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UK housing market more stable

says Council of Mortgage Lenders

Council of Mortgage Lenders Expect 2013 to be Positive for UK Property Market

Council of Mortgage Lenders Expect 2013 to be Positive for UK Property Market

C2013 is expected to be a more stable and positive year for the UK housing and mortgage markets, the Council of Mortgage Lenders (CML) has said.

The CML have said a steady increase in lending for house purchases has signalled more activity in the UK property market.

However, first-time buyers are still required to provide a substantial deposit averaging 20% of the property value, in order to get a foot on the property ladder.

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There are always a wealth of resources available covering the current state of the UK property market, although it may seem like a tangled web of information at times.Statistical data from numerous reports produced by various sources over the years have been collated into multiple graphical representations, many of which can be hard to understand.

However, the most important developments in the UK property market over the last two decades are highlighted in the graphics below.

Average UK Property Variations Over The Last 20 Years

Some facts are self-evident, but actual numbers are substantially different to what was initially anticipated.

Many property investors already know that London’s property market is a premium investment market; e.g. houses are 218% more costly than in the North-West of England.

However, in the early 90’s, the story was quite different, back then the Greater Metropolitan area of London was the most expensive region in which to own a property.

UK property Values By Property Type

UK property Values By Property Type

There have been some significant shifts in the UK property market over the past 2 decades, moving away from capital appreciation toward rental income, however, UK property remains a solid investment and will always be a rental income producing commodity for years to come as tenant demand shows little sign of diminishing.

See what investment properties are currently privately for sale by owner by clicking here

2012 Buy-To-Let Mortgage Numbers Increase By A Third

2012 Buy-To-Let Mortgage Numbers Increase By A Third

There are fresh fears that First-Time Buyers (FTBs) and next time buyers are being forced out of the UK residential property market by Buy-To-Let landlords.

The Council of Mortgage Lenders (CML) said that 32,300 Buy-To-Let mortgage loans were made over the first quarter of 2012, a 32% increase on the first three months of 2011.

Meanwhile, according to chartered surveyors E.serv, the number of residential property mortgages lent to first-time buyers in April 2012 fell to their lowest level for 9 months. The company said that loans made to first-time buyers in April numbered just 11,307, a drop of 5% from March 2012 and the lowest since July 2011.

Mainstream mortgage lenders are increasingly reluctant to accept applications from First-Time Buyers due to low Loan-To-Value (LTV) rates and the size of deposit required. Instead there is a preference to lend to Buy-To-Let landlords, who are less likely to default on mortgage payments because they are able to utilise specialist Rent Guarantee insurance products to keep cashflow constant.

Richard Sexton, business development director at E.serv, said “Mortgage companies have begun to scale back lending to first-time buyers. Buy-to-let landlords are taking the places of first-time buyers as there is an absence of them in the market place because they can’t get loans. The UK housing market would be in a far worst place than it is now if it were not for the return of buy-to-let landlords”.

Chief Executive of Dragonfly Property Finance, Jonathan Samuels, said “There has been a seriously sharp spike in mortgage loan applications for buy-to-let properties in the first four months of 2012. A shortage of rental stock and strong demand from the growing number of tenants forced to rent will keep driving the sector forward. There’s a lot of portfolio building, as investors continue to add properties to give them increased exposure. People are seeing Buy-To-Let as a pretty stable place to be because residential property prices are falling and mortgage lenders still see lending to owner-occupiers as risky. Investors feel that there’s a lot left in the buy-to-let market and are putting their money where their mouth is”.

However there are warnings that buy-to-let landlords will need to know what they’re doing when it comes to best rental practices and should take appropriate measures to protect their rental income, such as thoroughly referencing tenants and ensuring Rent Guarantee insurance is in place. Landlords should also be prepared for Bank of England interest rates to rise anytime within the next 12 months as the UK struggles to escape the grip of recession.

The CML said that although lending to buy-to-let landlords has grown sharply in the last year, it is still at only 30% of 2007 levels.

With average loan-to-values on buy-to-let mortgages at 75% and average minimal rental cover at 125% it is unlikely that Buy-To-Let mortgage lending will recover to the same levels seen in 2007, as 25% deposits will prevent many amateur landlords from buying rental property.

