01205 368 896
Facebook Twitter YouTube Google Plus

Valuation Request

UK Finance

The latest data and analysis from UK Finance has shown that house purchase lending was higher in August 2017 than in both the preceding month and a year earlier.
According to the report, first-time buyers borrowed £5.7 billion in August - a 16% increase on the previous month and 12% more than in August 2016.
Between them they took out 34,400 mortgages. This is 14% up on the preceding month and 9% more year-on-year. Home movers borrowed £8.4 billion, 18% more than in July and 20% more than in August last year. This equated to 38,500 loans, up 17% on July and 13% on August 2016.
Remortgaging by home owners totalled £6.4 billion, 4% down against July but 8% more than a year earlier.
Buy-to-let lending totalled £3.1 billion, down 3% on July 2017 and the same as in August last year. This equated to 20,400 mortgages, the same as in July but 4% more than in August last year.

With effect from 30th September, a new set of rules is being introduced by the Prudential Regulation Authority (PRA) which govern the way lenders assess buy-to-let mortgage applications from landlords who own four or more mortgaged properties – portfolio landlords.
There has been some press speculation that this may make life more onerous for landlords who own multiple properties, or even prevent some of them from being able to access sufficient mortgage funding in the future.
I’m pleased to report that the reality may not be as onerous as many had feared and the key issue is how lenders will interpret the new rules.
Most portfolio landlords will find that it’s an administrative exercise that requires a bit more paperwork and form filling. So no need to panic!
Why are the changes being introduced? The PRA wants to ensure that when assessing portfolio landlord buy-to-let mortgage applications, lenders adopt a specialist underwriting approach.
The PRA therefore requires lenders to build a comprehensive picture of a landlord’s financial position when all of their business dealings are taken into consideration.
From a practical perspective, this means you will need to provide lenders with detailed information about your properties, business and income and expenditure.
To be honest, a number of lenders have been asking for this information anyway, so their processes and procedures won’t change very much.
Lenders have been slow to publish details of their requirements from landlords who own multiple properties (at the time of writing, only three buy-to- let lenders had done so), but the picture is now starting to become far clearer.
In summary, portfolio landlords will have to provide the following information:
• A schedule showing all the individual
properties which make up their total portfolio and a summary of their experience as a landlord
• A statement of assets and liabilities, including future tax implications and all outstanding mortgage balances
• A cashflow forecast • A business plan.
Templates
A key point to remember is that lenders have to assess your whole portfolio of properties and not just those against which you have mortgages or for which you are applying to raise mortgage finance, so be prepared to gather together information about your total business activities.
To make this task easier, a series of downloadable document templates will be available free of charge on the RLA mortgages website www.rlamortgages.co.uk
As you will see, these simply ask for information that you probably have to hand anyway, so hopefully it shouldn’t create too many problems.
In most other respects, lenders will take a very similar approach to assessing your mortgage application, that they take to assessing all other mortgage applications.
They will look at your income and expenditure including living costs, ongoing credit commitments and any other financial commitments.
Lenders will also validate your rental income, if it’s used as part of your personal income, by comparing it with typical rents in your area.
Future expected rentals will also be checked against existing rental agreements or via an independent valuer.
In summary, the downside of these changes is that they will result in more paperwork and form filling.
The good news, however, is that you will probably have most of the information you need easily to hand and the changes shouldn’t make it any more difficult for you to arrange finance in the future.
Another piece of good news is that one lender is using these changes as an opportunity to launch a new forward funding facility for its borrowers.
This means that they’ll analyse your property portfolio and financial circum- stances and then set an amount they are willing to lend up to in the future.
This will make subsequent loan applications a lot easier and quicker to facilitate.
If in doubt about any of these issues, the best course of action is to consult a specialist buy-to-let broker.

April House prices

In varying degrees, all of the major lenders and professional property market bodies have been reporting signs that house price growth has been slowing during the course of the past couple of months. This isn't wholly surprising, since the majority of sector analysts had forecast that the market would soften somewhat in 2017. What is perhaps more striking is the recent extent of the downturn. Nationwide has now published its April house price index, and its findings are in keeping with this trend.

House prices in the UK are falling

The most striking figure contained in the Nationwide report was that house prices in the UK fell by 0.4 per cent in April. Nethouseprices readers will no doubt recall that the lender recorded a decline of 0.3 per cent in March. The average cost of a residential property now stands at some £207,699.

The annual rate of growth is just 2.6 per cent, down from 3.5 per cent the previous month. This represents the slowest rise in house price inflation for four years.

Lower volumes of mortgage approvals

Meanwhile, the British Bankers' Association (BBA) announced its mortgage lending statistics for February, and these were just as sobering: mortgage approvals fell from 42,247 to 41,061.

These numbers, taken at their face value, appear to run counter to the latest Council of Mortgage Lenders (CML) index, which found that mortgage lending grew by 19 per cent, to £21.4 billion in March. The disparity can be explained quite readily. The CML reports on completed mortgage deals, while its counterpart, the BBA, just reports on approvals which haven't yet been translated into actual home loans. Allowing for the typical time lapse between obtaining a mortgage approval and completing a house purchase, the CML figures for April and May will no doubt reflect more closely the BBA's February index.

