Posts with tag: finance

Demand for Homes Drives 30% Rise in Mortgage Lending

Published On: March 20, 2016 at 8:27 am


Categories: Finance News

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Demand for homes has driven a 30% rise in mortgage lending in the 12 months to February, reaching a total of £17.6 billion, according to the latest figures from banks and building societies.

Despite a monthly decline of 5% from January’s total, the Council of Mortgage Lenders (CML) has reported strong annual growth, as low mortgage rates and high demand for homes fuelled lending.

The £17.6 billion total was up from £13.6 billion recorded for February last year and was the highest lent in any February since 2008, when the financial crisis was starting to take hold.

The CML’s figures detail gross lending during the month, not taking repayments into account.

Recent months have seen strong levels of remortgaging activity, as borrowers take advantage of fixed rate mortgages at record lows.

Mohammad Jamei, an economist at the CML, states that the annual rate of growth was in line with the figures for the last months of 2015.

“The recovery is being underpinned by market fundamentals in the UK, as wages grow and unemployment falls, helped by Government schemes and competitive mortgage deals.”

Demand for Homes Drives 30% Rise in Mortgage Lending

Demand for Homes Drives 30% Rise in Mortgage Lending

The forthcoming change to Stamp Duty for buy-to-let landlords and second homebuyers, which comes into effect on 1st April, has caused a 40% increase in buy-to-let loans for house purchase in January, and it is likely that this surge will have continued into February.

However, Jamei does not believe that the figures point to a significant acceleration in lending: “While there may be a slight current boost to lending as some transactions seek to complete before the 1st April tax changes in the buy-to-let sector, this is likely to be followed by a slight fall in activity.

“Affordability pressures continue to weigh on activity, as does the low number of properties coming on the market, though this has been improving very recently.”1

Wednesday’s Budget confirmed that all property investors, including corporate landlords, will face the 3% Stamp Duty surcharge.

The new tax rate will add £6,000 to the cost of purchasing a £200,000 rental property.

The Chief UK Economist at IHS Global Insight, Howard Archer, says that lending was likely to have been boosted by both remortgaging and purchases.

“Housing market activity is seemingly getting some boost at the moment from increased activity from buy-to-let and second home purchases ahead of April’s rise in Stamp Duty,” he observes.

“This could exert limited upward pressure on house prices in the near term. Post April, a likely waning of buy-to-let interest may modestly dilute housing market activity and ease upward pressure on prices.”1

Many industry experts have reported a boom in the buy-to-let market ahead of the Stamp Duty change.

The main house price indices suggest that the cost of buying a home has risen more quickly than earnings in the past year.

Jeremy Duncombe, the Director of Legal and General Mortgage Club, which works with advisers and lenders, claims buyers are being forced to take out larger loans to cope with growing house prices.

He claims: “These high prices, combined with a lack of affordable housing, puts owning a property out of reach for many first time buyers. Initiatives that can aid the delivery of the 250,000 extra homes needed annually should be thoroughly explored by the Government, with all options considered.

“As the Chancellor himself conceded in his Budget, more needs to be done to speed up the realisation of these new properties if the housing market and the wider economy is to return to full health.”1 


First Time Buyers Must Earn £11k More Than the UK Average to Get on the Property Ladder

Published On: March 3, 2016 at 9:42 am


Categories: Finance News

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The difference between the average UK salary and the income that first time buyers need to get onto the property ladder has hit a post-recession high, according to research conducted on behalf of mortgage insurer Genworth.

First Time Buyers Must Earn £11k More Than the UK Average to Get on the Property Ladder

First Time Buyers Must Earn £11k More Than the UK Average to Get on the Property Ladder

Analysis of Office for National Statistics and Council of Mortgage Lenders figures shows that the average income needed to acquire a first time buyer mortgage is £38,977 – a huge £11,332 higher than the average UK salary of £27,645.

This is the greatest difference recorded since the recession, indicating how access to homeownership in the UK has become increasingly limited. It also signals how and why the private rental sector is likely to grow in the future.

Yesterday, we revealed that 30% of all households will rent from private landlords in 30 years’ time.

The difference in income needed and the average salary has grown significantly in recent years, due to stricter lending criteria and soaring house prices. Many prospective first time buyers will now have little chance of getting onto the property ladder without support from a partner, family member or Government scheme.

In fact, it was recently found that just 16 parts of the country are affordable for single first time buyers.

Comparatively, the gap between the income needed for a first time buyer mortgage and the average UK salary in 2000 was just £3,170 and £7,505 in 2011.

In London, the average salary needed for a first time buyer mortgage is almost £58,500, or 65% more than the UK average. Compared with regional salary growth of just 1.3%, the incomes of first time buyers have increased by 19.4% in the capital.

This means that the difference between the salary needed for a first time buyer in the capital and London’s average is £23,142, more than double the gap in the rest of the UK of £11,332.

This is 3.9 times more than in Yorkshire, where the income needed for a first time buyer and the average salary is the smallest gap.

It is therefore unsurprising that in the first ten days of the Help to Buy London scheme launching, a huge 15,000 hopeful buyers showed interest in the initiative.











