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Em Morley

Amount of Mortgages for Buyers in London Fell 17% in a Year

Published On: June 2, 2015 at 11:03 am

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The London housing market is showing more signs of weakness as it has emerged that mortgage lenders reported a drop in lending to house buyers in the capital.

The Council of Mortgage Lenders (CML) revealed that there were 17% less mortgages in Greater London during the first quarter (Q1) of 2015 compared to Q4 2014, a total of 17,300.

The number of completed mortgages was also down 16% over the year.

Loans totalled £4.9 billion in value in Q1 2015, down 16% from Q4 2014 and down 11% on Q1 2014.

Lending to first time buyers and home movers decreased. First time buyer loans fell 14% in volume and 11% in value in Q1 compared to 12 months previously.

Amount of Mortgages for Buyers in London Fell 17% in a Year

Amount of Mortgages for Buyers in London Fell 17% in a Year

London home movers took out 18% fewer mortgages in the year and the value of these loans dropped 11%.

For those remortgaging, loans were 2% higher in volume and 7% higher in value compared to Q1 2014.

In the rest of the UK, lending was also down with all regions reporting declines in lending compared to a year ago.

London generally leads the UK property market, which influences price and lending rises elsewhere.

After house price decreases in the financial crisis, London properties were the first to rise again. Other areas took longer, but all regions are now experiencing yearly price growth.

The recent drop in London lending indicates reduced demand. This is despite generally positive conditions for buyers. Mortgage rates for all types of loan have been dropping and for buyers with larger deposits, the best rates are falling towards 1%.

Last week, we revealed that Yorkshire Building Society has launched the lowest rate ever. Read about it here: /lowest-ever-mortgage-rate/.

Additionally, wages have been rising ahead of inflation; by 2.2% a year compared to a 0.1% drop in the Consumer Price Index. This leaves buyers with more money for repayments and deposits.

However, buyers are still struggling with prices in the capital, which are much higher than 12 months ago. Many boroughs have experienced double-digit price rises in the past year, causing difficulty for buyers and raising the deposits needed by first time buyers.

The latest lending figures could have been influenced by the general election, as buyers awaited the uncertain result.

Prices could continue rising if the drop in buyers is matched by a fall in vendors. However, Land Registry data revealed monthly prices decreasing in March in eight of 32 London boroughs.

The Mortgage Market Review (MMR), introduced in April 2014, also seems to have had a substantial effect on mortgage demand.

The stricter lending criteria requires lenders to check the finances of buyers, particularly ensuring they could afford repayments if the Bank of England (BoE) base rate rose by 3 percentage points. This would make the average mortgage rate just below 7%.

The CML figures indicate that the amount of mortgages issued for house purchase in the capital fell from Q3 2014 onwards. A loan is used in CML data at the end of the purchase process when the money is advanced, which could take up to six months.

This means that some loans in the CML study for Q3 2014 were approved under the old lending rules. The decrease in loans after this period coincides with the MMR introduction.

 

 

 

 

 

 

Cashing out of full pension funds drops

Published On: June 2, 2015 at 10:25 am

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New figures have suggested that despite new pension laws coming into effect two months ago, the number of retirees looking to utilise their savings for property appears to have slowed. Many it appears are taking advantage of a more widespread range of options,

Drop

Data from Scottish Widows has shown that in the month from April, there has been a 72% drop in requests for full pension withdrawals. The firm said that about 20% of its customers were eligible to access their pension under the new regulations. The average amount of money being cashed out in full by these consumers was £20,000, with 85% of requests for totals less than £30,000. [1]

Different figures from Fidelity Worldwide Investment suggest that the majority of its direct customers are only interested in the tax-free cash available under the new laws. Their figures show that cashing out in full totalled just 6% of retirement enquiries.10% of enquiries to Fidelity’s customer call line were to discuss options. Scottish Widows also said that despite requests for full cashouts of pension funds slowing, more customers are looking for more detailed discussion over their new options, showing the more open-minded attitude of retirees.[2]

Cashing out of full pension funds drops

Cashing out of full pension funds drops

Additionally, the firm has indicated that it has seen more of its customers seeking advice from Pension Wise, with a third of customers taking this option in April.

