Archive for the ‘Mortgage Industry News’ Category

Rent Arrears The Main Cause Of Possessions

Tuesday, August 17th, 2010

Research published by the National Landlords Association (NLA) suggests that 47% of possessions by landlords are due to tenants not paying their rent.

Although one-third of landlords had never sought to end a tenancy, the survey found 23.3% of had because of “anti-social behaviour” by tenants.

Landlords reported in 57% of possession cases the tenants took less than three months to move out, while 81% of cases were resolved within five months.

This follows recent data released by the NLA showing a fifth of private-residential landlords had tenants in rent arrears during Q2 2010.

David Salusbury (pictured), chairman of the NLA, said: “Gaining possession can be very costly for landlords, especially when it is related to rental arrears. Many landlords have mortgages to pay on top of the expense of gaining possession. One-third of landlords have reported paying between £250 and £1,000 to have tenants removed. This amount is often compounded by late rent payments.”

Lettings Agents Want BTL Market Regulated

Saturday, August 14th, 2010

Property firm movewithus has conducted research which indicated that 51% of the estate agents surveyed believe that the buy-to-let market should be regulated by the FSA (soon to be replaced by the Consumer Protection and Markets Authority (CPMA).

The survey questioned over 200 major estate agents across the UK.

Robin King, movewithus director, said: “If the advice given to buy-to-let investors had been regulated by a body, such as the FSA, we might have seen better investment advice and far fewer casualties when things went wrong in this sector. Buy-to-let is still a vulnerable market because of the type of properties being bought and so it is interesting to see that a significant proportion of estate agents themselves would like to see the sector regulated.”

Landlords Expecting Continued Increase In Tenant Demand

Monday, July 19th, 2010

29% of landlords recorded growing levels of tenant demand during he second quarter of the year, compared to 10% who said it was falling, according to Paragon Mortgages’ PRS Trends Report.

This compares to the first quarter of the year, when 24% of landlords reported growing tenant demand and 8% reported falling levels of demand. Tenant demand was stable for the 54% of landlords during the second quarter, whilst 7% said they were unsure which direction demand was heading.

Landlords expect tenant demand to strengthen considerably: 35% of landlords expect demand to be higher in 12 months’ time, with 8% forecasting a decline.

Nigel Terrington, Paragon Group chief executive, said: “Tenant demand has been rising consistently for two years and shows no signs of slowing down. Would-be home buyers continue to be unwilling or unable to step onto the property ladder, whilst longer-term social changes, such as greater numbers of single person households and economic migrants, are also creating more demand for rented property.

“Strong tenant demand is great news for landlords, but will lead to rental inflation for tenants unless the private rented sector is able to expand to meet this demand. Pressure is building on the finite number of properties in the sector because the lack of buy-to-let mortgage availability has prevented landlords from growing their property portfolios.”

There was a significant increase in the proportion of landlords planning to purchase, with 21% intending to purchase during the third quarter of the year, up from 12% who said they wanted to purchase in the second quarter.

Four out of 10 landlords said that they attempted to secure buy-to-let finance for purchase or remortgage purposes during the second quarter, with 52% of those saying that it was more difficult than previous attempts to secure finance, with just 13% stating it was easier.

Landlords said that a wider availability of mortgage finance, tax incentives and sustained levels of tenant demand would encourage further investment in the PRS. Just over four out of 10 landlords (43%) said they would like a better tax environment to help expand their property business, with 45% calling for the expansion of available mortgage finance.

Terrington said: “It is clear that confidence is high amongst the landlord community, which is reflected in the greater appetite for investment. There is obviously a dislocation between landlords’ intention to purchase and their actual ability to do so given the continued scarcity of buy-to-let mortgage finance. However, PRS Trends confirms that landlords still value residential property as an investment vehicle.”

Rising Rents Hit 2008 Levels

Friday, July 16th, 2010

The average rent across the UK increased 1% in June as constraints on supply boosted prices to their highest level since 2008, according to LSL Property Services.