Accord Cuts Buy-to-Let Remortgage Rates

Published On: March 1, 2016 at 3:02 pm


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Accord Mortgages Buy to Let has cut certain rates by up to 0.15% on its range of two-year fixed rate mortgages at 60% and 75% loan-to-value (LTV).

The intermediary-only lender, part of Yorkshire Building Society Group, is now offering landlords looking to remortgage with a 25% deposit a series of two-year fixed rate loans with £800 or £2,495 fee options and a range of incentives on select products.

Accord Cuts Buy-to-Let Remortgage Rates

Accord Cuts Buy-to-Let Remortgage Rates

Some highlights of the two-year remortgage range include:

  • A 2.34% two-year fixed rate mortgage at 75% LTV with a £2,495 fee.
  • A 2.49% two-year fixed rate mortgage at 75% LTV with a £2,495 fee, and free standard valuation and legal fees.
  • A 2.49% two-year fixed rate mortgage at 75% LTV with a £2,495 fee and £300 cashback on completion and free standard valuation.
  • A 2.64% two-year fixed rate mortgage at 75% LTV with a £800 fee.
  • A 2.89% two-year fixed rate mortgage at 75% LTV with a £800 fee and free standard legal fees, or £300 cashback on completion and free standard valuation.

Each loan is available with a discounted reversion rate of 4.04% for three years once the initial fixed rate period ends.

During the reversion rate period, landlords will not have to pay any early repayment charges and can redeem their mortgage at any time.

On the mortgage’s fifth year, the rate will change to Accord’s standard variable rate of 5.79%.

The National Account Manager of Accord Buy to Let, Chris Maggs, comments: “Not only does our new range offer enticing rates and a choice of incentives, landlords taking out a two or three-year product will also benefit at the end of the mortgage term, as they will revert to our discounted reversion rate, or have the option of transferring to another attractive product available for existing borrowers.

“We are constantly reviewing our buy-to-let mortgages to offer the best fit for landlords, and we hope that this combination of benefits will really appeal to both landlords and brokers looking for the best option to suit their individual requirements.”1

We will continue to bring you the latest news of the mortgage market and buy-to-let finance.




Skipton Building Society Cuts Interest Rates on Buy-to-Let Mortgages

Published On: February 24, 2016 at 9:39 am


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Skipton Building Society has launched a revised series of fixed rate buy-to-let mortgage products, with interest rates cut on certain deals by up to 0.18%.

This will come as good news to those landlords that are hoping to beat the 1st April Stamp Duty deadline.

Skipton Building Society Cuts Interest Rates on Buy-to-Let Mortgages

Skipton Building Society Cuts Interest Rates on Buy-to-Let Mortgages

Skipton is offering a range of buy-to-let mortgages on two and five-year fixed rate terms, with purchase and remortgage products priced separately for 60%, 70% and 75% loan-to-value (LTV) bands.

The new buy-to-let range for property purchase includes five-year fixed rates at 3.69% at 70% LTV and 3.89% at 75% LTV, both with £995 fees.

For those looking to remortgage, the two-year fixed rate range includes a 2.19% deal at 60% LTV with a £1,995 fee, a 2.49% deal at 60% LTV with a £995 fee and a fee-free 3.19% rate at 60% LTV.

The five-year series includes a fee-free 4.17% deal at 75% LTV.

All remortgage products offer a free valuation and standard legal fees, while all purchase products include a free standard valuation.

The Head of Products at Skipton, Kris Brewster, explains why the building society decided to launch the new range: “Thanks to our prudent approach to lending, buy-to-let has always been a valuable and high-performing part of our mortgage portfolio. Our buy-to-let deals continue to prove popular and we are delighted to offer this refreshed fixed rate buy-to-let mortgage range with lower interest rates.

“We believe the range offers great value for purchasers of buy-to-let property and for those wishing to remortgage their portfolio.

“We have a total of 36 products in our buy-to-let range, to give landlords and potential landlords plenty of choice and as many different options as possible to help suit their many different needs.”1

From 1st April, buy-to-let investors and second homebuyers will be charged an extra 3% Stamp Duty on properties worth over £40,000. As many landlords are already rushing to invest in the sector, could one of these buy-to-let mortgages help you beat the deadline? 


UK Interest Rates May Not Rise Until 2020, Believe Analysts

Published On: February 10, 2016 at 12:24 pm


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Insecurity in global markets and a weakening US economy will force the Bank of England (BoE) to delay interest rate rises until at least 2020, according to leading industry analysts.

The Economist Intelligence Unit’s (EIU) prediction adds at least three years to the BoE’s timeline for the first increase from the historically low rate of 0.5%.

The forecast will be welcome news for mortgage borrowers, but will disappoint savers.

UK Interest Rates May Not Rise Until 2020, Believe Analysts

UK Interest Rates May Not Rise Until 2020, Believe Analysts

Most analysts expect the first rise in the base rate for almost seven years to arrive at the end of this year or in early 2017.

The Governor of the BoE, Mark Carney, announced in January that the UK faced “a powerful set of forces” that prevented policymakers from increasing rates.

