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Em

Em Morley

Mortgage Process Proves too much for One in Ten First Time Buyers

Published On: September 26, 2017 at 9:19 am

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The mortgage process is proving too much for almost one in ten (8%) first time buyers, who admitted that they were reduced to tears while attempting to secure their first mortgage, according to research from online mortgage broker Trussle.

Mortgage Process Proves too much for One in Ten First Time Buyers

Mortgage Process Proves too much for One in Ten First Time Buyers

That’s the equivalent of 27,000 first time buyers crying as a result of the mortgage process last year.

In the study of 2,000 homeowners, it was also revealed that roughly a quarter (23%) were forced to take time off work to make arrangements for their first mortgage. Applied to last year’s 338,000 first time buyers, this equates to 77,740 people.

Many find the traditional mortgage process to be opaque and time-consuming, with one in four (23%) borrowers reporting that they found the experience to be stressful, while 5% felt compelled to complain to their lender or broker about the service they received.

The negative experience so often associated with securing a mortgage is also leading to inertia among current borrowers. One in ten (9%) respondents – the equivalent of a million people – said that they’ve been discouraged from switching mortgage by their experience of being a first time buyer, while, for 13%, it’s actually discouraged them from moving home.

This switching inertia is costing UK homeowners billions of pounds every year, Trussle has found. There are roughly two million borrowers in the UK on a Standard Variable Rate (SVR) mortgage when they don’t need to be, and most will have slipped onto an SVR because they failed to switch when their initial term ended. A borrower on an SVR will almost always pay a higher rate of interest than they would on a competitive deal.

Trussle has calculated that the average UK borrower on an SVR pays £4,900 more in annual interest than they would on the lowest rate deal on the market – equating to £9.8 billion in excessive interest being paid by inert mortgage borrowers on SVRs each year.

The CEO and Founder of Trussle, Ishaan Malhi, says: “Buying a home is one of the biggest milestones in someone’s life and should be remembered with fondness, but, for so many, it’s an ordeal they’d rather forget. A lot of it comes down to the stress and inconvenience of the mortgage application process. It’s therefore understandable that so many people are reluctant to think about their mortgage when the time comes to switch, but the sad result is that homeowners are collectively losing billions of pounds a year.

“The good news is that things are improving, if in pockets. We’re already seeing dramatic progress in the mortgage customer experience, with the use of technology speeding up and simplifying the whole process. This in turn should help to address some of the causes of the inertia costing homeowners so much money.”

We’re reminding all portfolio landlords that the Prudential Regulation Authority’s new underwriting rules will soon be introduced. Get to grips with what they mean for you with our handy guide: https://www.justlandlords.co.uk/news/portfolio-landlord-underwriting-changes/

The Costs all Landlords Need to Consider

Published On: September 26, 2017 at 8:24 am

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Entering the rental market with buy-to-let properties is a popular way to gain extra income. The landlord community is made up of professional property investors, first time buy-to-let landlords and accidental landlords, all with varied levels of experience and knowledge, but, if you haven’t done this before, you might not be as informed as you could be when it comes to planning for all of the costs that can be incurred as a landlord.

We’re taking a look at some important cost points to consider for first time, or anytime, landlords; being fully informed of these costs could even save you money here and there.

Your mortgage

This is a cost you may or may not have to pay each month, however, if you do, this could likely be the biggest monthly cost for you. Having a buy-to-let mortgage could mean having to put down a larger deposit and also pay higher interest rates, so make sure you’re getting the best deal available and keep on top of this by checking regularly for better or improved mortgage offers.

Loss of rent

Although ideally your rent will cover or more than cover your mortgage payments, you should also consider any possible losses on rent. This could be due to the length of time taken to find or replace a tenant, resulting in an empty property, or due to unpaid rent. Although many insurance will cover some cases of unpaid rent, this is a possible loss you should be aware of.

Insurance

As a landlord, you’ll need to take out landlord insurance. This is not just to protect and help your tenants, but also protect your property, your investment. There are varying types of insurance, so make sure you do your research into what will and will not be protected; this way you are also in a good position to let your tenants know exactly what they need to insure.

Letting agent fees

Unless you have a tenant lined up already, you’ll need to find a tenant or tenants to rent your property to. This will mean either carrying out this search yourself or traditionally using a letting agent. High letting agent fees are a cost we hear a lot about, however, there are now alternatives at a much lower cost, such as Letproof.com, which allows you to search for tenants, deal with them and manage your property directly, skipping the agent and the costs.

Legislative changes

Changes to legislation can cost you. Keeping up with legislative changes is important to make sure you’re not missing anything that could affect you or your property. Changes to mortgage interest tax relief last year have taken their toll on landlords, and mydeposits found the majority of landlords are those using buy-to-let as a “part-time income supplement” and therefore may not keep as up to date with changes.

Repairs

Whether your buy-to-let property is new or old, there will always be small repairs which need to be tended to by the landlord, you. These are costs that can not be planned for and can unfortunately also include occasional larger expenses too, so be prepared for the possibility.

