Written By Em

Em Morley

UK Finance Issues Lending Update for January 2018

Published On: February 27, 2018 at 10:42 am

UK Finance has issued its lending update for January 2018, covering card spending, gross mortgage lending and business deposits.

The organisation found that card spending was 5.8% higher in January than in the same month of last year, although higher repayment levels meant that the pace of borrowing experienced little change, rising by 4.8% on an annual basis.

Gross mortgage lending in January is estimated to have been £13.8 billion – 7.7% more than January 2017 and slightly higher than the monthly average of £21.4 billion for 2017.

UK businesses’ deposits rose by 7% in the 12 months to January, while borrowing over the same period contracted slightly, by 1.4%. Within business sectors, manufacturers’ borrowing expanded modestly, while construction and property related sectors constricted.

Eric Leenders, the Managing Director of Personal Finance at UK Finance, comments: “January saw higher levels of repayments on credit cards, which is expected at this time of year, as customers pay off their festive spending. Meanwhile, households were careful with their outgoings, as wage growth remains below the inflation rate.

“Gross mortgage lending in January increased by almost 10% compared to the same period last year, and was higher than the monthly average, as customers took advantage of mortgage deals on offer at the end of 2017.”

The Managing Director of Commercial Finance at UK Finance, Stephen Pegge, also reacts to the data: “Business sentiment remains positive, with confidence in short-term trading conditions buoyed by the recovery in international markets. Investment levels remain broadly unchanged and borrowing continues to err on the side of caution, as companies adopt a wait-and-see attitude to trading uncertainties, opting to use their deposits as buffers for spending decisions.”

The Director at mortgage broker Private Finance, Shaun Church, gives his thoughts on the figures: “The mortgage market started 2018 with a bang, as gross mortgage lending soared by 10% year-on-year. While there may be whispers of a housing slowdown, these figures demonstrate that buyers are eager to get on the ladder and banks are looking to lend.

“With speculation of further interest rate rises to come in 2018, borrowers should act soon to lock in competitive rates. With a flurry of remortgage activity in January, existing homeowners are already shopping around to capitalise on the favourable rates on offer. Those with remortgaging still on their to-do list should act soon to ensure they secure the best possible rate. With inflation rising, savings stagnating and wage growth slowing, mortgage rates are one of the few market conditions currently working in the consumers favour.”

Agents will be able to Charge for Change of Sharer

Published On: February 27, 2018 at 10:11 am

Author: Em Morley

Categories: Law News

Letting agents will be able to charge a fee when a sharer on a joint tenancy changes, a Government minister has confirmed.

However, Heather Wheeler, the Minister for Housing and Homelessness, did note that any such fee will only be permitted when the tenant has requested the change themselves.

Speaking to MPs on the Housing, Communities and Local Government (CLG) Committee, Wheeler stated that the draft Tenants’ Fees Bill would be changed to make this clear.

Mark Prisk MP, who had earlier warned that there was some “nervousness” about the way in which default fees, which will be permitted under the bill, are defined, raised the question as to whether or not a charge would be allowed on a joint tenancy when a sharer changed.

Wheeler responded: “This is something we have listened to as the evidence has been given.

“We think that this is an area where further clarity is needed, and we intend to permit a charge for a variance on the tenancy and charges related to a change of sharer where these are requested by the tenant.”

When asked to clarify further, Wheeler confirmed: “It would be appropriate to charge a fee for a change of tenancy for a sharer when the tenant is asking for that.”

Under the draft bill, costs to tenants will be reduced, as landlords and their letting agents will be banned from requiring any payments from tenants as a condition of granting, renewing or continuing a tenancy with the exception of rent, a refundable tenancy deposit, a refundable holding deposit and tenant default fees (for issues such as lost keys or late rent payments).

We will continue to keep you up to date with developments to the forthcoming letting agent fee ban at Landlord News.

Be aware that the ban is not scheduled for introduction until spring 2019.

What if there was an Airbnb for Longer-Term Rental?

Published On: February 27, 2018 at 9:05 am

Author: Em Morley

Categories: Lettings News

We are living in the age of Airbnb, the age of simple and hassle free letting. It’s had its criticisms and its issues since launching in 2008, and experienced slow growth in the beginning, but now it’s here and used and loved by many. However, now, we’re seeing it opening up grey areas in private rental, grey areas that can be cleared up with the introduction of a certain new platform, Letproof.com.

