Despite a global economic downturn it appears that companies offering financial advice are starting to see an upturn in fortunes as Jump Money have proved in their latest results.

The financial advisors saw strong growth in the number of advisors, issued policies and turnover for 2010 in figures announced yesterday.

The Leeds based firm saw the amount of financial advice they charged for increase to just over £3million, a demand which saw them increase the number of financial advisors on their staff from just 2 at the beginning of the year to 17 at the end of the year.

The number of policies issued throughout the year was also up 14% and that growth shows no sign of slowing.

Three months into 2011 the firm have expanded to 24 advisors, adding a further 7, and as a result issued policies and turnover has continued to grow.

The firms primary focus is the life assurance and protection sectors, although they have had to expand to offer private medical insurance, general insurance, secured loans, mortgages and credit cards through the difficult period.

They are now looking to expand into pensions, investment and equity release in the remainder of this year.

Managing Director of Jump Money, Adam Temple revealed, “The last 15 months has certainly seen the Jump Money business expand and develop as we have grown in a variety of areas. At the start of 2010 we had just two advisers and at the end of quarter one 2011 this had grown to 24 not including those based in our retentions department.

“As we currently stand we fully expect to substantially improve on our turnover and number of policies issued by the end of this year, whilst we will also be moving into a number of new and exciting product areas.”

The firm look to find customers without a financial advisor at present, and aim to offer financial advice through a web based platform.

Their existing customers have also welcomed the new ‘Personal Account’ section of their website that gives customers access to client reports, storage for all their policy documentation and the latest offers and discounts.

Gross lending to homebuyers was up 15% in June to £13.1bn, according to new data released today by the Council of Mortgage Lenders (CML). This includes all UK mortgage deals, including both those taking first time buyer mortgages and remortgaging.

This was up 7% on June 2009 and the highest figure so far in 2010. However, June figures traditionally contain a seasonal boost in demand for first time buyer mortgages, and the underlying trend still indicated restrained lending by banks, and subdued demand from homeseekers, compared to previous years.

Some experts have predicted that lending may flatten as the year progresses, as the Government gets to grips with cuts in the public sector, implements the rises in taxes from the June 2010 budget, and freezes on wage increases begin to hit home, particularly with those seeking a first time buyer mortgage.

“Our gross lending estimate of £13.1bn in June represents a seasonal pick-up and is higher than June last year, but is still indicative of low levels of activity,” said Paul Samter, economist with the Council for Mortgage Lenders CML.

“There are signs of house prices stabilising and more properties coming onto the market following the abolition of home information packs.”

Samter also had a word of warning for homebuyers seeking a first time buyer mortgage. He referred to new guidelines that require banks and building societies to restraint in lending, so that those with first time buyer mortgages would not be overstretched and less likely to have difficulty with mortgage repayments in the longer term.

“The FSA [Financial Services Authority] has outlined a clear direction of travel as part of its mortgage market review. The consultation paper on responsible lending increases the regulatory burden on lenders and could make it harder for borrowers to access credit.”

Do you need mortgage advice? Make a mortgage enquiry now or freephone 0800 678 5929

Hopeful homebuyers now need a total of £36,500 up front in order to secure a first time buyer mortgage and the keys to their first home, according to the BBC’s Newsbeat programme.

The Newsbeat report pointed out that the best first time buyer mortgage deals are reserved for those with larger mortgages deposits.

This means that a first time buyer mortgage for a £100,000 house with a deposit of £10,000 would have a hefty monthly repayment of £640, while the same house with a £25,000 deposit would have a more affordable monthly repayment of £500.

In fact, the average deposit now required for a first time buyer mortgage is much higher, at £34,000, the BBC estimates.

Immediate additional costs include a set-up fee for first time buyer mortgages deals of £1,000, another £1,000 in solicitors’ fees, and £500 for surveyor services, meaning that the average first time buyer must have £36,500 in order to move into their first home.

The normal stamp duty that was previously payable is currently suspended in the case of genuine first time buyer mortgages up to £250,000.

One positive development in the area of first time buyer mortgages is a new report this week from accountancy firm Price Waterhouse Coopers which predicts that property values are likely to remain low until at least 2015. The report estimates that at the height of the market in 2007, house prices were overvalued by 25%, but that this has since fallen to under 10% and that, since lending to first time buyer mortgages remains restricted, house prices are unlikely to rise considerably.

Building on outline discussions held in October 2009, the FSA wants to make lenders responsible for ensuring that first time buyer mortgage deals are affordable for the borrower, on the basis of stricter affordability tests to vet the customer’s ability to pay.

