Tag Archives: investment
UK mortgage industry welcomes removal of affordability clause from hybrid lifetime loans
The UK home mortgage industry has welcomed a decision by the Financial Conduct Authority (FCA) to remove the need for an affordability assessment on home owners taking out hybrid lifetime mortgage products. The FCA said it has made the modification because it does not consider that an affordability assessment is required where there is no risk of arrears and repossession in the event of missed payments. ‘The modification works by dis-applying the requirement to carry out an affordability assessment where interest payments are anticipated or required, providing that the specific lifetime mortgage allows the consumer to exercise at any time an option to convert the product to interest roll-up,’ the FCA said. Lifetime mortgage contracts that give consumers the option to pay interest for a period became subject to affordability rules based on the requirements of providers following the Mortgage Market Review in 2014. But the Equity Release Council has been campaigning for the FCA to review its affordability assessment of these products and said it is pleased the argument has been taken on board. ‘This has the potential to help more consumers make use of options already offered by equity release providers in later life and encourage further innovation within the market,’ said Nigel Waterson, chairman of the Equity Release Council. ‘The optional payment of interest within a lifetime mortgage is different to that of a residential mortgage with the opportunity for consumers to switch to roll-up when they wish,’ he explained. ‘This change highlights the growing recognition that equity release has an important part to play in the planning of funding for later life and we look forward to continuing to work with the FCA in the future,’ he added. The Council of Mortgage Lenders also welcomed the decision. ‘This may look like a small change, but it is a really significant one that should allow the lifetime mortgage market to develop in a far more sensible and consumer friendly way. It removes one barrier to the provision of sensible, safe and worthwhile lifetime mortgage products,’ said Paul Smee, CML director general. Alice Watson, product and communications manager at Retirement Advantage Equity Release, said she believed that the affordability assessments were an unintended consequence of the Mortgage Market Review (MMR) and added an extra and unnecessary step to the application process. ‘The FCA’s decision is yet further recognition that the equity release market continues to grow and is a serious option for increasing numbers of over 55s across the country. The good news is that ultimately it is consumers who will benefit from this change, which will make access to lifetime mortgages more straightforward for more people and should allow providers to develop even more innovative solutions,’ she pointed out. Continue reading
One in five home sales in UK fall through, latest data shows
The number of house sales failing to successfully complete in the UK fell in the first quarter of 2016, with just one in five house sales falling through, according to new research. Figures from independent home buyer Quick Move Now indicate a house sale fall through rate of 20% in the first quarter of the year, a drop of just under 8% from the final quarter of 2015. The annual year to date fall through, which the firm says gives a greater overview of how the property market is performing generally, was fairly constant throughout 2015 and into the start of 2016 at around 29% and finished the first quarter of 2016 at 29.07%. ‘The start of 2016 has been an interesting time for the UK property market. Strong demand and low supply in many areas has led to a strong financial performance and whilst it is encouraging to see that the number of sales falling through before completion fell in the first three months of 2016, many property owners and would be buyers would still be shocked to learn that one in five sales doesn't go through,’ said Danny Luke, business manager at Quick Move Now. The two biggest reasons why house sales didn't complete in the first quarter of 2016 were the vendor pulling out of the sale for a higher offer and either vendor or buyer pulling out because they felt the sale wasn't progressing quickly, both at 25%. The firm said that many areas experiencing very strong demand and low supply, so vendors are keen to achieve the best possible price for their property so are willing to pull out of an agreed sale if made a better offer. Other reasons included the buyer changing their mind, 18.75% of cases while a buyer being refused lending by a mortgage provider accounted for 12.5%, the chain collapsing, survey issues and a buyer wanting to renegotiate after the initial offer had been accepted all accounting to 6.25%. ‘A lack of properties coming to market has led to prospective buyers having to move very quickly in order to secure a property, and may mean they put an offer in on a less than ideal property due to fear that they'll be unable to find anything else, which accounts for buyers changing their minds and trying to renegotiate after the initial offer has been accepted,’ explained Luke. ‘Some inevitably get cold feet about such a large investment, or find that a survey confirms their fears, and pull out before the sale completes,’ he added. Continue reading
Big rise in new rental properties advertised in run up to additional homes tax hike
The rush to beat the April additional homes stamp duty deadline in the UK saw a big rise in new rental properties being listed in the week of the tax hike, research has found. Some 20.6% more properties were being advertised compared to the previous week in more than 90 towns and cities across the country, according to a study from property crowdfunding platform Property Partner. The research looked at the number of new rental properties being advertised between 28 March and 03 April and compared it to the period of 21 March to 27 March. In 85% of the locations there was an increase in the number of new rental listings over the past week compared to the previous week and in many areas, there was a significant increase in new rental properties advertised. Telford in the West Midlands, for example, saw rental listings up almost 160% in the week of the stamp duty deadline, compared to the previous week, and in Stevenage new adverts almost doubled. While five out of the top 10 areas in terms of a rise in rental properties being advertised, were in the North of England. Of the major cities, London saw new rental property listings up 19.4% between 28 March and 03 April, compared to the previous week. While, in Manchester and Birmingham, new rental ads were up 28.7% and 49.9% respectively The following table shows the UK towns and cities that saw the biggest increase in new rental property listings between 28th March and 3rd April, compared to the previous week, 21st March to 27th March. ‘Inevitably there was a final rush by investors to complete on property purchases ahead of the 01 April stamp duty surcharge deadline. More rental properties on the market is good news for tenants, but sadly this looks like a temporary blip,’ said Dan Gandesha, the firm’s chief executive officer. ‘The savings landlords have made may turn into losses further down the line. Future cuts to mortgage interest tax relief and likely interest rate rises, could wipe out profits and force many landlords to sell up,’ he explained. He believes that in the longer term it is likely that the supply of rented properties will fall and rents increase and the most important issue is to build more homes for tenants as well as buyers. ‘The Government has changed the whole structure of the UK buy to let market and made it less attractive and viable for amateur landlords. Once the dust has settled on the stamp duty hike, anyone looking to invest in residential property would be wise to consider alternatives to traditional buy to let, which do away with the hassle, expense and tax implications,’ added Gandesha. Continue reading
