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Buy to let mortgage arrears in UK set to keep falling
Buy to let mortgage arrears in the UK are set to fall below 7,000 by the end of the year as landlords are confident and lenders have no reason to feel differently due to Brexit. The forecast from complex buy to let, commercial mortgage and short term finance lender Keystone, based on official data from the Council of Mortgage Lenders (CML), points out there has been no let-up in demand. Latest official estimates show 9,300 cases of buy to let mortgage arrears as of the first quarter of 2016, down from 10,300 the previous quarter and 11,300 in the first quarter of 2015. Keystone’s projections estimate that as of the second quarter of 2016 some 8,500 buy to let mortgages stand more than three months in arrears across the UK. This is expected to drop to 6,600 by the fourth quarter of 2016. ‘The referendum result was unexpected, the precise impact is unknown, and it is still rather early to tell what will happen. But we have seen no let-up in demand for buy to let mortgages and we don’t expect to see any change in the downward trend in buy to let arrears as a result. Landlords are confident and lenders have no reason to feel any differently,’ said David Whittaker, managing director of Keystone Property Finance. He pointed out that there are many landlords out there who still need finance, particularly professionals who are in the process of remortgaging to secure a solid five year fixed rate or selling their personally owned portfolios to their limited companies. ‘We have ensured Keystone has the funding lines in place to provide landlords with the solutions they need and in the four weeks since the vote we have forged ahead with our lending. We are increasing traction with brokers and investors. Optimism is the keyword here,’ he explained. In response to CP11/16, the consultation paper from the Prudential Regulation Authority (PRA) which proposed stricter underwriting standards for buy to let, Keystone has introduced separate stress tests for individual and limited company borrowers applying for products in the Classic Range. For individuals the new formula of 145% at pay rate or notional rate of 5.25%, whichever is higher, will be applied to term trackers and three year fixed rates. For borrowers choosing a five year fixed rate, the pay rate will be used. Stress tests for limited companies are to remain at 125% of pay rate or notional rate of 5.25%, whichever is higher, for term trackers and three year fixed rates. For limited company borrowers choosing five year fixed rates, the pay rate will be used. ‘We’ve also improved our criteria for landlords looking to finance larger multi-units. We’re accepting six flats in a block as standard and we’ll consider up to eight on a case by case basis. Keystone is tackling market changes head on,’ Whittaker added. Continue reading
UK rental market sees no Brexit effect so far
The decision by the UK to leave the European Union has not yet affected the country’s private rental market with rents, supply and demand not changing significantly after the vote in June. The latest monthly report from the Association of Residential Letting Agents (ARLA) says that the rental market is stable, with little to no movement in terms of rental costs. While some 12% ARLA agents reported an immediate dip in rent, an overwhelming 77% saw no change. This contradicts expectations, as prior to the result some 19% predicted rents would increase and 20% expected them to fall while 61% thought they would stay the same. Similarly, the supply of available properties and demand for housing remained the same immediately following the result. Some 67% of ARLA members reported no change in supply and a further 64% reported no change in the number of prospective tenants looking for properties. However, since the result 45% of letting agents have witnessed uncertainty from landlords looking to let properties, which could cause waves in the rental market over the coming months. ‘The rental market has responded to Brexit in a calm fashion, with no immediate fallout amid extreme political and economic uncertainty. What we need is some certainty from the new Government that housing remains a priority with the rental market playing a central,’ said David Cox, ARLA managing director. ‘For example, we want to avoid a situation where institutional investors start pulling away from the market because ultimately this will impact tenants by squeezing supply further and pushing up rents,’ he explained. ‘Although we’ve seen some hesitation from landlords this is relatively mild and it’s important they do not act in haste. Any inevitable longer term changes will then be taken on board with greater ease,’ he added. The report also shows that month on month, demand for rental accommodation was up in June, as was the supply of properties managed on letting agents’ books. There were 37 prospective tenants on average registered per ARLA member branch in June, up 12% from 33 in May. The supply of rental properties rose by 3% in June, from 171 in May to 176 properties on agents’ books this month. ‘If one thing is clear following Brexit, it’s that supply and demand remains a real issue in the rental market. If supply continues to dwindle against growing demand, no matter what the eventual implications of Brexit are, renting will become more difficult and expensive for tenants,’ Cox concluded. Continue reading
Supermarkets can add an average of £22,000 onto the price of a home
Living close to a well-known supermarket chain can add an average of £22,000 to the value of a home, new research has found. The report also reveals that premium brands can add even more to nearby house prices, with properties close to a Waitrose store receiving an average boost of £38,666 or 10% than the wider town in which they are located, according to the research from Lloyds Bank. In addition to Waitrose, properties near a Sainsbury’s, Marks and Spencer, Tesco or Iceland also command the highest house price premiums of £27,939, £27,182, £22,072 and £20,034 respectively. The lowest house price premiums are in areas with an Asda, Lidl or Aldi stores with premiums of £5,026, £3,926 and £1,333 respectively. ‘Our findings back-up the so called Waitrose effect. There is definitely a correlation between the price of your home and whether it’s close to a major supermarket or not,’ said Mike Songer, Lloyds Bank mortgage director. ‘Our figures show that the amount added to the value of your home can be even greater if located next to a brand which is perceived as upmarket. Of course, there are many other drivers of house prices beyond having a supermarket on your doorstep, but our research suggests that it is a strong factor,’ he added. A breakdown of the figures shows that homes in the same postal district as Waitrose command the highest price premium compared to other areas in the same town in seven out of ten regions of England and Wales. The largest premium is in the North West where the average house price in an area with a Waitrose is £73,629, some 39% higher than in the surrounding areas. Other regions with a high premium are the West Midlands at £57,539, Yorkshire and the Humber at £36,376 and the South East at £31,681. At a local level, Chiswick in West London commands the largest average house price premium when compared with the surrounding area, at £476,738. The average house price in Chiswick, which offers residents a Waitrose, Sainsbury's and Marks and Spencer, is £961,564, almost double the average for Hounslow at £484,826. Golder’s Green, which has a Sainsbury's and Marks and Spencer, has the next largest premium in cash terms at £423,180, followed by Belsize Park and Hampstead at £313,166. Outside of southern England, the largest average price premium is in the Cheshire town of Wilmslow, where shoppers are catered for by supermarkets including Waitrose, Sainsbury's, Marks and Spencer, Tesco and Lidl. Buyers can, on average, expect to pay a price premium of £277,028 for a home in Wilmslow. In the Ponteland area of Newcastle, the average premium is £206,401 with a Waitrose, Sainsbury's and a Co-op store. The also data shows that this ‘supermarket bounce’ is not necessarily just confined to those areas which have a Waitrose, Sainsbury's or Marks and Spencer's located in them. There are several locations with a discount supermarket store where average house prices trade at a premium…. Continue reading