First time buyers mortgages will also require much stricter verification of household income, which has been interpreted as a virtual ban on the self-certified first time buyer mortgages, where the customer’s word was taken as enough to obtain first time buyer mortgage deals. Such submissions based on trust were the basis of almost half of mortgage deals from 2007 to the beginning of 2010, said the FSA.

The same guidelines will also require lenders to modify their ‘fast track’ procedures designed to speed up offers to borrowers with good credit records. Now, a standard evaluation procedure may be applied to all borrowers, regardless of their good credit history, where everything must be documented and all boxes must be ticked.

Many homes overstretched by mortgage repayments

The FSA also found that in 2005-2010, 46% of UK households used up all their monthly income, of even had to raise extra cash or credit, to pay their mortgage and living costs.

The FSA has identified that many overstretched homeowners are depending on uncertain future life events, such as an increase in property values, as part of their strategy to repay their mortgage. Other borrowers have taken interest-only deals, which accounted for over 30% of the market in recent years.

“There is a clear link between financial overstretch and mortgage arrears and repossessions, and we are determined to protect vulnerable consumers by making sure that everyone who takes on a mortgage can afford to pay it back,” said Lesley Titcomb, FSA director for the mortgage market.

The FSA’s consultation document will now form the basis of a public debate, due for completion this coming November.

House prices in May showed a marginal drop of 0.2% from April, which was significant for being the first drop in house prices since March 2009.

The Land Registry Index measures only prices based on completed house sales, and as such is more indicative of any first time buyer mortgage deals that lie behind those sales. Other indexes published by lenders such as Halifax and Nationwide are different, in that they reflect sales agreed and mortgage deals which have not yet been completed.

House price behaviour was, as usual, different by region. While the prices outside London may bode well for first time buyer mortgages in regional UK, London itself showed an actual increase in house prices, when taken on its own. London house prices rose by 0.7% in May over April.

In the East Midlands and North-East of England the drop in house prices was most pronounced, at 3.6% and 1.9% respectively.

In addition to the Land Registry Index, other reports confirm that the number of properties now being placed on the market for sale is on the rise.

The Land Registry Index is regarded as a ‘lagging’ index, because the figures it contains reflect sales and mortgage deals up to 3 months after they have occurred.

In general, the drive of the FSA guidelines is to limit the number of homeowners who eventually find themselves in difficulty keeping up with their mortgage repayments.

By ensuring that the financial planning advice offered to those buying a mortgage comes only from fit and proper persons, such as an independent financial planner or other qualified provider of financial advice, homeowners can be more certain of taking on mortgage repayments that will be sustainable and manageable in the long term.

The benefits of independent financial advice were proven in a report by the Association of Mortgage Intermediaries (AMI) which stated that independent mortgage advice will save the average mortgage holder £962 per year in mortgage repayments.

This is because an independent mortgage adviser can take a ‘whole of market’ approach, comparing all mortgages on the market, to the best deal for the customer. Equally, independent remortgage advice will also identify whether staying with the existing lender or moving to a new deal is in the best interests of the customer. An adviser employed by or affiliated to a single lender, on the other hand, can offer only their own in-house range of mortgage deals.

The FSA’s guidelines also cautioned mortgage holders who are considering using ‘sale and let back’ companies to free up capital in their homes, by selling their home but continuing to live in it as a tenant. The FSA recommended security of tenure for sale-and-let-back customers for at least 5 years, and a 14-day ‘cooling off period’ for those opting to sell their home under such arrangements.

The stamp duty break for those taking first time buyers mortgages may go, following the June 2010 budget report published this week.

The June 2010 budget report states: “As announced in the Coalition Agreement, the Government will review the stamp duty land tax relief for first time buyers, taking into account its impact on affordability and value for money.”

The stamp duty break means that the 1% stamp duty levy does not apply to properties valued at less than £250,000. It therefore saves first time buyers up to £2,500 in stamp duty.

The stamp duty exemption was contained in the last budget of the previous government, and fixed for 2 years from March 2010. The Labour government had calculated that the break would cost the government £550m in lost revenues over the two years.

For properties over £250,000, stamp duty is phased in according to three tax bands. For properties from £250,001 to £500,000 stamp duty is 3%. From £500,001 to £1m the stamp duty is 4%. From £1m upwards, a new rate of 5% comes onstream in April 2011.

This means that first time buyers purchasing a property for £249,000 pay nothing (i.e. is currently exempt from paying duty which would have been 1%). However, someone taking a first time buyer mortgage for £250,001 is immediately hit with a 3% stamp duty bill of £7500.03.

Who is a first time buyer?

