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Em Morley

UK Mortgage Lending Rises and Low Interest Rates

Published On: May 15, 2018 at 9:34 am

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Categories: Finance News

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Making Sure You’re Successful in The Ever-Changing BTL Property Market

By Marc Trup, the Founder and CEO of Arthur Online

Despite the Government’s decision to reduce Stamp Duty for first time buyers last November, the first time buyers’ market has not shown many signs of growth.

Although UK mortgage lending rose by 4.9 % in February compared to the same period last year, the amount was below the 2017 monthly average borrowing figures. It is believed that borrowers are eager to climb on the property ladder ahead of forecasted interest rate rises, as predicted in all international markets, which include America, Europe and China. We are seeing a squeeze on real incomes of potential borrowers due to inflation and debt through over-use of credit cards. However, this could ease with the strengthening of sterling and a strong labour market.

Marc Trup, the Founder and CEO of Arthur Online

Marc Trup, the Founder and CEO of Arthur Online

With London house prices continuing to fall and house prices in the rest of the country increasing marginally, confidence in the property market is not at its highest. The Nationwide Building Society reported an average house price of £211,625 in March equating to an annual rise of 2.2%, and it is predicted that price growth will slow further to around 2%. Although mortgage rate rises are predicted over the coming year, it is not known when they will come and how high they will be. We do know that the policy of access to ultra-easy money will be short lived. With the lack of Government intervention keeping sterling weak, which could change at any time, the announcement of interest rate rises could have an effect on international buyers entering the UK market due to a strengthened pound.

If we can speculate that there will be a 2% interest rate increase, one being fairly soon and the other in the autumn, pundits are forecasting that the US Federal Reserve could raise interest rates three to four times over the coming year, as the US economy shows strength and in need of possible controlling. This is in contrast to Europe, where speculation is that there will be no interest rate rise, however, it will be interesting to see what quantitative easing the EU adopts and their long-term action plan for 2019.

With all this speculation, we head to the real crunch of what interest rates the UK market will offer new homeowners and the remortgaging market, with particular interest to the fixed rates mortgages over two, five and, in some cases, ten years. These are increasing in price and, in some cases, loan-to-value criteria are becoming more stringent, in order to realise the best deals on the market, with many of these looking for 60% deposit. It is believed that these rates and their increase will have a greater impact on prices in London than in the rest of the UK, due to the higher loan-to-income ratios in the capital. Home sellers are achieving nationally over 96% of their asking price, with the capital being just over 95%, showing confidence in the market increasing the further away you are from London. However, in the most popular locations, buyer demand is still pushing prices higher, due to lack of choice and there are generally less overpriced speculative properties appearing on the market.

Marc Trup is the Founder and CEO of Arthur Online

Marc fell into the property sector after selling his first business in 1998 to BUPA Healthcare. Focusing on residential property, he built up a portfolio in and around the London area, starting off with a small block of flats. Over the following 15 years, Marc grew his portfolio to manage over 85 properties. He wanted a system that allowed him to manage the portfolio from his iPhone, while drinking his espresso at the local coffee shop. Having searched online to find an app to help him do just that, he realised that it simply didn’t exist. So, he founded Arthur Online to make not only his life easier, but that of other property managers. Arthur Online is a cloud-based platform that enables property managers to respond instantly and solve problems fast – be it with tenants, contractors, property owners or letting agents. https://www.arthuronline.co.uk/

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RLA Calls for Government to Support Longer Tenancies

Published On: May 15, 2018 at 9:03 am

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Categories: Tenant News

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The Residential Landlords Association (RLA) has reached out to the Government to request that support is provided for landlords to adapt their tenancies in order to accommodate the rise in older renters.

Over a quarter of those in their late 30s and 40s are now renting, according to research based on figure from the annual Family Resources Survey. The amount of middle-aged tenants renting from private landlords in the UK has doubled in the past decade. The number of those in the same age group with a mortgage has also fallen from 60% to less than 50% between 2007 and 2017.

The RLA believe that the offering of longer tenancies, with assistance from the Government, will make a big difference.

David Smith, Policy Director for the RLA, has commented: “With government data showing that rents are increasing by less than inflation and that average weekly rents are lower than weekly mortgage payments, it is not surprising that more older people who are finding it difficult to afford to buy a property are now renting.

“We recognise that older tenants, especially those with children, want security in rented housing. Although official statistics show that tenants have, on average, lived in their existing rented homes for almost four years, we have called on the government to do more to support the provision of longer tenancies.

