Posts with tag: interest rates

Confidence in Housing Market Drops to Five-Year Low

Published On: October 30, 2017 at 10:22 am

Tags: buying a home,interest rates,property market,property sales

Confidence in the housing market has dropped to a five-year low, according to the latest Housing Market Confidence Tracker from Halifax.

The report found that, although just over half of adults still believe that house prices will rise over the next year, almost the same proportion predicts a slowdown.

Confidence in Housing Market Drops to Five-Year Low

The most pessimistic are Londoners and the under-25 age group, Halifax found.

The report also shows that a rise in interest rates, which is widely expected this week, is not seen as a major barrier to buying a home, and nor is Stamp Duty. These findings arrive at a time when the Government is considering scrapping Stamp Duty for first time buyers.

The main barriers to buying a home were seen as the ability to raise a deposit, followed by job security, high house prices and household finances. Shortages of properties for sale and fees related to housing purchases were considered relatively minor obstacles.

Existing mortgage borrowers, who were asked whether a rise in interest rates would affect their ability to meet repayments, were mainly unworried, with 36% showing concern. This proportion is down by 6% from the 42% measured in 2014.

The Housing Market Confidence Tracker also found that house price optimism – a measure of whether house prices will be higher or lower in a year’s time – has dropped 14 points from April, to 30 points now, which matches the record fall seen following the EU referendum result.

Half of the 1,968 adults surveyed said that they expect house prices to increase over the next year – the lowest level since April 2013, when the proportion was 45%. Meanwhile, one in five think that house prices will fall – the highest level since October 2012.

When it comes to those who think that the next 12 months will be a good time to buy, London is the only region with a negative outlook. Those aged between 18-24 were the only age group with a negative buying outlook, while those over 65 were the most positive.

Across the country, 52% of adults said that they think the next year will be a good time to buy a property.

Selling sentiment, however, has become more negative, down by 11 points since April, to 6%.

Those aged 18-24 were least positive about selling, with 8% more negative than positive, while 35-54-year-olds had the highest level of optimism, with 20% more positive than negative.

Despite expectations of an interest rate rise, an increase was only perceived as the main barrier to buying a home by 15%. Instead, 61% named the ability to raise a deposit and 42% cited job security as the main barriers.

The Managing Director of Halifax Community Bank, Russell Galley, comments: “Housing market optimism has declined significantly over the past year, with almost half of people expecting a general slowdown in the market.

“Even with a potential base rate increase on the horizon, it’s significant that buyers’ concerns continue to be centred on raising deposits and job security, and, as such, we do not anticipate that an increase in base rate will have a significant effect on the demand for properties.”

Figures for Final Month of Lending Before PRA Changes Revealed

Published On: October 25, 2017 at 9:22 am

Author: Em Morley

Categories: Finance News

Tags: interest rates,Mortgage lending,mortgages

Figures for Final Month of Lending Before PRA Changes Revealed

UK Finance has released the latest figures for the mortgage lending market, which show the scope of the sector in the final month before new lending rules for portfolio landlords were introduced.

UK Finance estimates that gross mortgage lending for September was £21.4 billion, which is 5% higher than a year ago. High street banks carried out almost two-thirds of this lending, or £13.7 billion.

From 30^th September 2017, lenders have been required by the Bank of England’s Prudential Regulation Authority (PRA) to introduce stricter criteria on portfolio landlords – defined as those with four or more mortgaged buy-to-let properties. We have created a guide to help you understand these changes: /landlords-guide-pra-portfolio-underwriting-changes/

Commenting on the data, the Senior Economist at UK Finance, Mohammad Jamei, says: “As we near the end of 2017, our data is showing that housing market activity has built up modest momentum since the start of the year, helped by an increase in first time buyer numbers.”

John Goodall, the CEO and Co-Founder of buy-to-let specialist Landbay, also responds to the figures: “Mortgage lending activity dipped slightly in September, but remains significantly up on last year’s levels, as borrowers continue to take advantage of record low interest rates and loan-to-value [LTV] deals. These more accommodating borrowing conditions are, however, set to change in the coming months, as the prospect of the first interest rate rise in almost a decade looms large, putting pressure on borrowers and potentially putting off first time buyers.

“September’s figures also offer some insight into the final month of lending before the PRA’s portfolio landlord changes came into effect. While these new regulations are a good thing for the sustainability of the buy-to-let sector, we may see a dip in lending in the coming months as the sector adjusts to both the new regulations and a possible rate change.”

John Bagshaw, the Corporate Services Director of Connells Survey & Valuation, offers his thoughts: “Having benefited from a decade of low interest rates, consumers are sensing the risk that this era is nearing an end. Many older mortgage deals are expiring this autumn, which will mean moving onto more expensive Standard Variable Rates. As a result, homeowners on these deals are opting to refinance, taking advantage of the intense competition in the mortgage market right now. With so much economic uncertainty and hints of a base rate rise, many are choosing to lock into a lower rate to see them through the next few years.”