The definition of a first time buyer is someone who has never owned a property before – not just in the UK, but anywhere in the world. In terms of mortgages, therefore, the stamp duty exemption is available only to those taking first time buyers mortgages.  For couples, both must fit the bill – i.e. you lose your status as a first time buyer mortgage customer, and must pay your stamp duty, if your partner has owned a property before.

The Revenue (HMRC) has recently replaced its simple Particulars Delivered form to make it more difficult for first time buyers to avoid stamp duty. While the Particulars Delivered form was a single sheet reporting names of buyer and seller and price paid, the new form is 6 pages long and records details of all elements of the sale.

This is because some buyers were reporting the price of the property at below the £250,000 threshold but then using a dubious excessive amount for  ’additional cost for fixtures and fittings’ to make the real cost of the property much higher. First time buyers deals with an excessive charge for fixtures and fittings or other add-ons are likely to attract the attentions of the taxman, who can investigate a sale for up to 9 months after the deal is complete.

Read more

While existing homeowners continue to focus on overpaying on their mortgages or clearing other debts, remortgages still managed to account for the bulk of mortgage lending. Remortgages accounted for 24,626 of the 36,709 mortgage loans approved. Remortgaging and equity withdrawal approvals taken together were, however, still lower than a year ago, the BBA said.

Sales of properties remained fairly flat however, with 73,000 homes sold during May, compared with 72,000 in April.

The average value of homes purchased during May was £150,500, which was up 10.5% on last year’s May figures.

The BBA’s figures also confirmed the level of credit card purchases was generally subdued, and down on the six-month average, reflecting again the focus on clearing rather than creating debt. Demand for personal loans was also down on a year ago, according to the BBA.

“High street banks are the main providers in the mortgage market, supplying 75% of all new lending and approving more than 35,000 loans for house purchase each month. The low interest rate environment is resulting in customers choosing to reduce or pay off borrowing, particularly personal loans, rather than saving,” said a BBA spokesman.

Government plans to restrict mortgage lending in this week’s round of budget changes could make first time buyer mortgages more difficult to obtain.

Experts believe that the Bank of England may be given new powers to cap loan-to-value offers from lenders. This could mean higher deposits needed for first time buyer mortgages, with possible restrictions on offering mortgages of over 90% of property value.

Reductions in the availability of high loan-to-value first time buyers mortgages have been a trend for some time. There are currently 174 first time buyers mortgage deals offering 90% loan-to-value, compared with 763 such first time buyers mortgages in 2007.

The Council of Mortgage Lenders (CML) has already warned that building a mortgage cap into the budget changes would hinder growth in the market, and not only for those seeking a first time buyers mortgage.

“We need to remember that what is currently bothering most people about the mortgage market isn’t high-risk lending, but the fact that lending is so constrained into low-risk borrowers that it may be making it more difficult for the economy to grow,” said CML director general Michael Coogan.

The effects of a mortgage cap in the budget changes could be equally serious for existing homeowners. The budget changes could leave existing borrowers trapped in expensive mortgage deals which they were unable to refinance. Consequently their flexibility to switch mortgage lender would be impaired, leaving them with no choice other than to accept the pricing policies of their existing lender.

The budget changes and government cuts will be announced by the Chancellor in the budget tomorrow, 22nd June.

First time buyer mortgages accounted for just 35% of total mortgages sold in April, down rather than up on 38% in the previous April, the Council for Mortgage Lenders CML said in its monthly report this week.

This gives the first time buyer mortgage category its lowest proportion of the total market since September 2007.

The conclusion is of a continuing shortage of easily accessible first time buyer mortgage deals, according to the CML. “The low share of the market shows that getting a mortgage remains problematic for first time buyers, who tend not to have a substantial deposit,” said the CML’s statement.

There were a total of 40,000 UK mortgage deals advanced in April, of a total value of £5.7bn, compared with 45,000 in March and and 35,000 the previous April. However, April generally shows a seasonal dip due to the Easter break, and the underlying trend is of a gradual recovery in mortgage lending, said the Council for Mortgage Lenders CML.

The dip was more strongly felt in remortgage activity, with 24,000 remortgage loans in April, down by 16% on March and down 26% on a year ago.

The CML expects rates to remain low for the immediate future and, with lending criteria still tight, remortgaging is likely to remain muted.

“Easter traditionally causes a dampening of lending levels and this year was no exception. First time buyers were particularly affected, perhaps because of the alteration of stamp duty, and in anticipation of the changes arising from the economic and political uncertainty of recent months,” said Michael Coogan, director general of the Council for Mortgage Lenders CML.

The Council for Mortgage Lenders represents banks, building societies and lenders who account for 94% of all residential mortgage lending in the UK.

There are currently 11.4 million mortgages in the UK, with loans worth over £1.2 trillion, according to the CML.