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New mortgage rules in UK next month, including new stress test
The UK mortgage industry will see the largest change to regulation in a decade next month and changes are already being introduced on applications. The changes will be formally implemented on 26 April when the Mortgage Market Review (MMR) rules come into play. They are being introduced to reinforce consumer protection, are overseen by the industry regulator, the Financial Conduct Authority (FCA). With a month to go, lenders, brokers and consumers will be noticing changes in mortgage applications, and the ongoing administration of mortgage accounts, as lenders begin to switch over to the new rules, according to the Council of Mortgage Lenders (CML). The rule changes are wide ranging and include the introduction of a clear distinction between mortgages sold on an ‘advised’ and on an ‘execution only’ basis, with most future sales and variations being advised, requiring staff to be trained and qualified to the required standard to give advice. Also, procedures for giving advice to borrowers will be more detailed. Firms will need to ask more questions to determine what mortgage product is suitable, taking into account individual needs and circumstances, so mortgage interviews could take longer and may even be split into two separate interviews. As well as buyers, remortgagors will also find that the process has changed. People wishing to make changes to their existing mortgages will also be affected, and may be required to go through an advised process and a new affordability assessment. The new rules reinforce measures to assess the future affordability of mortgages, as well as initial payments. Lenders will apply an interest rate stress test to ensure that the loan would still pass the affordability requirements even if the borrower's payments were higher. Lenders will also have to consider the impact of known future changes, such as retirement or redundancy, when assessing affordability. Lenders will have to make a more detailed assessment of the borrower's expenditure, including normal spending as well as credit card and other loan repayments. Borrowers may need to produce more evidence of their spending habits and other commitments than before. It will still be possible to take out an interest only mortgage, but this is likely to remain a niche product. Customers wishing to take out an interest only loan must demonstrate a credible repayment strategy to repay the loan at the end of term and any costs associated with that strategy must be taken into account in assessing affordability. To help consumers prepare for the changes, the CML has been working with the Money Advice Service which will publish online guides in April to explain how applying for a mortgage works under the new system. The CML said it will work with lenders to assess the impact of the new rules and minimise any disruption while they are put in place. Reassuringly, a recent FCA survey found all firms planning to conduct mortgage business, brokers as well as lenders, will be ready to implement the new… Continue reading
Strong real estate market in Miami with properties selling near asking price
The performance of the Miami real estate market remained strong in February, as prices continue to rise while properties are selling rapidly and near asking price, according to the latest report from the Miami Association of Realtors. Miami is one of the most popular parts of the United States for foreign property buyers and attracts enquiries particularly from Europeans and South Americans seeking to buy property for investment in Florida. The data shows that median sale prices again increased significantly for both single family homes and condominiums in February. The median sales price for single family homes jumped 17% to $227,000, marking 27 straight months of growth. The average sale price for single family homes increased 6.7% to $415,312 last month. ‘Despite the recent increase in inventory, sales activity remains at historically strong levels, resulting in rising prices,’ said Liza Mendez, chairman of the board of the Miami Association of Realtors. 'While additional inventory is creating a more balanced market, the fact that homes continue to sell fast and almost at asking price is still indicative of a seller’s market,’ she added. The median sales price for condominiums has increased for 32 consecutive months, up 7.3% to $177,000 compared to February 2013. The average sale price for condominiums increased 10.8% to $337,382 from a year ago. The report points out that Miami real estate continues to sell at a rapid pace and nearly at asking price, indicating properties are being priced right and buyers realize they need to be competitive in the current market. The median number of days on the market for single family homes sold in February was just 47 days, a decrease of 2.1% from February 2013. The average percent of original list price received was 95.2%, up 1.4% from February 2013. The median number of days on the market for condominiums sold in February was 57 days, an increase of 18.8% compared to the same period in 2013. The average sales price was 95% of the asking price, a negligible decrease of 0.8%. In February, residential real estate sales in Miami-Dade County decreased a negligible 1.9% compared to 2,075 in February of last year. Single family home sales increased 1.3% relative to February 2013. Compared to February 2013, condominium sales declined 4.1%. ‘The Miami real estate market also offers great opportunities for buyers. Prices are still low, comparable to what they were more than 10 years ago,’ said Francisco Angulo, residential president of the association. ‘And, interest rates are still at historical lows, making buying a home more affordable. Consumers considering buying a home should take advantage of all of the current favourable market conditions,’ Angulo added. The data also shows that active listings at the end of February increased 26.8% compared with a year ago. Inventory of single family homes increased 18.3% and condominium inventory increased 32.2%. At the current sales pace, there is a 5.6 month supply of single family homes, an increase of 6% from 5.3 months in February 2013, and a 7.5 month supply… Continue reading
England now needs 260,000 new homes a year!
In the 10 years since a major housing review report warned that at least 210,000 new homes a year needed to be built in England, an average of just 115,000 have actually been built. According to the author of the original report, Kate Barker, it means that the country is now one million homes short of what was needed to adequately house its population and prevent a worsening affordability crisis. Her latest report for the Home Builders Federation says that to put this into perspective, this shortfall is now equivalent to the number of homes in Birmingham and the surrounding areas. And reducing the long term trend and gradually pricing households back into the market will now require 260,000 private housing starts per year, some three times the number completed last year and a figure achieved in only four years since World War II. Even achieving the least ambitious of Barker’s three objectives, to slow down the rate at which households are priced out of the market, would require more than 200,000 private starts per year, a figure last achieved in 1973. ‘The Barker Review was a seminal report for housing and starkly illustrated the scale of the emerging crisis. Since then successive governments have failed to pay heed and develop policies to deliver the homes the country needs,’ said Stewart Beaseley, executive chairman of the HBF. ‘Whilst the Help to Buy Equity Loan scheme is finally starting to drive demand and significantly increase supply, we start from a very low base and the shortfall is huge,’ he told the organisation’s Policy Conference. ‘As we approach a general election, we now need to see all parties committing to policies that lead to a sustained increase in house building. We have to build our way out of the crisis. Building the homes the country needs will provide the decent homes people deserve and create hundreds of thousands of jobs,’ he added. Barker told the conference that the continued shortfall in housing supply matters most to those who lose out in the battle for dwelling space. She explained that even 10 Milton Keynes would only deliver 30,000 home a year, nowewhere near what is needed. ‘At the moment the cost is falling heavily on many families in the private rented sector. It is vital to raise the rate of new supply but also to develop coherent policies to address the consequences of the supply shortfall,’ she added. Continue reading
