Posts with tag: Buy-to-Let

Bank of England has power to regulate BTL sector

Published On: October 26, 2015 at 11:20 am

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Categories: Finance News

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Britain’s thriving buy-to-let sector could be thwarted if plans to regulate mortgages in the lending market put forward by the Chancellor are upheld.

The sector has been surprised by Mr Osborne’s announcement during the Treasury Committee hearing that he has already granted the Bank of England additional powers to regulate the buy-to-let market.

Changes

Chancellor Osborne has previously said that he would seek consultation after Bank Governor Mark Carney said that the buy-to-let sector could be a threat to the UK’s economic recovery.

However, it now seems that the Bank can regulate the sector anyway, should it see fit. The Bank already has the power to regulate the rest of the residential mortgage market, in a move designed to stop the housing sector from suffering due to demand pushing prices even higher.

Now, banks must make sure that no more than 15% of residential mortgages are allocated to people borrowing more than 4.5 times their income. In addition, they are required to ensure borrowers are in a position to repay their loans when interest rates eventually rise.

It was thought however that these rules do not currently apply to buy to let mortgages that account for around one sixth of the home lending market. Mr Osborne confirmed that he took Carney’s views on the buy-to-let market, ‘very seriously.’

Tools

‘We have given the FPC powerful tools to, for example, tighten mortgage standards if they feel there’s a credit bubble developing. The Governor of the Bank and the FPC have asked for additional powers over buy to let mortgages which weren’t included and we have granted those powers so they have that tool as well,’ Osborne told the committee.[1]

Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), expressed his disappointment that the promised consultation doesn’t seem to be happening.

Bank of England has power to regulate BTL sector

Bank of England has power to regulate BTL sector

Williams said that, ‘the Government stated its intention earlier this year to hold a post-election consultation to assess the evidence for granting powers of direction over buy-to-let lending to the Financial Policy Committee.’ He feels that the Chancellor’s address to the Treasury Select Committee suggests, ‘stage of evidence-led policy making has been removed and that the consultation may be limited to what those powers will be when, rather than if, they are granted.’[1]

‘It seems somewhat ironic that this development comes just days after Mark Carney also spoke to the Select Committee about the need for a wider stock take of financial regulations. There is a common interest in ensuring we have a stable market for buy to let, and we feel this would be aided by an open debate about the case for additional FPC powers based on the strength of evidence,’ he added.[1]

Take action

Mr Williams also noted that the FPC itself recently adjudged there to be, ‘no immediate cause to take action in the buy-to-let market. He stated, ‘clearly, there is a distinction between having powers and using them, but creating an evidence base to inform future FPC decisions is important and this process should continue.’ Continuing, Williams said, ‘we must also hope the potential bias towards action does not exclude a sober appraisal of the facts even though the Chancellor seems to have jumped that hurdle.’[1]

‘The rental sector is becoming increasingly important to the UK housing market and many people are staying in rented accommodation for much longer than we have seen historically,’ said Steve Griffiths, head of sales and distribution at Kensington Mortgages .The quality and variety of such accommodation has improved significantly following the growth of buy to let, and it is vital that these standards are maintained in the future. It would be short sighted to limit landlords’ ability to deliver quality rented accommodation when many people rely on this sector,’ Williams concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-buy-let-market-2015102611130.html

 

 

Negligence towards rogue landlords-reports

Published On: October 19, 2015 at 12:01 pm

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Categories: Landlord News

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The image of the private rental sector has been tarnished in this weekend’s press, with a number of reports on the alleged poor condition of homes to let.

Both The Guardian and The Independent published articles on a Citizens’ Advice Bureau survey which suggested that private landlords are raking in a cumulative total of £5.6bn per year in rent on homes that do not come up to required legal standards. Around one quarter of this sum is said to come from housing benefit payments.

At risk

Alarmingly, the Citizens’ Advice Bureau report suggests that as many as 740,000 families in the English private rental sector are currently living in homes that present a threat to occupants’ overall health and wellbeing.

In addition, The Times has reported on an investigation by charity group Shelter that suggests that number of people living in accommodation unfit for human habitation is larger than 250,000.

What’s more, the newspaper also reports than in excess of 25% of English councils have not prosecuted any landlords for providing inadequate accommodation during the last five years. A further half reportedly prosecuted less than two per year.

Negligence towards rogue landlords-reports

Negligence towards rogue landlords-reports

Failures

Figures in The Times report, sourced from the Residential Landlords’ Association and a Freedom of Information request, indicates that councils have prosecuted just 2,006 landlords during the last eight years. The average penalty was a fine of £1,5000.

