Posted by September 27th, 2023on
Today more than ever, lenders are encouraging their existing customers to ‘product switch’ their mortgage. If you’re coming to the end of your initial rate period or have dropped onto your lender's SVR, you’ll likely jump at the chance. After all, what they’re offering is good, old-fashioned customer service, right?
Not always. If you’ve never used an experienced broker before, you’ll go on believing you’re getting the best deal from your current lender.
In some cases, you may well be: a product transfer is the right option for you. But, I want to show you why remortgaging is a viable option, by:
- Helping you realise why dealing with one lender is ‘inadvisable’;
- Showing you which key offers to avoid (e.g. ‘execution only’);
- Availing you of the ocean of choice by using an experienced broker;
- Conversely, explaining product transfer ringfencing, and when is the right time to consider it.
My current fixed rate is about to end; will I pay more?
Let’s get the elephant in the room out of the way. If you took out your fixed-rate deal between two and five years ago, you’re going to pay more for your mortgage today.
The Bank of England’s base rate is 5.25%, and the market predicts that’s around where it will stay for the next two- to three years. If you’ve held back on remortgaging thinking there’s going to be a significant rate cut, don’t kid yourself. Not. Gonna. Happen.
Now that that’s out of the way…
What ringfencing is
I know not everyone reading this article will be ready to take the plunge right now. But, did you know that you can ringfence your next mortgage deal for up to six months before taking it out?
Not many people do. But with our help, lining up your next fixed rate mortgage way in advance is a doddle.
We constantly monitor the best mortgage rates.
We’re 100% independent, so can approach any lender on your behalf.
What’s more, our team is in constant contact with its network of underwriters across the UK mortgage landscape.
This puts us in a unique position: we can give our clients the opportunity to tie in a fixed-rate deal up to six months before theirs is due to expire.
In a time when the world is so volatile, and the Governor of the Bank of England has categorically not ruled out further base rate rises, having that option is invaluable.
What if rates go down after I've ringfenced a deal?
You are not committed to any rate we ringfence for you until you give us the all-clear to proceed. So, should lenders bring their rates down in the interim, we can often drop that ringfenced rate to get you a better deal.
Some lenders allow you to swap ringfenced rates as often as you like. Others set a limit on the number of times you can swap. When you talk to one of our advisors about specific lenders, they'll let you know how flexible they are.
Remember, we're constantly monitoring rates, so there's no chance of FOMO. Here are more reasons you should consider tying in a deal as soon as.
When ringfencing a product transfer might be an option
Protecting yourself from rising interest rates is an obvious reason you’d ringfence your next deal.
If you’re on a fixed-rate mortgage, you may be concerned about interest rates rising when your initial rate period ends. Ringfencing a product transfer would allow you to secure a new fixed-rate deal without having to wait until your current period expires.
This allows you to safely budget, and make other key financial decisions, beyond your current deal. Plus, if interest rates rise in the interim, you’re on a winner both ways.
Protecting what you have
Ringfencing a product transfer also allows borrowers to switch to a new mortgage deal with their current lender. In this Cost of Living crisis, that could be essential.
September data has revealed more people than ever before struggling with their mortgage payments. If you’ve struggled yourself, it might make you ineligible to remortgage with another lender.
In this case, a product transfer might not mean simply a lower interest rate. It could be a good option if your existing lender is offering better terms, such as extended fixed-rate periods or even the full term of the mortgage.
Spreading the cost of your mortgage over a longer term will reduce your monthly repayments, but will cost you more in the long run.
I’m on my lender’s SVR; surely a product switch is advisable
With how much interest rates have risen since coming out of the pandemic, I get why a product switch is tempting. Lenders’ standard variable rates are astronomical. If they offer you a new mortgage deal lower than their SVR, you’re going to think you’re onto a good thing.
But here’s the thing about blindly accepting the first rate your lender offers. You’re cutting yourself off from the rest of the mortgage market. And, for contractors and umbrella employees, choice is paramount to getting a mortgage rate that truly reflects their status.
