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If you want to talk to us, please use one of the numbers below:

For new business enquires:

Holly Andrews: 01799 582885

AToM, Intrinsic, Knight Frank Finance, Private Finance, TBMC, TenetLime, Vantage

email: holly.andrews@saffronbs.co.uk

Debby Tedder: 01799 582925

L&G, L&G Mortgage Club and all affiliated firms, PMS Club, Sesame

email: deborah.tedder@saffronbs.co.uk

Lewis Wheeler: 01799 582894

Brightstar,Complete, 3mc, Mortgage Intelligence, Next Intelligence, Platinum Options

email: lewis.wheeler@saffronbs.co.uk

For cases in progress call:

Mortgage Team: 01799 582966

email: mortgage.processing@saffronbs.co.uk

For technical support call:

Emma Hall: 01799 582966 option 2
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If you are a journalist and require further information, please contact:
Josh Cooper, Cooper Consultants Ltd
07768 355265
josh@cooper-consultants.co.uk

Head Office

Saffron House, 1A Market Street,
Saffron Walden,
Essex CB10 1HX.
Telephone: 01799 522211


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Blog

Mortgages for struggling second-steppers

‘Second steppers’ planning to move up the property ladder are finding it a tougher task than getting their first mortgage, according to recent research*.

Nearly a third say they had to turn to the bank of mum and dad to help fund their next house move. Limited equity in their first home and modest savings meant that moving into a larger home was a real challenge.

There is help at hand for homebuyers facing this predicament. Here at Saffron for Intermediaries, we have two mortgage products that are ideally suited for struggling next steppers:

Next Step Mortgage – a 5-year discount that is available up to 95% LTV.

Owner occupied 3.29% 3-year discount mortgage – we’ll lend up to 90% LTV and there is no arrangement fee.

And if parents or grandparents want to help by gifting a deposit, that’s fine with us, we’re happy to accept this form of help on many of our mortgages, and have produced a useful article which explains Gifted Deposits if you want to know more.

If you have any questions about any of our mortgage deals, please speak to either Debby Tedder on 01799 582925, Holly Andrews on 01799 582885 or Lewis Wheeler on 01799 582894, who will be happy to help.

Anita Arch
Head of Mortgage Sales

* Lloyds Bank research, June 2017.

New rules for Portfolio Landlords

A new set of rules are being introduced by the Prudential Regulation Authority (PRA) with effect from 30th September this year, which govern the way lenders assess buy-to-let mortgage applications from landlords who own 4 or more mortgaged properties (portfolio landlords).

There is concern that many landlords are unaware of these changes and that they could cause a lot of problems for those seeking to raise mortgage finance after 1st October.

What changes are being made?

The PRA has stipulated that lenders must adopt a specialist approach when underwriting applications from portfolio landlords, who will be required to provide detailed information about their properties, business and income and expenditure.

In summary, the new rules state that portfolio landlords must provide the following:

• A schedule showing all the individual properties which make up their total portfolio and a summary of their experience as a landlord
• A statement of assets and liabilities, including future tax implications and all outstanding mortgage balances
• A cashflow forecast
• A business plan

Lenders have to assess a landlord’s total portfolio of properties and not just those against which they already have or are applying to have a mortgage.

Although this sounds onerous, it’s not terribly different to the procedures many lenders have been adopting for some time, so the level of disruption will probably be far less than many commentators have been predicting.

What will Saffron Building Society’s approach be?

The answer is that it will be almost identical to our existing approach!

Specifically:
• The minimum income coverage ratio we require on properties being financed is:

  • Remortgages with no capital raising: rental cover of 125% of the pay rate.
  • Remortgages with capital raising and a new BTL: rental cover of 140% of either the pay rate +2% or 5.5%, whichever is the higher.
  • 5 Year fixed rates: rental cover of 140% of the pay rate

• All other BTL assets in the portfolio not financed by the society must meet rental cover of at least 125% of the pay rate, both individually and collectively.
• We’ll lend on up to 10 properties in aggregate, with a maximum exposure of £1.5 million to any individual.
• We’ll lend up to a maximum of 75% LTV on each property (which includes fees to be added)

All applications will be individually assessed by an underwriter and exceptions to the above will be considered on a case-by-case basis. This will be dependent on the borrower having alternative sources of income to support shortfall from operating cash flow.

