TSI
Equity release lending hits new record in UK
Equity release lending activity on homes in the UK surged in the second half of 2015, recording its strongest growth rates since 2008. The in-depth report from the Equity Release Council shows the average initial amount of housing wealth unlocked by equity release customers via drawdown mortgages in the last six months of 2015 was £49,607. It points out that continued house price growth across much of the UK means many homes can 'earn' more than the average salary. This increases the appeal for home owners over the age of 55, who may no longer be working themselves, to improve their finances in later life by unlocking wealth tied up in their home, while retaining the right to tenure. The most common age to draw money through equity release is 65 to 74 but there has been particular growth in the 55 to 64 age group and those aged 85 and over. Over half of 55 to 64s opt for lump sum lifetime mortgages, while from 75 onwards four in five plans are drawdown mortgages Every region in England saw drawdown mortgage customers take an initial advance worth more than a year's take home pay for the average full time worker in that region. In London, drawdown customers withdraw the equivalent of 130 weeks' pay at £72,858. For lump sum customers in all UK regions except Scotland, where 91 weeks' worth of pay is released, the average withdrawal of housing wealth was equal to more than two year's take home pay. London again had the greatest sums taken out at £209,739 or 373 weeks' income. The five years from 2011 to 2015 have all seen a surge in equity release activity during the second half of the year. Indeed, the second half of 2015 saw a 26% rise in the value of lending compared with the first half, from £710 million to £898 million, the biggest half year growth rate of the post-2008 era. The Council's analysis of data for the second half of 2015 also shows product choice differs by age group, however. Between 65 and 74 product preferences closely match the overall market and 68.2% of plans taken out by this age group are drawdown and 31.8% are lump sum. The UK average is split 66.6% drawdown to 32.8% lump sum, and home reversion made up the remainder. Customers aged 55to 64 bucked the overall trend with the majority, 54.5%, choosing lump sum products. In contrast, from age 75 onwards four out of five opt for drawdown plans, taking an initial sum in later life while preserving an additional sum to withdraw as the need arises. ‘Equity release products continue to prove versatile in helping customers meet a range of financial needs before, at and during retirement. As a result, there is growing recognition from UK consumers, regulators and politicians that housing wealth can, and should, play a greater role in financial planning for retirement,’ said Nigel Waterson, chairman… Continue reading
Residential rents in England and Wales rise for first time for several months
Rents in England and Wales increased by 0.1% between January and February, the first monthly rent since autumn 2015, according to the latest index. This took the average rent to £791 a month and could be the first of several rises as the private rented sector braces for anti-landlord policies such as tax changes. The data from the buy to let index from Your Move and Reeds Rains also shows that year on year rents are up 3.3%, or an extra £25 a month for the average tenant. Average rents are now rising on a monthly basis for the first time since September 2015, up 0.1% between January and February. Rents across England & Wales now stand at £791 per month as of February, 3.3% higher compared to this point last year – or an extra £25 per month for the average tenant. On a regional basis rent rises were led by the Midlands. In the East Midlands tenants have seen the fastest annual rent rises, up 7% over the last 12 months. This is followed by the West Midlands with 6.3% and the East of England with rents 6.2% higher than in February 2015. These three regions all stand ahead of London on this basis, with rents in the capital 4.8% higher than 12 months ago. As recently as November, London consistently led the field in terms of annual rent rises. Meanwhile, at the other end of the spectrum rents are lower than a year ago in three out of 10 regions. These exceptions are led by the North East where the average rent is now 2.5% lower than in February 2015, followed by Wales with rents down 1.5%, and the South East with a marginal 0.1% annual drop. Five out of 10 regions have now seen rents rising month on month. On this basis the East of England leads with rents in February 1.1% higher than in January 2016. The South East and the East Midlands are joint second on this measure with rents up 0.6% between January and February. By contrast, rents in Wales and the North East are now 0.9% lower and 0.7% lower than in January, respectively. On the back of the latest monthly increases, monthly rents in the West Midlands have set a new an all-time record high, at £596, alongside a new all-time record for Yorkshire and Humber rents at £559. The East Midlands, while home to the fastest annual rent rises in the twelve months to February, has seen rents remain just £1 short of the all-time record high set at £610 in November 2015. Adrian Gill, director of lettings agents Your Move and Reeds Rains, pointed out that rents are rising at a time when demand is growing. ‘Rent rises could now accelerate further. If government attacks on landlords bite, having worsened again in this week’s Budget, the flow of investment… Continue reading
More details of UK buy to let extra stamp duty charge revealed
Details of how the new stamp duty surcharge on additional homes in the UK have now been provided by the Treasury following Chancellor George Osbourne’s Budget speech. From 01 April anyone buying an additional property, whether as a second home or a buy to let investment will pay an extra 3% in stamp duty. Sales completes before midnight on 31 March 2016 will not be liable for the extra charge and transactions where contracts were exchanged before 25 November 2015 will not be liable, even if completion takes part on or after 01 April. It means stamp duty for an additional home worth up to £125,000 will be charged at 3% whereas before it was zero. Properties sold at £125,000 to £250,000 will be subject to 5% charge, up from 2%. Those prices £250,000 to £925,000 8%, previously 5%, from £925,000 to £1.5 million a rise to 13% and those over that a 15% charge. The time limit for those who own two properties temporarily because they could not sell their main residence before buying another main residence has been extended from 18 to 36 months This means those who buy a new main residence without have sold their previous one will pay the additional stamp duty, but if they sell their previous residence within 36 months, they can claim a refund. Owners of multiple properties will also have 36 months to replace their main residence without incurring the extra 3% charge. The 36 month period will begin from 25 November 2015 for purchasers who disposed of their previous main residence prior to the Autumn Statement where the extra charge was announced. Couples who are separated will be treated as ‘separate entities’ in terms of property ownership. ‘The government will not treat married couples as one unit if they are separated in circumstances that are likely to be permanent,’ the Treasury document says. As announced by Osbourne on Wednesday large scale buy to let investors will be liable for the additional charge. This is despite the Chancellor initially saying that those buying more than 15 properties would be exempt. Buyers will declare their status as existing property owners or not when filling in the Stamp Duty paperwork on the purchase of a property. The Chancellor expects the additional 3% duty to raise £3.7 billion for the Treasury over the next five years. Continue reading