Robert Cochran, pensions development manager at Scottish Widows, said that, ‘although our data has shown an increase in Pension Wise awareness, there is still work to do in closing the knowledge gap and encouraging people to use the service.’[3]

[1] http://www.ftadviser.com/2015/06/02/pensions/personal-pensions/number-of-retirees-looking-to-cash-out-pension-falls-CPFp5i2FnCO6LlzI06LtOJ/article.html

 

Letting Agents Believe Rents will Rise in Next Five Years

Published On: June 2, 2015 at 10:04 am

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A third of letting agents reported that rents rose in April and many think they will continue increasing over the next five years, recent research has found.

The latest monthly private rental sector report from the Association of Residential Letting Agents (ARLA) revealed that in the North West, 46% of landlords experienced rent growth.

Across the whole of the UK, nine in ten agents said they were pleased with the general election result and 79% expect rents to increase in the next five years, as Labour’s rent cap plans are no longer a threat.

The report also indicates that in April, the amount of landlords selling their buy-to-let properties has risen, especially in London.

Letting Agents Believe Rents will Rise in Next Five Years

Letting Agents Believe Rents will Rise in Next Five Years

ARLA agents in the capital witnessed the number of landlords selling their rental properties double between March and April, increasing from three to six homes on average per branch.

Agents in Scotland reported an increase from four to seven buy-to-let properties going onto the market in the same period and the national average has risen from three to four.

ARLA Managing Director, David Cox, comments: “It is interesting that we have seen an increase in the amount of landlords selling their buy-to-let properties in the last month, which is likely to have been a result of political uncertainty.

“We know that Labour’s plans were unpopular for many landlords and agents, so this increase in those selling their buy-to-let properties may have been a knee jerk reaction to the possibility of Labour’s proposals coming into practise.” 

Following the election outcome, 90% of ARLA agents were happy with a majority Conservative Government and 95% think this will benefit the private rental sector.

Of those agents, 13% said it is positive because the Conservatives will interfere less with the industry and 11% believe it will provide certainty and stability in the market.

Supply and demand was similar in April to the previous month. On average, ARLA member branches managed 193 properties compared to 192 in March. In April, ARLA agents dealt with 36 prospective tenants per branch, unchanged from March.

Cox continues: “It is going to be interesting to see what happens in the market in the next few months following the election result and whether we see an increase in supply of rented accommodation as a result of the Conservative’s promise to build 200,000 new starter homes offered at 20% discount to first time buyers.

“This policy will help first time buyers make that leap onto the housing ladder and as a result, this will hopefully free up rental property.

“Hopefully, now the country is under less political uncertainty, we will begin to see the market pick up again and with the policies on offer in both the rental sector and housing market, we should see the overall market heading into the right direction.”1

1 http://www.propertywire.com/news/europe/rents-in-uk-set-to-rise-in-next-five-years-according-to-lettings-agents-2015052910565.html

Mortgage Rates for First Time Buyers are at a Three-Year Low

Published On: June 2, 2015 at 9:07 am

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Mortgage rates for first time buyers are at a three-year low, revealed research from MoneySuperMarket.

The comparison website found that that number of mortgage products for first time buyers is currently 2,776. This is partly due to the Government’s Help to Buy scheme, which has seen the amount double since April 2012, when the number was 1,324.

Furthermore, the average rate on a first time buyer mortgage has fallen by one percentage point in the last three years, to 3.26%.

Mortgage Rates for First Time Buyers are at a Three-Year Low

Mortgage Rates for First Time Buyers are at a Three-Year Low

The average loan-to-value (LTV) required for first time buyers has been stable since April 2012, 79% compared to 78%. This would require a high deposit of £31,500 on a £150,000 home.

However, a 5% deposit on the same property would be £7,500. And this is increasingly available to first time buyers, thanks to the amount of 95% LTV mortgages, which has grown recently.

There are currently 170 mortgage deals on the market at this LTV, as Help to Buy thrives. Since 2012, there has been a 448% rise in this type of mortgage, from 31 products three years ago. Additionally, the average rate on these deals has fallen by 1.04 percentage points, to 4.72%.

