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Property Optimism Falls To Lowest Level For 18 Months

Property Optimism Falls To Lowest Level For 18 Months

Property Optimism Falls To Lowest Level For 18 Months

UK property price optimism among private rental sector landlords and residential property owners has dropped to the lowest recorded level for 18 months after buy to let mortgage lending in January was reported to be decidedly sluggish.

Traditionally, the UK property market generally experiences a slow start that incrementally builds to a summer buying frenzy before reaching another plateau and then a further period of increase followed by a gradual easing at the end of the year.

The latest Halifax House Price Index (HPI) found that UK property prices increased by just 2% in January 2015, reaching a new UK average property price of £193,130 (GBP).

Combined with figures released by the Department of Communities and Local Government, showing a slowdown in the number of new homes being built, and it is clear why landlord and residential property owners optimism has fallen.

60% of landlords and property owners, surveyed for the lender’s latest housing market confidence tracker report, expected the average property price to be significantly higher in 12 month’s time.

This means that house price optimism has fallen by 10 points from 62 to +52, the lowest level of consumer confidence since June 2013, when 52% of private rental sector landlords and residential property owners expected a large rise in property prices.

So what’s different?

  • In June 2013 UK inflation was at 2.9% compared to the current 0.3%
  • Employment was just over 30 Million compared to today’s figure of 30.9 Million
  • Mortgage lending levels were at £15 Billion (GBP) compared to the current £17 Billion (GBP).

Despite the fact that the UK’s Gross Domestic Product (GDP) for 2014 increased by 2.6% and all members of the Bank of England’s (BoE) Monetary Policy Committee (MPC) voted to hold interest rates at 0.5%, the dip in confidence levels over UK property prices reflects public concern over the UK economy in general.

Craig McKinlay, mortgages director at the Halifax said that “More than half of consumers still believe UK property prices will be higher than they are now in a year’s time; however optimism has continued to weaken. Despite this we’re now seeing a return to the seasonal trend for house price activity”.

But he pointed out that of more concern are the figures from the Department of Communities and Local Government showing a slowdown in the number of new homes being built. ‘It’s widely acknowledged that the UK needs an increase in the amount of new housing being built,’ said McKinlay.

‘The Lloyds Banking Group Commission on Housing targeted 2 to 2.5 million new homes built by 2025 new homes to be built before 2025. If we are to address demand the increase in new homes coming onto the market needs to be sustainable,’ he explained.

UK Property Market Predictions For 2015

UK Property Market Predictions For 2015

What Will Happen To
The UK Property Market In 2015?

Happy New Year to all our readers, and welcome to the usual confusion over what the year ahead will bring for the UK property market.

Property prices are still predicted to rise in 2015, albeit at a much slower pace than in 2014, with economists and property experts providing forecasts ranging from 3% to 5% property price growth.

However, there are a few events that might affect the UK property market in 2015, namely the general election that will be held in May and the growing probability of Bank of England (BoE) raising the base interest rate.

Regarding the general election, it all could depend which party wins or what coalition combination is named to form the Government, after Labour recently confirmed that they would introduce a mansion tax if they come to power. Meaning that the changes to Stamp Duty that were announced in the 2014 Autumn budget would be negated if Labour win.

Less clear is what will happen with Bank of England interest rates. It had been predicted that a small rise, either by a quarter to half of a percent, was going to be introduced before the end of 2014, but that didn’t happen. Then it was going to be early 2015 but that is now also looking very unlikely.

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Bank Of England States That 2% Interest Rate Rise Would Put 480,000 Property Owners Into Mortgage Arrears

Bank Of England States That 2% Interest Rate Rise Would Put 480,000 Property Owners Into Mortgage Arrears

Bank Of England States That 2% Interest Rate Rise Would Put 480,000 Property Owners Into Mortgage Arrears

UK property buyers have an average mortgage debt of around £83,000 (GBP) plus many will have unsecured loans of up to £8,000 (GBP), however many are typically earning less than £43,000 (GBP) a year

The Bank of England has warned that up to half a million property owners could be at risk of falling into mortgage arrears once interest rates rise from their historic 0.5% low.

