Tag Archives: london
Latest index provides further evidence of UK house price growth slowing
UK house prices increased by 0.5% in October but annual residential property price growth slowed to 9%, according to the latest index from the Nationwide building society. It is the second month in a row when annual property price growth has fallen and Nationwide chief economist Robert Gardner said that a variety of indicators suggest that the market has lost momentum. ‘The number of mortgages approved for house purchase in September was almost 20% below the level prevailing at the start of the year. Some forward looking indicators, such as new buyer enquiries, suggest that activity may soften further in the near term, especially in London,’ he pointed out. ‘However, broader economic indicators remain positive. The labour market has continued to improve, with the unemployment rate falling to 6% in the three months to August and mortgage rates have fallen back towards all-time lows. Indicators of consumer confidence have also remained close to recent highs,’ he explained. ‘If the economy and the labour market remain in good shape, activity is likely to pick up in the quarters ahead providing mortgage rates do not rise sharply,’ he added. The Nationwide report also points out that an increasing number of borrowers have been opting for fixed rate mortgage deals in recent times. Data from the Council of Mortgage Lenders suggests that around 90% of new mortgages were contracted on fixed rates in recent months, up from 67% two years ago. ‘Fixed rate deals are most popular amongst first time buyers for whom certainty over monthly payments is likely to be particularly important. Some 95% of new mortgage lending to first time buyers is currently on fixed rates,’ said Gardner. ‘Borrowers taking out fixed rate mortgages have benefited from historically low interest rates. For example, the average two year fix for those with a 25% deposit is currently 2.46%. While this is a little higher than earlier this year, it is still more than one percentage point below the level prevailing in 2012. Moreover, for borrowers with a 10% deposit, the rates available for two year fixes are the lowest on record,’ he explained. ‘This has helped, in part, to offset the negative impact of rising house prices on affordability. Indeed, even though house prices are at an all-time high, the cost of servicing a typical mortgage is still close to the long term average as a share of take home pay,’ he added. However, despite the high proportion of new mortgage lending on fixed rates, the majority of the stock of outstanding mortgages, around 60%, is on variable interest rates. Gardner said this is a marked shift from the pre-crisis period where the proportion of mortgages on variable rates was 38%. Moreover, the majority of recent fixes are for relatively short time periods with 62% for two years and around 30% for five years. Gardner believes that the housing market should be able to cope with higher interest rates, provided the increase is gradual and the economy and the labour… Continue reading
Falling buy to let mortgage costs benefiting UK landlords
UK landlords are benefitting from tumbling mortgage charges and longer fixed rate deals with fees falling for all except the highest LTV loans, new research shows. Short term fixes are now less prevalent as longer initial terms form a growing proportion of mortgages and almost one in five of all available buy to let mortgage products (19%) are now five year fixed rate deals, says the latest index from Mortgages for Business. It says that overall competition is driving buy to let lenders to cut their charges and fees as well as to offer longer term fixed rates. On average the effect of fees and charges on buy to let mortgages was to raise the overall cost for comparison by just 0.54% per annum in the third quarter of the year. This is significantly lower than the average of 0.67% extra in fees and charges seen at the start of 2013, and down from 0.58% in the second quarter of 2014. However, beneath this overall trend there is also a growing divide between fees for buy to let borrowers at different loan to value ratios. For example, charges for low LTV up to 65% of property value and medium LTV from 65% to 75% buy to let mortgages have fallen dramatically. By contrast, charges for high LTV at 80% and above loans have increased. In the first quarter of 2013 the effect of these, at 0.71%, was broadly in line with that for medium LTV loans. Yet since then charges have mounted, to add an additional 0.84% to the average cost of buy to let borrowing at higher LTVs in the third quarter of 2014. ‘Healthy competition is good news for landlords, who can now choose from a pool of in excess of 700 different buy to let mortgages,’ said David Whittaker, managing director of Mortgages for Business. ‘Meanwhile, the wider benefits of more buy to let funding are being felt by everyone in the private rented sector, including tenants who have seen a growing supply of homes to let this year. This is a vote of confidence in landlords, at a time when lenders remain under serious pressure to maintain the safest possible loan books,’ he explained. ‘Yet the details are even more encouraging. Prioritising middle and lower LTVs is prudent but the most encouraging signs are lenders offering landlords what they need. Longer term fixed rates are the best option for landlords looking to protect their future income and minimise any risk associated with interest rate rises, and there are now many more of these options available,’ he added. The index report also shows that five year deals now make up almost one in five fixed rate mortgages on the market, at 19%, up rapidly from 15% in the second quarter of this year. By contrast three year fixed rate deals have dropped from 19% to 17% of all products in the third quarter while two… Continue reading
British appetite for overseas property remains strong, new figures suggest
British investors’ appetite for overseas property is still strong with one specialist reporting enquiries up by 37% so far this year compared with 2013. Spain continues to top the list of hot spots, accounting for more than half, 51%, of enquiries received from January to September, according to overseas mortgage firm Conti. The volume of enquiries for Spain has, in fact, increased by a massive 95% when compared with 2013. France, in second place, accounts for 29% of enquiries received so far this year, followed by Portugal with 12%. The data suggests that France appears to be making a comeback, overtaking Spain in the third quarter with 35% of enquiries, and 45% in September alone, compared with 32% and 18% for Spain respectively. According to Conti, there couldn’t be a better time to buy, with the strong pound shedding tens of thousands of pounds off property prices in the euro zone. Sterling exchange rates had a bit of a bumpy ride in the lead up to the Scottish referendum result in September, but the dust appears to have settled and the pound to euro exchange rate is hovering near €1.27 at the moment. Rewind to last summer when the pound fell to a low of €1.14, and the difference is pretty significant when you apply it to property prices. It means that a €200,000 property in Spain, for example, is now almost £18,000 cheaper, showing just how much difference the currency markets can make. ‘When you combine the strong pound with the low property prices to be found in many European property markets together with historically low mortgage rates, affordability is better than it has been in years,’ said Clare Nessling, director at Conti. ‘With buyers’ budgets stretching that much further, the purchase of that place in the sun could seem even more tempting, especially when you compare the cost with overheated parts of the UK market,’ she added. Conti says that it’s vitally important for buyers to seek the right advice. Bitter experience has taught many overseas property buyers that scrimping on independent legal advice can effectively cost them their holiday home. Buyers should always go through the same process that they would follow if they were buying a property in the UK. ‘There’s nothing to be gained, and everything to lose by cutting corners and failing to carry out due diligence,’ said Nessling. Advice from the firm includes never signing a contract that you don’t understand. If two versions are provided, i.e. English and local language, ask your solicitor to confirm the English version is a true translation, as you need to ensure it doesn’t contain errors, omissions or extras. Obtaining a mortgage ‘approval in principle’ will confirm you can obtain the necessary funds before signing on any dotted line and prove to sellers that you’re a serious buyer. And it costs nothing. Buyers should consider fluctuations in the exchange rate. It’s generally advisable for an overseas mortgage and the income used to service the… Continue reading