Head of Banking at MoneySuperMarket, Kevin Mountford, says: “The increase in the number of first time buyer mortgages, and the corresponding fall in interest rates, can only mean good news for those looking to get a foot on the ladder.

“Even better, borrowers who can scrape together a 10% or even 15% deposit will find they are able to get their hands on more competitive deals.

“The introduction of the Government’s Help to Buy ISA, which will see the Government provide up to £3,000 towards a first time buyer’s deposit, could also help prospective homeowners get themselves into a new LTV bracket, thus helping them secure a more competitive deal.”

Mountford continues: “For anyone looking to buy their first home, it’s important not to be led by interest rates alone when comparing mortgages. Expensive fees can wipe out the potential benefit of a lower rate, so it’s worth doing the sums first to ensure you really are getting a great deal.

“Whilst mortgage approvals were up 7% overall on March, this doesn’t mean that lenders’ criteria is becoming more relaxed. After the introduction of the Mortgage Market Review, borrowers not only need to have a strong credit score, they also need to prove that they can afford the mortgage they’re applying for – not only at its current rate, but if rates should rise in the future.”

He concludes: “Finally, also think about whether you want a fixed or variable rate deal. Fixed provides security that your rate won’t change during the term of the deal. Whilst variable rates tend to be cheaper, you need to ensure that you will be able to afford your monthly repayments if and when interest rates do rise.”1 

1 http://www.propertyreporter.co.uk/finance/ftbs-have-never-had-it-so-good.html

 

 

Investors Receiving Highest Returns in Manchester

Published On: June 1, 2015 at 5:08 pm

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HSBC Mortgages has found that the top three areas for receiving the highest rental returns are in the North West. So far this year, Manchester has offered the largest yield, at 7.93%.

Investors Receiving Highest Returns in Manchester

Investors Receiving Highest Returns in Manchester

Manchester made it to the top of the buy-to-let hotspots in the country, up from second place in 2014. Rental returns in London are some of the lowest.

Buy-to-let investors have been heading to the North of England as prices are typically lower and consequently produce higher yields. HSBC found Manchester, Kingston upon Hull and Blackpool to have the best returns.

The bank also revealed that Manchester has experienced a slight rise in average property prices, up from £104,244 in 2014 to £108,870 in 2015. However, economic progress in the city has upheld strong demand for rental accommodation.

Annual rents in Manchester have increased by 4% in the past year, from £8,316 to £8,628. Furthermore, the North West as a whole, especially Manchester, has one of the largest student populations in Europe.

HSBC found that over a quarter (27%) of housing stock is privately rented in the city, giving it the highest proportion of rental homes in the UK.

Kingston upon Hull and Blackpool have climbed the list due to their low house prices and strengthening demand for rental accommodation.

The average house price in Kingston upon Hull is £69,135 and Blackpool’s is slightly higher at £79,654. However, both areas require the lowest initial buy-to-let investment of all locations studied. The research included 50 UK towns and cities with the most private rental housing stock.

Top 20 areas for buy-to-let returns

Position Location 2014 position % of privately rented housing Average house price Average monthly rent Average annual rent Rental yield

Year-on-year yield growth
1 Manchester 2 27% £108,870 £719 £8,628 7.93% -0.7%
2 Kingston upon Hull 5 19% £69,135 £450 £5,400 7.81% 4.5%
3 Blackpool 4 24% £79,654 £488 £5,856 7.35% -3.6%
4 Forest Heath 22 22% £171,322 £1,035 £12,432 7.26% 38.7%
5 Coventry 6 19% £115,945 £702 £8,424 7.2% 1.5%
6 Southampton 1 23% £151,415 £900 £10,900 7.13% -18.3%
7 Nottingham 3 22% £89,312 £524 £6,288 7.04% -8.3%
8 Liverpool 9 22% £90,426 £494 £5,928 6.56% 0.8%
9 Cardiff 16 20% £150,892 £802 £9,624 6.38% 6.8%
10 Portsmouth 8 22% £155,696 £825 £9,900 6.36% -2.2%
11 Slough 11 23% £198,972 £1,050 £12,600 6.33% -1.8%
12 Cambridge 10 24% £205,019 £1,083 £12,995 6.31% -2.5%
13 Bournemouth 12 28% £183,600 £950 £11,400 6.21% -0.3%
14 Oxford 7 25% £277,201 £1,432 £17,184 6.2% -11.7%
15 Luton 15 21% £144,721 £725 £8,700 6.01% 0.4%
16 Leicester 17 21% £115,860 £550 £6,600 5.7% -3%
17 Brighton & Hove 13 28% £265,858 £1,248 £14,976 5.63% -8.8%
18 Southend-on-Sea 23 21% £172,024 £776 £9,312 5.41% 4.4%
19 Norwich 25 20% £158,102 £700 £8,400 5.31% 5.4%
20 Newham 14 33% £292,306 £1,255 £15,192 5.2% -13.4%