David Smith of the RLA noted that, ‘tenants and good landlords are being let down. Councils have plenty of powers to enforce standards in private rented housing and tackle criminal landlords. It is sad that at best the record on enforcement is patchy and at worst, non-existent.’[1]

Housing Minister Brandon Lewis also added that, ‘the Government is determined to crack down on rogue landlords and the housing bill strengthens councils’ powers to tackle poor-quality privately rented homes in their area.’ He concluded by saying that, ‘our measures include blacklisting landlords who have been convicted of serious offences and seeking banning orders for the most prolific offenders.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2015/10/surveys-highlight-councils-negligence-on-tackling-rogue-landlords

 

 

 

Buy-to-let investment yields 10% per year

Published On: October 19, 2015 at 10:49 am

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There has been encouragement for buy-to-let investors with the news that there were average returns of almost 10% in England and Wales over the last twelve months.

The latest Buy-to-Let Index from Your Move and Reeds Rains shows that landlords saw gross yields rise to 5.2%, while spiralling property prices increased total average yields to 9.4%.[1]

Record Rents

Additionally, the Index shows that rents rocketed to an all-time high of £816 per month in September, in comparison to £768 at the same period last year.

What’s more, rents in London, the South-East, South-West. East and West Midlands also soared to regional records. On average, rents rose by 6.3% during the last twelve months, despite consumer price inflation becoming negative. [1]

Rents in the capital are rising at the highest rate, up by 11.6% over the year to stand at a new record of £1,301 per month.[1]

Real terms

Cumulatively, the different with inflation is much sharper. Rents are now 24.4% greater than in January 2010, with the index of CPI inflation just 14.1% higher. In real terms, rents have risen by 10.3% since the beginning of the decade.[1]

Buy-to-let investment yields 10% per year

Buy-to-let investment yields 10% per year

In addition, despite rising rents, tenant finances have also grown, with rent arrears dropping to 8.6% of all rent due.

Adrian Gill, director of Reeds Rains and Your Move, noted that,’ rents are rising strongly in real terms due to the recent acceleration in wages and the much deeper and longer-term shortage of available properties across the UK.’[1]

‘Meanwhile, as the price of everyday essentials plateaus and even falls, rents are no longer following the same broad trends,’ Gill continued. ‘The cost of a place to live has now uncoupled from the cost of living.’[1]

Gill continued by stating, ‘as long as this supply and demand imbalance keeps up, it is hard to see any reversal in the speed of rent rises.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2015/10/buy-to-let-investors-earn-near-10-a-year

 

UK residential market in 6 month activity high

Published On: October 14, 2015 at 1:01 pm

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Encouraging new data indicates that UK housing market activity climbed to its highest level in the last six months. In addition, last month saw the second highest monthly level on record, according to research from Connells Survey & Valuation.

September also saw 0.5% property valuations carried out than in March 2015, which saw the highest recorded figure.

Activity increase

Annually, total valuation activity rose by 29%, following a 23% month on month rebound since August of 2015.

John Bagshaw, Corporate Services Director at Connells, feels that,’ Britain’s housing market is going from strength to strength.’ He said that,’ against a brightening economic background, players in all parts of the market are feeling more confident about their prospects. Valuation activity is growing beyond the seasonal pick-up at the end of August, with year-on-year growth gathering momentum.’[1]

Further data from the report shows that the total number of valuations carried of specifically for first-time buyers increased by 25% in September in comparison to August. There was also an 18% increase compared to September 2014.[1]

Valuation activity amongst existing home movers performed to a higher rate, increasing 26% month-on-month and by 23% year-on-year. ‘First-time buyers aren’t just feeling more confident, they are now following this up with real action and contributing a good portion of growth in the UK housing market,’ noted Bagshaw. ‘There are no signs yet that schemes such as Help to Buy are going to be phased out, helping to suppress the barriers to setting a first foot on the ladder,’ he added.[1]

First-time acceleration

‘Meanwhile, wages are growing faster than inflation and purchase prices have cooled a little in recent months, all contributing a good portion of growth in the UK housing market,’ Bagshaw continued. ‘Moreover, the latest focus from the government on starter homes is a promising sign there is at least a strong intention to maintain support at the bottom of the ladder.’[1]

Bagshaw also noted, ‘home movers have also been buoyed by the same trends. Rising real term wages combined with steadily increasing property values mean that many of those who are already fortunate enough to have a place of their own feel it’s a great time to buy.’[1]

UK residential market in 6 month activity high

UK residential market in 6 month activity high

The report also shows that remortgaging also experienced another positive month. Total valuations for those looking to take out a new mortgage against the value of their current home increased by 16% month-on-month and by 49% year-on-year.[1]

Buy-to-let stability

Furthermore, the buy-to-let sector has seen more steady growth, with the total number of valuations increasing by 13% since September of last year. Monthly, valuations carried out by on behalf of would-be buy-to-let investors increased by 21%.[1]

