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Younger home owners looking towards equity release in UK
A surge in equity release activity in the UK in the second half of 2014 saw younger borrowers turning to lifetime mortgages in the wake of the Mortgage Market Review (MMR) and the 2014 Budget pension announcement. The Spring 2015 edition of the Equity Release Market Report from the Equity Release Council shows that as the market has grown, the proportion of new equity release customers aged 55 to 64 dropped from 24% in 2011 to 21% in 2013, pushing up the average customer's age towards 71. This trend continued in the second half of 2014 when just 17% of new customers fell into the 55 to 64 age bracket. However, following the March 2014 Budget and MMR implementation on 26 April, this age group made up 20% of new equity release customers during the second half of the year. Compared with the first half of 2014, the number of new equity release customers aged 55 to 64 was 32% higher in the second half of the year, which was also the busiest half year since 2008 for total new plans agreed. The average age of customers choosing drawdown products was unchanged at 71.6 from the first half of the year to the second half but the average age of those choosing lump sums fell from 68.8 in the first six months of 2014 to 67.6 in the second. The data suggests that changes in the residential mortgage and pensions markets are having an impact on the profile of equity release customers. Reports have surfaced that people are finding it increasingly difficult to access residential mortgage finance later in life under the MMR rules, particularly if the desired term may stretch beyond their normal retirement age. At the same time, many borrowers with interest mortgages are approaching their final repayment date. For those who have no or limited resources for a repayment vehicle, using equity release to pay off their existing mortgage is a common solution. Some younger borrowers may also have used equity release in the second half of last year to meet an immediate need for extra funds, rather than accessing their pension savings ahead of 6th April 2015 when the new pension flexibilities will take effect. ‘Equity release is helping people respond to a host of financial challenges at various points in later life, or simply enhance their standard of living so they can enjoy a more comfortable retirement. Part of the appeal lies in the option to cover off large one off expenses,’ said Nigel Waterson, chairman of the Equity Release Council. ‘Paying off the last of an existing mortgage is often one of the biggest financial deadlines people have to face beyond the age of 55. The flexibility of equity release enables them to wipe the slate clean while also using their housing wealth to meet a range of other needs,’ he explained. ‘The money they have put into property often proves a good investment over time. Releasing equity… Continue reading
Average house prices in Scotland reach new peak with 1% monthly rise
Average house prices in Scotland increased by 1% or £1,600 in January, surpassing the May 2008 peak, according to the latest index data. Year on year prices are up 4.5%, taking the average home price to £166,771, a new record, but sales were down 44% compared to December, double the typical seasonal downturn. It means that the average home in Scotland is now worth £1,238 more than at the peak of the housing boom in May 2008, following the most significant monthly upswing for seven months, says the report from Your Move. Dundee saw the biggest prices jump with property prices increasing 6.7% or £8,161, while Fife and West Lothian set new peak house prices with growth of 9.5% and 10.9% respectively. North Ayrshire has experienced the biggest rise in house prices on the mainland over the last year, up 11.6% with the typical price of a detached home growing from £180,000 to £210,000 in the past 12 months. However, average prices have fallen in seven local authorities of Scotland during the past year. West Dunbartonshire has seen the steepest drop in values in the last 12 months, with prices falling 7.2% on average, and flats in the area are now worth £20,000 less than a year ago. In addition, completed house sales in January 2015 were down 44% on December levels, double the usual seasonal downturn, and a 14% fall on a year ago, as home sales drop to the lowest level for 23 months. ‘This shouldn’t be viewed as a bad omen though, as the start of the year is always the slowest time for house purchases in Scotland, and it will only get busier, as the sustained flow of front-end demand flooding into the market starts to translate into end results,’ said Christine Campbell, regional managing director of Your Move. The Scottish housing market is benefitting from the economy moving in the right direction, and employment on the up, while mortgage rates are at rock bottom, according to Campbell. She pointed out that next month’s Land and Buildings Transaction Tax will offer some extra relief to those clambering onto the bottom rungs of the ladder, lowering the stamp duty paid on purchases even further. ‘Greater policy clarity that will emerge after the general election will unleash a new wave of confidence that will outweigh any hesitancy in the market at the moment,’ she added. Continue reading
Planning permission for new UK homes up 12% but only half what is needed
Planning permissions were granted in principle for close to 200,000 new homes a year in the UK in 2014, an increase of 12% compared to 2013 and up 39% on 2012, according to new data. However, local Authorities now need to ensure departments are able to process applications if more homes are to be built, says the latest report from the Home Builders Federation and Glenigan, adding that the pace is only half what is needed. The homes identified in the report will, once they have navigated the remainder of the planning process, in the main be completed over the next two to three years and the research also shows that the number of new homes started in 2014 was up 36% on 2012. It says that as demand for new homes continues to increase, due to improved consumer confidence and the Help to Buy equity loan scheme, existing sites are getting built on quicker and so builders are looking to get on to more new sites more quickly than before. But it points out that whilst the increases are positive, they can only be translated into desperately needed new homes if local authorities ensure their planning departments have the capacity to process these permissions to the stage that they can actually be built. Too many sites are ‘stuck’ in the planning system, with an estimated 150,000 plots at ‘outline permission’ stage awaiting full sign off by local authorities. New government initiatives to introduce deemed discharge of conditions will greatly assist in making sure the planning system will not be a constraint on increased housing provision but the overall resourcing of planning departments is still a concern, the report explains. It add that central and local government must prioritise proper resourcing of planning departments if authorities are to be able to efficiently process more applications, as recommended by the HBF. It believes that speeding up the rate at which permissions are granted is one of the keys to a significant, sustainable increase in housing supply. Local Authorities must be resourced sufficiently to be able to sustain this increase in the rate of planning permissions being granted in order that the industry can increase housing output. Figures in the latest report show that more permissions were granted in 2014 that in any year since 2008. It also shows that the number of sites getting permission continues to trend upwards. Getting more sites operational is absolutely key to a sustained increase in actual build numbers as more sites, means more construction work and sales outlets. ‘Over the past 18 months, demand for new homes, largely driven by the Help to Buy equity loan scheme has increased markedly. House builders have responded by significantly increasing house building activity,’ said Stewart Baseley, executive chairman of the HBF. ‘We are still only building around half the number of new homes the country needs. Getting the required number of permissions, in a timely manner, is absolutely key… Continue reading