Head of Mortgages at HSBC, Tracie Pearce, comments on the significance of location, property prices and rental demand when investing in the buy-to-let sector: “Our research shows buy-to-let remains an attractive option for investors, but it’s important they focus on locations where rents have outpaced house prices. This means not just looking at large towns and cities, but also commuter areas and those with high rental demand and concentrated employment, such as a hospital or university nearby.

“Almost a third of areas in our report have seen a year-on-year growth in yield and almost half of the areas have achieved yields above 5%.

“Buy-to-let is a big investment and shouldn’t be taken lightly, but with the right research, landlords can feel confident that they can achieve good returns around the UK.”1

The top buy-to-let hotspot in London is Newham, with an annual rental yield of 5.2%.

However, the capital has experienced continuous decline in rental returns as property prices have increased without corresponding rents. Newham, Brent and Lewisham have seen a decrease in yield growth of over 10%.

Six of the ten worst places for buy-to-let returns are in London, with yields as low as 2.87% in Kensington and Chelsea, where the average house price is now over £1m and rents have been stagnant.

1 http://www.landlordzone.co.uk/news/manchester-buy-to-let-gives-highest-blt-yields#

Right to Buy Criticised by Ex Civil Service Chief

Published On: June 1, 2015 at 4:03 pm

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A former civil service chief has criticised the Right to Buy policy, saying that it will not solve the housing crisis.

Lord Kerslake will allegedly condemn the Conservative Government’s housing plan in his first House of Lords speech next week.

The Government has pledged to replace every property that is sold to housing association tenants with a new affordable home.

However, the Labour Party and housing associations have attacked the policy.

Right to Buy Criticised by Ex Civil Service Chief

Right to Buy Criticised by Ex Civil Service Chief

The scheme was introduced in the Queen’s Speech last week, which will give 1.3m housing association tenants in England the right to buy their homes at discounts of up to £104,000 in London and over £77,000 elsewhere.

The Government has said that housing associations will be compensated with funds raised by forcing local authorities to sell off their most valuable housing stock when it becomes vacant.

Ministers believe that this will ensure affordable homes are replaced, but some housing associations have threatened to sue the Government if they have to sell their assets.

Lord Kerslake comments: “I will raise my serious concerns about the policy in its current form. I think it’s wrong in principle and wrong in practise, and it won’t help tackle the urgent need to build more housing and more affordable housing in this country, particularly in London.”1 

The crossbench peer was the head of the civil service and until February he was the most senior official at the Department of Communities and Local Government.

Brandon Lewis, housing minister, says: “It is right that as high value council homes become empty, they should be sold to fund new affordable house building in the same area.

“The proposals in the Queen’s Speech will do that and more, extending Right to Buy level discounts to over a million housing association tenants, with the homes sold replaced on a one-for-one basis.”1

Labour says that Lord Kerslake’s words are “damning and telling.”1

Emma Reynolds, shadow housing minister, argues: “Labour supports people who want to buy their own home, but housing experts have lined up to say the Government’s proposed policy is uncosted and will lead to fewer affordable homes.

“The Government broke their promise to replace homes sold through Right to Buy on a one-for-one basis over the last five years.

“No one will believe their promises now and more of the same will lead to an increase in the number of families desperate for a home at a price they can afford.”1

1 http://www.bbc.co.uk/news/uk-politics-32952890