However, in his quarterly inflation report briefing, Carney said that interest rates were “more likely than not” to go up over the next two years1.

Two analysts at the EIU, Danielle Haralambous and Aengus Collins, believe Carney’s announcement is at odds with the downbeat evaluation in the inflation report.

They said: “We now expect record low interest rates to remain in place in the UK for at least the next four years.”

In the past week, the BoE has downgraded the UK’s expected GDP growth for 2016, and indicated that inflation will remain low this year and in 2017.

The EIU analysts found that downward adjustments to official growth expectations reveal that the loss of momentum last year was sharper than anticipated.

They also argued that the UK suffers from “unresolved structural weaknesses” that would prevent wages from rising and from putting pressure on prices.

They reported: “The vulnerability of the UK recovery, combined with the more decisively dovish tone at the BoE, has led to a significant change in our call on monetary policy. We no longer expect tightening for the next four years at least.”

The decision to maintain low rates will remain, despite a build up in inflationary pressures, they added.

The analysts concluded: “The BoE is likely to delay policy tightening in 2019, largely on the basis of our forecasts that the US will experience a downturn in 2019, and rising levels of indebtedness in China will have become a greater source of risk by the end of our forecast period. Our view is that the next increase in interest rates will come in mid-2020.”1 

If rates do not rise until 2020, how will your financial position change?


Contrary to Popular Belief, Buy-to-Let “is Not Dead”, Insists Finance Firm

Published On: January 27, 2016 at 2:58 pm


Categories: Landlord News

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Despite Government efforts to “take the shine off buy-to-let” through major tax changes for landlords, the sector is still “a very attractive investment opportunity”, according to an independent finance and property advisory firm.

Paul Mahoney, the Managing Director of Nova Financial, insists that the property sector “will remain resilient and continue to provide strong returns”, despite the changes.

Over the next few months and years, landlords will face numerous changes to the way they operate their lettings businesses, particularly financially.

Mahoney explains what’s in store for you in the near future if you’re a buy-to-let investor.

Contrary to Popular Belief, Buy-to-Let "is Not Dead", Insists Finance Firm

Contrary to Popular Belief, Buy-to-Let “is Not Dead”, Insists Finance Firm

He starts with the Wear and Tear Allowance: “As of 1st April 2016, furnishings will no longer be depreciated at a flat rate of 10% per annum. However, a positive change is that replacements of furniture will be deducted against the income of the investment for that year.”

Additionally, many landlords will see reductions in mortgage interest tax relief. Mahoney says: “From 2017 to 2020, the ability to offset mortgage interest against the income of the investment at the landlord’s own marginal tax rate will be reduced to the basic rate.

“This will be phased in using proportions of the landlord’s tax rate versus the basic rate as follows: 2017 = 75%/25%; 2018 = 50%/50%; 2019 = 25%/75%; and in 2020, all mortgage interested will be deductible at the basic rate of 20%. There are solutions to this scenario for those that may be negatively affected.”

He continues: “Lastly, as of 1st April 2016, there will be a 3% Stamp Duty premium for second homes and buy-to-let properties.”

Mahoney believes that the measures were proposed in order to crack down on the sector. He states: “The Government is trying to take the shine off buy-to-let, which has been, and will remain, a very attractive investment opportunity.

“They are using the proceeds to fund first time buyer incentives, which will have a positive impact upon the property market overall.”

But he insists: “Potential investors and current landlords need to be aware of these changes, how they relate to their investments and therefore account for them in making decisions moving forward. The key to doing this right is to seek professional advice.”

And while some landlords may be contemplating leaving the sector, Mahoney thinks the market is robust enough to handle the changes.

“These changes may negatively affect the sentiment of buy-to-let in the minds of some, but given the long-term nature of property and the fact that prices do not tend to move up and down quickly, like they do in stocks, the property market will remain resilient and continue to provide strong returns,” he claims.

“The buy-to-let sector is certainly still an attractive investment,” he maintains. “Contrary to what many journalists are saying, buy-to-let is not dead.”

However, Mahoney does acknowledge that landlords will see changes to their personal finances: “There will undoubtedly be some landlords that currently hold portfolios that are in a post-tax positive cash flow position, that will potentially be pushed into a negative cash flow position following the reduction in the ability to offset mortgage interest at their own marginal tax rate.

“These landlords may need to downsize their portfolios and rethink their strategy moving forward, but there are options.”

He reassures investors: “This is by no means the majority of landlords though, and the simple law of economics will prevail in property; when there is a lack of supply of housing and a growing demand for housing, prices in general will increase, both from a rental and capital appreciation perspective.”

Mahoney offers his advice to investors: “So when investing in areas where there are very strong reasons for people to live, such as employment, infrastructure, facilities and amenities, strong socio-economic levels and low vacancy rates, and where land is a limited commodity, you can have confidence in positive outcomes.”

He concludes: “The old cliché of property doubling every ten years no matter where you buy may be over, but by selecting very carefully, ideally with the help of an independent advisor, great opportunities exist.”

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