Tag Archives: guides
UK house price growth reaches 11 month high, says RICS survey
House price growth in the UK increased again in June, reaching an 11 month high, according to the latest market report from the Royal Institution of Chartered Surveyors (RICS). It comes at a time when market supply is falling with the survey showing average stock of houses per surveyor has fallen to its lowest since RICS began collecting the data in 1978. The survey also reports that buyer demand has increased in all parts of the UK expect the South East despite a more cautious attitude from lenders. It is the second month in a row that demand has risen. RICS says that one reason for the slight recovery in buyer enquiries is likely to have been a further drop in mortgage rates which is accompanying the ongoing strength of the labour market. The data also shows that 41% more surveyors expect house prices to rise over the next three months, which is the highest proportion since April 2014 and 36% more surveyors expect sales to increase despite the broadly flat trend in newly agreed sales. Across the rental sector, the demand and supply imbalance is also visible and instructions, which have been broadly unchanged for the past couple of years and show no signs of a material increase, are at growing odds with the rising demand that is putting further upward pressure on rents. ‘Although much of the discussion about supply shortages has focused on the owner occupier market, the survey demonstrates in no uncertain terms that the issue, at least at a headline level, is just as visible in the rental sector. This is most clearly reflected in both the house price and rental projections over the medium term which comfortably exceeds the likely growth in wages,’ said Simon Rubinsohn, RICS chief economist. ‘There had been some hope that the removal of political uncertainty following the general election would encourage more properties onto the market but the initial indications are that this is not proving to be the case,’ he explained. ‘Additionally, the recent flat pattern of appraisals by respondents to the survey suggests this is not about to change anytime soon As a result, it is hardly surprising that prices across much of the country are continuing to be squeezed higher with property set to become ever more unaffordable,’ he added. According to Jeremy Blackburn, RICS head of policy, pointed out that the government has its sights set on a long term project to drive owner occupation and property owning but the monthly survey shows that it is not just in this area where there is a marked shortfall in supply. ‘Just as significant is the pressure that is clearly building across the rental sector, through which a large part of our population is housed. It is particularly important for the younger more mobile workforce that it is central to improving our economic productivity,’ he said. He also pointed out that the housing benefit cuts announced the Budget will push many… Continue reading
UK financial watchdog says mortgage advice can be improved
Most people in the UK get suitable advice when they take out a mortgage but there is still room for an improvement in standards, according to a review by the UK’s financial watchdog. Two studies from the Financial Conduct Authority (FCA) found that many lenders have taken significant steps to provide advice for the first time. These firms, and those that have always provided advice, should now focus on delivering consistently good outcomes for customers. They also found that while there was no evidence of systemic customer detriment, some firms were failing to take reasonable steps to obtain sufficient, relevant information about customers’ needs and circumstances before making recommendations. Although 59% of advice provided to customers was assessed as suitable, with only a small number of cases assessed as demonstrably unsuitable, the basis for 38% of recommendations was unclear. The consumer research highlighted that some customers place the greatest importance on the initial monthly payment to the detriment of other factors. This can dictate whether they think a mortgage is a ‘good deal’ or not. ‘A mortgage is a significant undertaking for anyone. It is vital that customers are able to get suitable advice and a positive experience when deciding on their options. Some firms were able to provide this, but not all,’ said Linda Woodall, acting director of supervision at the FCA. ‘Although we welcome the considerable work of those firms delivering advice for the first time, and particularly those that have proactively identified issues within their own processes, there is still scope for improvement. We’ll continue working with firms to ensure they deliver good outcomes for consumers,’ she added. Following the review, the FCA said it will continue to work with industry to address the issues identified. Individual feedback to firms visited as part of the study has already been given, together with actions required as a result of the findings. Some firms assessed had already independently identified issues with their advice processes, and were making changes to improve their service to consumers. The review also found that many lenders had made significant efforts to deliver advice for the first time by investing in systems, front line staff and operational capability. Some firms were relying on highly structured processes. This often resulted in lengthy, stilted and repetitive conversations with consumers which limited the adviser’s ability to engage effectively and properly assess needs and circumstances. By contrast, other firms delivered advice with little or no structure, resulting in inconsistent quality of advice and a higher chance of unsuitable recommendations. The best performing firms have demonstrated that it is possible to strike an appropriate balance. The review of advice and distribution forms part of the FCA’s wider programme of mortgages work. Its thematic review into responsible lending commenced in April 2015 and from autumn this year, the FCA will begin a wider assessment of barriers to competition, with a view to launching a market study in early 2016 on those aspects of the… Continue reading
UK landlords seeing average yields falling, latest quarterly figures show
Average yields on residential rental properties in the UK have cooled across the board with landlords owning semi-commercial property sector the biggest losers, according to the latest buy to let index. Yields on semi commercial properties have fallen from 7.5% in the first quarter of 2015 to 5.9% in the second quarter, their lowest level in four quarters and a drop of 1.6%, the data from Mortgages for Business shows. Similarly, returns on houses in multiple occupation (HMOs) have dropped 1.3% to 9.3% between the first and second quarters of 2015 while average yields for standard buy to let have experienced a less marked decline, dipping from 6.4% to 5.8%. Multi-unit freehold blocks (MUFB) saw the only quarterly improvement with average returns up 0.8% to 7.1%. However, the second quarter MUFB yield rate is still below the 8.6% and 9.3% returns recorded in the third and fourth quarters of 2014 respectively. The data also shows that average loan to value (LTV) ratio has begun to fall. Average LTV rates for standard buy to let and multi-unit freehold blocks remained unchanged at 66% and 67% respectively between the first and second quarter of 2015. The LTV ratio for HMOs fell 1% over the quarter to 69% but the largest drop was in semi-commercial property, down from 65% to 54% over the first two quarters of this year, a drop of 11% and the lowest LTV rate for four quarters. ‘LTV ratios and yield rates have slid. While rental yields are still robust they seem to have lost the momentum they were gathering between the end of last year and the start of this one. That said, multi-unit freehold blocks seem to have avoided the yield downturn, demonstrating once again that complex property types produce higher yields because they offer tenants more features and facilities,’ said David Whittaker managing director of Mortgages for Business. ‘While many landlords had hoped that the improving economic climate may have pushed loan to value ratios even higher, the figures appear to have stalled. Property values dipped in the second quarter, but so did average loan amounts, suggesting lenders are waiting for more signs of economic improvement before they lend any more relative to the value of a property,’ he explained. He also pointed out that the General Election campaign impacted on LTV ratios. ‘With the pundits repeatedly predicting chaotic political horse trading after 07 May, many lenders thought it best to not give too much too early. They feared a change in the policy status quo that would hit BTL landlords and, with it, their ability to make mortgage repayments,’ he added. The report also shows that the proportion of HMO loans for remortgaging reached 90% in the second quarter of 2015, a 17% on the previous quarter and the largest proportion of any rental property type in four quarters. Conversely, the proportion of SCP loans for remortgaging has fallen back from 87% to… Continue reading