At full mortgage application stage we will require four additional documents:
Business plan, cash flow forecast, property portfolio schedule and a statement of assets and liabilities, which can be found here: www.saffronforintermediaries.co.uk/other-documents/.

For further information

If you would like further information about the way in which we will treat applications from portfolio landlords, please feel free to speak to our Business Development Managers who will be happy to help:

Debby Tedder – 01799 582925
Holly Andrews – 01799 582885
Lewis Wheeler – 01799 582894

We look forward to being able to help you and your portfolio landlord clients.

Anita Arch
Head of Mortgage Sales

Permitted Development Rights Explained

In this, the second in my series of blogs which address issues that affect property developers, I would like to focus on permitted development rights and explain why they represent a potentially important opportunity.

What are Permitted Development Rights?

Permitted development rights enable certain types of building work to be carried out without applying for planning permission. This is possible because of a general planning permission granted not by a local authority, but by Parliament.

More specifically, Article 3 of the Town and Country Planning (General Permitted Development) Order 1995 first allowed certain types of development to proceed without the need for planning permission. More recently, The Town and Country Planning (General Permitted Development) (England) Order 2015, sets out the scope of permitted development rights.

The most commonly used rights relate to residential properties and cover minor extensions and erecting structures within a property’s curtilage, without requiring planning permission.

Permitted development rights apply not only to residential properties, but also to commercial properties, although different types of building will have different permitted development rights that apply.

It’s also worth bearing in mind that in some parts of the country known as ‘designated areas’ permitted development rights are more restricted. These include conservation areas, national parks, areas of outstanding natural beauty, world heritage sites and the Norfolk and Suffolk Broads.

Permitted development rights can be removed by an Article 4 Direction, which specifies an area where a council decides to remove all or some of the permitted developments. These typically apply in places such as conservation areas.

If in doubt, it’s always sensible to consult the local planning authority before undertaking any work, just to make sure.

Commercial Property

There are a significant number of commercial properties located throughout the country that are suitable for repurposing and which are covered by permitted development rights.

Typical examples include office blocks constructed in the 1960s, often on the edge of large towns and cities, which are no longer required for commercial purposes. They can make ideal structures for converting into flats and apartments and in inner-city areas they may be suitable for conversion into student accommodation.

It’s not only offices. Many old agricultural buildings, light industrial units and warehouses can be repurposed and put to good use once again. There may be additional issues that need to be addressed such as contaminated land and some of the plots may be in the less desirable areas of a town, so developers need to carefully consider the wider range of issues that may present themselves.

A ticking clock

Just because a property is currently subject to permitted development rights, doesn’t mean they will last forever. As mentioned above, planning departments are able to revoke permitted development rights by issuing an Article 4 Direction.

Also be aware that exemptions to permitted development rights are currently in force across 17 local authorities including London’s Central Activities Zone as well as parts of Manchester and Ashford. Developers who have secured prior approval before the exemption was put in place have until May 2019 in which to complete the change of use.

It should not be assumed, therefore, that a development opportunity will remain in place forever.

Financing a change of use development

Development finance is available for property developers who are planning to repurpose an existing commercial building.

Here at Saffron Building Society, for example, we’re happy to receive applications from experienced investors who want to redevelop an exiting building.

We welcome proposals up to £3 million and are particularly interested in development projects based in London and the South and East of England. We will also consider applications from developers based elsewhere in England and Wales.

Please bear in mind, however, that the property must be developed as a commercial project for sale on completion. It cannot be developed as the investor’s main residence.

Further information

You can find further information about permitted development rights at:

Department for Communities and Local Government:
www.gov.uk/guidance/when-is-permission-required#What-are-permitted-development-rights

House of Commons Briefing Paper (June 2017) ‘Permitted Development Rights’:
researchbriefings.files.parliament.uk/documents/SN00485/SN00485.pdf

The Planning Portal: www.planningportal.co.uk/info/200187/your_responsibilities/37/planning_permission/2

Want to talk about development finance?