New Report Compares First Time Buyers in the UK to Ireland

Published On: September 25, 2017 at 10:28 am

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First time buyers in both the UK and Ireland are suffering similar effects of the financial crisis but, in the past decade, they have also undergone vastly different experiences, due to migration and other demographic changes affecting their respective countries, and severity of the housing market correction.

These are the findings of a joint research report published by UK Finance and the Banking and Payments Federation Ireland (BPFI). The report, UK and Irish Housing Markets: A First-Time Buyer Perspective, argues that the financial crisis produced similar, and well-documented, adverse effects on housing and mortgage markets.

New Report Compares First Time Buyers in the UK to Ireland

New Report Compares First Time Buyers in the UK to Ireland

Each country has also experienced continuing tensions between Government schemes seeking to promote activity in the housing market and regulatory intervention intended to ensure that the market remains sustainable.

The research provides the first detailed comparison of the UK and Irish mortgage markets, and uses detailed loan-level data from UK Finance and the BPFI to profile first time buyer borrowers in the two markets.

A common challenge in both countries is a continuing shortage of housing supply. But, despite this, first time buyer activity has been growing since 2011 in the UK and since 2013 in Ireland.

First time buyers remain vital to the health of the wider housing market. As well as continuing to sustain homeownership, they provide liquidity in the market, and enable existing homeowners to move and create housing chains.

Recent developments affecting first time buyers in the UK and Ireland include:

  • Demographic factors that have implications for the scale and nature of housing demand, with older people accounting for a growing share of the population, and major life events prompting household formation – particularly marriage and childbirth – occurring later in life.
  • The failure of housing supply to keep pace with demand, with housebuilding and sales activity still recovering from the collapse at the end of the last decade.
  • Changing lender risk appetites and practices after 2009, and tighter mortgage regulation to reduce demand and limit lenders’ exposure to losses from 2014.
  • A lack of liquidity in the housing market resulting from some existing homeowners being unable or unwilling to move.
  • Government housing schemes to support supply, although these schemes have more explicitly targeted first time buyers in Ireland than in the UK.

Key findings from the loan data include:

  • The age distribution of first time buyers in the UK remained broadly unchanged between 2004-16, while, in Ireland, there has been a large fall in the number of young first time buyers.
  • First time buyers in the UK have extended average mortgage terms since the financial crisis but, in Ireland, terms have tightened.
  • High loan-to-value (LTV) borrowing – 95% and above – continues to be largely absent from both markets.
  • There is evidence of loans bunching just below macro-prudential limits on loan-to-income (LTI) in both countries – 90% LTV and 3.5 LTI in Ireland, and 4.5 LTI in the UK – with lending above the limits imposed by regulation falling.
  • Higher LTI borrowing was focused in the capital cities of London and Dublin, where, of course, house prices are higher.

Another challenge is that the shortage of housing supply in both the UK and Ireland means that prospective first time buyers are also potentially competing for properties with movers who have acquired housing equity and private landlords, but creating a favourable environment for first time buyers must also mean addressing the needs of other purchasers and households in general.

Are you surprised by the differences between the UK and Ireland?

NLA Makes Recommendations to Treasury Ahead of Autumn Budget

Published On: September 25, 2017 at 9:45 am

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Guides for Landlords

The National Landlords Association (NLA) has submitted some recommendations to HM Treasury ahead of the Autumn Budget statement, which is due to be delivered on Wednesday 22nd November 2017.

NLA Makes Recommendations to Treasury Ahead of Autumn Budget

NLA Makes Recommendations to Treasury Ahead of Autumn Budget

The focus of the organisation’s recommendations was to ensure that fiscal and economic policy better supports investment in private rental property, and that sufficient funding is allocated to facilitate the implementation of the Homeless Reduction Act.

In summary, it makes the following recommendations:

  • Embark on an immediate review of the reduction in tax relief on finance costs for private landlords.
  • Introduce a package of Capital Gains Tax (CGT) reduction measures to encourage the sale of: poorly performing investment properties; properties where the proceeds of the sale will be entirely reinvested into the lettings sector; properties invested in and utilised for a period of more than ten years; and properties that are eligible and suitable for sale to existing tenants.
  • Introduce measures to facilitate the tax efficient movement of a lettings portfolio into a corporate structure.
  • Establish a Government-backed investment vehicle to allow the sale of properties into a managed fund.
  • Reintroduce the Landlords’ Energy Saving Allowance (LESA) and establish a level sufficient to improve the tax efficiency of carrying out relevant works.
  • Set LESA at a level sufficient to improve the tax efficiency of carrying out works.
  • Fund the expansion of Help to Rent nationwide.
  • Establish a national deposit guarantee scheme for the private rental sector.
  • Remove the CGT surcharge for property sales.
  • Introduce CGT tapering and business asset rollover relief for private residential properties that are let.
  • Abolish the Stamp Duty surcharge on additional properties.

You can read the NLA’s full submission to the Treasury by clicking here.

