

But I think everything got a little bit out of hand. The interest rates got so low, people took so much borrowing. People probably took mortgages bigger than they were. You know we're seeing it now. People are coming to us for refinances now and their interest rates have gone up. You know we're considering it. Some people have been on good five-year deals and they're starting to come up now this year, in next year there's going to be interest in times ahead and especially in the bike-led market as well. That's getting pretty rough as well. So I think the Bank of England will raise the interest rates slightly again and at some point they are going to have to stop. I think that's going to stay with us till probably at least Q4 next year and then we might see a bit of a settling down of the interest rates and the mortgages.

Speaker 1: 6:34

But I think we've got to be kind of mindful that interest rates are going to be high and there's a lot of stuff in the press about lenders putting their mortgage rates down. We had this with Halifax we're bringing our mortgage rates down, we're going to make things easier for you. So we had a lot of clients contacting us who were with them saying, oh, our rates have come down, so we want to check. They haven't. They haven't actually really moved at all. So what came down was kind of certain types of buyer like first-time buyer or home mover, and I was the same with a lot of lenders. We actually didn't really bring the mortgage is down, like they kind of said in the press. I think they kind of wanted to give some good news but actually just meant that you know, financial advisor like us would be bombarded with questions from people. So we hear the interest rates gone down now they haven't really. So it's an interesting time at the.

Speaker 1: 7:22

I think now is the time. If you've tried to do your mortgage before on your own, I think now is the time you really need to go and see a mortgage broker To try and get the best deal you can, because you know we do have access to more lenders some in the region of eighty plus lenders and anyone. Time can be over 10,000 products. If you go on to the kind of internet you're not going to get the kind of the best deal or one of the kind of fiction. I'll touch on that a minute. So it's one of my questions and frequently ask questions which I'm going to cover off. But you know Inflation is still high. It has been coming down. Whether it'll hit the target they want to get it to, which is the sort of two percentage target, I don't think it. Well, I think the government got to be a little bit more realistic with what they kind of thinking and how they think the market's gonna head. So yeah, it's, it's an interesting time. I think now's the time you really need to.

Speaker 1: 8:15

If you're in, you got a mortgage, you really need to speak to someone professional about it, because it's just not ideal to go on the internet and try and find you the best deal. You might be actually staying with your current lender is Is the best option will most broken, can check that out. But they also check the whole market for you and actually see, especially if you do invite a lot. That's a really tough market at the moment because rents are not kind of compatible with the lenders Calculation they use to give you the maximum loans, which we find that's really hard to play some kind of by. Let mortgages and we have to say to a lot of landlords you might consider putting your rent up, because that's what's driving these things at the moment Is interesting times. But there are some positives. You know there are. You can still get a mortgage. That's not a problem. The way lenders are lending no kind of issues yet borrowings a little bit less because the multipliers and the risk to the lender. But they haven't stopped lending. That's the one thing. So if you think in a movie is the right move for you, you can afford it, you know, go for it.

Speaker 1: 9:14

Don't kind of don't let all the kind of negative press kind of put you off with that when you the kind of things that kind of said. So there's a lot they kind of take in one of the time. I'm gonna kind of cover off some kind of common questions we asked by Some of our clients. So you use, when we hear a lot, do I have to use the estate agent, solicitor or financial advisor? That's an interesting one. Now a lot of estate agents Will say that you have to use them and the reason you have to use them is because you speed the process up and Means that you're more likely to buy the house.

Speaker 1: 9:53

Now I got a couple of views on this. When I kind of get it from the estate agent point of view is the fact that if they use their own financial advisor, their own solicitor, it can control the process. So it means that they can contact and they can keep the seller informed of how the buying process going because they've got the solicitors close to them and they've got the financial rise close to them. Now there's a little bit of a gray area over the fact that actually you probably need third party consent to actually have these conversations because the agreement will be with you and the financial rising, you and the solicitor. By thinking estate agents, solicitors, have probably a bit of a kind of deal going on there.

