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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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Royal Institute of Chartered Surveyors Slams Government

Royal Institute of Chartered Surveyors Slams Government

Government Not Doing Enough
To End Housing Shortage

A recent study by the Royal Institute of Chartered Surveyors (RICS) has shown that the Government still are not doing enough to alleviate the chronic shortage of residential housing in the UK.

The Royal Institute of Chartered Surveyors have again stated that successive governments have failed to produce a coherent long-term strategy for UK housing.

The RICS housing commission may concede that some of the coalition government’s policies are producing short-term help for the UK house building industry but they are prepared to argue that successive ministers’ lack of consistency in policy over the past 50 years has exacerbated the failures of the UK property market.

The Royal Institute of Chartered Surveyors think that current Government housing policies are merely clearing up the problems left by their Labour party predecessors, and current government ministers are struggling to find a viable alternative solution to the current housing shortage.

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FCA Accused Of Interest-Only Mortgage ScaremongeringThe Financial Conduct Authority (FCA) has been accused of scaremongering when it comes to dealing with outstanding interest only mortgages.

You may remember that Spotlight reported that the FCA warned that almost half the 2.6 million or so UK property owners that have interest only mortgages would not have savings or other funds to cover the final bill at the end of the tenure.

Read the article here

Interest only mortgages represent approximately 33% of all UK mortgages.

With Interest only mortgage holders only paying enough to cover the monthly mortgage interest on the amount borrowed, the average shortfall is £71,000 (GBP) per person, according to the published FCA research.

The FCA, the new watchdog for the sector taking over from the Financial Services Authority (FSA), commissioned the research to provide a clear indication of what mortgage borrowers could face when their Interest Only mortgages mature between now and 2041.

Property investors and Buy-To-Let landlords are still wise to select interest only mortgages, rather than waste money by opting for capital repayment mortgages from the outset.

Landlords choose interest only mortgages to purchase rental properties because they are the cheapest option and may choose to switch to a repayment option at any time once the rental income is coming in.

Peter Williams, Executive Director of the Intermediary Mortgage Lenders Association (IMLA),said: “By confirming that nine in every ten interest only (IO) borrowers have a repayment strategy in place, the FCA’s research should put an end to misguided reports of a mis-selling ‘scandal’ when the market boomed between 2002 and 2007. Having said that, as both the Experian report for the FCA and the GfK report shows, there are issues for the industry to deal with.” 

Market research firm GfK NOP questioned 1,103 interest only borrowers to consider how prepared they were to repay their loans.

The study found that 37% of interest only mortgage holders faced a shortfall in their plans to pay back the lump sum of the home loan, based on their own calculations.

But the FCA believes that many people underestimated the financial problem and it believes 48% of interest only mortgage holders will face a shortfall.

Martin Wheatley, Chief Executive of the FCA, said: “My advice to borrowers is not to bury their head in the sand over interest only mortgages. This report is a call to action.”

 

Interest Only Mortgages Are A Ticking Time Bomb

Interest Only Mortgages Are A Ticking Time Bomb

Over 1 million landlords and homeowners with interest only mortgages could face financial difficulties when reach the end of their tenure and they have to pay them off, according to the Financial Conduct Authority (FCA).

The FCA estimates that around half of the 2.6 million or so UK property owners with interest only mortgages, which represents about a third of all UK mortgage holders, will not have savings or other funds to cover the final bill.

With these mortgage holders only paying enough to cover the monthly mortgage interest on the amount borrowed, the average shortfall is £71,000 (GBP) per person, according to FCA research.

The FCA, the successor of the Financial Services Authority (FSA) as the sector’s watchdog, commissioned research to give a clear indication of what borrowers face when mortgages mature between now and the year 2041.

Market research firm GfK NOP questioned 1,103 interest only mortgage borrowers to consider how prepared they were to repay their loans.

The study found that 37% of borrowers with an interest only mortgage faced a shortfall in their plans to pay back the lump sum of the home loan, based on their own calculations.

But the FCA believes that many people have seriously underestimated the severity of the financial problem and believe the true percentage to be around 48% of all residential property owners with interest only mortgages will face a shortfall.

The vast majority of interest only mortgages were taken out by property investors and residential homebuyers before the financial crash, according to Martin Wheatley, Chief Executive of the FCA, who stated: “It’s just that people were optimistic about the future. My advice to borrowers is not to bury their head in the sand. This report is a call to action.”

The interest-only mortgage time bomb is a serious problem for property investors without an exit strategy and potentially terrifying for homeowners who have no means in place to repay the capital of the original loan.

The media have already stirred up a fervour of anguish with overemphasised coverage on the negative aspects of taking out an interest only mortgage, almost as if they are acting in the interests of the mainstream mortgage lenders attempting to get property owners to switch to repayment mortgages immediately.

The media coverage suggests that interest-only mortgages are a disaster waiting to happen for property investors and residential homeowners with at least 60,000 borrowers facing capital repayments by 2020 without any means of being able to pay back the loan and another 260,000 facing the same financial crunch over the next 30 years.

Graham Lock of House Network said that the FCA is guilty of scaremongering, stating: “People use interest-only mortgages to get on the ladder and they can choose to switch to a repayment option at any time once it becomes affordable. Wage inflation will take care of most of this added with the fact that most of us will work until we’re 70 means there is plenty of time to switch to repayment in the future.”

Executive Director of the Intermediary Mortgage Lenders Association (IMLA), Peter Williams, added: “By confirming that nine in every ten interest-only (IO) mortgage borrowers have a repayment strategy in place, the FCA’s research should put an end to misguided reports of a mis-selling scandal when the market boomed between 2002 and 2007. Having said that, as both the Experian report for the FCA and the GfK report shows, there are issues for the industry to deal with.”

Landlords Risk Losing Insurance Claims

Landlords Risk Losing Insurance Claims

UK Buy to let landlords have been warned not to try and make false economies by attempting to make savings on their annual insurance premiums.

The warning has come from Michael Portman, managing director of tenancy referencing and insurance firm Let Risks. He says that in the current financial climate, landlords are trying to keep their premiums low to make savings.

The result, he says, is that there has been a large rise in the number of private rental sector (PRS) properties that are “significantly under-insured”.

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