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Mortgage Market Review Hits UK Property Market

Mortgage Market Review Hits UK Property Market

Mortgage Market Review Affected Housing Market Before Launch

The new regime for the approval of mortgages came into force over the weekend (26th April 2014) but even before it was officially launched it was having a dramatic effect on applications, with loan offers being carefully scrutinised and the impending process had lenders asking even more questions before approving any mortgage offer.

I experienced the vagaries of the system myself, when taking a call from a lender the day before funds were due to be released, I was asked to provide even more details than ever before on a loan application, culminating in further delay to purchasing, and the details I had to provide and verify could have been done weeks before.

The lender said the additional information was in order to comply with MMR and this was before the official launch date. The property I was purchasing should have completed last week, before the MMR introduction date, but the delays caused by the lender requesting verification of the additional information required to process my loan meant that the loan process was delayed and resulted in dragging things out, until 9am today, when my solicitor called me to say that the purchased had finally completed.

The additional requirements of the MMR will result in the death of quick purchasing by property investors, however, I now know that in order for loans to be agreed that I have to provide extremely detailed accounts, financial projections, and provide verified proof of everything I have ever done in order to prove affordability.

The personal finance industry publication Mortgage Strategy says 7 out of 10 mortgage brokers reckon that it will be harder and slower for prospective purchasers to get a mortgage loan under the new MMR regulations.

For all new mortgage applicants it means not only providing evidence to the lender of all income and earnings including payslips or audited and verified accounts for the self-employed, but also requires providing details of all spending, too.

Mortgage applicants must itemise and cost spending on things they cannot do without, as set out in a list provided by the Financial Conduct Authority (FCA), including food, household cleaning and laundry, all heating costs, water bills, telephone, essential travel and existing property charges such as council tax, buildings insurance, ground rent and service charges for leasehold apartments.

Applicants must also disclose discretionary spending on clothes, household goods, personal goods such as toiletries or leisure activities.

The FCA says mortgage applicants must itemise other debts such as credit card bills, outstanding loans, child maintenance and alimony payments.

Mortgage lenders and finance providers must consider how interest rates are predicted to change over the next five years, to gauge the affect on borrower’s mortgage repayments. If payments are likely to go up then the lender will check that the borrower can afford it based on disclosed financial commitments.

And if mortgage terms extend into a borrower’s retirement, the lender has to check on pension income predictions too, in order to judge continued affordability.

Mortgage Market Review Regulations Will Slow Property Transactions

Mortgage Market Review Regulations Will Slow Property Transactions

New Mortgage Rules Will Slow Down
UK Property Transactions

65,500 property purchases were approved by mortgage lenders in March 2014, showing the second successive monthly drop in the number of property transactions as mainstream mortgage lenders implement stricter rules which will be rolled out fully at the end of April 2014.

The figures for March were 7% lower than the 70,309 mortgage approvals recorded in February 2014.

The recent falls in the number of mortgage approvals are a stark contrast to the 11 months of continuous improvements which saw average monthly lending levels increase from 52,537 to 76,753 between February 2013 and January 2014.

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Buy-To-Let Mortgage Lenders Reducing Rates As Demand Soars

Buy-To-Let Mortgage Lenders Reducing Rates As Demand Soars

Buy-To-Let Mortgages Improving To Meet Increased Demand

UK mortgage lenders are offering more Buy-To-Let mortgages, with better rates on smaller deposits, in response to soaring demand from property investors and portfolio landlords over the past year.

Buy-To-Let mortgage lending increased by 18.6% in 2013 compared to 2012, according to the latest figures from the Council of Mortgage Lenders (CML).

The last quarter of 2013 also saw Buy-To-Let mortgage lending finish strongly, despite a predictable seasonal dip in December, with lending up 20% against the same period of 2012.

Demand for Buy-To-Let mortgage loans is picking up as landlords in the UK seek to expand their rental property portfolios, with over 30% aiming to buy more properties in the next 12 months and more than 80% of UK private rental sector (PRS) landlords are making a full-time living from their lettings activity according to the latest BM Solutions/BDRC Continental Landlord Panel.

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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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More Auction Action For Property InvestorsEasier Access To Finance Increases The Number
Of Property Auction Purchases

There has been a sharp rise in the number of property investors snapping up property at auction and the reason has been credited to easier access to finance, as lenders report significant growth in lending, surpassing pre-property crash levels.

The number of properties sold at auction is booming as property investors seek to build rental property portfolios below market value (BMV), without breaking the bank.

