Tag Archives: housing
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
Calls for large scale build to rent projects to be exempt from new additional home tax
The property industry is urging the UK Government to protect large scale investment in residential property from a proposed higher rate of Stamp Duty for purchasing additional homes. The British Property Federation says in its response to the consultation on the new tax that is due to be introduced in April that unless they are protected the housing industry risks losing much needed investment in new housing. It warns that the higher rate of tax could cancel out the progress that the build to rent sector has made since 2011 with new data showing that there are now over 30,000 build to rent units with planning permission in the UK, a 47% increase since October, when the BPF calculated there to be 21,000 units with permission. The BPF has noted that since the turn of the year there have been significant build to rent investment announcements made by the sector, these include Grainger Plc pledging to invest £850 million in the private rented sector by 2020. Legal and General is working with Dutch pension fund PGGM to deliver a £600 million build to rent investment plan, Greystar Europe Holdings, one of the USA’s biggest housing investors, announcing the acquisition of a 26.5 acre site in Greenford, West London, on which it will develop the UK’s largest purpose built rented housing scheme and the Royal Bank of Scotland has pledged £1 billion in lending for the build to rent sector. The BPF is calling for the introduction of a simple portfolio test to exempt institutional investors with 15 or more units in their portfolio from the additional tax. ‘Since the start of the year, there has been investment in the build to rent sector on a scale that we have never seen before. Following the changes that were made to SDLT a few years ago, investment in the sector has really taken off, and it is great to see pension funds and other institutions now investing heavily in housing,’ said Melanie Leech, BPF chief executive. ‘There is cross-party support for new housing and a better quality rented sector, and we would expect Government to recognise the impact that the SDLT surcharge might have on investment in new homes, and the creation of a better quality rental product,’ she added. Without such an exemption there would be a significant negative impact on the sector, according to Andrew Stanford, UK residential fund manager at LaSalle Investment Management and chair of the BPF’s Build to Rent Committee. ‘LaSalle intends to provide good quality, built to rent homes across the country for customers on their journey to home ownership or for customers who want the flexibility and security of renting a home with a long term institutional landlord,’ he said. ‘We were encouraged by the proposed exemption for large scale investors from the additional 3% SDLT charges. If the exemption was not implemented it would have a significant negative impact on our ability to invest in… Continue reading
UK prime property prices up by an average of 0.3% in final quarter of 2015
Prime property prices in the UK increased by an average of 0.3% in the final quarter of 2015 despite a strengthening economy and low interest rates, according to the latest report. Beyond London prices of prime residential property saw muted price growth of 2.4% on average across 2015, but this was much lower than the 4.5% seen across the wider UK mainstream housing market. The situation reflects a general absence of urgency among buyers in the prime property market, says the report from international property services firm Savills. It explains that the resulting lack of upward pressure on prices was fairly uniform across the regions though markets in the London commuter zone performed marginally better, boosted in particular by the performance of prime property in high value towns and cities where annual growth averaged 5.4%. By contrast prime country property in London’s hinterland only saw annual growth of 1.9%. Across the country the performance of larger country houses has been most constrained with values of larger rectories and manor houses seeing little if any growth over 2015, reflecting a thinner stream of demand for the most expensive prime properties. The report also explains that higher value homes have been most affected by successive increases in stamp duty that culminated in the changes introduced in December 2014, which have also held back the prime property market in London. This has had a knock-on effect on demand flowing out of the capital, interrupting the ripple effect which we would otherwise expect at this point in the housing market cycle. The impact of taxation has also been noticeable in the prime housing markets in Scotland where the introduction of LBTT has meant that average price growth of just 0.4% in the past 12 months, though prime property in Edinburgh and Glasgow has performed more strongly. Across all areas smaller prime properties have performed best with those below £1 million showing annual price growth of 3.7%, much more in line with the wider housing market. Generally these markets have been the most buoyant, with greater levels of transactional activity. Looking ahead, in the short term Savills says that the demand for good quality family homes is likely to continue to underpin modest price growth across the prime regional markets, with appetite for larger higher value homes remaining more price sensitive. The firm is expecting price growth of 2.0% to 3% in 2016, which means sellers will need to remain realistic in their asking price, but which presents an opportunity for committed buyers. However, thereafter Savills expects the ripple effect to be restored as the market adjusts to higher transactional costs and buyers more actively seek to exploit the price differentials both between London and the commuter zone and the commuter zone and beyond, which have widened significantly over the past 10 years. The report also points out that Chancellor announced further changes to stamp duty in the 2015 Autumn Statement introducing a 3% surcharge on additional homes, the sales of… Continue reading