Speaker 1: 10:32

So I understand from that point of view, but you cannot be forced to use their financial rise in their estate agent and their solicitor. There's actually guidance which is set out by the regulator of the estate agents to say that they cannot force you to do that. You can't basically be made to use their in-house. You can't take independent advice because what you will find with a lot of the bigger estate agents, the mortgage brokers in-house are not independent. They do have a tied element to them. They can only use certain products.

Speaker 1: 11:03

And the other thing is the reason a lot of estate agents are using it, anselist and the using this is because they're getting kickbacks. They run the business, they're trying to get as much income as they can in from different sources, so there'll be money kind of flowing. So it's in their financially beneficial interest to use their own financial riser Anselist. But what they can't do is force you to do it. If they do try and force you to do it, getting in touch with us, I can send you the code which is in the estate agent's effective governing body which says they can't do it, and if you quote that to them they will kind of leave you alone. But I've used some horror stories recently. I'm on effectively a mortgage community with sort of like 4,000 different advisors on there in the UK and there's been some horror stories of what some estate agents are doing, actually to the point where they're threatening clients in. You know we won't put your offer towards what will pull your offer from the seller Because you're not using our financial riser. I'd be interested to know if the actual seller knows that some of these tactics are going on. But it's quite interesting what's going on. So, no, you don't have to use them, but there are some benefits to potentially using them. In fact, they can kind of control the process. But I'll leave that kind of call up to you, but don't be pressuring to doing it.

Speaker 1: 12:13

Okay, now another one we have. We've had this from clients in the past and we still kind of get it. We get an email saying I found this great rate online. Send us a screenshot. Why have you offered this rate? Okay, and I'll have a look at it and I'll say, okay, that's fine. So we're going to have a look, we'll do some research and we'll come back and say, okay, use an example of one. Client came to us and said I want this rate. This is much lower. So we looked at it and it was a discounted variable rate. Now what that means is discounted off the lender's standard variable rate. So therefore it's not a fixed rate and it can go up and down. So I went back to the client game and call and said, okay, great, got this rate, we can do it for you. So it is a brilliant rate.

Speaker 1: 12:55

But you asked us for a fixed rate mortgage and they said oh, is that not a fixed? I was so explained them that it wasn't and they were quite shocked at the fact that, as far as they were concerned, on looking online, it looked like a fixed rate mortgage. Now, I don't know how that was portrayed on the online kind of portals which they kind of looked in, but that's a common one where people see this rate 3.24%, and the best fixed is four and a half. Well, they don't realize it's a discounted rate. Now, there's nothing wrong with discounted rates, but they're not for everyone because they're not fixed and these people actually wanted a five year fix. So this was nowhere near what they wanted. So once I explained to them Now, then we've had others where they come to say this is great rate, it's with, for example, lloyd's Bank and it's this rate really low.

Speaker 1: 13:40

So then I'll go and have a look and I'll come back to the client and say that's great, yes, we can get you that rate. Can you just give me your premier banking account number? And they'll say why don't I bank with Lloyd's? Ok, well, this rate is only four premier bankers with Lloyd's or Barclays on that West. Now, none of this is actually in the kind of main print of when you go sourcing for these mortgages. All you do is you put in this is how much my mortgage is. This is, I think, is worth this, what's your, and they'll just bang out as many rates as it possibly can at you, but it won't tell you the individual details of it.

Speaker 1: 14:12

And we've had other ones where they've kind of come to us and like, yeah, we can do that, fine, this is five thousand pound feet. The lender like so I didn't see that and it doesn't explicitly say, or it doesn't have, it might be a remortgage and it doesn't have free valuation or free legal. So be very careful about what you shop and online. Ok, and also bear in mind that these online sites are making money from every referral they send through to the mortgage lender, so they have a kind of beneficial interest in sending you to those places. Ok, so that's an interesting one and it's one.