There has been a huge increase in the number of loans that have been financed by specialist lenders over the past 12 months, with average loans increasing by more than 22% according to property finance lender, Auction Finance Limited.

The news comes as the latest Essential Information Group (EIG) figures show a seven year high for UK’s auction houses, with lots sold in October 2013 up by 30% compared to October 2012. These record figures have now surpassed pre-recession auction house transactions.

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Property repossessions In the North of England are higher than national average

Property repossessions In the North of England are higher than national average. Property
May Be Cheaper But It Is More Likely To Be Repossessed

4 Of Top 10 Property Repossession Areas
Are In North West of England

A new study by e.surv chartered surveyors has revealed the top 10 hotspots for property repossessions in the UK, and the results show that property owners in the North are less able to keep up with mortgage repayments than property owners in the South.

e.surv’s researchers analysed Ministry of Justice figures for court-ordered repossessions for the 12 months up to 30th June 2013, plus the company’s own data, and found the largest North-South divide since the onset of the financial crisis, with 3.2 repossessions per 1,000 households in the North of England, compared with 2.4 per 1,000 in the South of England.

Four of the UK’s top five “repossession hotspots” are in North-West of England according to the data with Chester, Blackpool, Oldham and Wigan among top five property repossession hotspots.

These areas are among those with the highest proportion of property owners who are struggling to keep up with mortgage repayments.

The data revealed that even despite all the media coverage about surging property prices in and around the capital, two areas within Greater London – Romford (3rd highest number of property repossessions per thousand households) and Croydon came in joint 7th on the repossession hotspot top ten.

Chester is the top UK city for property repossessions by a substantial margin, THREE times the national average!

The rest of the North-West of England does not fair much better with 8 out of 10 towns having above the national UK average number of property repossessions per thousand households.

This news presents an excellent opportunity for new, amateur and seasoned property investors to grab some property bargains as mortgage lenders and banks will be looking to offload these repossessed properties quickly so that they can get their money back, they are not looking to profit!

Lancaster, Liverpool and Carlisle in the North of England showed a lower than the average number of property repossessions, according to the data. However, despite being below the national average, Carlisle had seen a 37% increase in the rate of property repossessions in the 12 months to June 2013.

Other UK regions that also showed huge increases in the volume of property repossessions over 12 months, but remained below the national average are:

  • Taunton in Somerset – 34% increase in property repossessions up to 30th June 2013
  • Brighton – 30% increase in property repossessions up to 30th June 2013
  • Reading – 27% increase in property repossessions up to 30th June 2013

e.surv Director, Richard Sexton, said: “Residential property prices may be high in the capital, and employment prospects may be stronger, but in such densely populated areas, there remain property owners who are struggling with mortgage payments. Many borrowers have seen their finances slowly eroded by high inflation and increasing living costs. This has been particularly potent in London, where less affluent borrowers, by that I mean those who could only just afford to buy, have been badly affected. On a national level repossession numbers are falling as mortgages become cheaper, wages are slowly picking up and the employment market has more vitality. For the UK as a whole, repossessions fell 17% during the 12 month period, with 66,544 repossession orders granted in 2012-13, as opposed to 77,856 in 2011-12. As a region, the north has traditionally depended on public sector jobs, but a squeeze in public sector funding has led to loss of jobs for many, and very slow pay increases for others. Pay increases that are consistently below the rate of inflation have further tightened household budgets, and caused many to fall behind on mortgage repayments. There is still a long way to go before the northern property market returns to its pre-recession health, and all the while the north is still playing catch-up, and falling further and further behind the south.”

Top 10 Property Repossession Areas

 

UK Town / Region

Property Repossessions Per Thousand Households

Total Number Of Property Repossessions In 12 Months To 30th June 2013

1

Chester – North West

8.4

961

2

Blackpool – North West

4.5

570

3

Romford – Greater London

4.4

936

4

Oldham – North West

4.3

829

5

Wigan – North West

4.2

541

=5

Luton – Bedfordshire

4.2

565

7

Bradford – Yorkshire

4.1

1002

=7

Doncaster – Yorkshire

4.1

1356

=7

Croydon – Greater London

4.1

644

10

Northampton – Northamptonshire

3.8

966

 

 

 

 

 

 

 

 

Source: e.surv 

So what are you waiting for?

There will never be a better time to purchase repossessed properties, there are a great number of deals to be had from the areas listed in the table above.

Think of the table as a treasure map, with 10 UK locations offering repossession property deals direct from the banks and mortgage lenders.

