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Research reveals how UK home owners are switching mortgage deals
Some 18% of borrowers in the UK have changed their mortgage details or come to a new arrangement with their lender in the last three years, new research has found. Meanwhile, one in 12 have moved to an interest only mortgage and the same number have extended their mortgage term, meaning they could end up paying more, according to the research by Ocean Finance. It says that despite enjoying more than five years of record low interest rates, the squeeze on real incomes over the same period has left many home owners struggling to keep on top of their monthly repayments. An interest only mortgage sees the borrower paying off the interest on the loan every month, but not repaying any of the capital, which makes the monthly repayments cheaper. However, this means that at the end of the term they do not own the property and will need to find a lump sum to repay the debt, perhaps by selling their home. Extending the term of a mortgage might mean extending the period of time they have to repay the loan from an initial 25 years to as much as 40 years. While this means they should pay less each month, it is likely to see them paying more overall due to the interest they will continue to be charged over the extended period of the mortgage. The firm points out that a longer mortgage term may also mean people have to rethink their future plans, such as working later in life to continue repaying their mortgage, rather than retiring. The research also found that 3.8% of home owners revealed they had agreed with their lender to make temporary lower payments. Meanwhile, 2.3% of home owners surveyed said they were taking a temporary holiday from making payments. ‘While repossession figures have been low, this has masked the real struggle that many borrowers have had to keep paying their mortgage. As incomes have been squeezed over the past few years, one in six borrowers has had to find a way to reduce their monthly payment,’ said Ian Williams, spokesman for Ocean Finance. ‘Switching to an interest only mortgage or extending the term are both being used as a way to lower repayments. While both of these can help provide short term relief and may serve to keep the roof over people’s heads, it may be that this is simply storing up problems for the future,’ he pointed out. ‘In addition, with the Bank of England currently predicting that it expects to start to raise the base rate of interest in the middle of next year, more home owners may find that they start to struggle, especially if they are still on a standard variable rate or tracker mortgage,’ he explained. ‘It might therefore be worth their while speaking to their existing lender or a mortgage broker about whether they could benefit from switching to a new mortgage now,’ he added. Continue reading
PRS sector in UK benefits from improvement in tenant arrears
The number of UK tenants severely behind on rental payments has fallen by 9% over the last 12 months, new research shows. Improvements mean an overwhelming 98.6% of private sector tenants now avoid significant rent arrears and this is being reflected in the rate of evictions with court orders drown by 16% in the latest quarter. Overall the figures from the latest Tenant Arrears Tracker by estate agency chains Your Move and Reeds Rains, part of LSL Property Services, shows 65,200 UK households remain more than two months behind on rent, compared to 71,700 in the third quarter of 2013. In absolute terms, those more than two months behind on their rent now number just 65,200. This compares to 71,700 tenants at least two months in arrears in the same period last year, or an annual improvement of 6,500 households who no longer face the potential threat of losing their home. As a proportion of all tenants, those in serious arrears of more than two months have also improved, standing at just 1.4% in the third quarter of 2014 compared to 1.6% of all tenants in the same period in 2013. This means 98.6% of tenants in the private rented sector now avoid falling into significant rental arrears. Improvements in the most serious rental arrears also tally with the latest figures on overall levels of late rent, including shorter lapses on payments. According to LSL’s latest Buy to Let Index, overall tenant arrears of any duration now stand at just 7.2% as of September 2014, down from 8.5% in September 2013. ‘The private rented sector has mustered enough new capacity to meet, in part, the growing demand for affordable housing, through the greatest economic depression in modern times,’ said David Newnes, director of estate agents Your Move and Reeds Rains. ‘This isn’t just about those relatively prosperous households forced to put ownership plans temporarily on hold. For many thousands of others, with far tougher monthly budgets, private tenancies have also provided a lifeline. For many renting is now their chosen route as it provides flexibility and mobility,’ he explained. ‘Gradual rent rises, on a par with inflation, have helped. But now a bigger turnaround appears to have happened. For many years more momentary cases of rent arrears have been in decline, yet it’s only recently that the most serious cases where families could actually lose their homes are following suit,’ he pointed out. He said one explanation is the improving jobs market, with the improvement in unemployment constantly outperforming expectations. ‘Wages would however need to rise faster for most households to feel the full effects of economic recovery. Reduced unemployment levels would seem to be far more beneficial for those households who are struggling the most,’ he added. The data also shows that eviction rates see first annual improvement since 2010. In the latest data, for the second quarter, 27,700… Continue reading
Property sales in Canada set to rise by almost 4% this year
Residential property sales in Canada are forecast to increase by 3.8% this year compared to 2013, according to revised figures from the Canadian Real Estate Association (CREA). The data reflects stronger than expected sales in recent months. Even so, sales activity is expected to peak in the third quarter as the impact of a deferred spring dissipates and continuing home price increases erode housing affordability. This would place activity in 2014 slightly above but still broadly in line with its 10 year average. Despite periods of monthly volatility since the recession of 2008/2009, annual activity has remained stable within a fairly narrow range around its 10 year average. This stability contrasts sharply to the rapid growth in sales in the early 2000s prior to the recession. British Columbia is forecast to post the largest year on year increase in activity at 11.9% followed closely by Alberta at 7.7%. Demand in both of these provinces is currently running at multi year highs. Activity in Saskatchewan, Manitoba, Ontario, Quebec and New Brunswick is expected to come in roughly in line with 2013 levels, with sales increases ranging between 1% and 2% in the first three provinces and edging lower by about 1% lower sales in the latter two provinces. Sales in Nova Scotia and in Newfoundland and Labrador are projected to be down this year by 3.9% and 5.2% respectively. Mortgage interest rates are expected to edge higher as Canadian exports, business investment, job growth, and incomes improve. These opposing factors should benefit housing markets where demand has been softer but prices have remained more affordable. Sales in relatively less affordable housing markets are likely to be more sensitive to higher fixed mortgage rates, the CREA report also says. National activity is now forecast to reach 473,100 units in 2015, representing a decline of four tenths of 1%. Sales activity is forecast to grow fastest in Nova Scotia at 3.3%, followed by Quebec with growth of 1.3% and New Brunswick at 1.3%. Alberta is the only other province forecast to post higher sales next year with growth of 1%. In other provinces, activity is forecast to decline in the range of between 1% and 2%. In British Columbia and Ontario, this trend reflects eroding affordability for single family homes, the report says. The national average price has evolved largely as expected since the spring, resulting in little change to CREA’s previous forecast so it is projected to rise by 5.9% to $405,000 in 2014, with similar price gains in British Columbia, Alberta, and Ontario. Increases of just below 3% are forecast for Saskatchewan, Manitoba and Prince Edward Island. Newfoundland and Labrador is forecast to see average home price rise by about 1% this year, while Quebec is forecast to see an increase half that size. Prices are forecast to be flat in New Brunswick and recede by almost 2% in Nova Scotia. The national average price is forecast to edge up a further 0.7% in 2015 to $407,900. Alberta and Manitoba… Continue reading
