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CML Say Help To Buy Is Not Creating Another Property Bubble

CML Say Help To Buy Is Not Creating Another Property Bubble

Help To Buy Only Accounts For 4% Of Annual Mortgage Approvals 

New analysis of the UK residential mortgage market by the Council of Mortgage Lenders (CML) has revealed that the impact of the government’s Help To Buy scheme on the UK property market has been fairly limited.

Property pessimists have tried to claim that the Help To Buy initiative is responsible for creating another property bubble, however, official figures show that HTB has had little impact on UK property sales.

The Help To Buy scheme accounts for just 1% of all residential mortgages taken out in the six month period to March 2014.

According figures from the CML, only 4% of all UK mortgage approvals between April 2013 and March 2014 were part of the Help To Buy scheme, but 85% of those taking part in the scheme were first-time buyers.

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Mortgage Loan Approvals Increase

Mortgage Loan Approvals Increase

More “Help To Buy” Mortgage Lenders Announced

The number of mortgages given to first-time buyers increased by a third in the 12 months to August 2013 according to the latest data from the Council of Mortgage Lenders (CML), with new entrants to the property market accounting for 44% of all residential property purchases during the month.

The CML figures were published as Barclays became the latest high street lender to confirm it was signing up to the second part of the government’s Help to Buy scheme, which is designed to make more 95% mortgages available to first-time buyers, second steppers and home movers.

Barclays join Santander, RBS, Halifax and HSBC in confirming it will use the taxpayer-backed guarantee to make high Loan-To-Value (LTV) mortgages available for property purchasers, meaning that more than half of UK mainstream mortgage lenders are now signed up to provide more mortgages at higher loan to value ratios.

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Is Funding For Lending Working For First Time Buyers?

Is Funding For Lending Working For First Time Buyers?

FIRST-TIME buyer numbers are up by almost a quarter year-on-year, lenders said yesterday, amid signs that government efforts to encourage mortgage lending are finally percolating down to people with smaller deposits.

A total of 21,700 loans worth £2.7 Billion (GBP) were made available to first-time buyers in November 2012, one of the highest monthly totals in the last three years, the Council of Mortgage Lenders (CML) said.

These figures mean that first-time buyer numbers were up by 24% compared with a year earlier, and increased by 8% month on month.

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The UK may need an extra 1.1 Million private sector rental properties within the next 4 Years

The number of people renting homes in the UK Private Rented Sector (PRS) has almost doubled over the last ten years, increasing from 2.5 Million tenants in PRS properties in 2002 to 4.8 million tenants today.

‘Rental Britain’ – A new report from Savills estate agency and the property portal Rightmove, predicts that one in five households could be in Private Rented Sector (PRS) property by the year 2016.

That would require an additional 1.1 Million rental properties to be made available for rent to new tenants.

The report may be gloomy reading for the UK Government but it is great news for thousands UK landlords who have already secured their rental incomes using specialist products and services for landlords, such as, Rent Guarantee insurance.

The ‘Rental Britain’ report forecasts that £200 Billion (GBP) investment in property will be needed, but says that only £50 Billion (GBP) of this is expected to come from buy-to let-funding, with the gap filled by institutional investment in new purpose built rental accommodation, but the report says that this needs to be recognised by the planning system.

The report also states that a shortage in supply is making some regions of the UK unaffordable, with PRS rent rises averaging 5.2% across the UK during 2011.

The report estimates that during 2011, working tenants paid around £48 Billion (GBP) in rent to private landlords, and this is expected to rise to around £70 Billion within the next five years.

Lucian Cook, director of Savills residential research, said: “Meeting the growing demand for private renting and the changing profile of tenant demand are perhaps the greatest challenges facing both the housing industry and policy makers. The dynamics of supply and demand make a great case for investment in this sector, and rising rents and lower capital values have begun to attract private investors back into the market. Investment returns relative to other asset classes will dictate the pace of investor entry to this sector.”

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Reluctant landlords making the wrong choices when it comes to insurance

Don't be Confused Over Landlord Insurance

An increasing number of private residential properties are being rented out to tenants because the owners have moved out but found it difficult to sell the property on the open market. The rise in “reluctant” or “accidental” landlords has caused ripples of concern within the UK lettings industry.

In fact, according to the Association of Residential Letting Agents (ARLA), increasing numbers of property vendors are either forced into or choosing to rent out homes they cannot sell in order to avoid financial ruin, in fact 47% of ARLA members experienced movement of this nature in the final quarter of 2011.

ARLA operations manager, Ian Potter said: “Renting a property on a short term basis can be a good option for anyone who has found a buyer for their home, but who have not found the right property to buy themselves. The approach would also suit individuals considering a move to a new area who would like to test the water before committing to anything final”.

Many UK property owners are facing this position as the UK property sales market remains sluggish despite the recent rally in property prices due to the end of the stamp duty holiday. However many property owners are getting it wrong when it comes to getting the right sort of insurance cover.

