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Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Mortgage Market Review Already Causing Delays For Borrowers

Would be residential property buyers are dismayed about the change of the rules on residential mortgages, with strict lending criteria tightened following the introduction of the Mortgage Market Review (MMR).

Since 26th April 2014, mortgage lenders have been required to carry out much more detailed checks of a borrower’s financial situation to be sure that they can truly afford to purchase and continue to afford the property, both now and in the future.

The introduction of the MMR is supposed to help regulate the residential property purchase market and does not yet apply to buy to let mortgages, but that could happen in time.

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Smaller Buy-To-Let Properties Provide The Best Rental Yields

Smaller Buy-To-Let Properties Provide The Best Rental Yields

Smaller Buy-To-Let Properties Provide

 The Best Rental Yields

A one-bedroomed rental property in Wales may not sound like the most glamourous of property investments but it could deliver the best rental returns for landlords according to a new in-depth buy-to-let report by the UK’s largest lettings agency Countrywide.

A survey of more than 50,000 Private rented sector property owners has revealed Buy-to-let landlords are getting excellent rental yields in Wales, the North of England and the Midlands from 1 and 2 bedroom rental properties.

Landlords in many parts of Wales are achieving an average 6.7% rental yield (rent measured as a percentage of the property price), beating the North of England and the Midlands, which both average a 6.5% rental yield.

These figures are substantially higher than the average 4.6% rental yield observed in parts of Central London, regarded as the red hot heart of the UK’s property market.

One and two-bedroom rental properties have seen the greatest increase in average monthly rental prices in April 2013, with a 1.4% and 1.3% month-on-month increase to £679 (GBP) and £766 (GBP), respectively.

The detailed report into buy-to-let rental returns was conducted by Countrywide, who found that average monthly rental prices in England, Scotland and Wales have continued to increase for six consecutive months to reach an average of £842 (GBP) in April 2013.

But rent increases remain below the increased cost of living, with an annual average increase of just 0.8% measured against Consumer Price Index inflation of 2.8%.

However, average monthly rents have fallen within Central London, the South East, Wales and parts of Greater London.

The biggest rental price drop of 6.3% was seen in Central London, where average monthly PRS rental prices average £2,371 (GBP), more than double the £1,106 (GBP) recorded in parts of Greater London.

Rental returns by location

 

Rental returns by location - Source: Countrywide

Rental returns by location – Source: Countrywide

 

Nick Dunning, from Countrywide, said: “With renting for longer now the norm for many people as they save for a deposit to buy their first home, we are seeing more young families looking to rent cheaper accommodation, hence the increase in demand for smaller rental properties. While prime Central London has seen the greatest fall at 6.3%, this is simply reflecting the fact that in April stock levels in prime Central London were very high compared to last year which benefited from the Olympics. As a result this April, tenants tended to view multiple properties putting in lower offers, which some landlords accepted. However, as demand picks up into the summer, and supply and demand becomes more balanced, the same property could easily rent for more in August than in April.”

Returns by property type

 

Rental returns by property type - Source: Countrywide

Rental returns by property type – Source: Countrywide

 

Source: Countrywide

New LHA Rates For 1st April 2013 Announced

New LHA Rates For 1st April 2013 Announced

The Valuation Office Agency (VOA) has published its new Local Housing Allowance (LHA) rates, which come into effect on the 1st April 2013.

LHA rates were frozen for a 12-month period until 31st March 2013. Future upratings, whilst still based on market rents, are limited to the rate of the September Consumer Price Index (CPI).

The LHA rates to be used in the first annual uprating in April 2013 were determined by rent officers and have been published on the VOA corporate website.

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UK residential property values have seen the first monthly rise since three months ago.

A new report by mortgage lender Nationwide found that UK property valuations showed a modest increase of 0.3% in May compared with previous months, after April’s figures recorded a 0.3% fall.

The low volume of residential properties up for sale is sustaining the price increase, according to the mortgage lender.

UK property valuations are still 0.7% lower than they were this time in 2011, meaning the average asking price is £166,022.

This reduction is smaller than the 0.9% year-on-year drop recorded in March and April, said the Nationwide.

Robert Gardner, chief economist at Nationwide said “Demand for homes remains subdued on the back of weak labour market conditions, but the lack of homes coming on the market is providing support for prices. This is in part a reflection of the low rate of building in recent years which has failed to keep pace with household formation”.

The mortgage lender’s findings also showed that consumer demand for residential property outweighs the supply due to rising rent costs as a result of people staying in rented accommodation in the PRS because they are unable to raise the deposit or secure a mortgage to purchase a home of their own.

2012 Buy-To-Let Mortgage Numbers Increase By A Third

2012 Buy-To-Let Mortgage Numbers Increase By A Third

There are fresh fears that First-Time Buyers (FTBs) and next time buyers are being forced out of the UK residential property market by Buy-To-Let landlords.

The Council of Mortgage Lenders (CML) said that 32,300 Buy-To-Let mortgage loans were made over the first quarter of 2012, a 32% increase on the first three months of 2011.