Analysing the figures

The first observation is that the Nationwide report's finding that prices fell by 0.4 per cent was not predicted by the main body of economic thought. Most housing economists anticipated that the cost of residential real estate would rise in April, albeit at the minimal rate of 0.1 per cent. That prices actually declined, said Robert Gardner, economist at the Nationwide, was unexpected for the simple reason that the wider economy is remaining robust. Certainly, he conceded, factors like increased pressure on domestic finances this year were widely forecast to slow down house price growth, but they weren't really thought likely to drag prices down.

Discussing his organisation's April index, Mr Gardner said that monthly reports can reflect some temporary volatility, but the fact that we are now in our second month of decline in the property market suggests that this is a trend rather than a "one off."

Other commentary

Jeremy Leaf, a leading London-based estate agent, said that the figures simply showed that there was an overdue market correction taking place, reflecting the fact that prices have reached an affordability "ceiling" in many places across Britain.

Howard Archer, of IHS, argued that the index was compelling evidence that the market is slowing in response to pressures on consumer finances.

One feature of the market that might have been expected to buoy prices is the increasingly low cost of mortgage borrowing. In a recent Nethouseprices column, we covered the emerging consensus that a mortgage rates war is being unleashed. Cheap borrowing, goes the argument, will allow more people to spend more on housing. This, of course, is true as far as it goes, and no one would seriously deny that low interest rates have, to some extent, supported the market. That they won't result in runaway house price growth, though, is explained by the rigidity of post-Mortgage Review rules around affordability. In other words, says Jonathan Harris, a mortgage broker, lenders are required to apply strict tests to every mortgage request, in order to be sure that the borrower can realistically afford the mortgage repayments in the event that interest rates are hiked. This, in turn, means that, as low as interest rates may be, borrowers cannot overextend themselves and buy higher priced properties.

Conclusions?

After months of mixed messages, it finally seems to be clear that the market is slowing. Uncertainty around Brexit is one of most oft-cited reasons for the sluggish performance of the sector. The upcoming general election might also induce caution among both buyers and sellers, though given the short lead time for the poll, this is unlikely to have a sustained impact on house prices. The general economy, which admittedly depends to a degree on the the outcome of the election, is believed to be key to the decline. Why?

Firstly, general price inflation is expected to rise to upwards of 2.7 per cent by the end of this year, which means that greater chunks of family finances will be used for everyday expenses, limiting both the savings and the confidence that are required to buy a house. This will be compounded by limited wage growth during the balance of 2017 and the probable contraction of the jobs market.

Secondly, the UK's economy is already showing signs of slowing, despite the fact that Brexit negotiations haven't really started in earnest. The Office for National Statistics (ONS) reported at the end of April that GDP growth more than halved, to 0.3 per cent, in the first quarter of this year. Economists had expected the figure to be closer to 0.5 per cent.

As discouraging as these figures unquestionably are, there aren't, at least as yet, any real grounds for doom and gloom. No one is suggesting that a house price crash is imminent, supported as prices are by Britain's chronic housing shortage. Equally, if the year since the EU referendum has taught us anything, it's that the country's housing market is remarkably resilient and more often surpasses than falls short of expectations.

Visit us again soon for the April statistics from other agencies, as well as the wider property market news.

Process of buying a first property research from Aldermore

New research from Aldermore has revealed the impact of the difficulties faced by first time buyers in the current housing market.
According to the findings, the process of buying a first property causes so much stress for some people it has made 35% ill or caused 34% issues in their relationship.

This stress is understandable. Aldermore’s figures show 17% of recent first time buyers took three or more attempts to buy their home, while 27% had to delay by more than two years. The impact of the buying process even resulted in 40% of respondents feeling like they have had to rebuild their life due to the compromises they had to make to get on the housing ladder.

Aldermore discovered that 9% found the actual process of securing a mortgage the biggest difficulty, and 10% cited the whole buying process as the biggest problem. For a further 8% of first time buyers it was the length of the purchase process.

When asked what could be done to improve the situation, 32% of recent first time buyers requested the issue of rising house prices to be addressed. 34% of respondents, simplifying the whole buying process would help, while three in ten (30%) believe the situation would improve if better mortgage products were available.

In the end though, the positives outweigh the negatives. 73% of recent first time buyers felt like they had reached adulthood when they got the keys to their first home, and 69% found that putting their own stamp on their new home to be an empowering experience.

75% of recent first time buyers feel they are no longer wasting money on rent, and 70% believe owning their own home gives them financial control.
Charles McDowell says:“Our latest quarterly first time buyer index reveals the issues recent first time buyers have faced when getting on the property ladder and the impact this is having on their day-to-day lives. Buying a first home is an empowering experience and can provide financial control, but our research shows the sacrifices being made by first time buyers to reach that first rung of the property ladder are negatively impacting their health and personal relationships.

