This week's Top 10 Stories in Mortgage Strategies
Highlights include Starling being fined £29m by the FCA for its “astonishingly lax” high-risk customer screening, and brokers saying the central bank's new interest rate stance means mortgages will be reduced to “3” by the end of the year. For example, the company expects it to be in the low 50% range. 
See below for details.
Sterling fined £29m for 'astonishingly lax' high-risk customer inspections: FCA
Starling Bank has been fined £29m by the Financial Conduct Authority (FCA) for what it called an “astonishingly lax” lack of vetting of high-risk customers. The number of customers has rapidly grown from 43,000 in 2017 to 3.6 million in 2023, outpacing the bank's financial crime efforts. Despite a 2021 agreement to restrict high-risk customers from opening accounts, Starling opened more than 54,000 such accounts from September 2021 to November 2023. The FCA cited systemic issues and lack of compliance, prompting Starling to implement improvements to its financial crime management framework.
Bank of England's new interest rate stance could lead to mortgages in the “low 3% range'' by year-end – broker
Brokers have suggested that mortgage rates could reach the “low 3%'' range by the end of the year, as the Bank of England moves to a “more aggressive'' stance on rate cuts. Major financial institutions such as Barclays and HSBC have already announced interest rate cuts after central bank governor Andrew Bailey hinted that interest rates could be cut if inflation continues to improve. The money market predicts that there is a 96.5% probability that interest rates will be cut to 4.75% next month. Analysts believe these changes could significantly boost the real estate and mortgage markets and benefit consumers amid increased competition among lenders.
Landlords face a £21.5bn bill to meet EPC targets by 2030
UK landlords are predicted to face a £21.5bn bill to upgrade their properties to meet new Energy Performance Certificate (EPC) standards by 2030. The Department for Energy Security and Net Zero proposes that all rental housing achieve a minimum EPC rating. Currently, 55% of private rental properties are rated D or below. The average cost of upgrading a property is estimated to be £8,000, with London landlords facing the highest costs. Critics have warned that such mandatory upgrades could discourage landlords from participating in the rental market.
Landlords could see their capital gains tax bill jump by £15,000: B&R
Changes to capital gains tax (CGT) rumored in the next autumn budget could increase the average landlord's CGT liability by £15,000, according to Mr Benham and Mr Reeves. If the CGT threshold were brought into line with income tax, landlords could face a significantly higher rate of tax, potentially increasing their bill to £37,460 for higher rate taxpayers. As property values rise, the average landlord will earn £96,651 per property over 10 years. Analysts warn that further tax increases could worsen the rental crisis, pushing up rents and reducing private rental stock.
Molo adds 2-year fix starting at 2.99%
Molo Finance has launched a new tier of mortgage products introducing two-year fixed interest rates starting from 2.99% for individual and limited company borrowers at a loan-to-value (LTV) of 75%. Additionally, 5-year fixed rates start at 4.49%. Moro has also reduced interest rates on specialty products, including multi-unit freehold blocks and holiday lets, with two-year fixed rates starting at 4.14% and five-year option rates starting at 4.59%. Moro distribution director Martin Sims said these changes were in response to changes in the mortgage market.
Cover feature: Finally land lease reform
The Labor Government is committed to meaningful leasehold reform and is committed to speeding up the Leasehold and Freehold Reform Act 2024 and introducing a new draft Leasehold and Shared Tenure Reform Bill. It aims to end the “feudal leasehold system” by establishing common land rights as the default ownership and banning the construction of new leasehold apartments. Around 84% of voters support the reforms, and campaigners are optimistic about bipartisan support. However, concerns remain for existing leaseholders who are faced with soaring rents and long-term contracts, highlighting the urgent need for reform.
Nationwide completes £2.9bn acquisition of Virgin Money
Nationwide has successfully completed its £2.9bn acquisition of Virgin Money, becoming the UK's second largest mortgage lender. Following the acquisition, Virgin Money will be delisted from the stock market and CEO David Duffy will step down and be replaced by former Nationwide CFO Chris Rose. The Virgin Money rebrand will take place over the next two years as Nationwide plans to phase out the Virgin brand. The merger was approved by the Competition and Markets Authority, ensuring that competition would not be significantly reduced.
Minister sets out 'seven immediate priorities' for UK housing
Housing Secretary Matthew Pennycook has outlined seven immediate priorities for Homes England to support the Government's aim of building 1.5 million homes over the next five years. The target set is 50% higher than the previous five years and represents a significant increase in housing supply. Ministers' priorities include accelerating development, supporting stalled projects, maximizing social rented housing and ensuring value for taxpayers' money. Additionally, Homes England's strategic plan will be revised to align with the new long-term housing strategy as part of the government's wider housing agenda.
Mortgage Works lowers select BTL rates by up to 0.55%
Mortgage Works has announced that it will be reducing select buy-to-let (BTL) mortgage rates by up to 0.55% for both new and existing customers. Key changes include two-year fixed rate of 3.59% (3% fee) and five-year fixed rate of 3.79% for remortgages, both available up to 75% loan-to-value (LTV). is. Senior manager Joe Abern said the new fees, which will take effect from October 3, are aimed at attracting customers who are nearing the end of their current transactions.
Banks may become 'more aggressive' in cutting interest rates: BoE's Bailey
Bank of England Governor Andrew Bailey has suggested that the central bank could take a “more aggressive” stance on cutting interest rates if inflation trends remain positive. In a recent interview, he acknowledged the importance of geopolitical tensions, particularly in the Middle East, but noted that the current stability in oil prices is a positive factor for monetary policy. Money markets are now expecting a rate cut to 4.75% at the next Monetary Policy Committee meeting in November, reflecting a change from previous expectations of a gradual rate cut.
