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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.

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