Written By Em

Em Morley

Buy-to-Let Lenders Cut Interest Rates

Published On: September 23, 2014 at 2:41 pm

Tags: buy-to-let interest rates,cut in mortgage rates

Recently released data indicates that buy-to-let investors have had an extremely profitable year. According to figures from LSL Property Services, landlords recorded a 12.7% profit on their portfolio, taking rental income and capital gain of the property into consideration.

Profitable

LSL’s findings show that landlords made an average return of £8,233 in rent and £13,066 in capital gain during the last 12 months.[1] It must be noted however that these figures were recorded without taking tax, mortgage repayments or maintenance costs into account. This had led to concern that landlords could get into arrears with mortgage payments, especially if there is a significant rise in rates.

Cuts

Thankfully, good news came recently with a number of leading mortgage lenders cutting the interest rates charged to buy-to-let landlords. This indicates that the market feels that rising interest rates seem to be way off at present.

Buy-to-Let Lenders Cut Interest Rates

The biggest cut was made by Leeds Building Society, trimming its two-year fixed interest rates from 3.49% to 3.09%, for those borrowers able to secure a 40% deposit.[1] Virgin Money, Santander and Accord have cut their mortgage rates by a nominal 0.1%.[1]

Landlords however are increasingly looking for longer term rates to secure themselves in case of any variable rises. Skipton Building Society has introduced a seven-year plan, which is the longest available on the market. A fixed rate of 4.6% will be offered until 2021 for investors with a 40% equity or deposit for the property. This will be subject to a fee of £750. For investors with a 25% deposit, rates rise to 5%, with the fee rising substantially to £1,750.[1]

A number of Britain’s private landlords fear that their returns may fall in the face of any interest rate increases. Particularly concerned are new borrowers, who were enticed into the market by low interest rates.

Buy-to-let-charges

Often, buy-to-let mortgages come at an increased price. Arrangement fees and interest rates raise owner-occupier mortgage costs. David Hollingworth, representative of London and Country Mortgages, said that large fees go hand in hand with the payoff of lower rates. Hollingworth said: “It’s more common to get bigger fees in buy-to-let but landlords will be more willing to pay up in order to drive down their interest rate.”[1]

Landlords can also be assisted by the lack of regulation attributed to buy-to-let mortgage applications, making loans more securable than those for homeowners. Hollingworth suggests that buy-to-let mortgage loans “are not subject to the same kind of affordability checks for ordinary buyers.” He goes on to say: “Lenders are also able to look at the property’s rental income, as well as the borrowers salary, when making a decision about a buy-to-let mortgage.”[1]

Hollingworth concludes: “Landlords are still in a healthy position, as the recent rate cuts show that the market is fiercely competitive. As a result, they benefit from rate cuts.”[1]

[1] http://www.landlordexpert.co.uk/2014/09/23/good-news-for-uk-landlords-as-buy-to-let-lenders-cut-mortgage-rates/

Immigration Checks Launch in West Midlands

Published On: September 23, 2014 at 11:18 am

Author: Em Morley

Categories: Landlord News

Tags: illegal migrant tenants,right to rent checks

The first phase of the Government’s controversial Immigration Act is due to be trialled in parts of the West Midlands from this December. Landlords in Birmingham, Walsall, Dudley, Sandwell, and Wolverhampton will be the first to enforce the new requirements.

A Home Office spokesperson said that the West Midlands was chosen as the trial area for the scheme due to its large population size and diversity.

The Immigration Act 2014

The Immigration Act 2014 is designed to stamp out and deprive illegal migrants from the UK and deprive them of any services that they are not entitled to. Under the Act, landlords are permitted to check the immigration status of all new or potential tenants. Failure to do so could result in fines of up to £3,000.

Code of Practice

Amidst an angry response from landlords, the Home Office issued an official code of practice, in an attempt to ensure that there is no discrimination when conducting checks. All new tenants should be subject to eligibility checks, apart from landlords’ immediate family members or tenants under the age of 18.

Immigration Checks Launch in West Midlands

Landlords will be responsible for checking evidence of a person’s identity and citizenship, in order to comply with the new legislation. Permitted documents that can be used to prove eligibility to reside in the UK include passports or biometric residence permits. Documentation must be copied by the landlord and kept for a period of 12 months after the tenancy agreement has ended.

Despite opposition from landlords and leading industry organisations, the Government looks set to continue with their plan to roll out the scheme across the UK from next year. Landlords believe that they are effectively being asked to take on the roll of the UK Border Agency, something that they feel is grossly unfair.

There is also scepticism on the Home Offices’ promise that a landlord checking service will respond to status inquiries within two working days, for tenants who have outstanding immigration applications.

Students

Student tenants that have been directly nominated by local authorities, colleges or hostels are exempt from new immigration status checks. This is due to the fact that additional checks would duplicate existing research.

