Written By Em

Em Morley

Leeds Building Society brings in tighter lending criteria for borrowers

Published On: December 8, 2016 at 3:03 pm

Tags: Bank of England,borrowers,Leeds Building Society,lenders

The Leeds Building Society has become the latest buy-to-let mortgage lender to alter its criteria for borrowers, ahead of amendments planned for next year.

The changes come as a result of new guidelines forwarded by the Bank of England, giving them greater powers of mortgage lending.

Changes to stress tests

From the New Year, lenders are permitted to assess if their borrowers can repay loans, should interest rates rise by 5.5%. In turn, borrowers must give evidence that their rental income can cover 145% of the mortgage outgoings. This means that in effect landlords will be able to borrow less.

One final change is that lenders must also take into account a landlord’s overall tax position, when agreeing whether to agree a mortgage. At present, the Bank of England demand has yet to be finalised.

Leeds Building Society will insist on an income coverage ratio for buy-to-let and holiday let mortgages of 140%, not 125%.

Leeds Building Society brings in tighter lending criteria for borrowers

Richard Fearon, chief commercial officer at the society, noted: ‘We believe the combination of an income coverage ratio of 140 per cent, a specific and lower stress test rate for re-mortgages, our supporting criteria and market expertise brings a unique proposition to the buy to let market.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/12/another-buy-to-let-lender-introduces-stiffer-criteria-for-investors

Housing market to be hit by low stock in 2017

Published On: December 8, 2016 at 11:18 am

Author: Em Morley

Categories: Property News

Tags: housing stock,lack of housing stock,sales activity,surveyors,tax changes

New analysis from RICS has revealed that despite a rise in sales activity in the residential sector, a sluggish sector is predicted as a result of a lack of housing stock.

The firm suggests that the number of prospective buyers in the UK housing market rose for the third month during November. This figure though still remains historically low, with 13% more surveyors recording a rise in new buyer enquiries, as opposed to a fall.

Agreed sales rise

This increased demand is also leading to further rise in agreed sales throughout Britain. 9% more respondents said they had seen more activity during November, the highest reading since February.

RICS’ data shows that the growth in sales activity, despite only being modest, has lead to a further decline in homes for purchase. The majority of respondents to the survey believe the beginning of 2017 to be quiet as a result of the lack of properties coming onto the market.

With stock continuing to fall, regions bucking the trend were the West Midlands and the North West of England.

When asked to look at the next three months, 14% more surveyors predict an increase rather than a decline.

However, respondents were less confident in the prospects for London prices in comparison to other areas, with tax changes still impacting massively on this part of the market.

Housing market to be hit by low stock in 2017

Slowdown

Simon Rubinsohn, Chief Economist at RICS, noted: ‘A key issue for the housing market is the slowdown in transaction activity since the spring which is clearly being reflected in the RICS Agreed Sales data as well as in official figures. Although there are some signs that the numbers may begin to edge upwards in the new year, the combination of macro uncertainty, the on-going supply shortfall, with stock levels around historic lows, and the myriad of tax changes impacting on buyers suggest that any pick-up in activity will be relatively modest. This is significant not just for the housing market itself but also for the wider economy given how much of consumer spending is tied in with home purchases.’[1]

Brian Murphy, Head of Lending at Mortgage Advice Bureau, also commented: ‘The report released from the RICS today is based on sentiment of its members, so provides us with a good snapshot ‘from the coalface’ in terms of what Surveyors are observing on a daily basis. The survey suggest that activity from buyers in most parts of the country is increasing, albeit modestly, although this is of course reliant on available stock. As a result, RICS members in many areas expect to see prices remain steady, if not potentially increase in the next three months, although this will of course depend on continued applicant levels.’[1]

[1] http://www.propertyreporter.co.uk/property/lack-of-housing-stock-to-hamper-recovery-in-2017.html

Avoiding the Growing Trend of Rent Arrears

Published On: December 8, 2016 at 11:16 am

Author: Em Morley

Categories: Landlord News

Tags: rent arrears,rent prices,tenants

James Davis – Portfolio landlord & property expert

After being a landlord for 22 years and becoming increasingly frustrated with the lack of quality tenant find services for landlords, James started Upad – the UK’s largest online letting agent. Upad has mastered the intricacies of online to provide landlords a service they can rely on. In this week’s article, James highlights the increasing importance of selecting tenants based on affordability, given the growing cases of rent arrears.

