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Call for relaxation of mortgage affordability rules in UK
A relaxation of mortgage affordability rules in the UK could help more lifetime mortgage customers take up the option to make interest repayments initially before switching to a roll-up arrangement, it is claimed. Such a move for residential rather than lifetime lending could benefit consumers and encourage innovation, according to the Equity Release Council which has asked the Financial Conduct Authority to look into it. Amendments to the Mortgage Conduct of Business (MCOB) rules following the Mortgage Market Review (MMR) mean that lifetime mortgage contracts which permit, but do not require, consumers to pay interest for a period are subject to the requirement of providers to assess their affordability. This is despite the fact that payments of interest are always optional and that customers will never be at risk of losing their home as a result of being unable to continue with interest payments. As a result, says the ERC, some customers who would have taken out a lifetime mortgage giving them the option to repay interest for as long as they wished might not now pass affordability assessments, may be reluctant to subject themselves to the assessment process or be recommended alternative products. The Council has asked the FCA to consider whether a relaxation of rules originally designed for residential rather than lifetime mortgages would help more consumers unlock their housing wealth while protecting a larger amount of equity in their property. A relaxation might also support existing providers' ability to expand their product range and encourage new entrants. The request from the Council formed part of its evidence submission to the FCA's Call for Inputs on competition in the mortgage market. The FCA is set to outline next steps in the form of a summary statement in the first quarter of 2016. The Council's submission included a separate request for the FCA and Government to consider the long-term impacts of decisions relating to tax and regulation which may affect equity release lending. It also recommended that the FCA engages with the Prudential Regulatory Authority (PRA) to consider how equity release is currently funded, the extent to which current prudential requirements create barriers for firms and whether a broader approach could be taken which would enable alternative sources of funding to be accessed. ‘We welcome the proactive decision by the FCA to review whether there are any barriers to competition in the mortgage sector. Retirement lending is a crucial part of this and there needs to be careful consideration of the factors which differentiate residential and lifetime borrowing,’ said Nigel Waterson, chairman of the Equity Release Council. ‘As part of our wide-ranging input we highlighted that revisiting affordability rules may help more consumers to make use of options already offered by equity release providers in later life, as well as encouraging more new entrants to the market,’ he explained. ‘There is a growing recognition that equity release has an important part to play in the planning of funding for later life, and we look forward… Continue reading
Aberdeen property market showing signs of moving again
The property market in and around Aberdeen, which has been hit by the fall in oil price, is showing encouraging signs of activity according to latest figures from an independent property consultancy. The report from CKD Galbraith reveals that its regional office in Cults has been successful in bringing more properties to the market in Aberdeenshire as well as reducing the average time taken to sell a property by almost three weeks. CKD Galbraith’s Aberdeen statistics from the final quarter of 2015 show that the supply of properties coming onto the market increased by 50% quarter on quarter. They also shows that the average time taken to sell a property was down by 32.75%, almost three weeks, compared to the previous quarter of 2015. ‘The Aberdeenshire property market has continued to show positive results throughout the final quarter of 2015 despite the downturn in the oil and gas industry in Aberdeen. We have been greatly encouraged by the increase in the number of properties coming onto the market and there has been a healthy appetite from buyers viewing properties,’ said Hannah Christiansen, head of residential at CKD Galbraith’s Aberdeen office. ‘Good properties at the lower end of the market continue to sell well, with good viewing levels and strong offers whilst the higher end of the market does continue to move, albeit its taking slightly longer. People are still moving home in Aberdeen and excellent property, in both city and rural locations, continue to be in demand,’ she explained. ‘The industry wide figures for sales in Aberdeen over the previous quarter have been down across the industry, as reported by the latest Registers of Scotland figures. However, we have witnessed a strong start to the year and as we enter the prime Spring selling period we are confident the market will see healthy activity with a flurry of properties for sale prior to the introduction of the 3% levy on second homes coming into place in April,’ she added. The latest Registers of Scotland index report covering the final quarter of 2015 showed that the total volume of residential property sales in Scotland increased by 14.5% compared with the same period in the previous year. The average property price in the quarter was £167,734 an increase of 1.6% compared to the previous year. Continue reading
Concerns voiced about lack of flood awareness among UK home owners
With the UK in the middle of yet another storm with high winds there are calls for a new approach to home building on flood plains and an increase in awareness for home owners. Land agent Aston Mead believes that the country needs to get rid of the notion that sand bags can prevent homes from being flooded and instead adopt a radically different approach. The call comes as new survey reveals that one in three home owners are unaware whether their home is on a flood plain or not. Almost 10,000 homes a year are built on floodplains, with an average of one new home in every 14 constructed on land that has a significant chance of flooding, either from a river or the sea. Aston Mead director Richard Watkins said that flood prevention should be at the core of construction on floodplains. ‘We can’t go on treating flooding as an afterthought. Instead, we should be building properties which are specifically designed to rise and fall with the flood water. The technology is already available out there, all we have to do is make best use of it,’ he explained. He points to designs for homes which are built on top of a pre-cast pontoon sitting inside an excavated concrete void. As flood water enters the void, the pontoon rises, guided by vertical rails which can be hidden within walls and chimney breasts. As the floodwater recedes, the house returns to its original position, with a pump removing any excess water. Access is available at all times using an articulated pathway, and services remain connected using a system of flexible knuckle joints. ‘This system is completely scalable, and designs of properties can range from the very traditional to the highly contemporary, with the footprint of the floating pontoon extending beyond the building itself to include garages, terraces and gardens,’ Watkins pointed out. ‘The pontoons can also be used as fully habitable basements and there are few limitations to size, design or even the number of storeys that can be added on top. An additional advantage is that as water fills the void, it reduces the amount of flood water passing onto neighbouring properties,’ he said. ‘These buildings can be mortgaged on standard terms by most lenders and they also qualify for standard household insurance despite being on the floodplain. What’s more, if they are also fitted with grey water recycling and photo-voltaic panels, they can remain fully functional safe havens even in the worst flooding conditions,’ he added. Recent Met Office figures revealed that December 2015 was the wettest month ever recorded in the UK, with almost twice the amount of average rainfall and more storms hit the country in January and already in February. ‘Resorting to a supply of sandbags in the garage just in case is no longer good enough. We can’t continue fighting… Continue reading
