Posts with tag: finance

Mark Carney Expresses Yet More Buy-to-Let Concerns

Published On: January 27, 2016 at 9:24 am

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The Governor of the Bank of England (BoE), Mark Carney, has yet again expressed concern over the boom in the buy-to-let market.

Mark Carney Expresses Yet More Buy-to-Let Concerns

Mark Carney Expresses Yet More Buy-to-Let Concerns

He reports that further analysis of the sector has begun, in response to the growth in loans to private landlords.

Responding to questions from MPs about possible risks to the economy, Carney said: “We think developments in the buy-to-let market have warranted heightened scrutiny and have done so for some time.

“As a general rule, any time you see a very sharp and sustained increase in activity in one area… it at least bears heightened scrutiny.”

Data from the BoE reveals that lending to landlords has surged from 8.8% of all new loans eight years ago to 14.5% last year.

In its December financial stability report, the Bank warned that its Financial Policy Committee (FPC) “stands ready to take action if necessary”.

Carney then told the Treasury Select Committee that the Bank would study the impact of changes to landlord taxes proposed by George Osborne.

“We want to assess the implications of those in assessing the overall implications for stability of developments in buy-to-let,”1 he stated.

From 1st April, landlords will see a reduction in mortgage interest tax relief, a change to the Wear and Tear Allowance, and a 3% extra Stamp Duty charge on investment properties. Find out more about the financial changes here: /landlords-and-agents-warned-that-buy-to-let-mortgages-could-crash/

An external member of the FPC, Martin Taylor, reinforced Carney’s statement: “We are expressing mild concern about buy-to-let.”1

Carney also told MPs that he will decide by the end of this year whether to extend his time as the Bank’s Governor.

1 http://www.standard.co.uk/news/uk/bank-boss-alarm-at-buy-to-let-housing-boom-a3165351.html

 

Equity Release Levels at Record High Among Over-55s

Published On: January 26, 2016 at 3:56 pm

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A record level of property wealth was released by homeowners aged 55 and over last year, with £1.61 billion unlocked through specialist equity release plans.

The Equity Release Council (ERC) reports that lending grew by 16% on the previous year, as homeowners used lifetime mortgages and reversion plans to withdraw cash from their homes.

Over 22,500 deals were agreed for 2015 – the highest figure since 2008. The value of borrowing also exceeds its pre-recession high by a third.

Equity Release Levels at Record High Among Over-55s

Equity Release Levels at Record High Among Over-55s

Lifetime mortgages, which allow borrowers to take out a loan against a property and only pay interest on its sale, were the most popular form of borrowing. Meanwhile, reversion plans, which allow homeowners to sell part of their property but continue living there, accounting for less than 1% of deals agreed.

The data shows that for many retirees, property is their biggest asset. Additionally, as house prices have continued rising, they have built up considerable equity. The ERC reports that customers borrowed an average of £70,670.

The Chairman of the ERC, Nigel Waterson, says the figures are “the latest sign of growing reliance on housing wealth as a key pillar of later-life financial planning”.

He continues: “Housing wealth is often people’s greatest asset and it makes sense for equity release to be on every homeowner’s checklist to consider as part of their retirement and estate planning. At the same time, it is not suitable for every circumstance, which is why professional financial advice and independent legal advice are essential.”1

An equity release expert at retirement advisers Age Partnership, Simon Chalk, says the 9.5% increase in property prices over 2015 has made people’s homes “potentially their greatest asset”.

He adds: “During the year, more over-55s benefitted from their increased housing wealth than before, as annual equity release lending reached a new high.

“The strong growth in the market is set to continue in 2016, as house prices see no sign of slowing down and people become more aware of the importance of their housing wealth.”1

Traditionally, equity release plans are controversial, with the original products allowing homeowners to end up owing more than they released from their property.

Current plans protect against negative equity, but they are still not always the best option for homeowners, as they offer less cash than would be available if the property was sold on the open market, and have other financial implications.

The Head of Retirement at Saga, Alex Edmans, comments on the findings: “These latest figures suggest people like being able to unlock cash from their home as and when they need it. This can be a smart move financially, as people only have to pay interest on the funds they release, but they know they can unlock more cash at a later date if they need to.

