New Year, mortgage cheer for contractors?

As Christmas and New Year fade into the background, many people’s thoughts turn to buying a new home. The reasons are many:

• prospective first-time buyers petrified by the claustrophobia the holidays brought;
• empty-nesters looking to downsize once the winter fuel bills land on the welcome mat;
• growing families reminded over Christmas that they need more space;
• or those same families looking for a location closer to a good school or an easier commute.

The "New Year, New Start" motto resonates to even the dustiest corners of the housing market. The brief home-buyer hibernation over the holiday period is over.

The sniff of Spring is in the air and, this year, the winter blues show signs of lifting long before the first daffodils bloom.

Positive news for borrowers

After the years in the doldrums post-global financial crisis, the housing market may see better times in 2013. Confidence has been low for half a decade, but that could be about to change.

One of the most authoritative sources on market activity is the Council of Mortgage Lenders (CML). The financial institutions amongst its rank account for 95% of UK residential mortgage lending.

In late November, its monthly report suggested recent market weakness may be coming to an end. This good news is, in part, due to the official Funding for Lending scheme. It is doing its job, helping lenders to meet borrowers’ needs.

Now is as good a time as any since 2008 to explore mortgage options. There's a taste of recovery in the air, accompanying the springtime blossom. And it's about blooming time.

Mortgage lending on the up

The CML’s estimates showed total gross mortgage lending of £12.9 billion in October, 2012. That's around 4% up on the previous October.

Chief economist at the CML, Bob Pannell, has gone on record, highlighting what he thinks are the key drivers:

• both home-buying and remortgaging have "picked up recently";
• improving availability and pricing of mortgages should support this trend;
• he hopes Funding for Lending, following its positive launch, will continue to bolster the market,
• counter some of the negative pressures associated with a protracted and weak economic recovery.

Positive news for contractors looking to remortgage

The CML reference to remortgaging is noteworthy. It highlights how many homeowners have found new mortgage deals as their existing arrangements have come to an end.

Like many, these homeowners have had the same mortgage for years. The recent gloom has done little to encourage homeowners or lenders to do anything other than stay put.

Now, homeowners are discovering that their interest rates are no longer as competitive as they were. With the government doing what it can to kickstart housing, now might be the right time to look around.

The early weeks of 2013 may present that opportunity. If you're still not sure - and no one would blame you - you should seek professional advice on new mortgage deals.

Don't forget, these new government initiatives are brand new to High Street lenders for the public market. When you consider the nuances of the contractor mortgage market, getting reliable advice is a must!

Whether you're planning to move, remortgage or a prospective first-time buyer, don't be hasty. Weigh up the options, do the exercise with the new products and draw upon an adviser's insight.

In the majority of cases, it costs nothing to get a guideline quote or even an agreement in principle.

New Buy Scheme

First-time buyers wanting a new-build property have the added incentive of the NewBuy scheme. This may, in the words of the CML,

“allow you to buy a home with a lower deposit than a lender would normally need.”

Contractors need protection cover like everyone else

We always advocate that contractors take out income protection cover. It would amaze you how many take on the responsibility of a mortgage without protecting their income.

Buying a new home will inevitably involve addressing your existing cover policies. You need to ensure that if you can't work through illness or accident, your new family home isn't at risk.

Your adviser can tell you more about mortgage protection and critical illness cover. It's common practice for permies to take out their own insurances either with the lender or under their own steam.

For some reason, independent professionals think they're invincible. They're not. Moreover, there's little chance of 'sick pay' to cover the repayments when they're too ill to earn themselves.

It is also paramount to cover buildings and contents for risks like fire, flood, subsidence and burglary. The last thing you want is to go through the trouble of getting a mortgage for misfortune to undo your hard work.

Don't start 2013 on the right foot, just for the left to trip you up when you're not looking. For the cost of protecting your mortgage repayments, contractor cover's not worth being without.