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Em Morley

Just 1% interest rate rise could affect 7m lenders

Published On: June 3, 2015 at 12:11 pm

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Alarming research has indicated that up to 7 million people will face difficulty in paying their mortgage costs if interest rates increase by just 1%.

Worrying

According to a report from Ocean Finance, a rise of just a single percentage would see lenders with a variable rate mortgage have to find an extra £55 per month for every £100,000 owed. While a rise is not expected until the Spring of next year, the findings are likely to concern a vast number of lenders.[1]

63% of borrowers quizzed for the report said that they felt they were have to scale-down spending on non-vital items to cover the extra payment. Another 13% said that they felt they would still end up in financial difficulty even if they were to cut back.[1]

Nearly 25% of borrowers said they had already moved onto a fixed-rate mortgage, with an additional 16% planning to follow suit in the near future. Furthermore, the increased demand on mortgage payments would see around 10% to think about selling their existing property [1]

Just 1% interest rate rise could affect 7m lenders

Just 1% interest rate rise could affect 7m lenders

Inevitability

Spokesman for Ocean Finance, Gareth Shilton, said that, ‘it’s inevitable that interest rates will rise at some point, whether that happens in Spring next year or later in the year.’ Shilton feels that the rate is, ‘likely to be gradual and it may take a while to get to a 1% increase.’ However, he warns that, ‘every rent hike will have an impact on hard working families who are already struggling to make ends meet.’[1]

He went on to suggest that, ‘many people will feel like mortgage prisoners because their circumstances have changed since they took out their loan and they’ll understandably be concerned about what a potential interest rate rise means for them.’ Shilton says, ‘it’s important to understand that in most cases there are options, so it’s important that anyone who is concerned about a rate increase should seek advice on the best deal available to them.’[1]

[1] http://www.propertyflock.co.uk/f/A732D8635

 

Buyers Not Confident in the Housing Market

Published On: June 3, 2015 at 11:54 am

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Confidence in the housing market dropped during April, however, activity is expected to increase in the coming months.

The Halifax Housing Market Confidence Tracker fell to +58 (Halifax rating) in April, down from +64 in March.

This came despite mortgage rates decreasing to record lows and house prices continuing to rise.

Buyers Not Confident in the Housing Market

Buyers Not Confident in the Housing Market

Furthermore, the amount of people who believe the next year will be a good time to buy a property has increased to +26, up from +21 in March.

Additionally, those who think the next 12 months will be a good time to sell a property fell to +30, from +33 in the previous month. This indicates that the current gap between supply and demand will continue.

Halifax’s research also found a disconnection between people’s property price expectations and the fundamental principles affecting the housing market.

Just 63% of people believe house prices will be higher in 12 months, down from 67% who forecast increases in March.

Halifax said this decline arrives despite many factors supporting the housing market recovery in the short-term. Record low mortgage rates, decreasing swap rates (which affect fixed-rate mortgages), rising employment levels and negative inflation of 0.1% in April all have a positive effect on property.

Meanwhile, the Bank of England’s (BoE) Monetary Policy Committee voted to keep interest rates at 0.5% and its Quarterly Inflation Report signalled that the first base rate increase would not come until 2016.

Mortgages Director at Halifax, Craig McKinlay, comments: “With inflation now at its lowest level since records began, unemployment falling and the economy still growing, the fundamentals for the housing market remain positive.

“Going forward, the key factor in how consumers adjust to any changes in rates will be the way in which they manage their disposable income.”1

Zoopla found that the average house price in the UK is currently £265,737.

There are signs that property price inflation is starting to pick up again, after a slowdown in the second half of 2014.

Halifax recently reported that house prices rose 1.6% in April, with the annual rate of growth increasing to 8.5%, up from 8.1% in March.

1 http://www.zoopla.co.uk/discover/property-news/is-the-next-year-a-good-time-to-buy-a-house/#Xl5aO4OHdmlLFcL2.97

Cash buyers at record high

Published On: June 3, 2015 at 11:14 am

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New figures released today have indicated that property cash buyers in the UK are currently at a record high.

According to data from the UK’s second largest mortgage lender the Nationwide, 38% of homes sold in Britain during the first quarter of 2015 were done so without the need for a mortgage.[1]

Investment

The results of the report show that low interest rates are encouraging more investment in property, with tumbling mortgage lending rates also a major contributing factor.