Anything for an easy life?
But I do get it. I can see why a contractor, who may have struggled to get a mortgage under their own steam before, would go for the easy option.
They see the ‘execution only’ deal on their lender’s website. No financial checks, no fees, and no paperwork to compile. Just pick up the phone, and talk to a call centre agent. They send you the paperwork, and all you have to do is sign a handful of times, et voila. You’re done.
But, opting for the easy life could cost you thousands on your mortgage repayments, over time. That's the real risk of going the 'execution only' route. You get no advice, and any liability for your new rate is on you!
I also know contractors. They’ve worked hard to get where they are. They’ve seen cut after cut on what they can claim against tax. And, frankly, they’ve had enough. If there’s a saving to be made, they’re up for it. That’s where we come in.
The flaws inherent in desktop evaluations
The biggest beef I have with product switches is that the lender assumes the value of your home based on your existing mortgage. This is when having a broker who knows how to communicate with underwriters is invaluable!
For a start, we ask: when did you take out your current mortgage?
Even if it’s just two years ago, your home has probably risen in value (depending on where you live, the type of home, etc.). If it was five years ago, you’d have to be unlucky not to have seen a decent increment in the value of your home.
And then there’s: what have you done to your home since you last took out a mortgage?
Let’s be blunt: contractors and umbrella employees earn good money. Many will have spent not an inconsiderable amount ‘doing up their gaff’. A new kitchen, conservatory, garage, garden, loft conversion – there’s no end of improvements you could have made. These all add value.
Putting that value-add to proper use
Most of you know that the more equity you have in your home, the lower the interest rate you’ll pay. The difference between 90% Loan to Value (LTV) and 80% LTV is substantial.
By asking the questions we do about your home, we establish whether you aren’t missing out on savings.
The amount you borrowed for your current mortgage will be the same, minus the payments you’ve made. But if your home has increased in value, there’s every chance the new equity in your home gives you more bargaining power. Most desktop valuations won’t do that!
Once we’ve gone through our valuation Q&A, it gives us visibility into how close you are to that next LTV tier. Now, if you’re a contractor, you’ve probably got retained profits in your limited company. Or, as an umbrella employee, you may well have savings.
If you’re within, say, a couple of grand of that next LTV tier, we put the question to you. Is it worth using those profits/savings to pay off a lump sum and get you to that next tier?
In many cases, the answer is unequivocally yes. And, often, that investment’s recouped within the new fixed-rate period.
We’d need to be precise about the figures, which are unique to each borrower. But why not see if we can get you there?
When is the right time to fix my mortgage rate?
If you’re on your lender’s SVR, act immediately. You’re throwing money down the drain. Average fixed-rate deals are much lower than standard variable rates.
And, contrary to some people’s belief, just because you’re paying more interest doesn’t mean you’re bringing your mortgage down quicker.
Or, maybe you need to set a mid- to long-term budget, even though you’re within six months of your current deal ending. Tying down an interest rate now will help you plan for the future.
Conversely, if you only took out a five-year fixed deal last year at around 2%, do nothing. Enjoy the low repayments while you’ve got them. You have time to plan and budget for increased payments between now and when your deal expires several years from now.
You really product switch for FREE!?!?!?
Another bonus for you: we don’t charge for product transfers. Your lender might be offering several product transfers and you might not know which is best for you.
Our expert advisors will ensure your best interests are at the heart of any decision you make. Whether it’s a product transfer or a remortgage, talk to us in confidence. We can put you on the right path.
Posted by August 17th, 2023on
Are there such things as 'contractor mortgages'? Without wanting to sound like Richard Harris's Dumbledore in The Philosopher's Stone, "Yes. And no."
Let's start with the 'no' bit.
The repayment mechanisms are essentially the same across the mortgage industry for all borrowers. It's getting past the application part that's often the problem for independent professionals.