If you want to talk about funding for a development project, then give me, Peter Owen, a call on 07824 095807 or send an e-mail to: peter.owen@saffronbs.co.uk

I will be delighted to discuss your requirements and explain how Saffron Building Society may be able to help.

Design makeover for self-build mortgage

I’m delighted to announce that we have launched a new mortgage product for people wanting to build their own home.
 
When we researched the needs of Britain’s band of self-builders, we found that their top priorities as far as mortgage finance was concerned were:
 
·     Having low monthly payments, to help their cashflow during their building programme.
·     Having the flexibility to draw down funds as and when required, rather than needing to adhere to a pre-determined schedule of stage payments.
·     Being able to accommodate first-time homeowners, especially children who may have been gifted land by their parents.
 
We have therefore gone back to the drawing board and have completely redesigned our self-build mortgage proposition.
 
Our new product keeps monthly payments low by offering a 2-year discount of 4.20% (SVR – 1.19%) on an interest-only basis.
 
We have also moved away from stage payments, preferring instead to let self-builders draw down funds as and when required. We will lend up to:
·     65% of the purchase price of the land
·     100% of the build cost (subject to the loan to value ratio not exceeding 75%)
·     75% of the gross development value (the final value of the property)
 
Our new self-build mortgage has also been opened-up to first-time borrowers. We found that some parents who have spare land are making it available for children to build a home of their own and our new product will enable their offspring to fund the construction of their first home (stamp duty is not payable if the land is donated by parents).
 
Find out more about our self-build mortgage. Alternatively, please feel free to speak to our Business Development Managers who will be happy to help:
 
Debby Tedder – 01799 582925
Lewis Wheeler – 01799 582894

 
We believe that our self-build mortgage is now perfectly designed for those people who want to build their perfect home. All mortgage applications are assessed on their own merits by a skilled underwriter and brokers and their clients are guaranteed a fast and personal service.
 
Anita Arch
Head of Mortgage Sales

A welcome boost for buy-to-let

The CML’s June statistics confirm that volumes of buy-to-let business are down this year. April saw a 17% decrease in buy-to-let lending by value and 16% decrease by volume and nearly two-thirds of all buy-to-let lending is now remortgage business.

Here at Saffron, however, we have one statistic that is bucking the general buy-to-let trend: the number of enquiries we receive about expat buy-to-let deals is at an all time high.

Expat buy-to-let has always been one of our areas of expertise and we’ve developed a strong reputation for being able to help British expats who want to invest in property back here in the UK. What’s more, expat mortgage deals are a great opportunity for brokers to boost their buy-to-let business at a time when the rest of the sector is in the doldrums.

I’m therefore pleased to be able to report that we’ve just made our expat buy-to-let proposition even stronger. We’ve introduced a new 75% LTV band offering a discounted rate and borrowers no longer need to show a history of having a UK mortgage. We also have no country restrictions and are happy to receive applications from as far afield as Australia! We will also consider first-time-buyers and first-time landlords.

Our expat buy to let deals include a new 3.69% discount (SVR – 1.7%) for 3 years up to 75% LTV. It has an arrangement fee of 2.5% and early redemption charge of 3% for 3 years and mortgages are available from £30K up to £1m over periods up to 40 years.

What’s more, the good news doesn’t end there.

We have also enhanced our everyday range of buy-to-let mortgages, by launching new discounted and fixed rates. We will now accept first-time landlords and our rental cover requirement on debt-to-debt remortgaging is only 125% of the pay rate.

Rates include a 2.49% discount (SVR – 2.9%) for 2 years up to 75% LTV,
or a 2.77% fix until 28/02/23 up to 75% LTV. The arrangement fee is 2% and
early redemption charges are 2% for 2 years for the discounted loan and 3% until 28/02/23 for the fixed rate mortgage. Mortgages are available from £30K up to £1m over periods up to 40 years.