“However, equity release is not right for everyone. We always recommend getting thorough advice before taking out a plan, as well as speaking to family and friends so they know what you are thinking of doing.”1

1 http://www.theguardian.com/money/2016/jan/25/equity-release-levels-record-high-2015-over-55s

New Range of Buy-to-Let Mortgages from Leeds Building Society

Published On: December 27, 2015 at 10:44 am

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New Range of Buy-to-Let Mortgages from Leeds Building Society

New Range of Buy-to-Let Mortgages from Leeds Building Society

Leeds Building Society has launched a new range of mortgages with cashback for existing buy-to-let borrowers.

Existing buy-to-let landlords hoping to add to their property portfolio or remortgage investments they already own can choose from an exclusive range of competitive products, each with £250 cashback.

They include: a two-year discount buy-to-let mortgage at 2.10%; a two-year fixed rate deal at 2.60%; and a five-year fixed rate product at 3.39%.

All of these deals are available at up to 60% loan-to-value (LTV) and come with a free valuation for properties worth up to £500,000 and fees-assisted legal services. They also have a low fee of £199.

Buy-to-let deals up to 70% LTV are also available through the lender.

Director of Business Development at Leeds Building Society, Martin Richardson, comments: “Adding the cashback benefit for existing buy-to-let borrowers complements some of the other changes we have made to criteria on this type of lending.

“We keep our lending criteria under active review and listen carefully to feedback from borrowers and intermediaries to find ways we can improve our service and develop products which better suit customer need.”1

The building society made changes to criteria on its buy-to-let mortgages earlier this year, including increasing the maximum number of properties an investor can hold to eight.

Currently, Leeds requires a minimum income of £25,000 for borrowers, but this has been altered slightly to allow joint income earners with less than £25,000 annual income to apply, so long as their joint income is over £40,000.

It requires rental income to cover at least 125% of interest payable on the buy-to-let variable rate.

1 http://www.propertyreporter.co.uk/finance/leeds-announces-btl-range-changes.html

Basel Committee Joins Crackdown on Buy-to-Let Sector

Published On: December 15, 2015 at 3:28 pm

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The buy-to-let sector could be hit by further restrictions, as the Basel Committee looks set to join the crackdown on property investment.

Basel Committee Joins Crackdown on Buy-to-Let Sector

Basel Committee Joins Crackdown on Buy-to-Let Sector

Mortgage experts have already warned that Chancellor George Osborne’s plans to attack buy-to-let taxes could destroy the market.

The Bank of England (BoE) is also joining the fight, after it called for new powers over the interest cover ratio on buy-to-let calculations.

The Basel Committee sets global financial standards. It wants banks to hold twice as much capital against mortgages when repayments are dependent on rental income. It fears that landlords will struggle to meet their repayments if they cannot find tenants for their properties.

This measure would double the amount of capital lenders must hold against a loan from 35% to 70%, pushing up the cost of buy-to-let mortgages and reducing supply.

The BoE’s Financial Policy Committee (FPC), managed by Mark Carney, warns that buy-to-let mortgages are twice as likely to break down than loans for owner-occupiers.

The FPC has requested powers from the Treasury to restrict lending to landlords, which could include limits on loan-to-value and loan-to-income ratios.

The buy-to-let sector is still growing strongly, despite activity dropping by 4% in November, according to a recent study by Connells Survey & Valuation.

John Bagshaw, of Connells, says buy-to-let remains an attractive venture for prospective investors.

He comments: “Much of the energy is being fuelled by a desire to out-manoeuvre the Treasury’s attempts to take more money from buy-to-let business.

“With the Chancellor imposing more fees and regulations on landlords in his most recent Autumn Statement, many would-be landlords are hurrying to get into the market before these changes kick in from April next year.”1

Buy-to-let investors and second home buyers will be charged an extra 3% in Stamp Duty from April.