We also have a response from John Eastgate, the Sales and Marketing Director of OneSavings Bank: “Mortgage lending has grown modestly since the start of the year and is heading towards the levels last seen in 2008. Despite growing concerns around affordability, much of this demand is coming from first time buyers, largely driven by Government initiatives such as Help to Buy. With a rate rise in the offing, however, borrowers may well have to face up to the reality that they’ve missed the opportunity to secure the lowest mortgage rates in history.

“The mortgage market continues to demonstrate sustainable growth, but not without challenge. Real wage growth is in negative territory, and supply shortages continue to drive up prices, albeit modestly, in most parts of the country. Nevertheless, with property transactions on an even keel, neither seem to be a threat to ongoing growth.”

Variable Rate Mortgage Borrowers to be Hit by Higher Charges if Rates Rise

Published On: October 24, 2017 at 8:00 am

Author: Em Morley

Categories: Finance News

Tags: base rate,interest rates,mortgages,variable rate mortgages

Variable rate mortgage borrowers could have to collectively pay an extra £82.8m in higher payments in December if the Bank of England (BoE) raises the base rate by 0.25%, according to online mortgage broker Trussle.

If the Bank’s Monetary Policy Committee (MPC) announces a 0.25% base rate rise on 2^nd November, as is widely expected, most UK lenders will pass the full increase onto their customers within a month, based on historical lender behaviour.

In this scenario, the average variable rate borrower on a repayment loan would see their monthly payment rise by £16.56 – that’s £82.8m across the UK.

Variable Rate Mortgage Borrowers to be Hit by Higher Charges if Rates Rise

On an annual basis, these variable rate mortgage borrowers would see their payments increase by £198, or a total of £990m.

While most new home loans are on fixed rate terms, there are five million UK variable rate mortgage borrowers, who are on rates that move up and down with the base rate set by the BoE.

A borrower may be on a variable rate because they opted for one when securing their mortgage, or if their initial fixed rate lapsed onto their lender’s Standard Variable Rate (SVR) – three million people are currently in this position, mostly because they didn’t switch at the right time.

Variable rate mortgage borrowers in London, where the average outstanding mortgage value is around £243,000, will be hit hardest by a rate rise. A London-based borrower with 20 years left on their mortgage, currently paying an interest rate of 2.25%, would see their annual charges increase by £336 if rates were to go up.

The last time the base rate was changed was on 4^th August 2016, when the MPC cut the rate from 0.5% to 0.25% – the first change in almost a decade.

Of the lenders monitored in Trussle’s 2016 Lender League Table, 53% had dropped their rates in line with the BoE within a month of the rate change, including four of the six biggest lenders.

In anticipation of a rate rise next month, more than 20 lenders have already raised their rates, several by a full 0.25%.

Further research has also suggested that buy-to-let mortgage rates are creeping up.

The CEO and Founder of Trussle, Ishaan Malhi, comments: “It’s looking ever more likely that the BoE will raise interest rates, either in November or December. This will impact anyone on a variable rate mortgage. While the increase is only likely to be small at first, borrowers on variable rate deals should consider how they’ll cover the extra cost, especially those on a tight budget or with a large outstanding mortgage.

“With more rate rises potentially on the horizon, those nearing or beyond the end of their initial mortgage term should be thinking about switching to a more competitive deal. Because of the perceived complexity of getting a new mortgage, many people tend to this put this task off. As a result, a quarter of mortgage borrowers in the UK have ended up on their lender’s SVR, paying far too much interest. The process of switching has never been easier than it is now, so we urge borrowers to take action sooner rather than later.”

How will you be affected if the base rate rises over the next couple of months?

Next Property Crash Could be Triggered by Great Sell-Off by Landlords

Published On: October 5, 2017 at 9:59 am

Author: Em Morley

Categories: Landlord News

Tags: interest rates,landlord profits,mortgage interest tax relief,rent controls,tax changes

Mortgage interest tax relief changes, coupled with proposed rent controls, could trigger the next property crash, as landlords rush to sell-off their investments, warns a finance expert.

Next Property Crash Could be Triggered by Great Sell-Off by Landlords

Gary Heynes, a partner at tax and business advice firm RSM, believes that landlords could rush to put their properties on the market as the full effects of the reduction in mortgage interest tax relief, alongside Labour’s proposed rent controls, hit their profits.

He says that, as the tax relief changes are increasingly phased in, landlords could find themselves paying more in tax than the net rental income they receive.

If they cannot put rents up to cover the shortfall, Heynes claims that there would be a huge influx of properties put onto the market.

The amount of tax relief that landlords can claim on finance costs is already being cut. From 6^th April 2017, tax relief is being restricted, with the full reduction due to be in place by 2020/21.

This tax year, 25% of landlords’ finance costs will receive tax relief at the basic rate of 20%. In the next tax year, this will rise to 50% and, by 2020/21, all finance costs will only get tax relief at the basic rate.

Heynes explains that someone with a £600,000 property paying an interest-only mortgage could find that, in the future, what is now a 4% annual return on investment would be replaced with a cost of £1,700 to run the property.