Property vendors move out of the property and on to pastures new but are unable to sell the property and attempt to get it rented out in order to reduce their financial burden. In doing so new landlords often decide to cut corners and attempt to save money in the wrong areas in a bid to reduce their financial stress, with potentially disastrous consequences if they decide to scrimp on insurance costs and don’t choose specialist landlord insurance, but they only discover that they are not covered when the worst has already happened, compounding their misery.

Legal 4 Landlords spokesman Sim Sekhon said: “When renting out property there are factors that many people don’t take into consideration and even take for granted, such as insurance or making sure the rent will be paid on time, every time. New landlords need to educate themselves on their responsibilities, the demands and expectations of tenants in the current rental market as well as complying with government and safety legislation. It can be a tough world for the inexperienced but the specialist products and services offered by Legal 4 Landlords enable landlords and letting agents to protect their rental assets, including landlord and Buy to let insurance”.

Landlords are advised to check that they have the correct insurance cover for their rental properties and it may also be a requirement of the mortgage company to provide a copy of the policy document.

The Prime Minister David Cameron insists that the coalition Government’s plans to take a more pro-active role in the UK housing market is “absolutely right” in order to help struggling potential buyers to raise large deposits.

Speaking at a residential property construction site in Lewisham, Mr Cameron attempted to reassure people seeking mortgage advice, stating that the NewBuy Guarantee initiative will help “unblock” the housing market by providing 95% Loan-To-Value mortgages underwritten by homebuilders and the UK Government.

Three major mortgage providers have so far committed to the Government-backed NewBuy scheme.

Barclays, Nationwide Building Society and NatWest Home Loans intend to back the NewBuy scheme by offering products which will tie in with it. Santander and Halifax are also expected to begin offering similar mortgage products along the same lines at a later date.

The mortgage indemnity initiative will aim to help people invest in property even if they only have a deposit of 5% or 10%.

As well as helping people who are finding it tough to save towards 20% deposits, the project is designed to boost the construction sector by spurring demand for new-build properties.

First Time Buyers (FTB) looking to purchase homes in England worth up to £500,000 could be eligible for the scheme in the months to come. The Government will cover 5.5% of the value of each mortgage provided, while 3.5% will be covered by house builders.

Forecasts suggest that as many as 100,000 UK new build home buyers could gain mortgage funding through the scheme.

Mr Cameron said: “The problem today is we have lenders who are not lending so builders cannot build so the buyers cannot buy and it needs the government to step in and help unblock the market. The new scheme was absolutely right in attempting to lower the requirements to more affordable levels of between “£10,000 to £15,000” with the taxpayer and the construction industry underwriting the high loan-to-value (LTV) mortgages”.

However, as reported on “Spotlight” earlier this week, the scheme has already prompted heavy criticism from opposition parties.Read the full article here 

Labour’s shadow housing minister Jack Dromey was among the first to be openly critical of the mortgage indemnity scheme proposal, publicly stating that the Government needed to invest directly in the building of more new homes.

Some property industry pundits have labelled the scheme as a “gimmick” to boost the ailing UK construction sector.

Even some lenders remain fairly wary of the Government’s plans and are yet to sign up to the initiative, with only three major lenders signed up to take part so far.

Nonetheless, the Council of Mortgage Lenders has backed the scheme as “good news for home-buyers”.

Specialist provider of Buy-to-Let cover, Total Landlord Insurance, has launched Total Rent Guarantee Insurance.

In these troubling financial times it is impossible for landlords to predict whether their tenant’s circumstances will change in the future and whether they will always be able to pay the rent, even though they have a successful reference. With the number of rental arrears on the increase across the nation, it is important that landlords don’t let their investment suffer.

Steve Barnes, Broking Manager, said: “Drawn out legal wrangles, legal expenses and missed rental payments can be a nightmare and play havoc with the landlord’s investment and financial planning. In the current financial climate our customers wanted a policy that would be cost effective and provide legal assistance and rent guarantee in the event of a tenant falling into rental arrears.  That is why we have launched Total Rent Guarantee Insurance.”

 The policies are available both online and by phone, although there are significant discounts if purchased online.  Online, landlords can purchase legal expenses for just £45 saving £31.85 and combined legal expenses & rent guarantee insurance for just £94.50 saving £31.80 over the call centre price.

 For more information on Total Rent Guarantee Insurance, go to www.totallandlordinsurance.co.uk.

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UK Private Rented Sector Survey by MyPropertyPowerTeam.co.uk

UK Buy To Let Landlords Want More Properties But Are Unable To Get Mortgage Finance

A new survey of Landlords in the Private Rented Sector (PRS) has discovered that only 20.2% ( 1 in 5 landlords) in the UK, were able to add fresh residential properties to their existing residential portfolio stock during 2011.

Property value growth expectations and the prospect of a regular income were the key drivers behind the property investment trend and only the lack of available mortgage finance, and/or financial know how, held back even more landlords from adding to their property portfolios.

Out of all the landlord insurance customers interviewed, 85% predicted that residential property values in the UK would remain the same for at least the next 12 months and private sector residential rents were expected to be considerably higher in 2013.

London led the way, after 87% of respondents said they believed that rents in the UK capital would continue to rise throughout 2012.