But it needn't be!
If a contractor goes through a reputable, specialist broker, they should be treated no differently than PAYE employees, with access to similar:
- mortgage terms;
- interest rates;
- deposit requirements.
So, why do most contractors struggle to convince lenders that they can afford the mortgage they know their income warrants?Continue reading about Are there special mortgages for contractors?
Posted by July 24th, 2023on
This last year, mortgage customers have faced a tirade of consecutive interest rate hikes and market uncertainty.
Such a dynamic backdrop has caused a conundrum of challenges, many of which most younger homeowners have never experienced first-hand.
Interest rates stand at an all-time high, with potentially more increases to come. As such, it's crucial that lenders support the flexible labour workforce.
We, as an industry, must supplement that support by providing accurate guidance, communication and flexibility amid the ongoing economic challenges.
Today, we look at:
- how and why the mortgage market got to where it is;
- what we can expect in the short- to mid-term;
- what independent professionals can do to mitigate the varying levels of impact.
Continue reading about Mortgage Market Outlook | Q3, 2023
Freelancer Financials Joins the Freelancer and Contractor Services Association (FCSA) as an Official Business Partner
Posted by May 26th, 2023on
Our mortgage and protection services are now available to Freelancer and Contractor Services Association's 200,000+ network of independent professionals!
London, 26th May, 2023 - Freelancer Financials can today announce our official partnership with the Freelancer and Contractor Services Association (FCSA). The agreement avails FCSA's 220,000-member network of our specialist mortgage services and related insurance cover products.
"We are excited to welcome Freelancer Financials as the latest FCSA Business Partner," said Chris Bryce, Chief Executive of the FCSA.
"Freelancer Financials is a leading contractor mortgage and protection specialist for independent workers, and their partnership will be a valuable asset to our community."
What this partnership means for FCSA members
"We're thrilled to join the FCSA and become a part of this vibrant community of independent workers," said John Yerou, Managing Director and founder of Freelancer Financials.
"Since our inception in 2004, we've devoted ourselves to changing lenders' biased attitudes towards professional contractors and freelancers.
"We have a solid history of approaching lenders directly and helping them develop their own contractor-friendly underwriting criteria. We maintain these relationships daily, safe in the knowledge that specialist underwriters know how to assess independent professionals' true mortgage affordability.
"FCSA's contractors can now get mortgages based on what they're really worth: their top-line day rate!
"Irrespective of their trading structure—Ltd or PAYE Umbrella, in- or outside IR35—professional contractors and freelancers can borrow based on their gross contract income. We look forward to working with the FCSA to support the independent workforce."
Freelancer Financials is a family-owned, independent brokerage of 37 people, winner of multiple awards, and was launched with the sole intention of helping those with specialist incomes own their own homes.
For more information, visit fcsa.org.uk.
Posted by December 14th, 2022on
Today's post is all about the contractors' longstanding best buddy when it comes to mortgages: The Halifax Bank.
First, we look at the lender's report on November house prices.
Then, we look at their most recent assault on the recent rise in interest rates.
The latter by no means return to the historic lows of last year. Or even the optimistic lows of earlier this year, if truth be told. But they do represent a sea change.
Combined with reducing house prices, the drop in interest rates is significant. They might be the first signal that the housing market is changing to a buyer's market for the first time in months, if not years.
Continue reading about Housing Market Movement Oct/Nov 2022 by numbers ~Halifax
Posted by August 8th, 2022on
The Bank of England Monetary Policy Committee voted 8-1 to increase the Base Rate to 1.75% last week. That's the first time the Base Rate's been above 1.5% since 8th January 2009 (to which it dropped from December 2008's 2%).
When the MPC increased the Base Rate from 0.10% to 0.25% in December 2021, few would have predicted we'd reach this 13½-year high so quickly. And the likelihood is, it won't stop there.
What — if anything — can we gauge from the comments and reactions following this latest increase?
Moreover, what do all these changes mean for the many types of UK mortgage holders?
