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Brexit will badly hit house prices-Chancellor

Published On: May 9, 2016 at 10:39 am

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Categories: Property News

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With the vote on EU membership moving ever closer, Chancellor George Osborne has used house prices as a pawn in his latest plea for voters to back the ‘Remain’ campaign.

In a television address, Mr Osborne claimed that if the UK left the EU, than there would be a, ‘significant hit,’ for property prices.

Costly

Speaking to Robert Peston on ITV, Mr Osborne said, ‘you will see the analysis we (the Treasury) will do, but I’m pretty clear that there will be a significant hit to the value of people’s homes and to the costs of mortgages. That is one example of the kind of impact, economic impact, that we get from leaving the EU.’[1]

‘I think it’s very important for people to think about that and we are going to be producing some more research on that in the coming weeks. It’s already clear from the Treasury analysis that for example, there would a significant shock to the housing market, that would hit the value of people’s homes, that would hit the cost of mortgages,’ he continued.[1]

Osborne also noted that, ‘we’re doing the work on it now but the emerging Treasury analysis backs up what you are hearing from major banks like Virgin Money that the value of people’s homes will be affected and people trying to get on the housing market would be hit because mortgage costs would go up.’[1]

Brexit will badly hit house prices-Chancellor

Brexit will badly hit house prices-Chancellor

Increases

Just last week, the chief executive of Virgin Money, Jayne-Anne Gadhia, observed that a British exit from the EU would cause house prices to slide, but push interest rates up.

Gadhia said, ‘my personal view is that property prices would be likely to come down, as inward investment, particularly in London, is less available. The risk on a Brexit is I think that property prices come down and interest rates go up.’[1]

Noting that buy-to-let lending would dip following the passing of the stamp duty surcharge deadline, Gadhia also said she believes demand for owner-occupier mortgages would stay strong-if Britain stays in the EU.

‘We are expecting a market of about £240bn this year if the referendum vote is to stay in and there is no disruption that way. That is quite substantially higher than our original expectation of £220bn, the mortgage market is definitely flourishing,’ Gadhia stated.[1]

[1] https://www.estateagenttoday.co.uk/breaking-news/2016/5/brexit-would-mean-significant-hit-for-house-prices-warns-osborne

Landlord jailed after cannabis cultivation

Published On: May 9, 2016 at 9:16 am

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Categories: Landlord News

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A buy-to-let landlord has been put behind bars after being found guilty of growing cannabis with a value of £75,000 in one of his properties.

Despite claims that he was unaware of the cultivation, James Sullivan, 61, was given a three-year jail term.

Scent down

Officers were alerted to the illegal cultivation after detecting a scent from the street outside the house in Plymouth. When entering the property, the officers found 64 mature plants, some of which reached 4ft in height.

Mr Sullivan, a former paratrooper, was found guilty of growing cannabis between December 2012 and February 2013 and was sentenced to four years behind bars. However, this conviction was quashed by the Court of Appeal.

Addressing the most recent conviction, judge Ian Lawrie said: ‘you are a man of good character and what on Earth possessed you to get involved in criminal activity at this stage in your life, I do not know. But you are going to have to pay a heavy price.’[1]

Landlord jailed after cannabis cultivation

Landlord jailed after cannabis cultivation

Going to pot

The case of Mr Sullivan highlights the need for landlords to be wary of their tenants growing cannabis in their rental property.

In the last year alone, police seized 456,911 plants across Britain, according to Direct Line for Business. In London, 59,002 plants were found, more than in any other part of the country.

Birmingham is also the second city in terms of cannabis cultivation, with police in the West Midlands confiscating 52,218 plants. In greater Manchester, officers found 33,547 plants.

Jane Guaschi, business manager at Direct Line for Business, noted, ‘the consequences of a cannabis farm on a landlord’s property can be financially catastrophic.’[1]

Offering advice for landlords, Guaschi said, ‘landlords should check to see if their insurance policy covers them for malicious damage as it’s not just the structural damage that could have insurance implications, it’s the financial headache of the clean-up that will hurt the landlord’s back pocket. What’s more, landlords could face the loss of rent and the stress of the legal wrangling during periods of repair or eviction.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/5/landlord-jailed-for-marijuana-related-crime

Buy-to-Let Lending Criteria Gets Tougher

Published On: May 9, 2016 at 9:14 am

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Categories: Landlord News

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With the UK’s biggest building society, Nationwide, tightening its lending criteria for buy-to-let investors, it could become even harder for landlords to invest in the private rental sector.

The building society has cracked down on rental calculations and loan-to-value (LTV) ratios for buy-to-let mortgages, ahead of forthcoming tax changes in the sector.

