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Mortgage Lending Up £1.7 Billion (GBP)

Mortgage Lending Up £1.7 Billion (GBP)

UK Mortgage Lending Up £1.7 Billion (GBP)

The latest mortgage lending figures released by the Bank of England show that lending secured on residential property increased by £1.7 Billion (GBP) in December 2013, compared to the average monthly increase of £1.1Billion (GBP) observed during the previous six months of the year.

The increase is generally being credited to the success of the Government’s Help-To-Buy scheme, with London leading the way on residential property price rises, but what is the real situation affecting the UK?

Director of e.surv chartered surveyors, Richard Sexton, explained: “Mortgage lending in the UK is improving at lightning-speed. Lending has hit a six year high, as banks continue to offer cheap loans and interest rates, and repayments remain low. Mortgage lenders have dramatically increased lending to borrowers with smaller deposits, which has encouraged more first-time buyers to the market. And the government’s Help-To-Buy scheme has given consumers a huge confidence boost, which has increased lending volumes further. But the heart of the market remains in London and the South East. In other areas of the country the recovery is far slower. House prices may be increasing quickly, particularly in the capital, but it’s important not to withdraw Help-To-Buy too soon. In London, buyers need the scheme to get on the ladder. In many other areas, wage growth has been comatose since the economic crash, would-be property buyers simply don’t have enough income to save for a deposit. Building more houses would be a far more prudent approach to capping price rises than trimming down the Help-To-Buy scheme prematurely.”

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New Affordable Housing Guarantees Funding Is Intended To Deliver

New Affordable Housing Guarantees Funding Is Intended To Deliver
Thousands Of Affordable Properties

New Affordable Housing Guarantee Funding Is Intended To Deliver Thousands
Of Affordable Properties

On the 24th July 2013, Government ministers announced a multi-million pound boost to build thousands of new and affordable residential properties in the UK.

69 different housing associations and developers will each receive a share of £220 million (GBP) to deliver almost 14,000 new and affordable residential properties outside of the London area.

Work on the new residential properties will be started by March 2015 and will be expected to be completed by 2017.

The move is part of wider government efforts to get Britain building, which will lead to the fastest annual rate of affordable house building for over 2 decades.

The increased funding is part of the expanded £450 million (GBP) Affordable Housing Guarantees which will support up to £3.5 Billion (GBP) in government debt guarantees to deliver thousands of new homes.

Of the almost 14,000 homes this money will help deliver, the majority will be available at an affordable rent with 2,000 of those available to buy through shared ownership.

Housing associations and developers who plan to use the guarantee scheme will now work with the Affordable Housing Finance to finalise the details of the loan funding that will work alongside today’s grant allocations.

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Government Funding To Boost Shared Tenancies For Homeless

Government Funding To Boost Shared Tenancies For Homeless

£1 million Government funding boosts rental options for single homeless people

This week, Communities Minister Don Foster announced a cash boost of up to £1 Million (GBP) to support single homeless people providing access to shared tenancies within the UK private rental sector.

The funding is intended to help homeless people to find a safe and secure home in shared accommodation or Houses of Multiple Occupation (HMO’s) in private rented sector (PRS) properties.

Mr Foster allocated up to £800,000 (GBP) for homelessness charity Crisis to fund schemes to set up new shared tenancies for single homeless people within the UK’s private rented sector.

The minister also announced a further £230,000 (GBP) for the charity to continue its Private Rented Sector Access Programme, which works with local landlords to help vulnerable people find the homes they need in privately rented accommodation.

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CML Announce Buy To Let Mortgage Growth

CML Announce Buy To Let Mortgage Growth

The Council of Mortgage Lenders (CML) has announced details on the growth of Buy-To-Let mortgages in the UK as more landlords enter the rental property market.

Over the past quarter, buy-to-let mortgages have created a gross total of £4.2 Billion (GBP) across 33,500 mortgages and CML reports that there are now around 1.46 Million buy-to-let mortgages held by landlords in the U.K.

According to the CML, by the end of March 2013 UK buy-to-let mortgages accounted for 13.4% of the total outstanding mortgage lending in the U.K.

The increase in lending for buy-to-let mortgages shows steady growth from the previous quarter at 13% and 12.9% at the end of the first quarter of 2012.

The latest CML report also highlighted that buy-to-let mortgages account for 8.3% of all mortgages reported as being in arrears over the past three months, a significant drop from the 10.5% reported in the first quarter of 2012.

