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Help-To-Buy Scheme Could Threaten UK Housing Market

Help-To-Buy Scheme Could Threaten UK Housing Market

The Help To Buy Scheme Could Be Scaled Back Amid Concerns That The UK Property Market Could Be Heading
For Another Property Bubble

George Osborne, the Chancellor of the Exchequer has said that the Bank of England are being vigilant on UK house price rises and they would intervene if the situation becomes necessary.

The Chancellor’s comments come after the Organisation for Economic Co-operation and Development (OECD) warned that the booming UK property market could threaten the economic recovery of the country.

Possible action could include reigning back the Government’s Help-To-Buy scheme, which enables people with only a small deposit to take out a mortgage.

In a report the OECD said that “The UK should introduce measures to address the risks of excessive house price inflation, as property values now significantly exceed long-term averages relative to rents and household incomes. Access to the Help to Buy scheme should be tightened, and buyers should be required to put down bigger deposits for mortgages”.

In response to the report, Mr Osborne said: “I’ve said we should be vigilant about the housing market and this Government has given the Bank of England the power and the tools to do what they felt needed to be done to help to contribute to building a resilient economy in an independent way”.

The Help to Buy scheme enables the Government to place a second charge on properties purchased under the scheme, allowing them to have some degree of profitability and allow them a small degree of control over the UK property market.

People buying property worth up to £600,000 (GBP) using a deposit of just 5% may be grateful of the Government’s help but many fail to realise the full implications of the scheme, or spot the Government tactic of controlling properties.

The Government either top up the purchasers 5% deposit with 20% of the property’s value or it will underwrite a portion of the debt allowing lenders to advance purchasers with high loan-to-value mortgages that the Government guarantee.

The £600,000 (GBP) upper limit of the Help-To-Buy scheme has been widely criticised for being too high, however, recent figures show that the average cost of a property bought using the scheme was just £148,000 (GBP).

Concerns are rife that another property bubble may be formed in the UK property market following a continuing run of positive house price trends.

Mortgage lender, Nationwide recently reported that property values had risen by 10.9% during the last 12 months, the first time annual house price inflation has reached double figures since April 2010.

Data from the Land Registry also shows that average property prices in London have already surpassed the previous 2007 peak.

Recent property price increases have caused the typical average cost of residential property in the UK to rise to £262,770 (GBP), according to Zoopla.

New regulations to control borrowing were introduced at the end of April 2014 to ensure prospective property owners are not risking taking on too much debt.

Under the Mortgage Market Review, lenders are required to carry out stringent affordability checks, including making sure borrowers can continue to meet the mortgage repayments if and when interest rates rise.

However, data on the number of mortgage approvals for residential property purchases appear to suggest that the market may be moderating, with the Bank of England reporting a dip in loan approvals for the second consecutive month during March 2014.

BoE Base Interest Rate Set To Remain Low Until 2015

BoE Base Interest Rate Set To Remain Low Until 2015

Base Interest Rates Set To Remain At
Low Levels Until The End Of 2015

A new economic forecast by Ernst & Young’s (EY) independent forecasting group, the Item Club, reckons that Bank of England (BoE) interest rates will remain at their historic low until the end of 2015 as wages start to outstrip inflation.

The Bank of England’s base rate has an impact on mortgage loans on property and savings returns and with the base rate remaining at 0.5%, it expects house prices to rise by 7.4% this year and 7.2% next year.

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Manchester Leads UK Property Boom

Manchester Leads UK Property Boom

Manchester Leads UK Property Boom

Increasing property prices are not just a phenomenon belonging to London and the South-East of England, as new data from Nationwide shows that all UK regions are now enjoying increasing property prices as the property boom continues to gather pace.

Every region across the UK saw property prices increase year-on-year, ranging from a 14.9% annual increase in London to a 1.9% uplift in the North.

Nationwide reported that property values increased by an average of 8.4% across the whole of the UK in 2013, as the market revival became increasingly broad-based, but Manchester emerged as the property boom city, with property prices up by 21% over the last year, to reach an average value of £209,627 (GBP).

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UK Property Prices Increase Again

UK Property Prices Increase Again

UK Residential Property Prices
Return To Good Health

UK residential property prices increased again in June 2013, marking the return to good health of the property market.

Property price rises are at their fastest rate in over two-and-a-half years as mortgages became more available and less expensive, adding to fears of another property market bubble as overall housing supply remains low.

The latest monthly residential property price index from UK mortgage lender, Nationwide, shows that UK property prices were up 0.3% in June 2013, while the annual increase of 1.9% was the sharpest residential property price increase since September 2010, but those gains were below the 0.4% monthly rise and 2.1% year-on-year price increases forecast by many economists.

In May 2013, residential property prices rose an unrevised 0.4% on the month and 1.1% on the year overall, signalling the recovery of the UK property market.

The number of mortgages approved by UK banks also increased by a quarter in the twelve months to May 2013. However, over the same period, the value of outstanding mortgage loans secured on property dropped by 0.2%.

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Uncertainty Remains Over Recovery Of Universal Credit Rent Arrears

Uncertainty Remains Over Recovery Of Universal Credit Rent Arrears

The UK Government are to introduce a mechanism to automatically recover rent arrears, alongside the direct payment of housing benefit to tenants.

Details released last week by the government explained that under the welfare reforms landlords will now be able to contact the Department for Work and Pensions (DWP) to request Universal Credit benefits designed to cover housing costs of tenants are paid to them once a prescribed level of rent arrears have been reached.

At this point the DWP will recover the arrears by docking universal credit payments to tenants.