Mr Bagshaw believes, ‘the remortgaging sector is continuing to power ahead with plenty of people still opting to improve rather than move. High demand in this sector is still being driven by the large number of good mortgage deals out there, as homeowners rush to capitalise on the value of their home, while it’s still relatively cheap to do so.’[1]

‘Meanwhile landlords are proving resilient. Many thought the buy to let market might be in full retreat after a Summer Budget aimed at clamping down on the sector. But most investors’ panic was short lived as they realised that the fundamentals of buy to let’s profitability, namely large demand from tenants and low mortgage rates, were still in place. Far from being a drag, the sector capped off what has been a very good month for total valuations,’ Bagshaw concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-property-activity-report-2015101311084.html

 

 

CML suggest large BTL lending increase

Published On: October 14, 2015 at 11:42 am

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Categories: Finance News

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New figures from the Council of Mortgage Lenders (CML) suggest that buy-to-let lending continues to show a substantial annual rise.

Buy-to-let purchasing has showed greater annual growth than home-owner loans for the best part of the year. The CML said that this is in part a market recovery response, with buy-to-let lending declining more sharply than home-owner lending during the economic downturn.

Falls

Loans for home-owners for house purchase fell by 50% in volume terms from 2007 to 2009, while buy-to-let loans for house purchase fell by 71% during the same period. Buy-to-let represented 17% of total gross lending in August, a proportion that has remained more-or-less constant since the turn of the year. However, this figure was up from the 13% recorded in the same period in 2014.[1]

CML suggest large BTL lending increase

CML suggest large BTL lending increase

The largest driver in the buy-to-let mortgage market was remortgaging, with the number of loans up by 51.3% annually. What’s more, the number of properties purchased was up by 26.5%.

CML chief economist Bob Pannell noted that, ‘seasonal factors pushed all categories of lending lower in August compared to July.’ He went on to say that, ‘however, the mortgage market continues to see year-on-year growth and we expect this to continue over the coming months.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2015/10/latest-cml-figures-show-big-buy-to-let-lending-increase

 

 

 

BTL mortgage options rise to nearly 1,000

Published On: October 6, 2015 at 3:47 pm

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The number of buy-to-let mortgage products available soared to almost 1,000 during the third quarter of the year, according to a new report.

Data from the latest Complex Buy to Let Index from specialist brokers Mortgages for Business show that options for buy-to-let investors rose by 11% during the last three months.

Annually, there has been an increase of 35% in these products.

Yielding success?

‘Vanilla’ buy to let properties offer the lowest gross yield to landlords, with a further fall of 0.8% recorded in quarter three of this year to 5%. Annually, these yields have fallen by 0.9%.[1]

Moreover, between the second and three quarters of 2015, yields on multi-unit freehold blocks feel from 7.1% to 6.1%. Year-on-year, yields for this type of property have fallen by 2.5%.[1]

In comparison, HMO’s performed reasonably well, with yields only falling by just 0.1% in quarter three.

‘The number of new mortgages coming onto the market has rocketed in recent months,’ said David Whittaker. ‘There is huge interest in mortgages suitable for limited companies as landlords take advice from their accountants.’[1]

Continuing, Whittaker suggested that, ‘as rents fail to keep pace with racing property prices, yields are continuing to plateau. Returns on vanilla buy to let have now fallen to the 5% mark. Landlords will reasonable borrowing costs and a strong portfolio of these sorts of properties will still be making a solid income from such investments but this changes the case for those considering new purchases. With average yields on HMO’s still nearer 10%, more complex property types are likely to attract a growing portion of new investment.’[1]

BTL mortgage options rise to nearly 1,000

BTL mortgage options rise to nearly 1,000

Remortgaging rises

Further data from the report shows that remortgaging performed better than new purchase loans for the fourth consecutive quarter. During the third quarter of this year, 66% of vanilla buy to let loans were for remortgaging, in comparison to 34% for new property purchases. [1]

For multi-unit freehold blocks, remortgaging accounted for 89% of all new mortgages in the period, up by 7% month-on-month and by 22% on the same period one year ago.

Whittaker feels that there is, ‘a change of mood for landlords. Recent unfriendly noises from the Government and Bank of England have contributed but mostly this represents a natural cooling in the buy to let industry after an exceptionally strong first half of 2015.’[1]

‘Consolidation is the order of the day. Landlords are taking full advantage of record low borrowing rates while this lasts. The fact the landlords are choosing in vastly larger numbers to remortgage rental property rather than purchase shows they are looking to get a competitive fixed rate mortgage,’ he added.[1]

[1] http://www.propertywire.com/news/europe/uk-landlords-buy-let-2015100611062.html