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30% of buyers who bid successfully at property auctions are let down by mainstream lenders, say experts.

Banks are pulling out of property deals after property investors have made successful bids at auction, resulting in buyers struggling to raise finances in order to meet the 28 day completion deadlines set by many auction houses, resulting in a great deal of business for bridging finance companies.

National Development Manager at Auction Finance, Scott Hendry, said:“It’s all too common for high street banks to pull out of funding an auction transaction because of the short timescales for completion or the property has no kitchen or bathroom. Yet most people bidding at auction want the property quickly so they can renovate it to sell on or rent out at a profit. Sometimes bidders assume that the funding has been agreed by the bank or lender when in fact they only have an ‘agreement in principal’ which is wholly different from a real approval to borrow the amount required for the property. We estimate that in 2012, so far, 30% of property investors we have dealt with have had to rely on short-term finance to fund their purchase because their previous lender has let them down. In some cases they have been able to agree long-term funding with their bank at a later date but this process just takes too long for someone trying to secure a good investment opportunity at auction.”

Top reasons why auction property deals fall over:

  • Bank pulls out of the funding due to short timescales
  • Bank refuses to fund because the property has no kitchen or bathroom
  • Borrowers assume the funding has been agreed
  • Delays in depositing the funding from the bank
  • Last minute revelations on the borrower’s credit check prevent funding

A short-term bridging loan secured against other properties in a portfolio is one way to avoid being let down at the last minute.

UK residential mortgage lending made a dramatic recovery in May 2012 after the sharp decline caused by the end of the stamp duty concession at the end of March.

The Council for Mortgage Lenders (CML) claimed that the amount of residential mortgage loans advanced to property buyers increased by 33% from in April 2012 to 48,300 in May 2012 resulting in overall mortgage lending being 25% higher than at the same point in 2011

The CML put the rise in first-time buyer activity down to the market bouncing back from the temporary slump that came with the reintroduction of 1% stamp duty at the end of March 2012.

CML’s Director General, Paul Smee, said: “The slump following the end of the stamp duty concession seems to have been short-lived. Lending is similar to late 2011 levels and showing a healthy improvement on the same time last year.”

Despite some 18,100 first-time buyer mortgage loans worth £2.3 Billion (GBP) increasing by more than 20% compared with May 2011.

Mr Smee urged caution amid the ongoing Eurozone crisis stating “Economic uncertainty could affect both the supply of mortgage lending and consumer confidence and we still anticipate a challenging lending environment for the rest of the year.”

New Measures Announced To Boost UK Cashflow

New Measures Announced To Boost UK Cashflow

Sir Mervyn King, Governor of the Bank of England, last week announced further measures to boost the UK’s economic recovery, in his Mansion House speech.

The BoE have launched a Multi-Billion (GBP) initiative to increase the cash flow of some of Britain’s biggest financial institutions.

The Bank’s offer of £5 Billion (GBP) in six-month loans at a rate of only 0.75% has already been entirely taken up by major UK banks and it is understood that they were told to apply by Sir Mervyn himself.

The Governor of the Bank of England does not want the scheme to be seen as another ill conceived emergency measure, instead, he intends the money to be considered as a mainstream source of funding.

It is also widely rumoured that a similar loan process will occur on a monthly basis.

The facility announced by Sir Mervyn King is just one of several measures aimed at boosting the economic recovery and encouraging investment.

The BoE Governor also launched an estimated £80 Billion (GBP) policy with Chancellor of the Exchequer, George Osborne, intended to prevent a second credit crunch in the UK as fears surrounding the impact of the Eurozone debt crisis grow.

Gross mortgage lending declined to an estimated £10.2 Billion (GBP) in April 2012.

Mortgage lending fell by 19% from £12.6 Billion (GBP) in March 2012 but was 2% higher than the total of £10.0 Billion (GBP) in April 2011, according to the Council of Mortgage Lenders.

CML chief economist Bob Pannell comments:“Mortgage lending activity has been relatively buoyant in recent months, with stronger lending for house purchase underpinning the more upbeat lending picture. The underlying picture is likely to be a bit stronger than the April figure suggests, because some first-time buyers are likely to have brought forward their transactions to March 2012 to take advantage of the stamp duty concession that was coming to an end in March 2012. Eurozone developments remain highly uncertain and have the potential to undermine UK economic prospects and conditions in our housing and mortgage markets. The underlying picture is likely to be one of easing momentum in the housing market, but with potential for a sharper downwards correction on bad Eurozone news.”