Find out more about our buy-to-let deals. Alternatively, please feel free to speak to our Business Development Managers who will be happy to help:


Debby Tedder – 01799 582925
Lewis Wheeler – 01799 582894

The buy-to-let market may have taken a downturn this year, but hopefully these enhancements to our buy-to-let range will help intermediaries generate more business in a challenging market.

Anita Arch
Head of Mortgage Sales

Section 106 and CIL explained

When I talk to developers I’m often asked for information about a range of technical issues such as Section 106 agreements, brownfield site development and issues relating to planning gain.

I thought it may be helpful, therefore, to produce a series of short blogs which provide background information about these issues. This first blog aims to explain section 106 legal agreements and the Community Infrastructure Levy. If you would like further information about these subjects, you’ll find some useful links at the end of this blog.

What is a Section 106 Agreement?

Section 106 (S106) agreements, which are also known as planning obligations, are legal agreements made between local authorities and developers.

S106 agreements are designed to address issues that new developments may place on local infrastructure. The agreement will vary depending on the nature of a development, but will typically address issues such as:

• Affordable housing
• Highways
• Education
• Public open space
• Town centre improvements

The content of a S106 agreement is agreed during the consultation period of the planning application and the agreement is prepared by the council’s solicitor. Smaller developments have the option of completing a Unilateral Undertaking instead of a full S106 agreement.

What is a Community Infrastructure Levy?

A Community Infrastructure Levy (CIL) is a new planning charge introduced by the government via the Planning Act 2008. It provides a means of ensuring that a new development contributes to the cost of the infrastructure that the development will rely on, such as schools and roads.

The levy applies to most new buildings and charges are based on the size and type of the floor space being created. The idea behind the CIL is that it’s fairer, faster and more certain than the system of S106 planning obligations, which are negotiated on a case-by-case basis.

Under the system of S106 planning obligations only 6 per cent of all planning permissions nationally made any contribution to the cost of supporting infrastructure. With CIL, all but the smallest building projects will make a contribution towards infrastructure costs.

S106 or CIL?

All local authorities in England & Wales are empowered, but not required, to charge a CIL on new developments in their area. Although S106 planning obligations will continue with some developments, reforms have been introduced to restrict their use.

It’s worth bearing in mind that the CIL is intended to provide infrastructure to support a development, rather than make an application acceptable in planning terms. There may therefore be some site-specific impact mitigation requirements without which a site won’t be granted planning permission. A S106 planning obligation may therefore be imposed to ensure that the consequences of a development can be mitigated.

What is and is not liable for CIL?

A development will be liable for CIL if it involves:

• new build of at least 100m2 gross internal area (GIA) floor space
or
• the creation of one or more dwellings.

A development is not liable for CIL if it:

• involves only a change of use, conversion or extension.
• is for structures such as wind turbines, pylons or buildings into which people don’t normally go (e.g. for housing plant or machinery).
• is permitted by a ‘general consent’ or is for a use which benefits from zero charges set out in the CIL charging structure.

Further information

You can find further information about S106 and CIL charges at:

https://www.gov.uk/guidance/planning-obligations

https://www.gov.uk/guidance/community-infrastructure-levy

http://www.planningofficers.org.uk/downloads/pdf/POS_Advice_Note_S106_and_CIL_final_version_Apr2011.pdf

You may also find further information in the planning section of your local authority’s website.

Want to talk about development finance?

If you want to talk about funding for a development project, then give me, Peter Owen, a call on 07824 095807 or send an e-mail to: peter.owen@saffronbs.co.uk

I will be delighted to discuss your requirements and explain how Saffron Building Society may be able to help.

Cash Control

‘There’s no such thing as a free lunch’ so the old saying goes.

Which is not strictly true, because sometimes a ‘free’ deal can be just that. But often there are strings attached and they can make the deal far less palatable.

One such offer that’s been meeting with a less than enthusiastic reception from brokers recently is free legals. On the face of it, free legals seem to be a great offer: no legal fees to pay on remortgages. But the downside is that the borrower has to use the lender’s chosen conveyancing firm. Which means that you and your client start to lose control over the deal.