“This includes addressing the problem that mortgage lenders often prevent landlords offering longer tenancies with an RLA survey showing that 44% of landlords have mortgage conditions that limit the maximum length of tenancy that can be offered.”

“This is making it more difficult in areas of high demand for tenants to find decent accommodation,” he added.

“The government is increasingly asking the private rented sector to house people in categories that it was never intended or structured to do. Ministers need to undertake a comprehensive review to ensure the support is in place for landlords to meet the changes in the types of tenants in rented housing.”

Reforms Needed to Fix High Levels of Property Sales Falling Through

Published On: May 15, 2018 at 8:10 am

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Categories: Property News

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According to research undertaken by YouGov on behalf of the HomeOwners Alliance and homebuyer IMMO, the UK sees a collapse of more than 300,000 property transactions each year, costing the seller an average of £2,700. This was recorded to be as a result of buyers changing their minds, costing sellers a total of £400m between them annually.

It is beginning to feel like being caught between a rock and a hard place for many landlords. To maintain a portfolio is becoming increasingly costly, due to a combination of the Stamp Duty surcharge and stricter mortgage lending, yet to sell a property is no easy task these days.

With gazumping being a longstanding issue, the government has announced plans to improve the situation by introducing voluntary reservation agreements. With both the seller and the buyer paying a non-refundable fee, they will be locked into the sale. Such a method should be beneficial for both parties, as a way of avoiding time-wasters and likewise making them legally bound to see the process through to the end.

YouGov’s survey revealed that 20% of sellers experienced the collapse of their sale, with 51% having to face costs averaging £2,727.

69% of the home sales that fell through were due to issues on the buyer’s part, such as the purchaser changing their mind. The lengthy process also allows the opportunity for buyers to end up pulling out for another property, resulting in 39% of collapsed sales. 28% of deals falling through were due to buyers not having their finances organised.

Gazundering has also been an issue for some, a situation where the buyer has lowered their offer just before the exchange of contracts. This accounted for 8% of collapsed sales.

Paula Higgins, chief executive of HomeOwners Alliance, commented: “We often hear about would-be buyers losing their dream homes as a result of sellers accepting higher offers but less is said about sellers forking out thousands in wasted fees only for buyers to change their mind, leaving the seller back at square one”.

“Gazundering and time wasting is a huge problem. The homeselling system is so unreliable it’s deterring homeowners from selling – adding to the ongoing housing shortage crisis as a lack of suitable homes is one of the barriers to people moving up the property ladder.”

Samantha Kempe, Co-Founder of IMMO, has also said: “The current system has created a fundamental power imbalance between the seller and the buyer, with the seller often at the buyer’s mercy during what is often the largest financial decision of their lives.

“Sellers should be able to proceed with the sale of their property knowing what price they will receive and feeling assured that the sale will go through.”

Aspiring Property Developers say Economic Growth will have the Greatest Effect on House Prices

Published On: May 14, 2018 at 10:01 am

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Categories: Property News

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A sharp decline in buy-to-let investment causes rents to rise

LendInvest has published the results of its survey of property developers, revealing what they think will affect house price growth in the next five years.

When asked what they thought will have the biggest effect on house prices, those surveyed thought national economic growth is likely to have the biggest impact.

Only a quarter (24%) believed that political developments, such as further elections and Brexit, will affect house price growth the most.

 A fifth (20%) of those who took part in the survey thought shortage in supply of housing to be the biggest concern affecting house prices, while 16% of aspiring developers cited the construction of new infrastructure such as the new HS2 and Crossrail lines as the key influencing factor.

 Steve Larkin, Director of Development at LendInvest, commented: “It is great to see that the next generation of SME housebuilders are so confident about prospects for the housing market in the medium term. Typically, we might expect to see more scepticism or concern surrounding the impact of Brexit on the market. Likewise, shortage of supply is the conventional culprit for pushing house prices up.

“Naturally we must wait to see how the economic and political developments of the next year or two unfold. But for now, it’s encouraging to see these aspiring developers taking such a fresh perspective on the market they’re entering.”

"Demand for housing is often noted to be ‘income elastic’ – with rising incomes leading to more being spent on houses."

“Demand for housing is often noted to be ‘income elastic’ – with rising incomes leading to more being spent on houses.”

How does economic growth affect house prices?

Demand for housing is dependent on income. With higher economic growth and rising incomes, people will be able to spend more on houses, which increases demand and pushes up prices. In fact, demand for housing is often noted to be ‘income elastic’ – with rising incomes leading to a bigger proportion of incomes being spent on houses.

