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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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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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Government Seek Bids For Build-To-Rent Scheme

Government Seek Bids For Build-To-Rent Scheme

Build-To-Rent scheme seeking bids from property developers to help bring about the fastest rate of affordable residential property construction for two decades 

UK Government Housing Minister, Mark Prisk, last week announced a second round of funding for the construction of new rental properties and the government are seeking fresh bids for a share of at least £400 Million (GBP) to build new properties specifically for the private rental sector (PRS).

The funding is part of the flagship £1 Billion (GBP) Build-To-Rent fund, which offers support for property developers and property investors who want to get into the private rental sector for the first time.

Mr Prisk said the new Build-To-Rent scheme would encourage investment in the UK’s private rental market and offer prospective tenants a greater choice of rental property. The scheme is intended to run alongside up to £10 Billion (GBP) in government housing guarantees.

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Help-To-Buy Heralded As UK Property Market Saviour

Help-To-Buy Heralded As UK Property Market Saviour

RICS Claim Help-To-Buy Is Reason
For UK Property Market Recovery

The Royal Institute of Chartered Surveyors (RICS) have stated that the Government’s Help-To-Buy scheme and other financial initiatives have seen the UK property market turn the corner after the post recession slump.

In its monthly report RICS said property prices are up for a fourth consecutive month as the largest number of property buyers in 4 years return to the market.

The RICS report particularly picked out the West Midlands and the North East, as two areas which had suffered more than most in the UK property market crash, but these areas experienced the biggest increase in property buyer activity during July.

The widespread pick-up in the UK property market has seen residential property prices rise at their fastest rate since the peak of the property market in November 2006.

There is a growing chorus that the Government’s Help-To-Buy scheme, which was introduced in April to provide equity loans for first time buyers of up to 20% towards the cost of a new build property worth up to £600,000 (GBP) is creating a new property bubble.

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Buy-To-Let Remortgaging Eclipses Property Purchase Borrowing

Buy-To-Let Remortgaging Eclipses Property Purchase Borrowing

Buy-To-Let Remortgage Surge

Buy-to-let remortgages have witnessed a huge surge in demand during the second quarter of 2013, as existing landlords refinance to raise capital for further rental property purchases.

Remortgaging activity has eclipsed all other types of mortgage transactions covering multiple property types, other than granting new mortgages for buy-to-let property purchases.

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Top Economist Warns Of Fresh House Price Crash

Top Economist Warns Of Fresh House Price Crash

Disastrous House Price Crash Could Be Caused By
Government’s Funding for Lending Scheme

One of the UK’s leading economists has warned of a potentially disastrous house price crash and points the finger at the Government home buying scheme for being the cause of another unsustainable property bubble.

Chief Economist at the Institute of Directors (IoD), Graeme Leach, said the introduction of the new Help-To-Buy scheme, under which UK taxpayers are underwriting thousands of new mortgages for property purchases, means the world must have gone mad.

Mr Leach said “The Funding for Lending scheme is very dangerous because it will drive up property prices at a time when it seems likely that (property) prices are already over-valued.”

The scheme is one of Chancellor George Osborne’s financial initiatives where the Government will underwrite mortgage loans allowing new and first time borrowers up to 20% of a property’s value as part of their deposit, effectively giving the Government a proportionate stake in the value of the mortgaged property.

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Is There A Dark Side To The Help-To-Buy Scheme?

Is There A Dark Side To The Help-To-Buy Scheme?

Is There A Dark Side To The Help-To-Buy Scheme?

The Government’s Help-To-Buy Scheme was intended to allow first time buyers to get on the property ladder with the hope that this would kick start the UK property market and it appears to be having the desired effect with increasing property transactions and the slow rise in property prices.

However, the Government intervention in the UK residential property market could have disastrous consequences for property owners and could even cause another property bubble.

The Government are spending huge amounts of money to aid first time buyers to get on the property ladder by offering low deposit, high loan to value, mortgages that are underwritten by the Government, effectively giving them a second charge on the property for a period allowing the owners to repay at a set rate per year.

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UK Property Prices Rise Most in Six Years

UK Property Prices Rise Most in Six Years

Residential Property Prices Continue To Increase

UK residential property prices have increased by 0.4% in May 2013, the biggest monthly increase since May 2007, as, according to Hometrack Ltd, a shortage of available residential properties boosted average property values in London.

Average residential property prices in England and Wales have seen a gradual increase in value during the last six months with property prices increasing gradually, while London property prices have jumped 0.9% over the same timeframe.

Demand for residential property in the capital has surged 15% in the past six months alone, while supply of available properties has fallen 0.6%.

Richard Donnell, Director of Research at Hometrack said, “The impetus for rising house prices is originating almost exclusively from London and the South East. Elsewhere housing market conditions are improving gradually, with prices trending slowly upwards.”

The Government initiative to ease the strict lending conditions set by lenders has improved the overall health of the UK property market but the Funding for Lending scheme needs to be backed by more solid initiatives.

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 Mortgage Approvals Fall As Demand From

Residential PropertyBuyers Fades

UK Mortgage Approvals Fall

UK Mortgage Approvals Fall

UK mortgage approvals in February 2013 have fallen to the lowest level seen for seven months according to E.surv chartered surveyors.

E.surv, reckon that only the government Funding for Lending (FLS) scheme is preventing a much steeper fall in residential property mortgage lending for purchasing, even though uptake from potential property buyers has been lower than expected.

Overall UK mortgage approvals fell by 11% in February to just 49,019,  down from 54,719 approvals recorded in January 2013, making it the lowest mortgage approval level since July 2012, according to E.surv data.

The fall in mortgage approvals comes despite a wider and cheaper range of residential mortgage products on offer, which suggests that the drop in mortgage lending was due to weakening borrower demand and not a decline in the availability of residential mortgages.

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UK Funding For Lending Scheme Flops

UK Funding For Lending Scheme Flops

The UK Government initiative to get banks lending again has become a bit of a laughing stock according to some economists.

The funding for lending scheme (FLS) was dubbed a “white elephant” after the first data showed that in the three months to the end of September 2012, just £500 Million (GBP) of lending was released by all the 35 banks and lenders signed up for the scheme, which was launched in August this year.

The funding for lending scheme was supposed to reduce borrowing costs for banks and other lenders, who are required to pass on the lower costs to their customers. But so far the lending appears to be lowering mortgage rates rather than helping small businesses.

Only six banks and building societies have used any funds from the FLS in the three months to the end of September 2012 and their net lending – which takes account of loans being repaid – was negative by £1 Billion (GBP) because customers repaid existing loans faster than new loans were granted.

At three banks, more loans were repaid than new loans actually taken out, leading to negative net lending at Royal Bank of Scotland of £642 Million (GBP) and Lloyds Banking Group took £2.7 Billion (GBP) from the economy during the third quarter while Santander removed £3.4 Billion (GBP).

The biggest injection of credit came from Barclays at £3.8 Billion (GBP), whilst Leeds Building Society added £212 Million (GBP) and Nationwide Building Society £1.8 Billion (GBP).

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