Tenants Charter Proposals For Longer Tenancies Breach Mortgage Lenders Current Buy-To-Let Mortgage Terms

Tenants Charter Proposals For Longer Tenancies Breach Mortgage Lenders Current Buy-To-Let Mortgage Terms

Industry welcome to weak tenants’ charter that could see UK PRS landlords at odds with

Buy-To-Let Mortgage Lenders

The new tenants’ charter was announced by the Secretary of State for Communities and Local Government (CLG), Eric Pickles, last Wednesday, allowing tenants to ask for longer tenancies and better transparency of letting agents’ fees.

The new tenants’ charter will also aim to force all lettings and property managing agents controlling PRS rental properties to join a compulsory redress scheme.

The Tenants’ Charter, published for consultation, outlines what tenants should be looking out for at every stage when renting a property in the UK’s private rented sector, including lettings agents having to inform customers what all their fees are upfront, before they have committed to anything, including visiting a property.

However, the introduction of these terms under the banner of the tenants’ charter could threaten the business future of large numbers of landlords who would technically be in breach of the strict buy-to-let mortgage terms imposed by many mortgage lenders, which generally stipulate that tenancy agreements are to be for a period of no more than one year.

Secretary Of State For Communities & Local Government, Eric Pickles

Secretary Of State For Communities & Local Government, Eric Pickles

Mr Pickles stated that the Government intend to publish a code of practice setting standards for the management of property in the private rental sector (PRS) along with guidance setting out the role of public bodies in protecting tenants from illegal eviction.

Mr Pickles said: “This government is on the side of hardworking people and the last thing we want to do is hurt tenants and kill (property) investment by increasing costs and strangling the sector with red tape. But tenants deserve better value for money, and dodgy landlords should be under no illusion they can provide a shoddy service with impunity. These proposals will raise the quality and choice of rental accommodation, root out the cowboys and rogue operators in the sector, and give tenants the confidence to request longer fixed-term, family-friendly tenancies that meet their needs”

Mr Pickles also said that the Government will develop a model tenancy agreement which will clearly set out the rights and responsibilities of tenants and landlords, and ensure families can benefit from longer tenancies, without changing the existing legal framework for the rental market. He said “Longer tenancies will give families greater certainty and security, especially for those with children at school, and reduce costs for both tenants and landlords who will not have to pay letting agents to arrange frequent contract renewals.”

Clive Betts MP, Chair of the Communities and Local Government Committee said: “I am pleased that the Government has embraced many of the recommendations in our private rented sector report. The proposals for a tenants’ charter and model tenancy agreements reflect our calls for greater awareness of rights and responsibilities. Far too often the security needed by families is not being provided by the private rented sector. I am pleased, therefore, that the Government has listened to what the Committee said about the need for more family friendly tenancies. It is also welcome that the Government is taking forward our proposal to allow rent and housing benefit to be clawed back when landlords have been convicted of letting out dangerous property. The Committee will be watching closely to ensure that they are translated into action. We will also press to ensure that the Government’s gathering of information on selective licensing leads to action to raise standards. Much remains to be done if renting is to become an attractive alternative to owner occupation. It is disappointing; therefore, that the Government does not see fit to crack down on cowboy letting agents and their rip off fees and charges. It is also regrettable that the Government has declined to give local authorities the powers and freedom they need to improve housing in their areas.”

Tenants Charter Proposals For Longer Tenancies Breach Mortgage Lenders Current
Buy-To-Let Mortgage Terms

Property professionals generally agree with the introduction of the new tenants’ charter but many think that the Government have sidestepped the opportunity to enforce much tighter regulation of landlords in the private rental sector and lettings and property managing agents in particular and many feel that the new measures fall short of what is really needed.

It will be interesting to see if the Government put pressure on the banks and mainstream mortgage lenders to abolish or ignore such limiting clauses, allowing them to deliver on the real aim of the tenants’ charter.

Caroline Kenny, an executive of the UK Association of Letting Agents (UKALA) wants the Government to build on the experience and expertise of those industry bodies which already require higher standards of their members. Commenting “Responsible agents who choose to belong to professional bodies which require client money protection insurance, impartial redress and an adherence to a strict Code of Practice are forced to compete with those who show little regard to professional standards or the needs of their clients. UKLA believe that this package of proposals represents a missed opportunity for the Government to make mandatory the kind of comprehensive protection offered by the UK Association of Letting Agents and other industry regulatory bodies, which are called UKALA & NLAfor by those working in the property industry and needed by hardworking consumers who are unable to differentiate between good and bad letting agents.”