Increasingly, brokers are complaining that with many of the free legal deals the service is often slow and unreliable. Some conveyancing firms appear to be struggling to keep up with demand and it can sometimes be a lottery knowing when your client’s application is going to be assessed.

It’s no surprise, therefore, that brokers are encouraging lenders to offer their clients a cashback rather than free legals. Brokers and their clients are then free to choose their own conveyancer and, as a result, maintain control over the application process.

Which makes eminent good sense.

We have therefore decided to give borrowers a choice and we’re now offering an £800 cashback on selected remortgage products, so that borrowers can choose which conveyancer they prefer to use. There are no strings attached; it’s a simple and straightforward offer.

If you would like to find out more about our remortgage deals that come with a cashback, click here . Alternatively, please feel free to speak to our Business Development Managers who will be happy to help:

Debby Tedder – 01799 582925

Lewis Wheeler – 01799 582894

Self-build mortgage or development finance?

Here at Saffron Building Society we provide finance both to individuals wanting to build or refurbish a home of their own and to house builders and developers who want to construct property for others.

There is sometimes confusion as to what constitutes a self-build mortgage and what makes a deal development finance, so I thought it may be helpful to clarify the differences.

Self-build mortgages

Self-build mortgages, as the name implies, are for individuals who are looking to build a home of their own, refurbish an existing property or demolish and rebuild a house.

The important point is that the property, when completed, is occupied by the person applying for the mortgage. Self-build mortgages are normal residential mortgages (and are regulated), but the funds are usually released in stages as the building or refurbishment work is completed.

Here at Saffron, we’ll also provide funding to buy a plot of land and will lend on an interest-only basis until the project is completed.

Full details about our range of self-build mortgages, including a free downloadable Guide to Self Build Mortgages, can be found here.

Development Finance

Development finance is an entirely different kettle of fish and is a funding facility provided to builders or property developers who are constructing properties for sale.

All our property development finance deals are bespoke to an individual project (which may be for a single or multiple properties) and are provided to experienced property developers or builders who have planning consent for a development project.

Here are some of the key features of the property development finance we can provide:

• We’ll lend on residential new build, refurbishment or property conversion projects based in England or Wales (we don’t lend in Scotland).
• We are particularly keen to hear about projects in our own heartland: East Anglia, London and the South East.
• We’ll lend on single properties or multi-unit developments.
• We typically provide funding of between £500,000 and £3million, but can be flexible.
• We will lend up to 75% of the costs or 65% of the gross development value, whichever is the lower.
• We will provide finance for the purchase of land as well as the construction costs.
• We’ll offer flexible terms to suit your requirements and funding can be drawn-down in stages throughout the term of the project.
• Rates are agreed on a deal by deal basis.

In summary, therefore:

Self-build mortgages are aimed at individuals building or converting property that they will subsequently occupy themselves.

Property development finance is for experienced property developers who will sell on to others for profitable gain, the properties they construct.

Both self-build mortgages and development finance can be tailored to meet the specific needs of an individual borrower.

Want to talk?

Borrowers wanting to discuss a self-build project should contact Saffron Building society on 0800 072 1100.

Mortgage intermediaries should contact either:

Lewis Wheeler on 01799 582894 or e-mail: lewis.wheeler@saffronbs.co.uk

Debby Tedder on 01799 582925 or e-mail: Deborah.tedder@saffronbs.co.uk

If you want to talk about funding for a development project, then give me, Peter Owen, Head of Property Development Finance, a call on 01799 582931 or send an e-mail to: developmentfinance@saffronbs.co.uk

I will be happy to discuss your requirements and explain how Saffron Building Society may be able to help.

Finance for a broken housing market

The prime minister, in her forward to the government’s White Paper ‘Fixing our Broken Housing Market’ stated that “We need to build many more houses, of the type people want to live in, in the places they want to live.”