Additional statistics from the Nationwide report shows that British house prices in May were up by 4.6% in comparison to the same period last year. This represented a slowdown from the 5.2% annual rise reported in April. The overall price of a property in May was up 0.3% on last month, meaning that the average price of a home in Britain is now £195,166.[1]

Last year, the proportion of cash buyers purchasing a property was 36%, meaning the 38% recorded in the first months of this year is a record level.[1]

New rules

Despite the record high recorded, the Bank of England suspects that the peak is unlikely to continue, due to an increase in mortgage lending. On Tuesday, data revealed that the total of mortgage approvals for home purchases increased to a 14-month high during April.

Alex Gosling, chief executive of online agents HouseSimple.com, feels that the, ‘proportion will fall throughout the year as lenders and borrowers adjust to, and become more familiar with the new lending rules.’ He went on to say that this, ‘realignment of buyers with lenders may well be evident in the strong mortgage approvals data issued this week by the Bank of England.’[1]

Cash buyers at record high

Cash buyers at record high

Totals

Taking into account the total number of cash buyers as opposed to the proportion, there has been a slight rise since 2008. However, figures have not yet reached the heights of the housing surge in 2007.

The highest proportion of cash purchasers was recorded in the North East in 2013, were almost 50% of transactions were of this type. Second highest was the South West of England. This was due to the fact that the cost of property in the North East was quite low in comparison to the rest of England.

[1] http://www.bbc.co.uk/news/business-32977217

 

The Impact of the Benefit Cap on Social Housing

Published On: June 3, 2015 at 10:52 am

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The Right to Buy expansion has been hitting the headlines recently, covering up the housing issue that could have an even more devastating effect on social landlords and tenants.

Approaching is the reduced benefit cap, from £26,000 to £23,000 per year.

In London, some social landlords have adopted the affordable rent programme, but this sometimes sees social tenants paying much more in rent. These landlords could be massively hit by a rise in arrears as tenants see their benefits cut by £3,000 a year.

The Impact of the Benefit Cap on Social Housing

The Impact of the Benefit Cap on Social Housing

Many view the benefit cap as a positive move, but they may not be aware that it will affect those paying huge rents, through no fault of their own.

Currently, a working-age family claiming benefits can claim up to £500 per week. This will fall to £440 following the emergency Budget in July.

The new cap will apply to those receiving out-of-work benefits, including Jobseeker’s Allowance (JSA) and Employment and Support Allowance (ESA), which is paid to those with disabilities. Housing benefit is at the top of the benefits pile, meaning that it will be the first one cut once the cap is reduced.

Think of this example: A couple with three children live in a three-bedroom housing association home in Islington, paying £180 in rent per week. Both parents have disabilities and are entitled to ESA.

Their current weekly benefit allowance is £500 – child tax credits: £171, ESA: £115, child benefit: £48, housing benefit: £166.

Due to the existing cap, there is a £14 a week shortfall on rent from the housing benefit. This is not too problematic, as their other benefits make up the difference.

However, the imminent cut will take £60 a week off their housing benefit, leaving a £74 weekly gap. This equals £3,848 per year.

In the last four years, about 23,000 London properties have been let out at higher so-called affordable rents, with prices set at up to 80% of market rents. Housing associations generally rented homes at social rents of about 40-50% of market rates. Around 5,000 of these are three-bedrooms and above.

The average rent is about £250 per week and over half of tenants receive out-of-work benefits.

Considering the example family, these tenants could build up rent arrears of £7,000 a year. This would cause a loss of £37m in income for all social landlords affected.

Those impacted by the cut will be forced into smaller and cheaper homes, probably outside of London. They might also face eviction into temporary accommodation.

Will social landlords take any of the blame for setting these supposed affordable rents so high? And who will they let them to in the future?

It seems that affordable rents can only be let to those on fairly high incomes.

Fraudsters Imprisoned for Selling £4.3m of Worthless Land

Published On: June 3, 2015 at 9:56 am

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Eight fraudsters have been convicted for taking part in a land banking investment scam, which lost investors around £4.3m.

Five of the criminals have been given prison sentences totalling 26 years.