Well, for those on SVRs or coming to the end of their fixed term, it's time to lock in a new deal. For those with longer left to run, there are options, which we outline here.
Continue reading about Good, Bad & Ugly: The Rising Base Rate’s Impact on Mortgages
Posted by June 16th, 2022on
On Friday 4th June, 2021, I reported Halifax's remortgage rates around the 1% mark. A year on, mortgage interest rates look very different. The average two-year fixed rate is now almost three times more expensive than it was then.
Inflation, and the rising Base Rate to combat it, continue to climb. Here's what you can do to lock in a rate to see you through these turbulent times.
Rising mortgage interest rates: what's the story?
The Bank of England's Monitory Policy Committee met on 4th May and raised the Base Rate again. They voted by a majority of 6-3 to increase Bank Rate by 0.25 percentage points, to 1%.
Those members in the minority weren't against raising the base rate. Rather, they'd have preferred to increase it by 0.5 percentage points, to 1.25%!
At the subsequent meeting on June 15th, those in the minority got their wish. From June 16th (today) the Base Rate stands at 1.25%.
This has fuelled the expectation that rates will continue to rise throughout the year. It's worrying, because lenders have already almost trebled their interest rates in a year.
Continue reading about The rush to remortgage as interest rates almost treble
Posted by February 25th, 2022on
For years, investing in property has benefited contractors looking to squirrel away their profits.
That same Buy-to-Let market is flourishing despite (or because of) rising interest rates and inflation.
Today, we take a quick dive into the figures that back up the trend. Moreover, what they might mean for rental income over the next couple of years.
We also gauge reaction from the industry, and how that bodes for the buoyant, bustling buy-to-let investment opportunity.
Table of contents
- UK Finance figures (housing market, whole);
- Buy-to-Let report, Shawbrook Bank;
- Industry reaction:
- Interest rates could drive a surge in BTL remortgages;
Continue reading about Ideal Buy-to-Let Contractor Investment Window Open (For Now)
Posted by January 14th, 2022on
7th April, 2022:
update to our previous longlist announcement
Freelancer Financials makes the shortlist for Mortgage Strategy's "Best Specialist Broker/Distributor" 2022
I'd like to thank everyone who took the time out to vote for us for this most prestigious accolade. You've made us so very proud.
Enough of you voted for us to enable us to make the shortlist.
On the back of that, we've had an interview with the Mortgage Strategy panel.
And, when they announced the longlist results earlier this week, we were overjoyed to see our name on the shortlist!
We're not counting any chickens yet. We're up against five other specialist brokers of varying sizes and who serve various markets.
The winner will be announced on the 25th of May during the Mortgage Strategy awards ceremony at London's Grosvenor House hotel. We'll let you know how we get on but, until then, many thanks again. We couldn't have progressed this far without your support. #Legends!
Continue reading about Mortgage Strategy Awards Nomination: Best Specialist Broker/Distributor
Posted by December 3rd, 2021on
There was a time when contractors chose Limited Company payment structures over umbrella companies. That's because, working through a PSC, contractors retained more of their income than through an umbrella.
Even after paying an accountant, PSCs still made — and continue to make — financial sense. That is: from an income retention perspective.
And, yes: the difference in income persuades many contractors to overlook the risk of IR35's wrath.
Behind the scenes, we've also worked with many lenders to help them understand Limited Company day-rate contract income. So much so that our clients expect their application to breeze through the appraisal process.
Now, with another helpful nudge, many lenders are considering umbrella payslips, too.
So, up to a point: all good in the 'hood.
But, in our article today, I focus on the unforeseen struggles contractors who switch to an umbrella company face with mortgage lenders. It's an addendum to our recent post on ContractorUK, Why your umbrella payslip influences your mortgage application.
As ever, enjoy, comment, feedback to us. We're only too happy to help:
Continue reading about Using Umbrella Payslips to Get a Worthwhile Mortgage