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Research suggest a million UK home owners heading for an interest only mortgage time bomb
Around a million home owners in the UK could end up seeing their home repossessed if they have no way of paying off their interest only mortgages, new research has found. It is estimated that some 934,000 people have interest only mortgages and do not have a plan on how to pay it off when their term ends, according to the research by consumer charity Citizens Advice. Time is running out for some people who will either have to sell their homes, find the capital to pay off the debt or could risk having the property repossessed, the Yougov poll found. Some of the people who came to the consumer champion said they were not made aware that they would need to repay the capital at the end of their term. The average shortfall was previously estimated to be £71,000. Overall there are around 3.3 million mortgage holders who have interest only products of which 1.7 million have no linked repayment vehicle, such as an endowment or ISA and 934,000 of these have no plan for repayment and 432,727 of these people have not even thought about how they will repay the capital. Rules were tightened in 2012 to ensure interest only mortgages were no longer available without a repayment plan, which has resulted in a major drop in the number of products sold. Citizens Advice supports this change, but says people who already hold these mortgages need more support. The charity is concerned that interest only mortgage holders do not have the same protections when their term ends than when mortgage holders fall into arrears. A protocol was launched three years ago which gives lenders a legal obligation to consider alternative options before starting possession action, including extending the length of a mortgage, changing the type of mortgage and giving people reasonable time to sell their property if necessary. But these protections do not apply to interest only mortgages at the end of the term which is at the very point when many customers discover they are in trouble. 'People buy a home for stability but interest only mortgages have forced many into a financial black hole. It is good rules around these mortgages have changed, but there are many people who previously took out these products and face losing their home,' said Gillian Guy, chief executive of Citizens Advice. 'Lenders have to exhaust all other options when borrowers get into arrears and it’s time to level the playing field so that interest only customers get the same protections when their mortgages mature. It is also important that people can get independent advice, guidance and support about how they can plan and manage their finances,' she added. The Financial Conduct Authority (FCA) has said that due to previous peaks in the sale of interest only mortgages, they expect there to be waves of potential repossessions from 2017 to 2018, from 2027 to 2028 and in 2032. In 2013 the FCA called on banks to contact all borrowers with interest only mortgages ending before 2020 about how they… Continue reading
Property registrars in Spain report annual price growth of 5.12%
Spanish house prices have increased at their fastest rate since the downturn, up 5.12% in the 12 months to the end of June, the latest index report shows. This is up from 2.65% in the previous quarter, according to the data from the Property Registrars which also shows that quarter on quarter price increased by 2.8%. The latest rise in price growth means that prices are down 29% nationally since the peak of the market, but there are considerable regional variations. The recovery in the Spanish property market is limited to the most popular areas where houses are in demand such as Madrid, the Balearics, the Canaries, Catalonia, and the Valencian Community and the report points out that this is reflected in prices. It points out that sellers and buyers are adjusting their expectations accordingly. In more and more areas buyers who have been adopting a wait and see attitude whilst prices fell are now entering the market. Registrars are not expecting prices to surge but the report does suggest the recovery is well underway, supported by factors such as low interest rates, improved housing affordability, better mortgage conditions, and a sustained foreign demand for property in Spain. They expect moderate price growth and the report points out that a sudden surge would be unhealthy for the market. 'Now more than ever rational decision making is needed to avoid the errors of the past, which came at such a high cost to the economy and society,' the report says. The regional aspects of the market can also be seen in the latest price data from real estate portal Hogaria which shows that overall prices on its lists increased by 0.15% in July compared to June but year on year prices were down 4%. But 29 provinces saw prices increase which suggests that the recovery is there and the market is more stable than it has been. The provinces where prices dropped most in July were Toledo with a fall of 1%, Guadalajara down 0.9%, Lugo down 0.8%, Ciudad Real down 0.7% and Almeri down 0.6%. Cuenca led the growth with a price rise of 1.2%, followed by Sta. Cruz de Tenerife at 1%, Valencia also at 1%, Madrid at 0.9% and Cádiz also at 0.9%. Continue reading
London property sales over £1 million down 26% in second quarter
London saw a 26% drop in the number of properties sold above the £1 million level year on year in the second quarter of 2015 with the economic slowdown in China regarded as having an impact, a new report says. The situation in China is having a knock on effect on global equities and other buyers are still holding back since the stamp duty increase towards the end of last year, according to Richard Barber, director at agents W.A. Ellis. 'This could be perceived as good news for buyers, signalling a return to normality in the market due to more realistic pricing strategies. Such strategies will play a significant role for vendors looking to secure a prospective buyer this autumn,' he said. 'Discerning purchasers continue to take stock of last year’s increases to stamp duty and the ongoing strength of Sterling. After one of the most tumultuous weeks on record for the world’s financial markets, there is naturally considerable speculation regarding the real estate manifestations of the economic slowdown in China and knock-on negative impact for global equities,' he explained. 'In short, this will depend on the depth and duration of the nervousness that investors are now displaying and whether this becomes a protracted slowdown in investment activity,' he added. He pointed out that UK real estate is one area that traditionally experiences countervailing investment activity, with perceived defensive characteristics against weaker investment alternatives. 'International investment in London commercial property is currently running at around 60% of all Grade A space and this flow will remain strong well into 2016. Residential investment is also likely to experience continued support from international investors, with bricks and mortar investment often being compared with gold for its defensive investment characteristics,' said Barber. He also explained that there are exceptions to this trend, notably from economies experiencing a more severe currency devaluation and Russia, China, and Malaysia are all likely to fall into this category and investment flows from these countries may moderate through the remainder of 2015. In contrast, weak equity and real estate investment alternatives from the largest traditional residential investors, Hong Kong and Singapore, could possibly drive improvements from these countries. The report says that new build residential in London continues to perform well, notably in areas such as Nine Elms and East London, including Canary Wharf, where public transport and infrastructure improvements are driving seismic changes to the underlying real estate value. However, Barber concludes that prime London pricing has been relatively weak for the past 12 months. 'It may well be time that investors begin to again see value in these traditionally favoured locations during times of perceived uncertainty,' he said. According to Tom Middleditch, director at JLL Kensington, the prime lettings market has undergone an important shift in the second quarter of 2015 as pre-election weakness affected both sales and lettings but this was reversed with the Conservative party win. 'Although transactions were not quite at the euphoric levels that some agents reported in the… Continue reading
