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Survey confirms certain groups facing difficulties due to UK mortgage reforms
Mortgage Market Reforms (MMR) in the UK are making it more difficult for certain customers to get a mortgage including over 40s and the self-employed, new research has confirmed. When the rules changed in April there were warnings that they could impact adversely on the home lending market and now research from buy to let lender Paragon Mortgages shows there was a 3% reduction in average mortgages introduced by intermediaries in the third quarter of the year. Intermediaries thought it was more difficult for certain customer groups to get a mortgage in the third quarter compared to the previous quarter and this comes after other firms have reported difficulties for people aged over 40 trying to secure a mortgage. The specialist lender’s quarterly Financial Advisers Confidence Tracking (FACT) survey highlights intermediaries’ views on the performance of the mortgage market, also revealed that people borrowing into retirement, people wanting interest only mortgages and people with irregular incomes have experienced difficulties. Indeed, the stark figures show that more than 90% of the 186 respondents in each case reported these difficulties. During the third quarter the average number of mortgages introduced by intermediaries was 22, which was down 3% on the second quarter. Nevertheless, compared with the third quarter of 2013, this shows a 12% increase in the average number of mortgages introduced. This, however, was significantly lower than the 30% year on year increase seen in the second quarter. Intermediaries appeared more positive about the buy to let market with 24% of all mortgages introduced being buy to let mortgages, a modest increase from 23% in the second quarter of the year. In particular, 43% of intermediaries surveyed thought the availability of buy to let finance had improved since the second quarter, a significant increase of 7% over the period from 36%. In addition, only 8% of intermediaries stated the availability of buy to let finance had deteriorated, compared with 12% in the previous quarter. ‘The market has seen significant structural changes following the Mortgage Market Review. This is a result of both the regulations themselves and the way the lending industry has responded to them,’ said John Heron, managing director of Paragon Mortgages. ‘This could be one factor behind the softer levels of business that intermediaries are reporting in the third quarter. Indeed CML data shows us that buy to let lending was up 14% in quarter three compared with quarter two, and up 24% on the third quarter of 2013, which could suggest that the buy to let market is proportionally more important for lenders in the current market,’ he explained. ‘A healthy availability of buy to let finance is significant to maintaining a competitive and high quality Private Rented Sector, so it is pleasing to see increased confidence amongst intermediaries, for this type of business,’ he added. Continue reading
Latest index confirms that UK house price growth continues to moderate
UK house prices in the three months to the end of November were 0.7% higher than in the previous three months, according to the latest quarterly figures from the Halifax. This quarterly rate was marginally down from 0.9% in the previous month and the data also shows that prices in the three months to November were 8.2% higher than in the same three months a year earlier. On this measure, annual house prices are now growing at their slowest rate since February and on a month on month basis they are up o.4% which reverses the 0.4% monthly decline recorded in October. However, home sales fell in October to 98,490, the first time they have been below 100,000 in 2014. Nonetheless, current estimates suggest that housing transactions in 2014 will total in excess of a million for the second consecutive year. This is the first time since 2006 and 2007 that home sales have exceeded a million in successive years, according to HMRC, seasonally adjusted figures. The index also points out that mortgage approvals continue to fall. The volume of mortgage approvals for house purchases, a leading indicator of completed house sales, fell in October, to 59,426, data from the Bank of England shows. Approvals have now fallen by 22% from 76,574 in January 2014. Private housing completions in the first three quarters of 2014 were 10% higher compared with the same period in 2013, at 68,930, according to the department of Communities and Local Government. It means that levels of house building remain well below those required to keep up with the pace of household formation, but these latest figures show signs of a revival. A continuation of this upward trend in house building would help to bring demand and supply into better balance, curbing upward pressure on house prices. ‘Receding buyer interest combined with a revival in private housing completions has brought supply and demand into better balance. These factors have in turn contributed to the easing in house price growth since the summer,’ said Martin Ellis, Halifax housing economist. ‘But housing demand continues to be supported by a strengthening economy, rising employment levels, still low mortgage rates and the first gain in real' earnings for several years,’ he explained. ‘We expect a further moderation in house price growth over the next year with prices nationally expected to increase in a range of 3% to 5% in 2015. The prospect of higher interest rates at some point in the year and the deterioration in affordability over the past year are expected to be key factors curbing housing demand,’ he pointed out. ‘Housing demand should be supported by solid economic growth, higher employment, still low mortgage rates and the first gain in real earnings for several years. We expect to see a more even regional pattern in house price growth during 2015,’ he added. Continue reading
New UK property tax measures set to boost buy to let
The UK’s new property tax rules are set to provide a boost to both the sales market and buy to let market, it is claimed. The new rates will give the biggest savings to buyers at the lower and middle end of the market and according to Stephen Ludlow, chairman of lettings age Ludlow Thompson, as buy to let landlords usually invest in properties below £937,500 the changes will give almost all investors in this market a boost. ‘The changes in stamp duty will see the biggest increase in net returns for more modestly investments such as smaller properties in Zone three of London, city centre apartments, flats above shops, ex-local authority property and property in secondary locations,’ he said. ‘The reforms could encourage those who may have been delaying their purchase until after the election to reconsider. The new rates should also provide a boost to the sales market and result in an increased number of purchases in this usually quiet time for residential property deals,’ he added. Graham Davidson, managing director of Sequre Property Investment, also believes the change is a positive one for the buy to let market. For example, a buyer of a high end two bedroom Manchester city centre apartment at a price of £150,000 will now pay just £500 stamp duty, a saving of £1,000. ‘However the impacts on the £925,000 plus market will certainly be felt throughout the industry, in particular by the higher end London property market. We would expect to see this contribute to a further slowing of the market there,’ he added. Alison Platt, group chief executive of Countrywide, said the change is likely to attract more home buyers to the market. ‘So for those who are thinking of selling their property, there has never been a better time. Equally for buyers, a stable interest rate environment and the availability of a range of attractive mortgage products, means that now is an ideal time to purchase a home,’ she explained. But Jamie Lester, head of Haus Properties, thinks it send shockwaves through the London market, particularly in the £1.5 million to £2 million price range. ‘This market has been especially active with buyers sticking below the 7% stamp duty and proposed mansion tax thresholds. These buyers will now have to pay a significantly higher amount,’ he said. ‘For example, someone purchasing a £1.9 million property would have paid £95,000 under the old stamp duty rules, whereas under the reforms they will be paying almost £50,000 more at £141,750. However, those buying just above £2 million won't be quite so heavily hit, for example, someone purchasing at £2.1 million will now be paying £165,750, an increase of £18,750,’ he explained. Camilla Dell, managing partner of independent property buying agency, Black Brick, said there is no question that the old stamp duty bands were in desperate need of reform and overhaul. ‘For 98% of the UK population these changes are therefore clearly good news. But… Continue reading