Crackdown

The Immigration Act 2014 and its attributed responsibilities are part of the coalition Government’s crackdown on immigration. More measures included in the crackdown include revoking driving licenses, reporting sham marriages and harsher fines for companies that knowingly employ illegal immigrants.

The immigration minister, James Brokenshire, defended the introduction of the bill, stating: “The right to rent checks will be quick and simple, but will make it more difficult for immigration offenders to stay in the country when they have no right to be here.” He also says that the new rules “will act as a new line of attack against unscrupulous landlords who exploit people by renting out substandard, overcrowded and unsafe accommodation.”[1]

Brokenshire also promises: “Landlords in the West Midlands will have all the advice and support they need in advance of the checks going live on 1st December.”[1]

[1] http://www.landlordexpert.co.uk/2014/09/23/landlord-required-to-check-immigration-status-of-tenants-in-west-midlands/

People Rely Solely on Property to Fund Retirement

Published On: September 22, 2014 at 3:14 pm

Author: Em Morley

Categories: Finance News

Tags: funding your retirement,investing in property,property investment retirement fund

A veteran member of an asset management company has stated that a worrying number of people are relying on their property investment to fund their retirement.

People Rely Solely on Property to Fund Retirement

Rod Aldridge of Barings Asset Management has warned that people planning on selling or renting their property to boost their pension fund are open to the trends of the ever-changing property market.

Mr Aldridge says that people must be aware of the dangers of using property to fund retirement. As a result, he has urged those planning to do so to invest in other assets that are not tied up in property.

A recent survey from Barings found that 7% of non-retirees have made plans to sell their existing property in order to boost funds for their retirement. In addition, the number of people who have plans to sell a property which does not serve as their main dwelling has increased from 13% in 2013 to 16% in 2014.[1]

Volatile

Mr Alridge said that the results of the survey were concerning. He stated: “Property can, of course, form part of a diversified investment portfolio, but this year’s research indicates that more people are investing in property as a retirement source and this could mean they are too concentrated in the asset class. Property prices can be volatile, so relying on your home to provide all your income to fund retirement is risky.”[1]

He continued: “Expecting to fund your retirement through the use of a volatile asset such as their own home or from other properties, such as buy-to-let, should be fully appreciated and understood.”

Aldridge believes: “Investing for your retirement is about long-term planning,” and “more emphasis needs to be put on how a lengthier retirement will be funded.”[1]

Despite the concern, the research from Barings found that people who have never planned to use property to boost their retirement fund rose from 35% to 52% during the past year.[1]

[1] http://www.carehome.co.uk/news/article.cfm/id/1565240/worrying-number-of-people-relying-exclusively-property-to-fund-retirement

Rent Growth Stabilises Across UK

Published On: September 18, 2014 at 9:36 am

Author: Em Morley

Categories: Finance News

Tags: rent growth

The latest Homelet rental index has found that the average monthly private rent across the UK, excluding London, is now £729. London’s average monthly rent is £1,464.¹

The August index revealed that rental price rises in the UK steadied in August, as every region of the UK saw smaller rent increases than in previous months. The study also found that some regions that have previously seen high monthly growth, have dropped in August.1

The figures from the index saw rental rises were significantly lower than in previous months, with just London and the South East showing increases of over 2%, at 2.4% and 3% respectively.1

Rent Growth Stabilises Across UK

Two areas that have been showing strong growth in recent months, East Anglia and the South West, have seen stability in August, as rents in East Anglia rose by only 1%, and the South West recorded a decrease of 0.9% in rental prices.1

In Scotland, Wales, the North West and northeast England, rents were also down. The biggest drop was in the North West of England, with rents on new tenancies last month an average of 3.5% lower than in July.1

However, rents rose by 1.9% in the West Midlands, and 1% in the East Midlands and Northern Ireland.1

Martin Totty, Chief Executive of Barbon Insurance Group, comments: “August can traditionally be a slower month for the rental market and similar dips have been seen in rental prices in previous years.

“Nevertheless, the cooling in the rental sector may prove to represent the beginning of a trend towards a more settled market after several months of much more significant growth.

“A similar cooling has been seen in the wider housing market, with house price indices recording an easing of house price growth.”1

On a yearly basis, rental growth seems to still show strength, as just the North East and the East Midlands report lower rents for new tenancies in August than in the same month last year. Within London, rents rose by 11.4% on last year, East Anglia’s by 8.4% and the South East by 5.3%. Around the UK, the average UK private property rent increased by 8.2% in the year to August.1

Totty concludes: “While a calmer period for the rental sector is likely to be welcoming by landlords and tenants alike, with affordability concerns having increased in some parts of the country in recent months, demand for rental property is set to remain strong.”1

¹http://www.landlordtoday.co.uk/news_features/Renting-growth-easing-across-UK

Rise in House Prices Leaves People Priced Out

Published On: September 17, 2014 at 2:57 pm

Author: Em Morley

Categories: Property News

Tags: Rise in house prices

Rise in House Prices Leaves People Priced Out of a Stable Home

Every region of the UK has seen a rise in property prices this year, raising fears that generation rent will be trapped out of the housing market for longer.