Buy-to-Let Lending Criteria Gets Tougher

Buy-to-Let Lending Criteria Gets Tougher

Nationwide’s Mortgage Works – the building society’s buy-to-let arm – is increasing its rental cover requirements from 125% of the loan to 145%. It is also cutting its maximum LTV from 80% to 75% from 11th May 2016.

At present, landlords can claim tax relief on monthly mortgage interest payments at the top level of tax they pay, up to 45%. However, Chancellor George Osborne has introduced new tax rules that will see thousands of buy-to-let landlords’ profits hit, as the amount they can claim as relief will be set at the basic rate of tax, currently 20%.

Some basic rate taxpayers will also be affected, as the change will push them into the higher rate tax bracket. The reduction will be phased in over four years from April 2017.

Property investment firm Armistead Property believes that the tougher lending criteria and recent tax changes will not have a major impact on the housing market as a whole.

The company’s Peter Armistead explains: “This move by Nationwide could trigger other big lenders to follow suit. The banks seem to believe that the Chancellor’s tax crackdown on mortgage tax relief could cause difficulties for landlords. Though the new tax rules are challenging for most landlords, rising asset values and rental income will go a long way to protect profits.

“Landlords have plenty of options available that will help offset the increased taxation. The first thing landlords should do is carry out a serious portfolio review and work out how the tax changes and tougher mortgage lending will affect them and what options there are to save, or make, more money. For example, mortgaging to get a better deal, renovating some old stock – these costs will be tax deductible, selling some properties, or increasing the rent.”

He believes: “Landlords need to think outside the box and ask themselves questions like, ‘Can I buy with cash or with far less leverage?’, ‘Should I incorporate?’, ‘Can I change a house into an HMO [House in Multiple Occupation] and increase the rental income?’, ‘Can I get planning on an existing property to increase its value?’, or ‘Can I add an extension or convert the cellar?’

“Although the Government is trying to curb the buy-to-let market, property investment is robust in the long-term. It is estimated that two million Britons are now private landlords, collectively renting out five million properties. With rising demand for rental property and a growing shortage of accommodation, the buy-to-let market will continue to give a good return on investment.”

The Residential Landlords Association has recently reported that the majority of landlords are thinking of increasing their rent prices.

How will you react to the changes?

Generation Rent Responds to Election of Sadiq Khan

Published On: May 9, 2016 at 8:29 am

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Generation Rent Responds to Election of Sadiq Khan

Generation Rent Responds to Election of Sadiq Khan

On Friday evening, Labour’s Sadiq Khan was elected the Mayor of London. Tenant lobby group Generation Rent has responded to the appointment, explaining what it will mean for the housing market.

With housing such a serious and widespread issue in the capital, many groups have spoken out about what the new mayor must do to help ease the chronic shortage of affordable homes.

Last week, the Director of Your Move and Reeds Rains, Adrian Gill, called on the new mayor to boost private rental supply in London. He believes that Khan must regard the private rental sector as an ally, not an enemy.

Both Khan and his main rival, Zac Goldsmith, put housing at the core of their mayoral manifestos, highlighting the importance of this continuing issue.

Khan has promised to build 80,000 new homes in London every year, 50% of which will be affordable. He plans to deliver these properties on brownfield land. Khan also hopes to form a new homes division in City Hall, set up a not-for-profit letting agency, restrict rent rises, and further invest in the London Affordable Homes programme.

The Residential Landlords Association has also recently released its own manifesto, detailing what it believes the new mayor should do for the private rental sector.

Following Khan’s appointment on Friday, Generation Rent spoke out about his responsibilities now that he is mayor.

The group’s Director, Betsy Dillner, says: “Generation Rent congratulates Sadiq Khan for winning this referendum on London’s housing crisis. The new mayor has years of underbuilding to overcome, and in the meantime, two million private renters are facing high rents and insecurity, with no way out.

“In order to improve the lives of renters, the mayor needs new powers from the Government over tenancies – something that both he and Zac Goldsmith called for. In theory, this means that all of London’s MPs, on both sides of the House, should now be clamouring for stronger rights for renters. We hope Sadiq will capitalise on this consensus.”

Should You Pay Your Mortgage Off Now?

Published On: May 8, 2016 at 8:44 am

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With mortgage rates currently at the lowest level ever, there is only one way for them to go – up. So should you be thinking about paying off your mortgage now?

Paula Higgins, the CEO of the HomeOwners Alliance (HOA), insists that it all depends on your financial circumstances and future plans. She suggests answering the following questions before you decide:

What is the main reason to pay off my mortgage early?

The HOA claims that paying off your mortgage early will probably leave you better off in the long run. “Generally, if you have debts (such as mortgages), the best thing to do with your savings is pay off those debts, because with rare exceptions, mortgage rates are higher than savings rates,” says the organisation.