The BoE said the number of UK property owners expected to run into difficulties would increase by a third to approximately 480,000 in the event of a two-percentage-point increase in the cost of borrowing.

The BoE stressed the proportion of borrowers having trouble paying their mortgage loans should remain well below the record mortgage arrears levels of the early 1990’s, when the UK suffered its worst post-war property crash, provided that earnings incomes rose alongside interest rates.

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Bank Of England Governor Hints At Earlier Base Rate Hike

Bank Of England Governor Hints At Earlier Base Rate Hike

Is Mark Carney Eager To Raise Interest Rates?

The Governor of the Bank of England (BoE), Mark Carney, has drawn further criticism from economists after giving another mixed signal on the timing of any base rate increase away from the current historic low.

In an interview with the Sunday Times newspaper Mr Carney took great care to big up the health of the nation’s economy and insisted that the Bank of England would not wait for employed peoples wages to catch-up with the cost of living before hiking interest rates.

Mr Carney told the Sunday Times: “Wherever the finish line was in the depths of the crisis, we are much more than halfway towards that finish line now. The expansion is proceeding, momentum is more assured. The very fact we have had consistent quarters of growth in line with, or slightly better than, our forecasts shows that. We have to have the confidence that prospective real wages are going to be growing sustainably, before raising interest rates, we don’t have to wait for the fact of that turn to raise them.”

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Is The Mortgage Market Review Slowing The UK Property Market?

Is The Mortgage Market Review Slowing The UK Property Market?

Is The Mortgage Market Review Slowing The UK Property Market?

The number of new mortgages being approved by lenders dropped to an 11 month low in May 2014 as the new affordability rules brought in by the Mortgage Market Review (MMR) caused borrowers to be put off and delayed hundreds of existing mortgage applications.

The Mortgage Market Review brought in on the 26th April 2014 requires all UK based mortgage lenders to carry out rigorous affordability checks on the financial status of borrowers.

These stringent affordability checks include stress tests designed to determine if a borrower could continue to repay their loan if interest rates rise significantly.

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Demand For High Risk Mortgages Reaches New High

Demand For High Risk Mortgages Reaches New High

More property buyers with small deposits are taking out high risk loans worth over 3.5 times their take home income

The number of residential property buyers who can only raise a small deposit of less than 10%, and who don’t qualify for the Government’s Help To Buy scheme, are taking out high risk loans worth over 3.5 times their take home income, has risen to its highest level for over five years.

New figures published by the Bank of England (BoE) show that the number of high risk mortgages being taken out by property investors and existing landlords has increased in the first three months of 2014.

Mortgage lending to new borrowers who had less than a 10% deposit and a Loan-To-Income (LTI) multiple of more than 3.5 times a single person income, or 2.75 times for joint income borrowers, has increased to 2.6%, the highest recorded figure since the last quarter of 2008.

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UK Residential Property Prices Only Increased By 0.5% Last Month

UK Residential Property Prices Only Increased By 0.5% Last Month

Residential Property Prices Only Increased By 0.5% Last Month 

New data released by Hometrack shows that residential property prices only increased by 0.5% during May 2014, less than previous price rises recorded in the three previous months, suggesting a slowdown in property sales and price growth.

The data shows that the proportion of UK regions recording property price increases during May had fallen to just 42%, down from the 50% recorded in March and April 2014.

While property prices may have continued to rise in London, there has been an overall slowing in the rate of growth, with property prices only increasing by 0.6% in May, compared to the 0.8% average increase over each of the previous six months.

The main growth in London is in lower priced areas of the capital that are perceived as offering better value for money, however, central London prices only increased by 0.2% in May. 

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Help-To-Buy Scheme Could Threaten UK Housing Market

Help-To-Buy Scheme Could Threaten UK Housing Market

The Help To Buy Scheme Could Be Scaled Back Amid Concerns That The UK Property Market Could Be Heading
For Another Property Bubble

George Osborne, the Chancellor of the Exchequer has said that the Bank of England are being vigilant on UK house price rises and they would intervene if the situation becomes necessary.

The Chancellor’s comments come after the Organisation for Economic Co-operation and Development (OECD) warned that the booming UK property market could threaten the economic recovery of the country.