1 https://www.landlordtoday.co.uk/breaking-news/2015/12/basel-committee-joins-assault-on-buy-to-let

Barclays is First Major Lender to Tighten Buy-to-Let Criteria

Published On: December 3, 2015 at 11:23 am

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Barclays is the first major mortgage provider to tighten its criteria for buy-to-let lending.

Barclays is First Major Lender to Tighten Buy-to-Let Criteria

Barclays is First Major Lender to Tighten Buy-to-Let Criteria

The bank announced that from 7th December, its rental cover ratio will rise from 125% to 135% for all new applications. This decision was made after the summer Budget revealed that buy-to-let mortgage interest tax relief will be cut from 2017. Landlords are expected to incur higher costs as a result.

It is believed that Barclays’ change in criteria could spread out into the market, with other lenders adopting the same rules.

From Monday, all new buy-to-let applicants must prove that they can cover the mortgage payments by 135% of rent.

All existing buy-to-let and permission-to-let mortgages will continue to be assessed at 125% as part of the overall affordability calculation and the affordability rate will stay at 5.79%.

In July, Chancellor George Osborne announced that tax relief for landlords will be gradually reduced to the basic rate from April 2017.

In a statement from Barclays to intermediaries, the bank said that the increase in rental cover ratio will ensure new customers are protected in the long-term.

Chief Executive of mortgage broker SPF Private Clients, Mark Harris, believes the bank is likely to be the first of many lenders to make this change to their buy-to-let criteria.

He adds that the industry is coming to a point where buy-to-let will become a 50% loan-to-value (LTV) product in the South East and London at least, putting a small-scale investor into the same category as a large landlord.

He says: “This means that if you are going to invest in property, you won’t be leveraged at 85% LTV, for example, which was commonplace during the boom, but will need to find a lot more equity.”

He also states that when investors are hit by the higher rates of Stamp Duty from April, smaller landlords will be dropped in favour of wealthier investors. Find out more about the changes in Stamp Duty here: /btl-homes-hit-with-increased-stamp-duty/

“These developments are not good news for tenants, as landlords will inevitably push up rents if they can to cover some of their higher costs and removal of some tax breaks,”1 Harris concludes.

The Bank of England has also announced that it is ready to cool the buy-to-let market. Read more: /bank-of-england-stress-tests-results-revealed/

1 http://www.ftadviser.com/2015/12/01/mortgages/mortgage-products/barclays-buy-to-let-criteria-change-could-move-other-lenders-EgwhCcHiqlXNhb9mucbFiO/article.html

Bridging Specialist Launches Product to Release Landlord Equity

Published On: December 1, 2015 at 4:04 pm

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Bridging Specialist Launches Product to Release Landlord Equity

Bridging Specialist Launches Product to Release Landlord Equity

Recent research found that £70 billion has been added to buy-to-let equity in the past two years, as property prices have increased by 15% across the UK and by a huge 30% in London.

As a result, commercial bridging specialist JustBridging.co.uk has launched a product and dedicated broker/financial intermediary channel. The product aims to release the billions of pounds in property professionals’ portfolios.

Director of JustBridging.co.uk, John Davies, explains: “Our research shows property professionals are equity rich but options poor. This is because prior to the financial crisis, many had the foresight to take out tracker mortgages around just 0.5% to 1% above base rate.

“Understandably, the last thing they want to do is unlock equity in their portfolios by remortgaging, as this would significantly increase their overall borrowing costs. This can be extremely frustrating, as they are unable to use their equity to take on additional properties or improve their housing stock.”

This annoyance has led to JustBridging.co.uk launching its PortfolioBuilder product, which provides flexible funding solutions from £10,000-£500,000 for established property businesses in the UK that own at least one commercial property, including buy-to-lets.

The product works as a replica of a second charge bridging loan, but with a much higher than standard loan-to-value (LTV) required. It is also an exact replica of a normal bank overdraft, which aids landlords with late rent payments and allows the release of funds for repairs and maintenance work.

Davies concludes: “We are a lender to the business model and not a property lender. We focus on how the business is being managed and who is managing it. This results in potential access to loans at significantly higher LTVs if security is taken over real assets.”

Have you seen your equity change in the last two years?