Meanwhile, according to chartered surveyors E.serv, the number of residential property mortgages lent to first-time buyers in April 2012 fell to their lowest level for 9 months. The company said that loans made to first-time buyers in April numbered just 11,307, a drop of 5% from March 2012 and the lowest since July 2011.

Mainstream mortgage lenders are increasingly reluctant to accept applications from First-Time Buyers due to low Loan-To-Value (LTV) rates and the size of deposit required. Instead there is a preference to lend to Buy-To-Let landlords, who are less likely to default on mortgage payments because they are able to utilise specialist Rent Guarantee insurance products to keep cashflow constant.

Richard Sexton, business development director at E.serv, said “Mortgage companies have begun to scale back lending to first-time buyers. Buy-to-let landlords are taking the places of first-time buyers as there is an absence of them in the market place because they can’t get loans. The UK housing market would be in a far worst place than it is now if it were not for the return of buy-to-let landlords”.

Chief Executive of Dragonfly Property Finance, Jonathan Samuels, said “There has been a seriously sharp spike in mortgage loan applications for buy-to-let properties in the first four months of 2012. A shortage of rental stock and strong demand from the growing number of tenants forced to rent will keep driving the sector forward. There’s a lot of portfolio building, as investors continue to add properties to give them increased exposure. People are seeing Buy-To-Let as a pretty stable place to be because residential property prices are falling and mortgage lenders still see lending to owner-occupiers as risky. Investors feel that there’s a lot left in the buy-to-let market and are putting their money where their mouth is”.

However there are warnings that buy-to-let landlords will need to know what they’re doing when it comes to best rental practices and should take appropriate measures to protect their rental income, such as thoroughly referencing tenants and ensuring Rent Guarantee insurance is in place. Landlords should also be prepared for Bank of England interest rates to rise anytime within the next 12 months as the UK struggles to escape the grip of recession.

The CML said that although lending to buy-to-let landlords has grown sharply in the last year, it is still at only 30% of 2007 levels.

With average loan-to-values on buy-to-let mortgages at 75% and average minimal rental cover at 125% it is unlikely that Buy-To-Let mortgage lending will recover to the same levels seen in 2007, as 25% deposits will prevent many amateur landlords from buying rental property.

UK Government Housing Minister, Grant Shapps, said: “We do not have to make a choice between first time buyers and buy to let. We need both. And while a third of all mortgages went to first time buyers last year, only 12% went to buy-to-let landlords. But I’m determined to pull out all the stops for those who want to get on the property ladder, which is why in March the Prime Minister and I launched the NewBuy Guarantee scheme which is expected to enable up to 100,000 aspiring homeowners to buy newly built properties with just a fraction of the deposit they would normally need.”

Free Tickets To A Place In The Sun Live Property Exhibition
If you’re thinking of buying a property overseas, you can’t afford to miss A Place in the Sun Live, the UK’s biggest overseas property exhibition taking place at Earls Court London on 30th March- 1st April 2012.

As well as the opportunity to meet the TV presenters and talk to over 100 agents selling property from around the world, A Place in the Sun Live is the most comprehensive place to gather information and inspiration for your home in the sun

The Main Stage at A Place in the Sun Live is the heart of the exhibition, with interviews and top tips from television presenters Amanda, Jasmine and Jonnie as well as other experts from the world of overseas property on buying your home abroad.

The Buying Advice Seminar Theatre brings together developers, agents, consuls and lawyers in panel Q&A sessions, so is the place to go armed with your questions about buying abroad. There’s a packed schedule of sessions throughout each day, covering different countries and topics to help you make the most out of your property overseas.

There are also series of country-themed villages and pavilion areas within the show with dedicated seminar theatres, where you can get specific advice on the most popular destinations to buy a property abroad.

The French Village in association with the experts on France, French-Property.com and sponsored by Halo Financial has its own dedicated seminar theatre and is surrounded by agents selling property from all four corners of France. Plus there are experts on tax, healthcare and all the other important topics you need your questions answered on before buying a property in France.
The Portuguese Pavilion in association with the Portuguese Chamber of Commerce will showcase properties from the Algarve, Silver and Green Coasts.

The Pavilion is hosted by bilingual Portuguese property owner Christina Hippisley, who will be joined by other experts from the Portuguese property industry, who can answer all your questions about what its like to buy a property and live in Portugal.

The Florida Pavilion at A Place in the Sun Live is a dedicated area featuring hundreds of properties for sale from both coasts of Florida and features its very own dedicated seminar theatre. There will be a collection of licensed realtors along with experts that can advise you on rentals, currency and legal issues.

The Italian Pavilion in association with the Italian Chamber of Commerce visits our Earls Court show for the first time and is home to a selection of agents and developers from across Italy. There will be a dedicated seminar theatre with sessions from experts on the property market in Italy, where you can learn about everything from the buying process to the intricacies of the Italian tax system. Come prepared with your questions to make the most of your day.

Click here to get your free tickets worth £12 each:
You may have as many free tickets as you like, but you must complete and print a ticket for each person.

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