We will keep you updated with all of the developments surrounding the Government’s Autumn Budget online at Landlord News – don’t miss our daily updates.

Student Rents Unchanged for Second Year Running

Published On: September 25, 2017 at 9:08 am

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Private student rents have remained at an average of £100-£119 per week for the second year running, according to an annual report into student accommodation compiled by Glide Utilities, the student utilities and service provider.

The What Students Seek report shows that accommodation represents the second biggest outlay for students during their studies, behind fees. The majority (72%) of student rents are between £80-£139 per week. However, university locality creates some variance, with 15% of London students paying over £200 a week, while 69% of student rents in the North East are less than £90 per week.

Student Rents Unchanged for Second Year Running

Student Rents Unchanged for Second Year Running

Almost half (45%) of students surveyed said that their accommodation offers good value for money, but 36% disagree, suggesting that, while student rents remain static, landlords need to understand students better to attract and retain the best tenants; a growing concern given the continued increase of modern student developments on the market.

The annual What Students Seek report uncovers what students look for when it comes to their accommodation, to unveil common themes that could help landlords improve the market appeal of their properties.

When it comes to house shares, 39% of students currently share with five or more people. However, when asked how many people they’d ideally like to live with, almost half (48%) indicated that they’d like to share with just two people or fewer in their next property.

And it appears that a television isn’t going to sway students into renting a property – the majority (60%) rated having a TV as the least important factor when choosing accommodation. After cost, a fast broadband connection is by far the most important factor for students, followed by good storage space, rent inclusive of bills and double beds.

Positively, the majority of students (57%) are happy with the way their property is managed. Nevertheless, almost a quarter (23%) weren’t pleased, with the following issues causing the most problems: lack of response on maintenance issues (37%); poor upkeep of the property (30%); and lack of communication (28%).

One way that landlords could please their tenants is to include bills in the rent, which three quarters of students said was essential or quite important when considering a property.

You could even go the extra mile and offer cash or a non-cash incentive to students, which have been given to one in 20 students. Their landlord had even taken out 2% of students for a drink!

The report also highlighted the best university cities for landlords to invest in, based on overall tenant satisfaction ratings and annual yields.

Although there are great investment opportunities across the UK, cities in the North East consistently rate highly for both annual yields and tenant satisfaction, with properties in Middlesbrough delivering a 16.1% annual return and 82% satisfaction rating. Durham and Sunderland followed close behind.

Meanwhile, on the other end of the scale, London rated lowest, with an average annual yield of just 2.7% and a 76% satisfaction rating.

Outside of student rents, the report also pointed to a decline in the infamous student social life. When asked how respondents funded their social lives, almost one in five (17%) admitted that they didn’t have one. Despite this, over a third still rated the proximity to bars and clubs as an important factor when choosing accommodation.

The CEO of Glide Utilities, James Villarreal, comments: “It’s good news for students that private rental costs remain static, especially since the price of living in halls of residence continues to rise. However, it’s very likely that costs will rise moving forward, as the ban of tenant fees will inevitably get passed through to the price of the rent. Therefore, landlords and agents can offer students greater value for money by offering bills included, and ensuring that properties are well maintained and efficiently managed.”

Overseas Landlords Piling into Student Market in North West

Published On: September 25, 2017 at 8:04 am

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Landlords overseas

Although recent research shows that the proportion of international investors with properties in London has hit a new low this year, following Brexit and the Chancellor’s tax hikes, overseas landlords are piling into the student property market in the North West, according to The Mistoria Group.

While the capital has experienced the largest decline, with one in ten homes let this year owned by overseas landlords – down from one in four in 2010 – research from Savills shows that the proportion of international investment flowing into the UK market has almost doubled in the past two years, with £1.2 billion coming from Singapore alone in 2016.

Around 25,000 new student accommodation units have been completed for the start of this academic year, while a further 14,000 are already under construction for next year.

The Mistoria Group, which specialises in high-yielding property investments, has seen demand for shared student accommodation soar in the North West – up by 35% in Liverpool alone over the last 12 months.

Mish Liyanage, the Managing Director of The Mistoria Group, says: “It’s no surprise student property in the North West is booming with international investors. A north-south divide has opened up in the buy-to-let market, as a result of soaring property prices in London and the South East, which has made the region unprofitable for investors.

“The tougher tax measures, political uncertainty and falling house prices in London have led international investors to look for alternative asset classes, farther afield. Many have been attracted by the high yields in the North West, which boasts the ten best buy-to-let locations in the UK, while the south has the ten worst locations.”

He explains: “The type of international investors who were originally investing in the super-prime apartment bubble are now channeling their money into student flats and shared accommodation. Student property is the fastest growing sector of the market, giving investors strong returns that are well ahead of standard buy-to-let.

“In the North West, an investor can acquire a high quality three-bed HMO [House in Multiple Occupation] in Liverpool which will house four students, from £120,000 onwards.  The return on investment is very attractive too, with 13% – 8% cash rental and 5% capital growth.”

Has your property investment strategy altered to reflect the changing market?