In a recession for example, falling or loss of incomes will mean people can’t afford to buy. In addition, those who lose their job may find they can’t keep up with mortgage payments and end up having their home repossessed. Unemployment is also linked to economic growth; fewer people will be able to afford a house with higher employment rates, and even the fear of an unstable jobs market will put people off buying a house.

With house prices still out of reach for millions of people, Dan Wilson Craw, director of Generation Rent, says: “Rising house prices over the past 25 years have put home ownership out of reach for millions of people. But this trend has created a feedback loop that encourages investors to speculate on property. This diverts capital from productive parts of the economy, and lifts prices even further away from what the average household can afford.

“Dispelling expectations that prices will keep rising will also help ensure that the landlords who are renting to the rest of us are doing it to provide long-term homes rather than gambling on capital gains and booting out tenants when they want to cash in.”

Mortgage Arrears Drop to Lowest Level since 1994, Reports UK Finance

Published On: May 14, 2018 at 9:09 am

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Mortgage arrears dropped to the lowest level since records began in 1994 in the first quarter (Q1) of the year, according to the latest Mortgage Arrears and Possessions Update from UK Finance.

The report found that 78,800 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance in Q1 2018, which is down by 8% on Q1 2017 and the lowest level ever recorded by UK Finance.

Within the total, there were 24,100 homeowner mortgages with more significant arrears (defined as 10% or more of the outstanding balance). This has dropped by 3% on an annual basis.

"Mortgage arrears dropped to the lowest level since records began in 1994 in the first quarter (Q1) of the year"

“Mortgage arrears dropped to the lowest level since records began in 1994 in the first quarter (Q1) of the year”

Buy-to-let

In Q1, 4,500 buy-to-let mortgages were in arrears of 2.5% or more of the outstanding balance, which is down by 6% on the same quarter last year.

Within this total, there were 1,100 buy-to-let mortgages with more significant arrears.

Possessions

UK Finance’s latest study also revealed that 1,200 homeowner mortgaged properties were taken into possession in Q1 2018. This is unchanged from the same quarter of 2017.

Jackie Bennett, the Director of Mortgages at UK Finance, comments on the recent data: “The number of mortgages in arrears is at its lowest level since records began, while possessions remain at a historic low.

“This has been helped by low interest rates and lenders supporting borrowers through periods of temporary financial difficulty wherever possible.”

She continues: “However, the recent change to Support for Mortgage Interest (SMI) from a benefit to a loan, as well as potential pressure on households from a future base rate rise, risk causing a reversal of this trend as the year goes on.

“Only a small minority of those eligible for the SMI loan have taken it up so far. Lenders will proactively help borrowers in receipt of SMI to see if there are other ways to make up their payments if they do not want to take out the loan.”

She concludes: “As ever, customers should not hesitate to contact their lender if they anticipate any payment problems and want to discuss what options are available. Repossession is always a last resort.”

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Landlords Respond to Increase in Older People in Rented Housing

Published On: May 14, 2018 at 8:10 am

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Categories: Tenant News

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Data analysed for and by BBC News has revealed a steep increase in the proportion of 35 to 54-year-olds living as private tenants, compared to ten years ago. Since 2006-7, we can see that these numbers have doubled, according to the Family Resources Survey.

David Smith, Policy Director for the Residential Landlords Association, has responded to this research: “With Government data showing that rents are increasing by less than inflation and that average weekly rents are lower than weekly mortgage payments, it is not surprising that more older people who are finding it difficult to afford to buy a property are now renting.

“We recognise that older tenants, especially those with children, want security in rented housing. Although official statistics show that tenants have, on average, lived in their existing rented homes for almost 4 years, we have called on the Government to do more to support the provision of longer tenancies. This includes addressing the problem that mortgage lenders often prevent landlords offering longer tenancies with an RLA survey showing that 44% of landlords have mortgage conditions that limit the maximum length of tenancy that can be offered.

“The growth in the number of older tenants is one factor behind an increase in demand for rented housing at a time when an increasing number of landlords are not investing in more properties or are selling off homes because of Government tax rises on the sector. This is making it more difficult in areas of high demand for tenants to find decent accommodation.

“The Government is increasingly asking the private rented sector to house people in categories that it was never intended or structured to do. Ministers need to undertake a comprehensive review to ensure the support is in place for landlords to meet the changes in the types of tenants in rented housing.”