Speaker 1: 14:44

We get a lot. And that's why I say look, you know, we are mortgage brokers. We are professionals in what we do. We've been doing a long time, especially in our company. We've been doing this over 15 years. We're professionals in what we do. You know you don't go to the kind of dentist and tell the dentist actually can you take out this to us? I think it's really bad. But that's the dentist. They're the professional you trust them. You need to trust you more, brother.

Speaker 1: 15:08

We're not Commission and any fees on mortgages. A pretty level playing field is not much in it. They don't actually pay a lot of commission anyway. So people are not sending you to a different lender because they think it's going to get them more commission. Mainly why you'll choose a certain lender is Speed of processing. The best rate fits your individual criteria as a client. So they did not really go in at it from a point of view we're going to make more money from it. They're trying to do the best for you, okay, and they'll explain that you especially. If they haven't explained that, ask them. They'll explain why they use a certain lender. So that's kind of one way we kind of need to look at it.

Speaker 1: 15:47

What's the bike that market like pretty tough at the minute. That's when we get asked a lot. Interest rates are high. The rental calculations don't always fit with properties, so it's a little bit of a tougher market. But you can get mortgages out there. You just got to be mindful. Not on every deal I could use to would fit now, because by that interest rates are very high. You know they generally got a five or six percent sort of market or hiring them and some of the commercial rates even higher again. Another one which I wouldn't say. We always got lots of questions on.

Speaker 1: 16:17

What I see a lot around is by self employed getting mortgages. Now there's a lot of companies out there where by as an owner or director you don't take all the money you could do out of the company. You kind of leave a lot of what we call profit in the company. So you might only draw minimal salary and dividends class all you actually need. And if you draw more you're going to pay more tax. So you leave a lot of kind of money in the company. So that's what we would call retained profit. Now so let's just say for argument's sake, you drew salary and dividends of up to 50,000. So you stay in the kind of basic rate tax sort of area and therefore you wanted a mortgage and say the maximum you get was four times that. You get 200,000 pound mortgage. Okay, but you might have 200,000 pound retained profit in the business year on year. So that would mean playing the same four times in multiplier.

Speaker 1: 17:12

You can actually take an 800,000 pound mortgage. And you might think, wow, how does that happen? Well, because Lenders look at it from a point of view that you could take that money out of the. You just choose not to because you don't pay tax on it, so it is affordable. If you needed to, you could take the profit to pay the mortgage. And Look at the history of how long this happened.

Speaker 1: 17:32

It's not just the one off. You've got this retained profit is a little bit more due diligence to it, but there are a handful of lenders who will do this. Now we've come across this. Before. We dealt with a couple of clients in London who had been to various kind of mortgage brokers around. I think they've been to five or six and every single one looked and said your salary and dividends is X amount. We can only get you this. They came to us and we said that's great, yeah, you're looking for 1.5 1.6 million pound mortgage. Yeah, we can do that and they're blown away the fact that actually could be done and it's all a jit miss.

Speaker 1: 18:00

All done through the land is all about retain profits, is a lot of due diligence, you have to provide a lot of information, but it can be done and you're not paying a premium rate either you. You You're not paying a high rate for that service. It's actually there for you, the mainstream lenders. They really gotta do, but there is only a handful of them and you've got to know the kind of process now to kind of do it. So that's why it once again, I Go to the fact that don't just go to your bank, don't just go online, because you might just get a computer says no, when actually you might need experience of a mortgage broker who understands how self employed market works and they can help you with that.

Speaker 1: 18:35

So there's just some of the frequently asked questions we kind of get asked. I'm covered off. Will cover off a few in another video when we kind of do some topics. Yeah, so that's all from today. She'll be back next week. This podcast is coming this week while he's on his hollow Bob's in France, sending himself probably not this, probably raining, and I'll see you next week.