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Help To Buy Scheme Could Cause New Property Bubble

Help To Buy Scheme Could Cause New Property Bubble

Critics Warn Help To Buy Scheme Will Cause New Property Bubble

The Chancellor of the Exchequer has launched the second phase of the ‘Help to Buy’ scheme and laid out the terms of a programme that will underwrite UK residential property purchases up to the value of £600,000 (GBP) following a meeting with mortgage lenders and house-builders.

A number of groups, however, have warned that, if this scheme is allowed to drive up house prices in the UK, it will cause another property ‘bubble’ and encourage people to take on huge mortgages.

George Osborne is hopeful that the terms of the scheme will prevent another property bubble, as there are now strict income checks and other lending criteria imposed by mortgage lenders and the loan scheme will not be allowed to be used by purchasers to acquire second homes.

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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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New EU Rules Will Cause Mortgage Rate Confusion

New EU Rules Will Cause Mortgage Rate Confusion

European Ruling Set To Make Mortgage Rates Harder To Understand

New European rules could make mortgage rates even harder for customers to understand as Euro bureaucrats want to introduce a new way of calculating interest rates on residential property mortgage loans and experts are warning that this could be a recipe for confusion.

Under the new proposed EU directive, mortgage lenders would be expected to tell borrowers the maximum interest rate they have charged over the past 20 years, and display this figure on all of their literature.

However, industry experts say customers are already confused by the rates that lenders are forced to display, and that this will make it even harder for them to understand mortgage rates.

David Hollingworth from mortgage broker, London & Country, said:”I think that there is a chance that borrowers become overloaded with information and APR rates that mean little to them, and so risk them being ignored altogether, the extra information could lead to more customers failing to shop around and remaining on expensive standard variable rates (SVRs).

The EU credit directive concerning the mortgage change is expected to be approved later this year. It will compel lenders to display a new annual percentage rate (APR) on all of their literature. This will be calculated using the highest level that the lender’s SVR has reached in the previous 20 years.

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Government Help To Buy Scheme Set To Boost

Property Ownership

40% Of Trapped Tenants Could Become First Time Buyers With Help To Buy Scheme

40% Of Trapped Tenants Could Become First Time Buyers With Help To Buy Scheme

Almost 40% of tenants trying to escape being part of Generation Rent could become homebuyers when the Governments 95% Help to Buy scheme is implemented in January 2014.

New research released by Rightmove found that very few trapped renters, tenants who would like to buy but can’t afford to, are currently saving for a deposit.

39% of tenants feel they will never be able to become property owners unless they strike it rich, which Rightmove reckon could come in the form of the Government’s Help to Buy scheme, which will enable people with only a 5% deposit to get on the housing ladder.

The research, conducted among 3,214 current private rental sector (PRS) tenants, last month, between April 9th and April 25th, shows that while 42% of trapped tenants are trying to save for a deposit, currently less than 10% of tenants are on course to meet their deposit goal , with the majority not in a position to start saving.

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Help To Buy Could Boost UK Property Market

Help To Buy Could Boost UK Property Market

The Help To Buy mortgage indemnity scheme proposed by Chancellor of the Exchequer, George Osborne, in the budget announcement made last week is expected to raise both property transaction levels and property prices.

The Help To Buy mortgage indemnity scheme which kicks in next January is designed to generate £3.5 Billion (GBP) of new lending, could be administered by ‘bad banks’ Northern Rock Asset Management and Bradford & Bingley, now in the umbrella of UK Asset Resolution.

Lenders would have to pay to participate in the scheme, but the price has not yet been set.

Estate agents expect Help to Buy to enable people to buy both existing properties and new build homes with 95% mortgages.

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Hype surrounds 2013 Mortgage Figures

Hype surrounds 2013 Mortgage Figures

2013 started with claims that the UK had recorded the best lending on mortgage figures in five years, but these claims by the UK Council of Mortgage Lenders (CML) are being disputed.

According to the CML, a total of 38,300 loans were advanced for residential property purchases in January, the highest for the month since 2008 when 47,800 loans were advanced. The January performance came despite a marked drop from December 2012 when 45,900 mortgage loans were advanced.

Now critics have suggested that the CML’s mortgage figures were pure hype and speculation as mortgage approvals, and not actual monetary advances, were actually down in January this year, and no figures were released for the UK Buy To Let mortgage market for the same time frame.

Mortgage figures for approvals on residential property purchases appeared to be up 11% compared with January 2012 when there were 34,600 mortgage loans approved for residential property purchases and activity by first-time buyers and home movers both increased.

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UK Council of Mortgage Lenders May Change Buy To Let T's & C's

UK Council of Mortgage Lenders May Change Buy To Let T’s & C’s

Lenders may have to change their terms and conditions on buy to let mortgages and rethink their attitudes towards standard tenancies, according to the UK Council of Mortgage Lenders (CML).

The Council of Mortgage Lenders (CML) was responding to calls by Labour leader Ed Miliband for longer-term tenancies in the private sector after he said he wanted to see greater security offered to households in rental accommodation. Similar calls have also been mounted by Shelter, and longer tenancies were also discussed in Parliament at the end of January.

But the CML acknowledges that lenders are nervous about extended tenancy agreements because of the risk of a build-up of rental arrears leading to buy to let mortgage arrears, affecting lenders’ ability to repossess the property if a long-term tenant is in place.

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The latest data published by the Association of Residential Letting Agents (ARLA) has revealed another upward trend in landlord investment and property portfolio building, despite the poor availability of adequate Buy-To-Let mortgages.

The number of UK PRS rental properties owned by landlords increased from seven at the beginning of 2012 to 8 in the final quarter of 2012, with on average, at least 1 of these properties being a HMO.

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Reluctant Landlords have been avoiding insurance obligations

Reluctant Landlords have been avoiding insurance obligations

When the banking crisis struck back in 2008, mortgage lending in the UK virtually ceased as lenders became wary of the toxicity of sub-prime mortgage loans and raised their lending criteria (and lowered their Loan To Value ratios) to unprecedented and highly restrictive levels, virtually killing the property market.

This meant that properties became financial millstones for many people who were unable to sell, resulting in an upsurge of reluctant or “accidental” landlords who were able to take advantage of a booming rental market caused by the fact that potential property buyers were forced to hand over substantial deposits in order to be allowed a mortgage or were unable to obtain mortgages due to the tightening of the lending criteria and were subsequently forced to rent!

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UK PRS Rental Yields Increase

UK PRS Rental Yields Increase

In the UK the combination of high tenant demand, increasing PRS rents and realistic vendor pricing of properties for sale has been a major driving factor behind the increase in Buy To Let rental yields.

Buy-To-Let rental yields increased from 6.1% to 6.7% over the last quarter of 2012, with the biggest jump in the private rented sector (PRS) coming from houses in multiple occupation (HMO’s) up from 9.2% to 11.1%.

A much needed increase in the availability of buy-to-let mortgages, as well as property investors seeing the benefit of buying high yielding low priced properties for rental purposes, outside of central London and the South East where rental yields had previously been squeezed, has been fuelling the growth.

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