“Margins are getting tighter for landlords,” he says. “Add to this a possible increase in interest rates, and the issue is exacerbated.”

He expects many landlords to simply put rents up for their tenants in order to cover the shortfall.

“However, if a Labour government is elected, rent controls are almost certain to follow, so increasing rents might not be possible,” he explains. “Higher interest rates, coupled with rent controls, would not be a great environment for personal landlords and could instigate the great sell-off, as landlords look to reinvest elsewhere.”

Heynes adds: “This response could cause the next property crash, as the property market becomes over-supplied with assets to sell, pulling house prices down, impacting equity levels and mortgage agreements.”

Do you believe that Heynes’ predictions could become a reality?

Generation Rent being impacted on by higher prices and lower interest rates

Published On: September 20, 2017 at 8:56 am

Author: Em Morley

Categories: Property News

Tags: interest rates,landlords,property,rent

Tenants in London are facing a five-year delay in buying a property of their own should they leave savings in cash. This is a result of record-low interest rates, according to new research.

A surge in residential property prices over the last 20 years means that the amount required for a deposit has increased rapidly.

Deposit

With rent and other living costs on the rise, many are struggling to put money aside in order to save for a deposit. 41% are not expected to get onto the property ladder, according to the study from Bricklane.com.

Simon Headwood, Founder of Bricklane.com, noted: ‘Generation Rent is being doubly hit by rising house prices and low interest rates, meaning cash savings are not getting them any closer to the property ladder. With a big drop in home ownership among millennials and almost five million households in the UK calling their rented property home, now is the time for action.’

Generation Rent being impacted on by higher prices and lower interest rates

‘Young people work hard to put money aside for a deposit, but by saving into Cash ISAs they’re putting their chance of owning a home in even greater jeopardy. We need to get people participating in and benefitting from the residential property market so that everyone can make their savings work harder and get closer to owning a home,’ he added.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/9/generation-rent-hit-by-rising-house-prices-and-low-interest-rates

Bank of England Hints at Rate Rise in “Coming Months”

Published On: September 15, 2017 at 9:01 am

Author: Em Morley

Categories: Finance News

Tags: base rate,interest rates,mortgages

The Bank of England (BoE) has said that higher inflation and a pick-up in growth could lead to a rate rise in “the coming months”.

Members of the Bank’s nine-strong Monetary Policy Committee (MPC) voted seven to two to keep interest rates on hold at 0.25%.

Bank of England Hints at Rate Rise in “Coming Months”

But the MPC was talking in much stronger terms about a rate rise, analysts said.

The pound climbed more than 1% against the dollar to $1.3363 after the BoE’s announcement.

The Bank’s Governor, Mark Carney, comments: “The majority of members of the MPC, myself included, see that that balancing act is beginning to shift, and that in order to… return inflation to that 2% target in a sustainable manner, there may need to be some adjustment of interest rates in the coming months.

“Now, we’ll take that decision based on the data. But yes, that possibility has definitely increased.”

In minutes of its latest rate decision, the MPC said there was a “slightly stronger picture” for the economy since its forecasts last month, thanks to signs of a firmer housing market, stronger employment, and a rebound in retail and new car sales.

The nine policymakers on the panel believed “some withdrawal of monetary stimulus was likely to be appropriate over the coming months”.

The Director of mortgage broker Private Finance, Shaun Church, comments on the latest news: “Over 2.2 million first time buyers have bought a home with a mortgage and benefitted from low mortgage costs since interest rates fell to 0.5% in March 2009.

“Although the BoE hasn’t raised rates this time around, the message is clear that consumers should be aware this might happen sooner than expected. When rates do eventually rise, it will be the first time over two million people have experienced this as a mortgage holder, and more rises are likely follow.”

He continues: “However, while today’s rock bottom mortgage rates can’t last forever, further base rate rises are likely to be gradual and mortgage rates won’t necessarily rise at the same rate. Healthy competition between lenders should ensure that mortgage pricing remains low for some time yet. Homeowners therefore have plenty of time prepare for a slight increase in pricing in the coming years.”

Ishaan Malhi, the CEO and Founder of online mortgage broker Trussle, adds: “With the BoE once again choosing to hold interest rates at 0.25%, anyone with a mortgage should be thinking about how they can take advantage of the situation. Borrowers should check what level of interest they’re paying on their mortgage and whether they could save money by switching to one of the more competitive deals on the market. Switching mortgage can now be done on a mobile in a matter of minutes, whether that’s on the bus to work, or waiting for the kettle to boil, and could shave hundreds of pounds off the average household’s monthly outgoings.

“Rock bottom interest rates offer the perfect opportunity for homeowners to overpay on their mortgage, increasing equity in their home and bringing down their debt. It’s easier than ever to stay on top of your mortgage, and the rewards for proactively managing it can far outweigh savings made by switching energy or internet provider. At a time when prices are rising and wages are struggling to keep pace, now’s the time to dust off that old mortgage statement and see what else is out there.”

We will keep you updated of any changes to interest rates at Landlord News.