Avoiding the Growing Trend of Rent Arrears

Avoiding the growing trend of rent arrears

Landlords and tenants are in a financial tug of war. While property owners struggle with growing rent arrears, renters are taking on too much expenditure. The worst possible eventuality is when this dynamic breaks beyond repair, leaving both sides with legal fees to pay and new relationships to build.

In London, 57% of young professionals’ take home pay is being spent on rent. While this doesn’t represent the rest of the UK, it is a trend that we do not want to emulate.

If you think about the modern tenant lifestyle, there are many new and incremental outgoings that most tenants forget to account for. Whether it’s a Spotify subscription or increasing student loan repayments, renters are now committing to more standing orders than ever before. In fact, the growth in unsecured debt, such as loans, credit cards and overdrafts is nearly £10,000 per household.

As a result, I’d recommend that rent should be no more than 30% of a tenant’s net pay. This will allow a financial buffer for any unforeseen monthly payments.

Fail without the detail

Evictions are expensive. To rise above this worst case scenario isn’t easy, but it is necessary, especially if you are one of many landlords who own multiple properties. Multiple evictions are really expensive.

From the beginning of a tenant search, landlords must ask the right questions about income and help their tenants to understand the impact of local bills and taxes on their monthly living costs. It is also important to revaluate risk throughout a tenancy, continuing to communicate with tenants about their situation and employment.

Most importantly, you nip problems in the bud. When a tenant doesn’t pay or you notice that they have stopped responding to calls, take a soft but direct approach to understanding more about their situation. Do this yourself, as tenants are less likely to respond to impersonal, automated agency emails.

eMoov Provides its Gift for the Property Industry This Christmas

Published On: December 8, 2016 at 10:16 am

Author: Em Morley

Categories: Property News

Tags: Christmas,property industry,property professionals

As Christmas gets closer and closer, online estate agent eMoov.co.uk has provided its own gift for the property industry – Prop Trumps!

eMoov Provides its Gift for the Property Industry This Christmas

The agent hopes its property-inspired card game will keep those in the industry both entertained and cheery over the festive period.

The team has compiled a list of the most influential, innovative, controversial and popular figures in the UK property industry (including some unpopular ones) to create a satirical card game using avatars loosely based around each character.

Although many of the cards are based on actual people in the industry, the game is to be taken lightly, eMoov points out, to provide fun for those who have to work over the Christmas period (we imagine many landlords will). All of the names, descriptions and ratings are meant in jest, and are a spoof of the current sector – it even includes eMoov itself.

The agent has taken what it finds amusing about each character and developed cards that display their strengths and weaknesses. The firm’s very own Russell Quirk, or Russell Smirk, makes an appearance in the game with a generous score of 100 for both ego and moral fibre. Although this isn’t strictly true, it notes, as his ego stretches far beyond 100 points!

The goal of this light-hearted game is to provide entertainment to property professionals and excitement over the festive period, while giving a humorous insight into the industry for both property buffs and game lovers alike.

eMoov hopes members of the property industry come together to enjoy the jovial game this Christmas – and maybe even learn a thing or two about the influencers in the sector.

Prop Trumps is the agent’s gift to the industry this year – You can download your own deck at emoov.co.uk/proptrumps. Alternatively, eMoov can arrange to have the deck printed for you, with all proceeds going towards its sponsored charity, Hope for Children.

Quirk, the Founder and CEO of eMoov, says: “During the lead up to Christmas, things slow down at the workplace and people are finishing up for the holidays. So, we’ve created this game for those in the property sector to play and laugh with co-workers in the countdown to Christmas.

“We’ve taken a light-hearted look at the UK property sector and created a tongue-in-cheek game that we hope will bring a bit of fun to players as the Christmas season creeps up on us.”