Richard Lambert, Chief Executive of the National Landlords Association (NLA), said: “The NLA has long argued that private renting can be far more flexible than commonly perceived, and we need to tap into this potential to meet the changing needs and expectations of those who rent. We look forward to working with government to make a success of these proposals. However, we believe that the Government has missed an opportunity to require greater professionalism of letting agents. While the requirement to belong to an approved redress scheme is a step in the right direction, it does little to protect the financial interest of landlords and tenants working with unregulated agents.”

Residential Landlords Association

Join The Residential Landlords Association

Alan Ward, Chairman of the Residential Landlords Association (RLA) welcomed the Government action to improve tenants’ understanding of their rights and responsibilities saying: “Tenants take more trouble buying a second-hand car than renting a house” Ensuring that tenants and landlords each understand clearly their rights and obligations to one another ensures a balanced relationship and enables them to hold each other to account based on the large number of laws already in existence. It will also play a vital role in rooting out those willfully criminal landlords who reap misery on tenants. We look forward to working with Ministers on the Charter as well as on how to best get this information to tenants.”

RICSPeter Bolton King, RICS global residential director, said “The long overdue announcement was definitely a step in the right direction. The lettings sector has for far too long been the Wild West of the property industry, with many tenants having absolutely nowhere to go should they wish to complain about shoddy service. The introduction of a code of practice specifically covering those managing rented property should certainly improve standards.”

Chief Executive of the Housing & Homelessness charity Shelter, Campbell Robb said “This announcement is recognition that current private renting arrangements are not fit for families with children, who need greater long-term stability. This is a welcome step in the right direction, and ministers now need to consider how to make longer tenancies a real choice for the families desperate for a more stable place to live.”

The announcement of the new Tenants’ Charter was good news for consumer champions, Which? Who have been campaigning since 2007 when they first called for an amendment to the Consumers, Estate Agents and Redress Act 2007 requiring letting agents to join an approved complaints scheme, just as property sales agents are. The consumer groups investigations also discovered earlier this year that major letting agents are acting unlawfully by not being upfront about the fees charged to clients.

The Enterprise and Regulatory Reform Act 2013, looks set to be implemented in Spring 2014, giving all landlords and tenants access to a complaints scheme. This will mean that 40% of agents who currently aren’t signed up to a redress scheme will have to become members

Which? Executive Director, Richard Lloyd, said: “Renting is now the only housing option for millions so we’re pleased to see the Government taking steps to address problems in the lettings market. Making charges clear upfront will enable people to shop around more easily, and longer tenancies could mark the end of unnecessary renewal fees. The new legislation giving landlords and tenants access to a complaints scheme now needs to be brought in as soon as possible and there must be strong action taken against any agent in breach of the scheme.”

  • Do you think the proposals go far enough?

Take our Poll on the Tenants Charter or leave a comment below!

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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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Chancellor Insists Help-To-Buy scheme Is Part Of A Healthy Property Market

Chancellor Insists Help-To-Buy scheme Is Part Of A Healthy Property Market

Chancellor insists that 95% mortgages underwritten by Government are Part Of A Healthy Property Market

The Chancellor of the Exchequer, George Osborne has hailed the wider recovery of the UK’s economy and taken a swipe at the critics of his housing policies, insisting that large home loans are part of a “healthy market” and “aspirational society”.

Several Government schemes have been announced since the start of the year aimed to get banks and mortgage lenders to increase both the availability and affordability of mortgages in the UK.

The Government’s Help-To-Buy scheme has been the most controversial, because the Government underwrites high loan-to-value (LTV) mortgages, removing some of the risk from mortgage lenders, enabling them to offer cheaper mortgage loans to borrowers who only have small value deposits.

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Buy-To-Let Property Investors Reap High Rental Rewards

Buy-To-Let Property Investors Reap High Rental Rewards

Activity In UK Buy-to-Let Property Market
Continues To Increase

Activity in the UK Private Rental Sector (PRS) has reached an historic high, with demand continuing to heavily outstrip the supply of available rental properties, according to the latest National Rental Report by Sequence, owners of Barnard Marcus, Fox & Sons and other well known high street property chains.

The Sequence rental index shows that activity in the UK’s private rental sector hit an 11-year high last month, with strong tenant demand driving up rents to a new monthly average of £751 (GBP).

New tenancies being agreed have increased by 6%, when viewed on a monthly basis, and the figures were actually up 18% when viewed annually.

The strong demand for rental property from would-be tenants is helping to fuel a rise in the cost of average rents, with prices up 2% month-on-month and 6% compared to July last year.

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There Will Never Be A Better Time To Invest In Property

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