Will bonuses boost high-end mortgage hopes?
New Year in 2008 is likely to have proved a testing time for those awaiting their bonus in the city.
With the highly anticipated performance related bonus for the preceding year appearing in the February or March paycheck for many, the next few weeks could prove a testing time for those seeking to make use of the cash injection to fund mortgages for professionals.
With the continued turmoil of the financial investment sectors, two issues are likely to play on the homebuying investment banker's' conscience - the size of their bonus and the state of the prime property lending sector.
Bonus uncertainty
The bonus trouble is by no means consistent across city employers however. U.S. bank Goldman and Sachs has reportedly offered its staff record payouts having managed to stave off the threat of the credit crunch.
By contrast, Merril Lynch & Co announced last month that even its top executives went without bonuses for 2007 after it recorded £6.1 million in net losses during the second half of the year.
Some city professionals are even considering legal action, with some estimating bonus cuts of up to three-quarters on the expected sum.
Law firm Dawson LLP's Richard Linskell explained: "Employees can bring a claim against their employer on the basis that the bonus decision was irrational or capricious."
Anticipating risk
But with flexibility the key to lenders' mortgages for professionals, a lower than expected bonus needn't damage the prospects of securing a loan for a prime UK property.
Investec Private Bank announced a new mortgage for professionals on property valued at over £300,000 earlier this month.
Wayne Preston, a spokesperson for the lender, explained that the prospect of low bonuses didn't deter Investec from announcing its new product.
"Even though bonuses might be down this year compared to previous years, our clients have a track record which spans many years… So we felt comfortable.
"We look at the average of the client's last three bonuses to determine the amount that they're going to earn."
However, he notes that the downside to this is that for investment bankers in their first year it will be difficult to secure an Investec mortgage even if they receive a particularly good bonus.
Those first-time buyer professionals from the city may also find securing a loan on their ideal property hard with other lenders too, as many have reduced their loan-to-value (LTV) ratio.
Professional mortgage specialist Scottish Widows, offering mortgages directed at professionals such as doctors and dentists, recently reduced their maximum LTV from 102 per cent to 95 per cent. Investec also only offer an 80 per cent LTV on their latest product.
Maintaining demand
The latest figures from the Royal Institute of Chartered Surveyors (Rics) will also offer glum reading.
According to the January Housing Market Survey, the stock of unsold property jumped by more than ten per cent last month - adding to an increase in excess of 40 per cent since September 2007.
A spokesperson for Rics, Jeremy Leaf, summarised: "Agents are finding it difficult to market properties to an audience which has decided to watch the current economic theatre from the wings."
On the positive side, Halifax Estate Agents reported in 2007 that the number of £1 million house sales in the UK increased nearly three times over the past five years.
Investec also remains positive about prime property demand in the UK, noting that non-domiciles have tended to buck the trend in sales over the last few years.
The lenders' mortgage specialist Andrew Arlott adds that the credit crunch "hasn't impacted on what our business does at all".
Even those looking to take out buy-to-let mortgages for professionals using their New Year bonus will also be filled with confidence, with the National Landlords Association (NLA) confident increased demand for rental property will drive up yields.
Overall then, the mortgage prospects for the prime sector remain largely positive for those awaiting bonuses, despite ongoing pressure across the financial sectors.
Mortgages for Professionals is a specialist mortgage broker offering a whole-of-market choice of all UK lenders. We provide a service dedicated to individuals with professional qualifications and high projected earnings – from doctors and dentists, to accountants and engineers
With the highly anticipated performance related bonus for the preceding year appearing in the February or March paycheck for many, the next few weeks could prove a testing time for those seeking to make use of the cash injection to fund mortgages for professionals.
With the continued turmoil of the financial investment sectors, two issues are likely to play on the homebuying investment banker's' conscience - the size of their bonus and the state of the prime property lending sector.
Bonus uncertainty
The bonus trouble is by no means consistent across city employers however. U.S. bank Goldman and Sachs has reportedly offered its staff record payouts having managed to stave off the threat of the credit crunch.
By contrast, Merril Lynch & Co announced last month that even its top executives went without bonuses for 2007 after it recorded £6.1 million in net losses during the second half of the year.
Some city professionals are even considering legal action, with some estimating bonus cuts of up to three-quarters on the expected sum.
Law firm Dawson LLP's Richard Linskell explained: "Employees can bring a claim against their employer on the basis that the bonus decision was irrational or capricious."
Anticipating risk
But with flexibility the key to lenders' mortgages for professionals, a lower than expected bonus needn't damage the prospects of securing a loan for a prime UK property.
Investec Private Bank announced a new mortgage for professionals on property valued at over £300,000 earlier this month.
Wayne Preston, a spokesperson for the lender, explained that the prospect of low bonuses didn't deter Investec from announcing its new product.
"Even though bonuses might be down this year compared to previous years, our clients have a track record which spans many years… So we felt comfortable.
"We look at the average of the client's last three bonuses to determine the amount that they're going to earn."
However, he notes that the downside to this is that for investment bankers in their first year it will be difficult to secure an Investec mortgage even if they receive a particularly good bonus.
Those first-time buyer professionals from the city may also find securing a loan on their ideal property hard with other lenders too, as many have reduced their loan-to-value (LTV) ratio.
Professional mortgage specialist Scottish Widows, offering mortgages directed at professionals such as doctors and dentists, recently reduced their maximum LTV from 102 per cent to 95 per cent. Investec also only offer an 80 per cent LTV on their latest product.
Maintaining demand
The latest figures from the Royal Institute of Chartered Surveyors (Rics) will also offer glum reading.
According to the January Housing Market Survey, the stock of unsold property jumped by more than ten per cent last month - adding to an increase in excess of 40 per cent since September 2007.
A spokesperson for Rics, Jeremy Leaf, summarised: "Agents are finding it difficult to market properties to an audience which has decided to watch the current economic theatre from the wings."
On the positive side, Halifax Estate Agents reported in 2007 that the number of £1 million house sales in the UK increased nearly three times over the past five years.
Investec also remains positive about prime property demand in the UK, noting that non-domiciles have tended to buck the trend in sales over the last few years.
The lenders' mortgage specialist Andrew Arlott adds that the credit crunch "hasn't impacted on what our business does at all".
Even those looking to take out buy-to-let mortgages for professionals using their New Year bonus will also be filled with confidence, with the National Landlords Association (NLA) confident increased demand for rental property will drive up yields.
Overall then, the mortgage prospects for the prime sector remain largely positive for those awaiting bonuses, despite ongoing pressure across the financial sectors.
Mortgages for Professionals is a specialist mortgage broker offering a whole-of-market choice of all UK lenders. We provide a service dedicated to individuals with professional qualifications and high projected earnings – from doctors and dentists, to accountants and engineers
