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UK mortgage arrears at lowest rate for more than a decade in 2015
Mortgage arrears in the UK are at their lowest for more than a decade with fewer than one in 1,000 ended in repossession in 2015, according to the latest data from the Council of Mortgage Lenders. Beneath the headline figures, the CML quarterly data shows home owner mortgage arrears running at 1.03% of all loans at the end of 2015, with buy to let at a lower rate of 0.31%, continuing the recent trend of a lower prevalence of arrears in the buy to let market. However, the picture is reversed on repossessions, with around one repossession per 2,500 mortgages in the buy to let market in the fourth quarter of the year, compared with one in 5,000 in the homeowner market. Across the whole market, most had relatively modest levels of arrears at under 5% of the mortgage balance. The number of loans with arrears in the most severe band, representing 10% or more of the mortgage balance, was 23,700, down from 24,200 at the end of 2014. The CML report says that the modest decline in the most serious arrears band may partly reflect distortions in the timing of possessions, but the overall arrears trend is clearly down. At 10,200, the total number of repossessions in 2015 was less than half the number in 2014, down from 20,900 but the report says that caution is needed on the year on year comparison, because the timing of some possessions may have been affected by the aftermath of a court case which has been causing lenders to review their processes. However, it is likely that the underlying trend is still emphatically down. ‘It is good news that the levels of mortgage arrears and repossessions remain low and falling. But, at the risk of sounding as if we are crying wolf, we would continue to urge all borrowers to plan ahead for a time when the interest rate environment may be less benevolent. Lenders do not wish to see borrowers who are coping currently falling into difficulty if and when rates do eventually rise,’ said CML director general Paul Smee. The figures are a sign of a period of relative stability for both owner occupiers and landlords when it comes to managing borrowing, according to Kevin Purvey, chairman of the Intermediary Mortgage Lenders Association (IMLA). ‘Lending volumes forecast to rise, the rigours of lenders’ affordability checks will help borrowers avoid a future scenario where they become overstretched. However, continuing delays to the Bank of England’s first rate rise should not breed complacency,’ he explained. ‘With mortgage rates at record lows, there is still plenty of reason for households to think ahead, weigh up their monthly balance sheet and consider remortgaging to help prepare for the inevitable rise. Changes to tax allowances will give landlords added incentive to look at their remortgage options in 2016,’ he pointed out. ‘Lender competition remains high, which means intermediaries will be at the heart of the continuing… Continue reading
Average prices in England and Wales now over £290,000, latest index shows
Home values in England and Wales rose by 0.2% in January taking the average house price above £290,000, the latest price index shows. ss England and Wales. Last June, average prices crossed the £280,000 marker, but we have to go back to August 2014 for the crossing of the £270,000 threshold’ said Adrian Gill, director of Reeds Rains and Your Move estate agents. ‘We’re now passing these milestones in quicker and quicker succession, as prices pick up pace. This hastening is good news for home owners, but means it’s getting harder for those still hoping for home ownership. In the last 12 months there’s been a 5.5% upswing in average property prices compared to just a 2.1% rise in average earnings,’ he pointed out. However, he also pointed out that aspiring buyers now have much more support to help get a foothold on the ladder, with the launch of the Help to Buy ISA in December and the new Starter Homes scheme this year. ‘But in the long term there has to be a huge breakthrough in house building if we’re going meet the growing demand for homes and keep house price growth sensible,’ added Gill. The analysis of the data says that while the South East remains the region with the fastest year on year price rise at 7.7%, London has now moved to second place. The typical property in London has increased in value by £34,485 in the last year, almost equal to the £35,333 median gross annual earnings in the capital. Gill explained that this 6.2% rise in the capital’s home values has been driven by activity in the more affordable outer boroughs. The cheapest 11 boroughs have seen the biggest boost in property prices, up 14% or £47,052 year on year, with a typical home in Newham now costing £63,429 or 23% more than in December 2014. ‘As London workers attempt to find affordable places to buy, prices are rising in the nearby commuter towns as well. The fastest growth year on year across the country has been experienced in Luton where home values are up 17.5%, with trains here only taking 23 minutes to get into St Pancras Station,’ said Gill. He also said that while home sales saw the usual seasonal slump in January, falling 26% from the previous month’s level, this is better than expected, with sales typically dropping by 28% between these two months. ‘Regionally, there has been a significant upswing in sales in the North West, rising 8.8% in the last quarter of 2015, compared to the same period in 2014. We are now seeing faster growth in sales in lower-priced areas, as buyers seek more property for their money,’ Gill explained. He also said that when looking at the type of property selling successfully, there has been a turnaround in the trend seen in recent years. Sales of detached homes are now rising fastest, up 5%… Continue reading
Survey finds over half of buy let landlords unaware of mortgage changes
Over half of buy to let mortgage applicants in the UK are unaware of forthcoming changes to mortgage tax rules and other changes that could affect their application, a new survey has found. Indeed, it is accidental landlords, those who did not intentionally set out to rent out a property, are least likely to know about these regulatory changes, according to the research from landlord insurance provider Direct Line for Business. It found that 62% of applicants were unaware of either the changes to mortgage tax relief or the European Union’s Mortgage Credit Directive (MCD), both of which could impact their ability to secure a mortgage. This lack of awareness rises to 71% amongst accidental landlords. This comes as it is estimated that accidental landlords account for around 17% of new mortgage applications, with overall buy to let mortgage applications growing by 29% in the past year. The research also revealed that only 7% of mortgage advisers believe that the MCD will have a positive impact on approvals of buy to let mortgage applications, compared to 59% who expect it to have a negative impact. The EU’s MCD could see circumstances where landlord mortgage lending will be viewed as consumer lending and could be subject to more stringent lending criteria. Accidental landlords with one or two rental properties may not be able to pass the expected new affordability tests. Changes to the mortgage tax relief are set to be phased in from April 2017 with landlords no longer able to deduct mortgage interest payments before calculating their tax bill. They will instead get a tax credit equivalent to 20% basic rate tax on this amount. Landlords are also set to be hit from April 2016 by stamp duty changes that mean anyone buying a second home or buy to let property will pay an extra 3% stamp duty. ‘The new EU legislation on mortgages coupled with the Government’s increase in buy to let taxation could significantly alter the buy to let market, so we would encourage any mortgage applicants to think carefully about the new law and how this could impact them as a landlord,’ said Nick Breton, head of Direct Line for Business. ‘With house prices in the UK rising by 7% in the year leading to October 2015, and with the estimated average deposit standing at more than £61,000, it is imperative that landlords are able to maintain a suitable amount of property to house the population of young people saving up to buy their first property, or those seeking a temporary stay in a town or city,’ he added. The firm urges landlords to make the most of existing tax benefits. Any money spent on keeping a property in a good state of repair is tax deductible, as are all broker and arrangement fees. Landlords can also claim the whole cost of council tax or utility bills that a tenant would pay. It also says they should keep up to… Continue reading