In its response to a Communities and Local Government (CLG) select committee report on the implementation of universal credit, the government says deductions can be up to 5% under existing legislation, but the government are considering whether this level of deduction is appropriate for tenants claiming universal credit, or if it should be increased in the future.

Under the new universal credit scheme, which is being rolled out nationally in the UK from autumn 2013, a range of benefits, including Housing Benefit (HB) or Local Housing Allowance (LHA), will be combined into a single monthly payment termed “Universal Credit”.

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UK Property Prices Increase

UK Property Prices Increase

According to one of the UK’s leading mortgage lenders, residential property prices in the UK rose by more than economists had expected in January putting a halt to the annual decline.

Nationwide say that residential property prices in the UK actually increased by 0.5% in January 2013, a further sign that the two years of static residential property prices and historically low property sales across the UK may soon be coming to an end.

Nationwide have published data that states that the average residential property price in the UK is now £162,245 (GBP).

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What’s in store for the UK residential property market in 2013?

What's In Store For The UK Property Market In 2013?

What’s In Store For The UK Property Market In 2013?

Many of the predictions made by property analysts have so far been reasonably positive in that the state of the UK property market can’t really get much worse.

2012 was a rollercoaster kind of year with the Queen’s Diamond Jubilee and the Olympic and Paralympic Games having an effect on the market.

But overall UK residential property prices and property sales have been fairly stable, probably ending the year just higher than where they started, although by how much depends on whose figures you look at.

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UK PRS Landlords still avoiding housing benefit tenants

1/3 of Private Rental Sector Landlords Avoiding Tenants Claiming Benefits

A new Government report has revealed a growing concern about UK landlords, as an increasing percentage are now refusing to accept applications from tenants claiming housing benefits.

The situation regarding LHA tenants is set to get much worse, following the recent statements made by UK Prime Minister David Cameron and his party’s vision for further welfare reform. Read full story

The Government commissioned report was compiled by the Centre for Regional Economic and Social Research at Sheffield Hallam University revealed that over one third of the 1867 landlords who agreed to take part, are already actively refraining from accepting LHA tenants or are considering avoiding benefit tenants in the future.

This change in UK landlord’s perspectives has developed since the government capped housing benefit payments in April 2011, meaning that many LHA claimants are no longer able to claim the entire rental amount from the local authority.

33% of the UK landlords surveyed admitted having severe reservations concerning the reliability of payments from LHA tenants, and as a result they were either planning to or considering no longer accepting benefit claimants as tenants.

29% of landlords had already gone through the process of tenant eviction with LHA tenants or had refused to renew the tenancies of benefit claimants when they came to an end.

36% also admitted that they were experiencing increased rental arrears from LHA tenants because of the changes to benefit payment levels made last year.

Landlords can safely and legally recover rent arrears/debts from all types of tenants, including absconded tenants by using Legal 4 Landlords professional services

Welfare Reform Minister, Lord Freud, didn’t see the results of the Government commissioned report as worrying, stating that: “The research gives us an early insight into what is really happening, and it shows that the many scare stories about the effects of housing benefit reform are simply not materialising.”

If that were true, why are an increasing number of UK landlords wrongly avoiding accepting LHA tenants?
Don’t miss out on the opportunity to get regualr direct payments from any Local authority – Get “The Landlords Essential LHA Handbook” by John Paul – The LHA Expert

It has been suggested that residential property prices in the UK are unlikely to rise significantly over the next five years, according to one property expert.

While costs are expected to rise slowly across the coming half-decade, the escalation in UK residential property values may not be as marked as some would like to think.

Timothy Lambert, head of investment property at Parallel Investment Management, explained: “It is difficult to predict trends in the current climate of economic uncertainty, observing that although there remains a desire to buy among the general public, many individuals remain wary about the prices they are required to pay. There is also widely believed to be a growing north/south divide in terms of pricing differentiation so people will consider carefully where they are based before committing to buy.”

And while many first-time buyers may be having problems saving the required large amount of money to pay a 25% deposit, other individuals are encountering even more difficulties when attempting to qualify to obtain a mortgage at a competitive rate.

UK Buy-To-Let landlords, on the other hand have the opportunity to reap the benefits of the EU’s monumentous decision not to target Buy To Let mortgages when the European Parliament looks at mortgage lending as a whole in coming months.

UK property repossessions increase

UK Property Repossessions are forecast to increase 22% in 2012

UK Property Repossessions are forecast to increase 22% in 2012

Economists expect the recession and rising unemployment to squeeze the already stretched household finances of thousands of struggling families this year and are warning UK homeowners and landlords of a sharp rise in residential property repossessions.

Record low Bank of England (BoE) interest rates and lower than expected unemployment figures kept property repossessions to relatively small numbers through the worst days of the first half of the recession and they eased again as the country struggled into a tepid recovery.

However, with a double dip recession inevitably looming, workers incomes failing to cover spiralling household costs, the Government’s economic cutbacks and welfare reforms starting to bite whilst the beleaguered private sector fails to replace jobs lost in the public sector, economists are fearing the worst.

The Council of Mortgage Lenders (CML) had already forecast a 22% rise in UK property repossessions for 2012 increasing the annual property repossession figures to around 45,000.

The property repossession figures include private residential properties where mortgage payments have lapsed and Buy-To-Let properties where landlords did not have <a title=”Landlord Insurance” href=”http://www.legal4landlords.com/rent-guarantee/” target=”_blank”>Rent Guarantee Insurance</a> and have been unable to keep up with their buy-to-let mortgage repayments due to their tenants not paying the rent.

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