The data is from the PRS Landlord Survey carried out among subscribers by MyPropertyPowerTeam.co.uk during the last quarter (Q4) of 2011.

The data also showed that 59% of landlords have been investing for more than 5 years would hold onto their property until around the year 2025, however, the average holding period for UK PRS properties was around 15 years.

The appetite from property investors in the UK PRS for additional property assets is still extremely strong and the UK rental market is seeing demand outstrip supply as private tenants seek quality PRS accommodation. The current rental trend shows little sign of abating at present, despite all the UK Governments welfare reforms.

The UK Private Rented Sector is currently buoyed up by a growing population that is spending longer periods than ever living in rented homes, similar to the continental norm.

Landlords are making use of insurance products to protect their property assets and even Rent Guarantee insurance to ensure regular monthly rental income.

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Property investors need to research before they buy in 2012

UK BTL property investors urged to be thorough with Due Diligence

Property investors are being urged to thorough research in order to be very selective about the areas they choose to purchase investment property in during 2012.

Poor returns from savings and the continuing strong demand for rental property will be the driving factors behind an increase in property investment in the UK buy to let (BTL) market.

However, taking a gamble on certain locations could be risky for would-be Buy To Let landlords with unemployment rising, Government welfare reforms and the fallout from the Eurozone crisis still looming.

UK property investors are urged to seek to purchase Buy-To-Let properties in popular residential areas with a good infrastructure and a strong employment market, such as upmarket commuter hotspots around all major cities.

Buyer and tenant demand will continue to outstrip the current supply of UK housing stock, supporting property price growth.
Property investors should avoid areas that are reliant on manufacturing or the public sector, during 2012 as these areas may face high levels of unemployment, and with the cap in housing benefit payments now in effect, rental yields may not be as healthy. Such areas are expected to see relatively low property transaction levels in 2012 and a fall in house values that could be more than 5%.

By conducting thorough Due Diligence property investors can purchase Buy-To-Let properties in strong locations that will deliver a reliable rental incomes and a good supply of quality tenants, in addition to a modest capital growth

A list of useful Due Diligence sites to aid property investors in their search for the best areas can be found here

Private Rental Sector property rents are expected to continue growing strongly in most areas, hopefully, in the region of +5% this year, due to continued restricted mortgage lending and poor employment prospects leaving a whole generation of potential first time buyers (FTB’s) with little prospect of buying a home.

To ensure rental income remains constant throughout the duration of a tenancy, landlords can utilise Rent Guarantee insurance to keep a regular income coming in from their buy-to-let property.

Policies offered by Legal 4 Landlords include 6 and 12 Month Rent Guarantee insurance policies designed to protect landlords whose tenants default on rent payments.
Rent Guarantee insurance can also provide additional cover to meet the cost of legal proceedings for the eviction of defaulting tenants from rented properties.

Private residential renting on the decline?

UK PRS faces mounting rent arrears

The demand for Private Rental Sector (PRS) residential property and the rise in the number of tenants struggling to meet their rental payments on a regular monthly basis is expected to see the decline of the UK residential property rental market.

According to the latest lettings survey from the Association of Residential Letting Agents, (ARLA) 55% of its members reported more tenants than available properties in the last quarter of 2011, down on 74% reported in the previous quarter.

39.2% of ARLA members reported an increase in tenants struggling to pay their rent, over the same period, a figure up from 36.7% the previous quarter.

President of ARLA, Tim Hyatt, said: “With household income decreasing and job uncertainty prevailing, it could be that increasing rental arrears is a sign that the wider economic malaise is having a tangible impact on personal finance – some consumers may have reached the limit of their access to finance, while others may be cutting back as many commentators have predicted. We are reassured by the fact that the number of new tenancies is stable, but we will be watching the market closely in the coming months to determine how significant these latest figures will prove to be”.

The number of First‐Time Buyers (FTB) able to secure finance isn’t expected to significantly increase during 2012 so the demand for the limited supply of private sector rental accommodation will only continue to rise. It won’t be long before rents will resume an upward trend.

With the mortgage market still facing more financial fallout from the Eurozone crisis and the wider economy remaining sluggish, UK credit conditions are unlikely to ease significantly in 2012. As household income become even more stretched during the course of the year, it is expected that the current rental boom will begin to decrease outside of prime areas in the latter half of this year.

With the numbers of tenants having trouble paying their rent being on the rise, UK Landlords are encouraged to use Rent Guarantee products from reputable suppliers such as Legal 4 Landlords as a means to keep their rental income flowing in.
If you are a Landlord who lets a property then you run the risk of rent default by your tenant. Even the best checks and references cannot predict a tenant falling on hard times and not being able to pay their rent. Could you cover your expenditure if this happened?

In the current economic climate, many landlords are finding their default rates soar as tenants struggle with rising unemployment and increased bills. Recovering arrears can be difficult and costly for landlords, without any guarantee of success.
At Legal 4 Landlords, our Rent Guarantee Insurance will cover you against your tenant defaulting or failing to pay the rent

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