Possible action could include reigning back the Government’s Help-To-Buy scheme, which enables people with only a small deposit to take out a mortgage.

In a report the OECD said that “The UK should introduce measures to address the risks of excessive house price inflation, as property values now significantly exceed long-term averages relative to rents and household incomes. Access to the Help to Buy scheme should be tightened, and buyers should be required to put down bigger deposits for mortgages”.

In response to the report, Mr Osborne said: “I’ve said we should be vigilant about the housing market and this Government has given the Bank of England the power and the tools to do what they felt needed to be done to help to contribute to building a resilient economy in an independent way”.

The Help to Buy scheme enables the Government to place a second charge on properties purchased under the scheme, allowing them to have some degree of profitability and allow them a small degree of control over the UK property market.

People buying property worth up to £600,000 (GBP) using a deposit of just 5% may be grateful of the Government’s help but many fail to realise the full implications of the scheme, or spot the Government tactic of controlling properties.

The Government either top up the purchasers 5% deposit with 20% of the property’s value or it will underwrite a portion of the debt allowing lenders to advance purchasers with high loan-to-value mortgages that the Government guarantee.

The £600,000 (GBP) upper limit of the Help-To-Buy scheme has been widely criticised for being too high, however, recent figures show that the average cost of a property bought using the scheme was just £148,000 (GBP).

Concerns are rife that another property bubble may be formed in the UK property market following a continuing run of positive house price trends.

Mortgage lender, Nationwide recently reported that property values had risen by 10.9% during the last 12 months, the first time annual house price inflation has reached double figures since April 2010.

Data from the Land Registry also shows that average property prices in London have already surpassed the previous 2007 peak.

Recent property price increases have caused the typical average cost of residential property in the UK to rise to £262,770 (GBP), according to Zoopla.

New regulations to control borrowing were introduced at the end of April 2014 to ensure prospective property owners are not risking taking on too much debt.

Under the Mortgage Market Review, lenders are required to carry out stringent affordability checks, including making sure borrowers can continue to meet the mortgage repayments if and when interest rates rise.

However, data on the number of mortgage approvals for residential property purchases appear to suggest that the market may be moderating, with the Bank of England reporting a dip in loan approvals for the second consecutive month during March 2014.

2014 UK Property Prices To Increase Further

2014 UK Property Prices To Increase Further

UK Property Prices Continue To Increase

There could be more good news for UK property investors over the coming months as projections for the rest of 2014 indicate that property prices are set to rise even more, providing the potential of greater Return On Investments (ROI).

Since the UK housing market crash in 2008, UK property prices slumped and were depressed for some time afterwards due to uncertainty in the economy, however, the end of 2013 saw the UK property market spring back to life.

According to data from the Halifax House Price Index (HPI), there were over 1 Million residential property transactions in 2013 for the first time since 2007, and residential property sales increased for the ninth month in a row in December 2013,  30% higher than in 2012.

The data from Halifax is great news for property owners and shows that the UK property market is well and truly back on its feet.  So, if you’re a property investor who is planning on investing in property in 2014, you can expect to see property prices continuing to rise.

2014 started with residential property prices on the increase and more people buying and selling. The introduction of the 2nd phase of the Government’s Help-To-Buy scheme in October 2013 allowed property purchasers to get 95% Loan-To-Value (LTV) mortgages, heralding the return of the first-time buyer to the UK property market. 

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Interest Rate Rises Could Stall UK Rental Property Market

Interest Rate Rises Could Stall UK Rental Property Market

Interest Rate Rises Could Decimate
UK Rental Property Market

The recent changes in the dynamics of the UK property market are forcing a number of mortgage lenders and property investment specialists to advise clients how they can better protect themselves.

The Governor of the Bank of England, Mark Carney, has claimed that the BoE has no immediate plans to increase the base interest rate, currently remaining at the 0.5% record low, however this situation could change within the next twelve months.

The UK property market remains in a fairly delicate state and affordable residential properties are being bought with amazing speed, as the UK economy continues to improve but property prices are predicted to rise considerably over the next few months.

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