Rents for prime property in central London slow during November

Published On: December 8, 2016 at 10:13 am

Author: Em Morley

Categories: Property News

Tags: buy-to-let in London,London,prime central london,rental values,rents

Increased activity levels in the prime rental property in central London have served to put downwards pressure on rental values. In turn, this has improved affordability for tenants, according to the latest analysis from Knight Frank.

This has strengthened the negotiation position of tenants during the course of the year, with the number of tenancies agreed in the three months to November 23.2% higher than in the same period in 2015.

Increasing yields, falling rents

The prime central London rental index report indicates that the average gross rental yield achieved was 3.18% during November. What’s more, average rents fell by 5.2% in the year. This was the lowest it has been since December 2009.

Despite this, the firm predicts that this will ease to a fall of just 2% in prime central London West during 2017.

There is however strong variation in the market. In City and Fringe, annual rental growth was fairly stagnant, but in Kings Cross, it rose by 0.3%. In Tower Bridge, there was a slight increase of 0.1%. In all other regions of prime central London, rents decreased year-on-year.

Rents for prime property in central London slow during November

Decline

Riverside led the way in terms of decline, with rents down by 9.3%. This was followed by Hyde Park (-9%), Marylebone (-8.8%), Notting Hill (-8.6%), Knightsbridge (-7.3%) and Belgravia (-7.1%).

At the same time, the number of viewings rose by 18.4%, with would-be tenants also rising by 7.8% over the same period.

Tom Bill, head of London residential research at Knight Frank, feels that the figures represent the increased regulatory uncertainty in the sales market. This has led to a number of vendors opting to let their property as opposed to selling, until more security around future pricing arises.

‘While broader uncertainty persists over issues including the UK’s decision to leaves the European Union and the election of Donald Trump, the extent of the cost pressures faced by banks was underlined in November when several banks failed to meet certain Bank of England stress tests,’ Bill explained.[1]

[1] http://www.propertywire.com/news/europe/prime-property-rents-central-london-affordable-latest-report-shows/

Paragon Refines Mortgage Affordability Criteria Ahead of Tax Changes

Published On: December 8, 2016 at 9:34 am

Author: Em Morley

Categories: Finance News

Tags: buy to let mortgages,buy-to-let finance,landlord taxes,tax changes

Specialist lender Paragon is refining its mortgage affordability criteria for buy-to-let landlords, ahead of landlord tax changes next year.

From 6^th April 2017, some landlords will face higher costs as a result of the reduction in mortgage interest tax relief.

Paragon Refines Mortgage Affordability Criteria Ahead of Tax Changes

While the tax changes will only be gradually introduced from April next year – and will not be fully implemented until April 2020 – Paragon is refining its affordability assessment now to ensure that its loans remain affordable in the future.

The lender is adopting an approach that seeks to assess the tax status of individual landlords and reflect this in the affordability calculation.

As a result, the interest coverage ratio (ICR) will not change for landlords who are unaffected by the tax changes. Those paying the basic rate income tax and corporate landlords will continue to be assessed at an ICR of 125%. If a landlord will be paying a higher rate of tax, an ICR of 140% will be used.

This revised approach to affordability also includes changes to the reference interest rate used in the affordability calculation. For all products other than longer-term fixed rates, the reference (or stressed) rate will be set at 2% above the product rate or 5.5%, whichever is higher.

For longer-term fixed rates, the current stressed rate of 4% or the product rate, whichever is higher, will be used.

All applications will continue to be subject to a background, forward-looking affordability assessment to ensure that products remain affordable when a fixed or discounted rate term comes to an end.

The Director of Mortgages at Paragon, John Heron, explains the need for the revised approach: “Government policy towards the private rented sector will increase costs for landlords, and it is clear that this will need to be reflected in lender affordability assessments.

“The Prudential Regulation Authority’s supervisory statement released in September this year is helpful in ensuring that lenders approach this in a consistent fashion.

“The changes that we’re announcing today are designed to tailor affordability to each landlord’s individual circumstances, whilst keeping the application process straightforward for brokers and their customers.”