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Research reveals concerns about new mortgage rules in UK
More than half of people who are either considering, or are in the course of applying for a mortgage in the UK believe that the obligation placed upon mortgage lenders to assess their ability to repay will slow down the application process. Overall 59% are in this position and 32% of those who have yet to apply also said they would find it fairly difficult to obtain evidence of all the expenditure information they believe a lender needs to assess a mortgage application. The research from Equifax, a credit information provider, also found that 69% who responded to the survey expressed concern that more detailed affordability checks would affect the amount they could borrow and 40% are worried about the time it will take to complete their mortgage application. The new responsibilities placed upon lenders, which came into effect in April 2014 as a result of the Mortgage Market Review, place even greater onus on the lender to assess an applicant's ability to repay. The applicant's credit history is likely to play a crucial role in that assessment, alongside other information gathered as part of the application process. ‘It is important to remember that lenders will take into account the information provided on the application form and will look at an applicant's income and outgoings to ensure they can afford the mortgage they are applying for, now and in the future. However, our research suggests that 22% are still unconvinced that the new affordability rules will help prevent home owners overstretching themselves in the long term,’ said Laura Barrett of Equifax Consumer Affairs. ‘We would recommend compiling any financial documents and expenditure information needed to support a mortgage application, as soon as the application process starts. Advance preparation will hopefully avoid any unnecessary delays,’ she pointed out. ‘A lender will typically look at an applicant's credit history when determining whether they meet eligibility criteria and may also use credit information during affordability assessments. Therefore, it is suggested that individuals check their credit report before making any applications to ensure that it is in the best possible shape for them,’ she added. Continue reading
Gap between residential rents and income widens in the US
The gap between rental costs and household income is widening to unsustainable levels in many parts of the United States and the situation could worsen unless new home construction meaningfully rises, it is claimed. According to new research by the National Association of Realtors which reviewed data on income growth, housing costs and changes in the share of renter and owner occupied households over the past five years, renters are being squeezed in many metro areas. This is due to the disproportionate growth in rental costs to incomes and New York, Seattle and San Jose, California, are among the cities where combined rent growth is far exceeding wages. Lawrence Yun, NAR chief economist, said that the disparity between rent and income growth has widened to unhealthy levels and is making it harder for renters to become home owners. ‘In the past five years, a typical rent rose 15% while the income of renters grew by only 11%. The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay,’ he explained. He also pointed out that the share of renter households has been increasing and home ownership is falling. Those financially able to buy a home in recent years were insulated from rising housing costs since most take out 30 year fixed rate mortgages with established monthly payments. Furthermore, a typical home owners’ net worth climbs because of upticks in home values and declining mortgage balances. The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing housing costs every year. ‘Meanwhile, current renters seeking relief and looking to buy are facing the same dilemma: home prices3 are rising much faster than their incomes. With rents taking up a larger chunk of household incomes, it’s difficult for first time buyers, especially in high cost areas, to save for an adequate down payment,’ added Yun. NAR’s research analysed changes in the share of renters and home owners, mortgage payments, median home prices, median household income for renters and the rental costs in 70 metro areas. The top markets where renters have seen the highest increase in rents since 2009 are New York with growth of 50.7%, Seattle up 32.38%, San Jose up 25.6%, Denver up 24.14% and St. Louis up 22.26%. Looking ahead, Yun says a way to relieve housing costs is to increase the supply of new home construction, particularly to entry level buyers. Builders have been hesitant since the recession to add supply because of rising construction costs, limited access to credit from local lenders and concerns about the re-emergence of younger buyers. Yun estimates housing starts need to rise to 1.5 million, which is the historical average, yet housing starts have averaged about 766,000 per year over the past seven years. ‘Many of the metro areas that have experienced the highest rent increases are popular to millennials because… Continue reading
England and Wales see fastest annual residential rent rises since May 2013
Average residential rents in England and Wales increased by 3.1% year on year to stand at £766 in February 2015, the fastest annual rise since May 2013. The latest buy to let index from estate agents Your Move and Reeds Rains also shows that the East of England recorded a 10.2% annual rent rise, the strongest growth of any region in over five years. The overall annual boost follows a monthly uplift of 0.4% in February 2015, a £3 increase which comes after a series of monthly drops in January of 0.6%, a fall of 0.1% in December 2014 and a fall of 0.2% in November. In real terms, average residential rents in England and Wales now stand at £766, compared to £763 in January 2015 and £743 in February last year. The index also shows that tenant finances are worse with 7.6% of all rent in arrears in February 2015, compared to 6.9% a year ago and returns for landlords have stabilised with total returns up to 11.5% over the last 12 months. According to Adrian Gill, director of Reeds Rains and Your Move, the rental sector is carrying the weight of the housing crisis. ‘More homes are needed to house an ever growing population. The supply simply isn’t there. The result is that landlords are catering to those who can’t afford to buy as well as those who choose renting for the flexibility it offers them such as workers moving into new jobs, or people wanting to get a feel for an area before committing to property ownership and setting down roots,’ he explained. ‘House prices rising out of reach for people at the lower end of the market makes increasing demand in the private rented sector inevitable. A serious and substantial commitment to new builds is the only way to bring supply in line with demand,’ he added. A regional breakdown of the figures shows that tents in the East of England have rocketed up to £787 in February 2015 compared to £714 a year ago. It forms the latest link in a chain of accelerating annual rent rises for the East stretching back to July last year. London saw the second highest annual rise with rents resting 4.9% above levels in February 2014. The North West saw rents down 0.3% and in the North East they were down 0.4%, the only regions to see a year on year drop in rents, while prices in the West Midlands and South West remained stable compared to last year. On a monthly basis, the South West took the lead with a 1.7% increase in rental prices, closely followed by Wales up 1.2% and the West Midlands up 0.9%. Although rents in the East of England saw a more modest 0.7% boost, it is the only region to have experienced monthly rises for 10 consecutive months, contributing to its dominant position in… Continue reading