She went on to say: “We will diversify the housing market, opening it up to smaller builders and those who embrace innovative and efficient methods and we will work to attract new investors into residential development.”

The White Paper goes on to confirm that somewhere between 225,000 and 275,000 new homes need to be built per year to keep up with demand and acknowledges that the construction industry is too reliant on a small number of big building firms.

Smaller builders and property developers therefore have an important part to play in helping to fix the broken housing market.

But there is a problem.

A reluctance to lend

Research conducted by the NHBC Foundation back in 2014, confirmed that 22% of builders and property developers believed that obtaining finance was a major problem. When asked to explain the issues, 50% said banks were reluctant to lend to small builders, 30% said it took too long to obtain mortgage finance and 25% said banks didn’t understand their business. A damning indictment.

Although the financial recovery was well underway when the research was undertaken, builders did not believe that banks were doing anything to make money more easily available to property developers. There appeared to be a mismatch between big banks and small property developers.

A like-minded approach

The good news, however, is that not all funding needs to be provided by big banks. At Saffron Building Society we have a specialist property development finance team who understand the needs of small builders and property developers. We’re not a mega-bank, we’re a more focussed regional building society which means we understand the needs of smaller businesses and are able to take a more personal approach to the way we do business.

Helping you get your development project off the ground

If you’re seeking finance to fund a property development project, then we may well be able to help. We assess each and every proposal on its own merits and don’t have off-the-shelf finance solutions, preferring instead to create a bespoke package that meets the exact requirements of our customers.

Here’s an overview of the type of developments in which we’re interested:

• We’re happy to talk to experienced property developers or individuals with experience of the property development market, who have planning consent for a development project.
• We’ll lend on residential new build, refurbishment or property conversion projects based in England or Wales (we don’t lend in Scotland).
• We are particularly keen to hear about projects in our own heartland: East Anglia, London and the South East.
• We’ll lend on single properties or multi-unit developments.
• We typically provide funding of between £500,000 and £3million, but can be flexible.
• We will lend up to 75% of the costs or 65% of the gross development value, whichever is the lower.
• We will provide finance for the purchase of land as well as the construction costs.
• We’ll offer flexible terms to suit your requirements and funding can be drawn-down in stages throughout the term of the project.
• Rates are agreed on a deal by deal basis.

Want to talk?

If you want to talk about funding for a development project, then please call 01799 582931 or email DevelopmentFinance@saffronbs.co.uk.
We will be happy to discuss your requirements and explain how Saffron Building Society may be able to help.

Gifted Deposits

Gifted deposits have become increasingly common, as first-time buyers continue to struggle to raise a deposit of their own and turn to parents or close relatives for help.

So how does a gifted deposit work?

As its name implies, it’s money that is given by the parent, grandparent or other close relative as an unencumbered gift. It cannot be a loan and the gift giver cannot charge interest nor have any interest registered in the property as they could be deemed to have a vested interest in the property, which may prevent lenders from considering the deal.

Once the gift has been made, the giver has no future claim over the money thereafter.

If your client is buying a property using a gifted deposit, you should let the lender and your clients’ conveyancer know as soon as possible, so that they can prepare the necessary supporting paperwork, which will include a gift letter. In order to comply with anti-money laundering rules, the lender will need confirmation of where the money for the deposit is coming from along with evidence of how the money has been accrued. You’ll therefore need to provide bank statements along with suitable proof of identity, such as a passport, of the person who is gifting the deposit.

All parties should seek financial and/or legal advice about the implications for them before entering into such a transaction. For example, your client may be buying the property jointly with a friend or partner and their parents may wish to gift the deposit only to their child. If that’s the case, they may want to consider the property to be held by both parties as tenants in common with unequal shares. It may also be sensible for them to complete a Declaration of Trust document, which sets out their future intentions and there may be inheritance issues that need to be considered as part of their inheritance tax planning.

With the benefit of a gifted deposit, your client may have a wider choice of mortgages available to them, such as Saffron’s fixed rate deals.

We’re happy to accept gifted deposits. For further information, speak to your local Saffron Building Society Business Development Manager.

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