UK Government Housing Minister, Grant Shapps, said: “We do not have to make a choice between first time buyers and buy to let. We need both. And while a third of all mortgages went to first time buyers last year, only 12% went to buy-to-let landlords. But I’m determined to pull out all the stops for those who want to get on the property ladder, which is why in March the Prime Minister and I launched the NewBuy Guarantee scheme which is expected to enable up to 100,000 aspiring homeowners to buy newly built properties with just a fraction of the deposit they would normally need.”

The Financial Services Authority (FSA) have warned landlords and homeowners about ‘property hijacking’, the practice whereby fraudsters attempt to raise mortgages on empty properties that they do not own.

The FSA says it has observed a notable increase in cases of UK property hijacking.

The warning has gone out to all UK mortgage brokers, but agents and landlords should also be aware of the potential for fraud.

In its smaller firms regulation round-up for April 2012, the FSA warned UK mortgage brokers that: “There have been attempts by fraudsters to raise mortgages on unencumbered properties which they do not own – property hijacking. This demonstrates the importance of undertaking appropriate due diligence when engaging in new relationships, to ensure that you know who you are dealing with and can identify any trends or anomalies in the business being offered.”

The UK coalition Government’s NewBuy scheme was launched today, (12th March), aiming to provide a much needed boost for people seeking first-time buyer mortgages.

A recent survey by property portal Rightmove questioned over 2,726 potential house purchasers between March 5th and 7th 2012 about their awareness of the 95% NewBuy mortgages and how the new Government backed scheme might affect them.

Their results of the survey found that nearly 2 in every 5 first-time buyers believe that the introduction of the scheme means they are more likely to get on the housing ladder within the next 12 months.

The NewBuy scheme is available only on UK new-build properties.

However, some critics were already questioning the scheme before any official announcement was made.

Labour’s shadow housing minister Jack Dromey claimed that only 3 out of the original 7 lenders were participating, and that the number of developers in the scheme had fallen from 25 to 7.

The Council of Mortgage Lenders, which up until last week was unable to confirm whether the launch was even going to go ahead despite being co-architect of the scheme.

The CML issued a general, guarded statement, adding that it would issue further information when details of the scheme and participants were available.

CML Director General, Paul Smee, said: “NewBuy mortgages will help creditworthy borrowers who simply haven’t yet managed to build up a large enough deposit to gain access to finance to buy a newly-built home. NewBuy is good news for home-buyers, and potentially good news for jobs and the wider economy too. Borrowers need to understand the implications of high loan-to-value (LTV), borrowing, so we will be supporting the initiative with clear consumer information to help people decide whether NewBuy borrowing is an attractive option for them.”

The House Builders Federation (HBF) also issued a statement just days after it too had to admit it did not know for sure if today’s launch would go ahead.

Stewart Baseley, executive chairman of the HBF, said: “NewBuy will help thousands of people to meet their aspirations to buy a new home, freeing up the housing market and helping first-time buyers and those unable to take the next step on the ladder. The scheme will also provide a vital kick-start for house builders large and small who will be able to build the homes and create the jobs that the country desperately needs.

According to the research by Rightmove, 38% of those looking to buy for the first time stated they would be more likely to purchase a home over the next 12 months once the scheme was launched.

The scheme could also benefit ‘second-steppers’ – those looking to sell and trade up for the first time – with 24% of respondents in this group stating they would be more likely to purchase over the next 12 months.

Rightmove director Miles Shipside said: “NewBuy looks set to give a significant housing boost to the fortunes of those who need it the most. We’ve found that raising a deposit has long been the major obstacle for those looking to purchase a new home at the foot of the housing ladder. NewBuy helps address this challenge, and we’ve found that the knock-on effect is that, as of today, nearly two in five first-time buyers will be more likely to getting on the housing ladder via thanks to this initiative. First-time buyers and second-steppers have long been frustrated in their efforts to get on to or move up the housing ladder by prohibitive deposit requirements. Four out of ten first-time buyers cited ‘raising enough of a deposit’ to be their single biggest housing market concern in our recent First-Time Buyer Report. NewBuy opens the door to these groups and can also serve as a great stimulus to help safeguard and create jobs in the new build property sector.”

The HSBC and Yorkshire and Clydesdale banks have already said they will not be participating, and neither LloydsTSB or Santander have deals ready although Nationwide has said it will have NewBuy deals available.

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