Institutional Investment is needed in UK Buy To Let Sector

Institutional Investment is needed in UK Buy To Let Sector

The Council of Mortgage Lenders, (CML), think the coalition Government’s Chancellor of the Exchequer, George Osborne should be doing more to encourage institutional investors to take a stake in Buy To Let property in the upcoming Budget.

The Council of Mortgage Lenders are the trade body for all the UK’s major bank and building society residential mortgage lenders.

The CML claim encouraging pension funds and corporate investors is a neglected policy that could provide the cash for more UK homes that can be made available to rent.

The suggestion is part of a wide-ranging Budget review aimed at influencing the Chancellor to ease the mortgage market. The submission also criticises current housing policies, including:

• Stamp duty holidays for first time buyers, which the CML claims creates a boom and bust market around deadline dates
• Paying housing benefits direct to claimants may damage landlord cash flows and lead to unnecessary mortgage arrears and repossessions
• Making better use of housing stock as, the CML states, most of the homes available over the next 20 years have already been built

The CML has told the Chancellor that given the vulnerabilities and uncertainties, it is important to make sure that all avenues, for strengthening and diversifying funding structures, have been explored.

The CML have also noted that the government continues to explore the obstacles to greater institutional investment in the supply of private rental property, but, strangely, the further scope for promoting domestic institutional investor interest in mortgage assets seems to be a neglected area of policy.

The Budget report also points out that UK banks and building societies rely heavily on raising funds from wholesale markets which are currently challenged by the Eurozone debt problems.

“Funding costs remain higher than a year ago, and the UK remains vulnerable to future eurozone developments. Given that current market conditions are somewhat fragile, it is very important that other government policies do not undermine housing market sentiment more generally. We believe that there are a few areas where policies are not as well aligned as they could be.” says the CML.

The CML’s calls echo the sentiment of many existing UK landlords who have had to search for a variety of additional landlord services such as insurance, tenant referencing and tenant eviction services from private sector specialist suppliers, in order to remain in a profitable situation.

With institutional investment into the UK private rented sector (PRS) specialist products and services for landlords will be enhanced for the corporate market and derivatives would be more affordable and even more readily available.

Buy-To-Let is Booming in the UK

Buy-To-Let property is Booming in the UK

The Council of Mortgage Lenders (CML), have revealed that the UK is in the grip of a Buy-To-Let boom that shows no signs of stopping, as property investors snap up UK property worth £160 Billion (GBP).

The CML state that there are a record 1.4 Million Landlord loans, valued at almost £160 Billion (GBP), currently invested into UK Private Rented Sector (PRS), residential properties.

It appears that property investors have been keen to cash in on the soaring PRS rental demand and have been snapping up large quantities of residential properties.

The rental demand exists because many people still feel that they can’t afford to buy a home of their own and those who want to buy, are forced to rent whilst saving huge cash amounts required for the deposit for a property purchase.

With income from savings wiped out by low interest rates, mortgage repayments have become cheaper and landlord numbers have increased.

With Private Rented Sector (PRS), rents close to all-time highs across the country, there has never been a better time to get into Buy-To-Let!

Owning a residential property that is suitable for buy-to-let (BTL), that produces a regular rental income can be a real money-spinner for both amateur and professional landlords.

In London the average rent is approximately £1000 pcm, however in the rest of the UK, the average rent is only £711 per month.

According to the CML, in 2001, when the UK Buy-To-Let market was still in its infancy, landlords had obtained 185,000 loans to invest in rental properties.

Today, landlords have taken out 1.39 Million loans, worth about £160 Billion (GBP), to spend on their property empires, with an estimated 84,000 homes bought using specialist Buy-To-Let mortgages last year alone.

Critics have claimed that the UK buy-to-let market has forced property prices up to levels which many first-time buyers cannot afford.

Although buy-to-let loan numbers have ballooned, the number of mortgages to first-time buyers has taken a dramatic nose-dive.

Last year, according to lettings agent Countrywide, about 275,000 new tenants registered their interest in private rental accommodation – a 24 per cent increase on the previous year.

It said that a typical tenant is a couple under the age of 35, although the number of families is rising.

During the past ten years, the number of young people getting on the property ladder has collapsed from about 500,000 each year to just 200,000 and the lack of available finance, high deposits and employment stability being blamed for the fall in applicants .

Read the full Daily Mail article here

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