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Research reveals widespread confusion over interest rates among UK home owners
Whilst January is traditionally the time to get finances in order and plan for the year ahead, new research reveals that there is widespread confusion around UK interest rates and when they might rise. Some 46% don’t know that the current Bank of England base rate and 88% are unaware of its interest rate forecast for a rise in October 2015, according to research from Barclays Mortgages produced in partnership with the Centre of Economic Business Research (Cebr). Some 61% of home owners are uncertain when interest rates might rise and half with variable rate mortgages aren’t aware their repayments could rise, the research also shows. And overall 76% are not putting money aside to be able to cope with interest rate increases despite the Cebr predicting a minimum total mortgage payment rise of £723.8 million across the UK. The research reveals that home owners cite different political and regulatory statements, conflicting family views and changing market commentary as the main reasons behind this widespread uncertainty. The lack of awareness may contribute to UK mortgage holders experiencing financial difficulties in 2015, according to the research. Just under half, 49.5%, of those with a variable rate mortgage don't expect or aren't sure that their mortgage repayments will rise in 2015, despite the Cebr predicting that home owners across the UK could face a potential £1.1 billion total increase in mortgage repayments by the end of 2015. This is based on the Cebr's 'sharp but potential' model suggesting three rate rises in 201 (taking the base rate from its historic low of 0.5% to 1.25% by December 2015, something which is not considered unfeasible by economic experts and which would increase average mortgage repayments for individuals by £118.974. The second 'medium' model focused on a single interest rate rise of 0.25% in May 2015 and would see home owners across the UK paying an additional total of £904.2 million in their mortgage repayments by the end of 2015 averaging at £101.33 per home owner. At a very minimum the Cebr predicts an average annual £81.12 increase in mortgage payments for individuals by the end of 2015. When looking at the UK as a whole, this 'gentle model' would result in a total £723.8 million annual increase in repayments. The research report says that whatever the increase in repayments, it is clear that people are underprepared for any interest rate rise. The survey also found 45% felt they may have missed out on better mortgage rates and therefore paid out more because they weren't sure whether or not to fix or change their mortgage. ‘Our report shows there is widespread confusion over interest rates and we encourage home owners to review their current situation and get advice on what their next mortgage step should be,’ said Andy Gray, Barclays managing director of mortgages. ‘We want our customers to remain financially fit in the face of potential interest rate rises in 2015, and believe the impending rise that… Continue reading
Scottish prime property market set to be busy due to tax change in April
An increase in demand for prime property in Scotland between September and December ensured a strong end to 2014, both in terms of prices and sales, the latest index report shows. Overall prime Scottish country house values rose by 1% in the final quarter of 2014 following two quarters of no change and prices ended the year up 2.1%, after a 1.6% increase in 2013, according to the figures from Knight Frank. The index report points out that the rise in prices seen in the fourth quarter came amid a notable step up in buyer demand, attributed to the certainty provided by the result of the Referendum vote and the announcement of the proposed Land and Buildings Transaction Tax (LBTT) that replaces stamp duty in Scotland from April. ‘After months of doubt about the outcome of the referendum, buyers now feel more secure about making a decision to move house or purchase a property,’ the report says. ‘The proposed LBTT rates published in October clarified how purchase taxes would change in April. The higher upfront cost of moving when LBTT comes into force, especially in the prime market, has prompted some home buyers and vendors to make quick decisions,’ it explains. Under the rates proposed in the incoming LBTT system, any sales above £254,000 will incur a higher rate of tax compared with the current stamp duty structure, introduced in December in the Autumn Statement by George Osborne. For properties in the prime market, the cost will be significantly higher. The report also shows that the number of potential buyers registering their interest in purchasing a property with Knight Frank was 18% higher in quarter four than the same period a year ago, with a similar rise in viewings. Sales were over 50% higher during the same period. ‘We expect this trend will continue into the New Year, driven by a desire among vendors and homebuyers to move before the introduction of the new LBTT levy in four months’ time,’ said Ran Morgan, head of Scotland residential at Knight Frank. He pointed out that under the current system, a house costing £900,000 will incur a stamp duty payment of £35,000, whereas the upfront costs under the new LBTT system for the same property will be 92% higher at £67,300. As a result of the stamp duty reforms announced during the Autumn Statement, by the time LBTT is introduced, home buyers in Scotland will have had to adjust to three different tax systems within six months. ‘The announcement of the proposed Land and Buildings Transaction Tax rates in October has already encouraged vendors and homebuyers in the prime market to make quick decisions to avoid the increased tax burden. We expect this will continue and as a result are anticipating a busy start to 2015,’ said Morgan. ‘In the country estates market, details of Land Reform proposals and CAP reform continue to emerge. Until these are finalised we expect the activity to remain subdued,’ he added. Continue reading
Fair compensation calculations needed for good lettings relationship
Calculating the right compensation charges at the end of tenancies is the holy grail of lettings and getting it wrong can lead to unnecessary disputes with tenants, it is claimed. Many landlords and agents are responsible for calculating the cost for compensation charges against a tenant and in doing so, should ensure it is reasonable and fair. However, everyone’s expectations are different. If landlords and agents have to calculate compensation charges themselves, it vital that they have a working knowledge of accepted principles, if they are to avoid a dispute, says the Association of Independent Inventory Associations (AIIC), adding that landlords and agents should also explain to their tenants how they have worked out the compensation deductions. ‘If agents and landlords can prove how they arrived at the proposed deductions from their tenants’ deposits, all parties involved will be happier to accept the decisions. Fewer disputes cause less headaches in terms of wasted time, money and effort all round,’ said Pat Barber, chair of the AIIC. ‘There are a few bits of information that agents and landlords need from the start to aid their calculation, namely the original cost of an item, the age and condition at time of check in, the length of tenancy, average life expectancy of the item and any extenuating circumstances,’ she explained. She pointed out that floor coverings are major bone of contention for landlords, agents and tenants and recent research also shows that accidental damage to flooring is the main cause of insurance claims for tenants at 42%. ‘So for example, if a tenant damages vinyl or laminate flooring with drag marks, deep scratches or scrapes, burn marks and stains, these are considered to be chargeable issues. A small number of surface scratches, nicks and minor indentations are considered to be consistent with fair wear and tear depending on the length of tenancy and original condition,’ said Barber. ‘It is always recommended that care instructions for surfaces such as vinyl and laminate floors be provided to the tenant by the landlord or agent. Laminated flooring can vary in quality from surface ‘photo’ coatings to a thicker laminate top layer. Laminates with a thin surface coating are prone to edge lifting, although excessive washing can also exacerbate the problem and could be chargeable if this can be proved,’ she added. She also pointed out that household circumstances, location, environment, quality, pets, previous wear and so on will all have an effect on the final compensation amount. ‘Landlords and tenants need to put all the evidence together to reach a safe conclusion, one which can be justified in writing at some point if required. Landlords should be able to provide written evidence of the original cost and age of the laminate flooring, or anything else in the property, to enable proper compensation to be calculated,’ Barber concluded. Continue reading