Fraudsters Imprisoned for Selling £4.3m of Worthless Land

Fraudsters Imprisoned for Selling £4.3m of Worthless Land

The scammers cold called savers and pledged high returns on plots of land. They said that the land could be sold to property developers at a huge profit. However the land was agricultural and there is little or no chance that permission would be granted. In some cases, the fraudsters did not own the land.

Regulator, the Financial Conduct Authority (FCA), which brought the case, says: “Using sales scripts, misleading promotional material and high-pressure sales techniques, they lied about the current and future value of the land. People were persuaded to purchase land at a vastly inflated price, on the false promise of a substantial profit.”1 

The defendants were convicted of offences including conspiracy to defraud, conducting investment business without authorisation from the regulator, possessing criminal property and providing false and misleading information to the regulator.

The judge said the scheme was “very substantial and deliberate fraud on the public.” He described the operation as “a subtle and cruel fraud because it involves the concept of owning land, a commodity that the public are bound to think has value and on which they cannot lose and on which they can easily be persuaded that they can make very substantial profits.”1

Four of the criminals were banned from being company directors for between five and ten years. Two others had already been disqualified. All defendants are having confiscation proceedings brought against them.

The FCA’s Georgina Philippou says: “We will take strong action, through both the civil and criminal courts, against those who operate illegal investment schemes and those who assist them.

“People put their homes and retirements at risk on the back of promises of high returns that were never going to be realised. The severity of the sentences shows how seriously the courts view this kind of offending.”1

The scammers used three companies – Plott Investments Ltd changed its name to Plott UK Ltd, European Property Investments (UK) Ltd and Stirling Alexander Ltd.

1 http://www.telegraph.co.uk/finance/personalfinance/investing/11644419/Five-imprisoned-for-duping-investors-into-spending-4.3m-on-worthless-land.html

Nationwide announces new Let to Buy scheme

Published On: June 3, 2015 at 9:48 am

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Nationwide Building Society has made another move in the mortgage tussle by announcing new loyalty scheme for their customers. The new initiative will see customers converting their main home into a Buy to Let property through the The Mortgage Works, while purchasing a new residential home for themselves to live in.

Loyalty rewarded

From today, a dedicated set of Let to Buy products aimed at loyal consumers will be launched through the The Mortgage Works, which is part of the Nationwide Group. As a result, customers will now have the chance to apply for a Let to Buy mortgage on their existing property with The Mortgage Works and the onward residential mortgage for their new home at the same time.

Those customers who both remortgage their existing home as a Buy to Let property and take out a new residential mortgage through Nationwide will receive a £250 loyalty cashback.

The move signals the first time that Nationwide has given the opportunity of a dual-venture with their residential side teaming up with their specialist lender The Mortgage Works.

Paul Wootton, Head of Specialist Lending at the firm, said that, ‘Nationwide is taking a joined-up approach to helping home movers turn their existing home into a buy to let, while purchasing a new home in which to live. We are making it easier and more flexible for our customers to complete the process of securing two different types of home loan at the same time, helping those who may wish to live elsewhere but want to turn their existing property into an investment opportunity.’[1]

Additionally, customers will be able to apply for a new residential mortgage of up to 85% LTV when applying for a The Mortgage Works Let to Buy loan. These new loyalty products are only available through intermediaries, but will be open to both existing and new Nationwide mortgage customers.

Nationwide announces new Let to Buy scheme

Nationwide announces new Let to Buy scheme

Options

David Hollingworth, Associate Director at intermediary firm London and Country, said, ‘a move to a new property can often be the point when an owner makes the decision to become a landlord. Linking the two sides of the let to buy coin makes sense and should give brokers and their customers the option of a more joined up solution with added cost incentives.’[1]

Some of the most applicable Let to Buy products available to customers who complete the subsequent residential purchase with the Nationwide are:

2 year fixed rate with £995 fee, available up to 65% LTV at 2.99%.
2 year fixed rate with £995 fee, available up to 75% LTV at 4.09%.
5 year fixed rate with £995 fee, available up to 65% LTV at 3.99%.
5 year fixed rate with £995 fee, available up to 75% LTV at 4.49%.[1]

As mentioned, all of these rates come with a free valuation and £250 cashback.

 

[1] http://www.propertyreporter.co.uk/finance/nationwide-announces-new-btl-homemover-loyalty-deal.html