The Office for National Statistics (ONS) has found that the average UK house price is now £272,000, an increase of 11% from £245,000. This demonstrates the widening gap between house prices in London and the rest of the UK. The huge price growth in July was at the fastest annual pace in seven years.¹

Londoners will now face average prices of £514,000, which has grown by £15,000 in a month, and £76,000 in a year, says the ONS.1

The average first time home is 13.5% more expensive than it was 12 months ago, which is the largest annual rise since March 2005.1

Experts expect this will cause a generation of young people to abandon their hopes of buying a house, and living in rental accommodation, or with their parents, for longer.

Rise in House Prices Leaves People Priced Out

Housing charity Shelter’s Chief Executive, Campbell Robb, says: “This shocking rise in house prices leaves people priced out of a stable home.

“The dream of their own home is slipping so far out of reach for young people and families across the country, the only choice they face is to become part od the clipped-wing generation, stuck living in their childhood bedrooms, or generation rent paying out dead money to landlords.”1

Average wages are £24,648 a year, and are only increasing at 1.7%.

A house in England costs £284,000, up from £255,000, with Scottish homes rising to £198,000 from £183,000. The average property in Wales is now £171,000, up from £160,000, and Northern Ireland’s homes are £139,000, from £132,000.1

Those trying to buy a house in London will also see rising stamp duty charges, as the tax rate increases from 3% to 4% for homes above £500,000.

The Council of Mortgage Lenders (CML) revealed recently that the number of mortgages given to first time buyers exceeded 30,000 in July, the first time this has happened in a one-month period since August 2007.1

However, first time buyers generally have to borrow record high figures to get into the market. The average new loan in this sector is £127,500, says the CML.1

The present low interest rate situation is helping keep borrowing costs down, however homeowners have been cautioned to consider how they will deal with higher payments when the Bank of England (BoE) base rate ultimately moves off its 0.5% low.

The Royal Institute of Chartered Surveyors (RICS) claimed that property sales are now generally taking up to a month longer to process than they were at the beginning of the year, which was attributed to increased lender caution.1

Despite this, property website Rightmove recently said that they are experiencing signs of strong activity returning to the housing sector.¹

Housing minister, Brandon Lewis, explains: “This Government is committed to delivering long term economic stability and economic growth.

“The last administration oversaw a housing boom and bust, and we have been picking up the pieces. House building is now at its highest level since 2007 and continuing to grow, and 200,000 new affordable homes have been delivered across England since 2010.

“By tackling the deficit left by the last administration, we are helping keep down both interest rates and the number of repossessions, while improving the housing market remains a key part of our long term economic plan.”¹

¹http://www.independent.co.uk/news/uk/politics/property-prices-in-all-regions-of-the-uk-grow-at-the-fastest-annual-pace-seen-in-seven-years-9736723.html

Landlords Receiving Record Income from Rentals

Published On: September 17, 2014 at 9:31 am

Author: Em Morley

Categories: Landlord News

Tags: rental records

Landlords within England are experiencing a thriving rental sector, as earnings from rental payments top £32 billion per year.

Landlords Receiving Record Income from Rentals

Direct Line for Business conducted a study that found landlords in London receive the highest proportion of private rental income in England, at a massive £14 billion a year. This is more than the North East, East Midlands, West Midlands, Yorkshire, and East Anglia combined. Altogether, 44% of the whole country’s rent is paid in London.¹

Outside of London, the highest amount of rent paid in any city is in Leeds, with yearly private rent reaching £565m. Next is Birmingham at £521m, followed by Manchester at £401m.1

The research also found that London and the Home Counties lead rental earnings, with central London seeing the highest average rents, at £1,633 a month or £19,596 per year. The highest rents outside of London are found in Elmbridge, Surrey, where they stand at £1,579 per month or £18,948 a year.1

Despite these huge figures, landlords outside of these parts can also see a strong rental income. Areas outside the London commuter belt can also demand high rents, with Bath, North Somerset, and the Cotswolds commanding annual rental incomes of over £11,0000.1

In terms of proportion of private renters, Bournemouth leads the way outside London, with 30% of households in rental accommodation. The Isles of Scilly have 29.7%, and Brighton and Hove have 29%. Inside Greater London, the proportion of private rentals is 30.7%.1

¹http://www.landlordtoday.co.uk/news_features/Landlords-enjoying-%22record-income-from-letting%22