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Call for more to be done for older home owners in the UK
The Council of Mortgage Lenders, to which most mortgage lenders in the UK belong, has outlined a range of calls to action for regulators, government and the industry itself to improve the market for older people who legitimately wish to borrow in retirement. In a new report, the CML demonstrates that the issues around lending to older borrowers are complex and interconnected. The overarching message is that improving this market in a meaningful way requires significant collaboration both inside and outside the mortgage industry. However, it is clear that the will to improve this market exists and the CML says that one of the most significant achievements of the work to date goes beyond the production of this report itself, and lies in the fact that so many different participants have come together with a common will to address the issues. Those involved range from mainstream lenders and lifetime mortgage providers, from across the spectrum of CML membership, to pension providers, financial advisers, compliance experts, groups representing older customers, retirement housing providers, think tanks, other trade bodies, and regulators. The report follows the publication last month of externally commissioned research on the demand for retirement borrowing and identifies a range of next steps and calls to action. These include continuing to work with the intermediary sector towards a more seamless advice framework. In particular, there needs to be work to identify how to improve ‘hand-off’ arrangements between different advisers when this would best serve the customer's individual needs. There ought to be monitoring of emerging evidence about how pension freedoms are interacting with the mortgage market, including whether access to pension pots is feeding through to some customers repaying their interest only mortgages, for example. This knowledge can be used to inform future action, the report says. It will also involve exploring the potential for a market in the 50 to 75 age group for a product that can flex between capital repayment and interest only rollup over time, and also the potential for further product innovation for the 65 to 74 age group. The CML is calling on the Financial Conduct Authority to consider addressing how regulation could encourage a more holistic approach to mortgage, lifetime and investment advice in the round, which is what many older borrowers really need. Also to look at how different reasons for borrowing should be reflected in sales channels, for example health may sometimes be even more important than age in determining the quality and suitability of products and the sales advice that accompanies them. The report says there needs to be a standard definition of retirement and some of the Mortgage Conduct of Business rules would need to be changed to allow, for example, for a lifetime mortgage to be an acceptable repayment strategy for interest only mortgages. On top of this the CML is asking the Treasury to consider introducing tax relief on professional advice received at retirement, to encourage take-up, and ensuring that the… Continue reading
Pending homes sales in the US up marginally after two months of declines
Pending home sales were mostly unchanged in the United States in October, but shifted marginally higher after two straight months of declines, according to the latest index data. The figures from the National Association of Realtors (NAR), show that gains in the Northeast and West were offset by declines in the Midwest and South. The Pending Home Sales Index, a forward looking indicator based on contract signings, inched 0.2% to 107.7 in October from an upwardly revised 107.5 in September and is now 3.9% above October 2014. The index has increased year on year for 14 months in a row. Lawrence Yun, NAR chief economist, explained that pending sales have plateaued as buyers struggle to overcome a scant number of available homes for sale and prices that are rising too fast in some markets. ‘Contract signings in October made the most strides in the Northeast, which hasn't seen much of the drastic price appreciation and supply constraints that are occurring in other parts of the country. In the most competitive metro areas, particularly those in the South and West, affordability concerns remain heightened as low inventory continues to drive up prices,’ he said. According to Yun, although contract activity has slightly trended downward since the spring, the ongoing strengthening of several local job markets continues to fuel the improved demand for buying that has now pushed existing sales above a five million sales pace for eight consecutive months. ‘Areas that are heavily reliant on oil related jobs are the exception and have already started to see some softness in sales because of declining energy prices,’ Yun added. With demand expected to remain stable through the final two months of the year, Yun forecasts existing home sales are set to finish 2015 at a pace of 5.30 million, the highest since 2006. He pointed out that although further expansion in existing sales is expected next year, ongoing inventory shortages and affordability pressures from rising prices and mortgage rates will likely temper sales growth to around 3% in 2016. Home prices are expected to slightly moderate from a 6% increase in 2015 to 5% next year. ‘Unless sizeable supply gains occur for new and existing homes, prices and rents will continue to exceed wages into next year and hamstring a large pool of potential buyers trying to buy a home,’ said Yun. A breakdown of the figures show that the index in the Northeast rose 4.5% in October, and is now 6.8% above a year ago. In the Midwest the index fell by 1% but remains 3.3% above October 2014. Pending home sales in the South decreased 1.7% in October and are now 0.3% below last October. The index in the West climbed 1.7% in October and is 10.4% above a year ago. Continue reading
Property price growth in Australian capital cities continues to fall
Home price growth in Australian capital cities fell in November with the slowdown recorded the previous month in Sydney and Melbourne in particular continuing, according to the latest CoreLogic RP Data index. Over the month, Melbourne values fell by 3.5% while Sydney values were down 1.4%. Hobart dwelling values dropped by 2.4%, Darwin values were down 1.3% and down 0.5% in Canberra. Values rose in the remaining three capital cities, with Adelaide showing the highest month on month growth rate at 0.7%, followed by Brisbane with growth of 0.6% and Perth up 0.3%. Overall the combined capitals housing index has seen dwelling values drop by 1.5% over November, taking the rolling quarterly rate of change to -0.5%. Head of research Tim Lawless pointed out that the latest results are now placing downwards pressure on the annual change in dwelling values. The annual rate of growth across the combined capitals index peaked at 11.5% back in April 2014, and has since reduced to 8.7%. Sydney maintained the highest annual growth rate at 12.8%, which is down from a peak rate of annual growth of 18.4% in July earlier this year, while Melbourne’s annual growth rate has reduced from a recent peak of 14.2% to 11.8% over the 12 months ending November this year. The only capital cities where values have declined over the past year are Darwin with a fall of 4.2% and Perth with a fall of 4.1%, where weaker economic conditions and a slowdown in population growth contributed to an early peak in housing market conditions in December last year. The equivalent peak in the cycle for Darwin was May 2014. Since that time, Perth values are down a cumulative 5.9% and Darwin values have fallen by a larger 6.8%. ‘The fact that mortgage rates have risen independently of the cash rate has, in all likelihood, become a contributor to the slowdown in housing market conditions, as well as tighter lending practices evidenced by a recent reduction in lender risk appetite for investment loans and high loan to valuation ratio mortgages. Tighter mortgage servicing criteria across the board and affordability constraints in the Sydney and Melbourne markets are also having an impact on market demand,’ said Lawless. As a consequence of the tighter lending environment for investors, as well as gross rental yields being at near record lows, participation in the housing market from investors has reduced from 54.1% of all new mortgages in May 2015 to 45.4% at the end of September, which is the lowest level since July 2013. The 1.5% decline in capital city dwelling values over the month, coupled with a 0.3% rise in weekly rents, has seen the average gross yield record a subtle improvement over the month. This follows a trend towards lower rental yields which commenced in May 2013, Lawless pointed out. Gross yields remain close to record lows for houses in Melbourne at an average of 3% while Sydney has overtaken Melbourne… Continue reading