Being mortgage-free can also make it easier to downsize in other ways, such as going part-time, and often makes it cheaper and easier to buy and sell your home. “Generally, a smaller mortgage gives you greater freedom and security,” explains the HOA.

What is the biggest reason not to pay off my mortgage early?

“Opportunity cost,” answers the body. “The money in your savings account is yours to do what you like with.” Once you have paid off your mortgage, it will be difficult to get the money back again, unless you take out a new loan, which could be difficult, as lenders have been tightening their conditions for some time now.

What things do I need to consider when deciding to pay off some or all of my mortgage? 

Should You Pay Your Mortgage Off Now?

Should You Pay Your Mortgage Off Now?

You must compare the interest rate on your mortgage to the interest you could receive on a savings account, advises the HOA. You should also check whether you would pay tax on those savings. You must also find out if there are any penalties for repaying your loan early.

In terms of your personal finances, ask yourself whether you are expecting any windfalls, such as selling a business. You may also have alternative investments that you’d like to make.

Importantly, remember to have a rainy day fund in place. The HOA suggests a minimum of three months outgoings, but six months is safer. Think about the costs that you’re expecting, such as school fees. If you have some large outgoings planned for the near future, put this sum aside rather than paying off the mortgage, advises the firm. If you are expecting a decline in income, you might want to keep extra savings to tide you over when the time comes.

How do I work out how much money I will save by paying off my mortgage? 

You should find out what your monthly interest payment is, either by asking your lender or working it out from the interest rate that you’re paying. Then, find out what interest you are receiving on your savings and how much tax you pay on that. If your monthly mortgage payment is greater than the interest you are receiving after tax, you will be better off paying off your mortgage.

Will I be better off using the money to buy something else? 

The HOA says that sometimes, you can earn more from using your savings in some other way than paying off your mortgage, however, investments such as a second property or stocks and shares come with risks.

How do I find out about any penalties? 

You should ask your lender if there are any penalties for paying off your mortgage early. Usually, these penalties decrease towards the end of a fixed rate or discounted period. Often, you can pay off a certain amount, such as 10%, per year without incurring penalties. The HOA believes that if the penalties are small, it could still be worth paying off your mortgage early.

Do I have to pay off the whole mortgage? 

“No – often you might just want to make a capital repayment that only partially pays off the mortgage,” says the HOA. However, all the same arguments about being better off doing this still apply. Even if you do have enough money to pay off your whole loan, you should still try to keep some aside for a rainy day fund, urges the organisation.

Will paying off my mortgage affect my ability to move home?

If you are planning to move to a similar priced or cheaper property where you will also not need a mortgage, then paying off your loan will make it easier and cheaper. However, if you have a portable mortgage and would need a loan on a new, more expensive home, then it might be wise to stick with your mortgage and use your savings to increase the deposit for the new home.

Should I accept my parents’ offer to pay off my mortgage and for me to pay them instead?

This is a tricky one, says the HOA. You should find out how much interest they will charge, but it ultimately depends on how well you get on with them. If they will charge less than your mortgage lender, then you will clearly be better off. You may also be able to reach a deal where both parties are better off. However, there are risks with this situation, so it is a good idea for both sides to get independent legal advice.

Could paying off your mortgage be right for you?

Is This the Cheapest Property in the UK?

Published On: May 7, 2016 at 8:43 am

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At a time when the average house price is almost £190,000, could this flat in a North Lanarkshire village be the cheapest property in the UK?

The three-bedroom flat in Upperton, near Airdrie, is on the market for just £1.

With everyone else in the country struggling to save for the average home, costing £189,901, could the buyer of this property be onto a winner?

Although the rundown apartment needs “significant upgrading”, Auction House Scotland claims it offers “huge potential for development”.

The flat is set to go under the hammer at an auction in Glasgow, with a guide price of just £1, later this month.

The firm expects a buy-to-let landlord to snap it up.

The Director of Operations at Auction House Scotland, Gillian Cochrane, says it is not the first property they have advertised for £1.

“We have done it once before and the flat sold for £14,500 to a London-based property manager,” she remembers. “It’s not a strategy that we’d use for all types of property.”

She adds: “It’s very rundown and the seller is desperate to get a quick sale – it’s a one-off.”1

The top floor flat in Dervaig Gardens has a shared balcony, communal gardens and on-street parking.

A similar property on the same street sold for £25,000 last year.

Although it seems that you’d really have to do your research with this property, could its super low price encourage you to make your first investment in buy-to-let, or expand your portfolio? There’s no doubt that you’ll make healthy returns!

1 http://www.bbc.co.uk/news/uk-scotland-glasgow-west-36202983