The affordability ratio has doubled since 19972, demand is currently outmatching supply, and these difficulties are directly impacting first time buyers’ wellbeing. First time buyers are the driving force of the property market, but they are currently being priced out. More needs to be done to tackle these issues to ensure they have the best opportunity to buy their dream home.

Almost one in ten (9%) found the process of securing a mortgage the biggest difficulty which is why at Aldermore we are committed to helping to those who are struggling to gather a deposit by offering a range of products, including the family guarantee mortgage and 95% mortgages for customers who have a smaller deposit.”

A new survey has found

A new survey has found that many home owners do not know who is responsible for advising on the physical condition of a property prior to purchase.
Additionally, they are unclear on the purpose of a mortgage lender’s property valuation report, suggesting a need for greater clarity within the home-buying process.
When asked who benefits from the data contained in a mortgage valuation, respondents were not clear with many opting to choose incorrect answers. 65% correctly stated that the valuation report is for the benefit of the mortgage lender, yet over a third (35%) thought it is for buyers to use to determine whether the property is worth the agreed purchase price.  Just over a quarter (26%) felt it is there to provide buyers with details on the condition of the home, while 15% of respondents directly stated that they did not know what the valuation report is for.

The National Landlords Association off from incorporating in case the Government tries to clamp down on limited

The National Landlords Association (NLA) is urging members to hold off from incorporating in case the Government tries to clamp down on limited companies being formed to mitigate income mortgage interest relief changes.
Richard Lambert, chief executive of the NLA, said the Chancellor hinted in his Autumn Statement that the Treasury is concerned by the drop in tax revenues as a result of businesses across the economy incorporating to reduce their tax bills.
He warned that landlords, many of whom are incorporating to preserve mortgage interest relief, should wait to see whether a consultation is launched in next week’s Budget before making a decision.
It comes as the proportion of landlords intending to take out commercial loans to fund their property purchases has doubled over the past 18 months as they look to mitigate the impending buy-to-let tax changes.
Research by the NLA shows that the proportion of landlords planning to use commercial loans has risen from 10% in July 2015 – when the changes to taxation were first announced – to 19% at the end of last year.
The changes to taxation will take place from April and, once fully phased in by 2021, will prevent landlords with buy-to-let mortgages from deducting their interest payments or any other finance-related costs from their turnover before declaring their taxable income.
This rise coincides with increasing numbers of landlords telling the NLA’s quarterly landlord panel that they would form a limited company to preserve the mortgage interest relief perks. One per cent of landlords said they would incorporate in January 2016 and the figures now stands at 6%, which the NLA says equates to a rise from 20,000 to 120,000.
Lambert said: “Over the past year more than one hundred thousand landlords have formed a limited company in order to beat the tax changes, and this overlaps with an increasing intention to look to commercial loans to fund future purchases.
“While commercial loans are available to non-incorporated landlords, they tend to be a source of funding more commonly used by limited companies looking to expand their property portfolios, so we’d expect to see this trend develop as the year plays out.”

The traditional 25-year mortgage could be on the way out

The traditional 25-year mortgage could be on the way out, with growing numbers of first-time buyers opting for deals lasting 30 or 35 years – suggesting that many will still be burdened with home loan debt in their 60s and 70s.
The Halifax said that in 2016, about 28% of all first-time buyers with a mortgage opted for a 30- to 35-year term – up sharply from 11% in 2006.
Meanwhile, the average price first-time buyers are paying hit a new high last year, passing the £200,000 mark for the UK as a whole, and rising above £400,000 in London.
With high house prices, student debts and a rise in the age at which couples have children, many people are tending to buy a home later and opt for a longer repayment term. According to the Halifax, the average age of a first-time buyer is now 30, though this disguises regional variations. The average figure for London is 32, but in certain boroughs, such as Barnet and Ealing, and locations such as Slough in Berkshire, it is 34.
Stretching the term of the loan reduces monthly payments, which can seem attractive to those with tight finances. The Halifax offers mortgage terms of up to 40 years and said that with a repayment mortgage, the longer the term, the lower the monthly payment. 
However, it warns potential borrowers: “It will take you longer to pay off the loan, so you will pay more interest. This means it will cost you more over the life of your mortgage.”
This trend means that mortgages that last into retirement are becoming more common. Traditionally, many lenders would only grant a mortgage up to an individual’s planned retirement date.
In its report, the Halifax said that as the cost of a typical first home has risen, there has been a growing trend towards mortgage terms longer than the traditional 25 years.
In 2006, almost two-thirds (64%) of first-time buyers opted for a term of between five and 25 years, while the remaining 36% were over 25 years. Ten years on, the picture is dramatically different: 60% of first-time buyer mortgages involve a term of at least 25 years.
In 2016, the average price paid by someone who had never owned a property before was £205,170 – the highest on record. At the height of the housing downturn in 2009, the figure stood at £135,254.
In London, first-time buyers have seen the average price rise by 81% since 2009 to reach £402,692 – again, the highest on record.