It’s fairly common for individuals to buy up housing in certain areas with the sole intention of renting them out on Airbnb. Of course, this was not the initial purpose of Airbnb and this is not to the liking of many of the residents in those areas. So, in Greater London, there has been, as of 2017, a 90-day limit introduced to stop households being let out on Airbnb as their sole purpose, all year round. Scotland is now calling for this to be introduced there too.

Airbnb has blurred the lines between entrepreneurial homeowners and landlords. The key thing that has been highlighted by the rise of the Airbnb-er is that there is a defined need out there for direct letting between landlords or hosts and their tenants.

Some landlords have taken to using Airbnb to let out their properties for short-term holiday lets. A report by the Residential Landlords Association (RLA) showed that, for 34% of landlords asked, the changes to section 24 mortgage interest relief were the reason for them making this decision, the need and desire to reduce their costs. However savvy this choice may seem, it’s important that landlords are aware of their mortgage restrictions and that they are not in any way violating their terms. A landlord may have a buy-to-let mortgage, but this usually states that the property has Assured Shorthold Tenancy (AST) arrangements, which is usually six months-plus at any one time – longer than your average holiday let.

Equally, those renting out their homes via Airbnb, when on holiday themselves etc, may too be violating the terms of their mortgage. A residential mortgage may not allow for the property to be used for short-term letting at all.

The Airbnb model means less cost for landlords, no paying letting agents for compliance checks, no tenancy renewal fees to be paid, just a do-it-yourself, simple to use platform where landlords can find holidayers, or short-term tenants themselves.

This really highlights the need for this kind of platform, this simple to use, landlords and tenants only, Airbnb style platform, but not only for holiday lets, for longer-term tenancies too; for landlords not wishing to violate their AST agreement mortgage. True, they may not then be avoiding section 24 tax relief changes, but they will be avoiding the letting agent fees, and they will be benefiting from the satisfaction and freedom of arranging the tenancy themselves, as they would through Airbnb. This flexibility can be found, and the place to do it? Leptroof.com!

Letproof.com is offering exactly that, the functionality and the flexibility; a cost effective platform for landlords and tenants wanting more than just a holiday rental, but a short, or long-term rental without any agents or middle men.

Try it, test it and spread the word.

If you’d like to get your property on to the site over the next month and avoid the sign up free, you can contact them here at info@letproof.com!

House Prices Set to Surge by 100% over a 25-Year Period

Published On: February 26, 2018 at 9:27 am

Author: Em Morley

Categories: Property News

Five-year fixed rate mortgages could bring good news for buy-to-let investors

Using Office for National Statistics (ONS) data from the past 80 years, financial comparison site money.co.uk has predicted that house prices are set to surge by a whopping 100% over a 25-year period.

Considering how our household finances could look in ten years’ time, money.co.uk has analysed personal finance data from the past 80 years to reveal the shocking rate at which we can expect our costs to increase by 2028.

House prices

The tool estimates that the number of Britons buying a home in 2028 will drop. Last year, money.co.uk found that 14.6m in the UK owned their own homes. However, in the next ten years, this is set to fall to 14.4m.

With the average cost of buying a home expected to rise by 20% over the next decade, from a typical property value of £208,318 in 2017 to £255,292 in 2028, unachievable deposits could be forcing people to rent privately.

In 2003, the average house price was £127,246, meaning that property values will have experienced a 100% increase in just over 25 years by 2028.

Rent prices

The tool not only found that house prices are set to rise by 20% over the next ten years, but also that the average monthly rent price is due to increase by 10% over the same timeframe, from £925 to £1,017.

Could this smaller rate of growth mean that more people will be geared towards renting, rather than buying their own homes?

Hannah Maundrell, the Editor in Chief of money.co.uk, says:  “The cost of our major life events, like buying a house and getting married, are rising, but wages are not keeping up. More than ever before, people need to make their finances a priority. Our predictions can give people a good indication of how much these life events are going to cost and the amount they need to save for their dream futures. It’s no surprise the UK is adopting a renting culture, as house prices are quickly outstripping what people can realistically afford.

“It’s really hard to save a deposit while you rent. If buying a property is on your bucket list, you need to seriously work out how you are going to achieve it. Getting a handle on your outgoings and incomings is the first step to budgeting for your life. It sounds daunting to budget for life events that feel so far away. However, with prices evidently on the rise, it will take you far longer to save up to achieve your life goals.”

She adds: “The figures we’ve predicted are based on trends in Government data. We expect certain external events may have a large impact on future finances, such as large political milestones like Brexit or wage freezes in the public sector.”

Landlords who Purchased Ahead of Stamp Duty Deadline Could Face Remortgaging Problems

Published On: February 23, 2018 at 9:57 am

Author: Em Morley

Categories: Landlord News

Back in March 2016, a surge in property purchases was recorded, as landlords rushed to complete sales ahead of the 3% Stamp Duty surcharge on additional homes. This rush to beat the change caused an 87% jump in housing transactions, according to the Land Registry.

Many landlords are likely to have secured themselves a two-year fixed rate mortgage at this time, so, in March this year, there will be an unusually high number of investors reaching the end of their deals.

Greg May, the Director of Financial Services at Romans estate agent, explains: “Landlords who bought before the Stamp Duty increase in 2016 are not only at risk of overpaying by being automatically transferred to the lender’s Standard Variable Rate (SVR) product, but may also find securing a new deal increasingly difficult due to the changes in mortgage lending criteria.”

Those who do not act when their fixed rate deal comes to an end may run the risk of being automatically placed onto the lender’s SVR, which could result in higher monthly repayments. The newly introduced stress testing on buy-to-let mortgages is designed to ensure that, should interest rates rise, the landlord can still cover the cost of the mortgage.

However, even when they do act to secure a new deal, some landlords may find that their options are limited, as mortgage lending criteria for buy-to-let properties has become much tighter.

This may prevent some landlords who aren’t aware of how to get themselves in the right financial position to remortgage from securing a new product.

May continues: “Landlords who borrowed at the higher end of the loan-to-value threshold are likely to feel the changes to lending criteria the most.

“Those who are unable to remortgage may be able to transfer onto a different product with their current lender, but this does mean that their options are extremely limited.”

He adds: “Ideally, landlords want to be able to pick between a number of different products from a variety of lenders, in order to find the right deal for their circumstance.”

Typically, a mortgage application process takes around six to eight weeks to complete, so many landlords will need to act now in order to find the right deal for their circumstances.

Landlords are faced with a number of options, from increasing their rental payments to working with a specialist mortgage advisor to create a business plan and demonstrate that they remain able to repay their mortgage, despite the change in criteria, or to find a different product.

Scrapping Section 21 Could Make Issues Worse, Expert Warns

Published On: February 23, 2018 at 9:39 am

Author: Em Morley

Categories: Landlord News

Following Wednesday night’s BBC Panorama programme that investigated the widely debated Section 21, or no-fault, evictions, one industry expert has warned that scrapping the system could make issues worse.

Investigative journalist Richard Bilton shed light on the difficulties faced by many tenants across the UK, but also spoke to landlords who see Section 21 as their only option.

Mark Pilling, the Managing Director of Spicerhaart Corporate Sales, responds to the programme: “Last night’s Panorama raised some very important issues. It focused on the recent rise in the number of landlords using no-fault Section 21 to evict. But, the truth is, there is always a reason why a landlord ends a tenancy, and I think it is misleading to say that tenants are being evicted for no reason.

“In our experience, the reasons for a Section 21 are usually either because the tenants have missed rent, they are late on rent or they are not treating the house well. The landlord may also need to use Section 21 because they are struggling financially and need to sell the property. The programme looked at the new rules introduced in Scotland at the end of last year, which put an end to no-fault evictions, giving more rights to both tenants and landlords. Under the new rules, landlords will need to take their case to a tribunal if they want it to evict, rather than having the automatic right to the property back.”

He continues: “Where tenants are being evicted through no fault of their own, but rather because of their landlords’ circumstances, it must be very upsetting for them. However, if landlords themselves are having financial difficulties, scrapping Section 21 could leave them trapped. With the changes in buy-to-let tax relief, a number of landlords will see their income reduce, whilst their borrowing costs will likely increase. This, coupled with potential payment difficulties linked to Universal Credit changes, means many will struggle.”

Pilling concludes: “There is a housing shortage in the UK, so the private rental sector is becoming more and more important, and, while I completely understand the reasons why there are calls for Section 21 to be scrapped, I fear it could actually compound the problem.”

Landlords, what are your thoughts?