LSL revealed that rents have risen for the fifth month in a row and are now 3.2% higher than a year ago. The average rent now stands at £673 per month, the highest price since November 2008.
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London lead the surge in June, with rents in the capital increasing 1.9% to an average £942, while rents in the North and North East rose 1.4% and 1.3% respectively.

However, the West Midlands saw a drop in rents of 1.7%.

Rental yields on buy-to-let properties have also been boosted up to 4.9% in June, as the average house price for the average rental property fell by 0.25% and the annual increase slowed to 8%.

The total return from investing in buy-to-let over the last year dropped slightly to 12.3% in June LSL found, as house prices come down. The average landlords would have made £18,983 in the past year, made up of £7164 in rent and £11,819 in capital gains.

Tenant arrears also fell to 10.1% of all rent in June compared to 10.7% in May, with £234m of all rent in the UK unpaid.

David Brown, commercial director of LSL, said: “The seasonal pick-up was exaggerated by the squeeze in the supply of rental accommodation. Although landlords weren’t clobbered as badly as feared, it is possible that some left the market in the run-up to the Budget and concerns over the new Capital Gains Tax rate dampened the number of new investors entering the market in June.

“But the restricted availability of buy-to-let mortgage finance has been the underlying factor holding back investment in the sector and the number of new rental properties hitting the market.”

Cash-strapped Landlords Struggling To Cover Mortgages

Thursday, July 15th, 2010

One in four landlords have admitted rents from tenants are barely covering their mortgage repayments and any interest rate rises could spell disaster, according to flat and house share website Spareroom.co.uk.

Research by Spareroom.co.uk found that 41% of landlords are only just meeting mortgage payments, while 43% said rents would no longer cover their mortgages if interest rates increased by 2%.

Some landlords admitted to standing even closer to the precipice, with 22% saying an interest rate rise of 1% would lead to rents not covering mortgages, while 10% said a rate rise of just 0.5% would create a shortfall.

The Bank of England’s Monetary Policy Committee has held interest rates at 0.5% for 16 months and is likely to maintain the rate for the time being. However, commentators agree interest rates must rise eventually.

Concerns over mortgage payments and potential rate rises have led 63% of landlords to increase rents in the past six months, with 21% admitting they have or plan to hike rents by 5% this year. A further 18% plan increases of between 3% and 5%.

However, over half of landlords said they are worried increasing rents could lose them loyal and valuable tenants.

Matt Hutchinson, director of Spareroom.co.uk, said: “Britain’s landlords are in a Catch 22. On the one hand, the rise in Capital Gains Tax for higher rate taxpayers means that many landlords either won’t be able to sell their buy-to-let properties full stop or will sell at a far greater loss. At the same time, holding onto their properties means they are at the mercy of the Bank of England and facing higher mortgage payments.

“For many landlords, it is hard to know which way to turn, and it could be that tenants feel the full force of landlords’ financial strain. The vast majority of landlords who have good relationships with their tenants don’t want to force the rent up, but for those who are struggling to make ends meet, it’s the only option.”

Buy-To-Let Landlords Warned To Protect Against Tenant Troubles

Thursday, July 15th, 2010

Buy-to-let landlords warned to protect against tenant troubles
15 July 2010

With the housing market still in a state of flux and predictions that house prices may fall further, many homeowners who are looking to move may consider renting their property out instead of selling.

However, moneysupermarket.com has warned homeowners who are considering this option to make sure they take out adequate landlords insurance as standard home insurance policies become invalid once you earn an income from your property.

With tenant demand for residential property continuing to rise, the proportion of landlords planning to buy new properties increasing and lenders slowly reintroducing good value buy-to-let mortgages, the number of people becoming landlords for the first time appears to be on the rise.

Whether you are moving into buy-to-let for investment, or have decided to go down this route to move home, getting the contract and paperwork right is essential and having adequate insurance in place is a must.

Last year, one in three landlords had tenants in arrears, so Brits shouldn’t skimp on their insurance. However it doesn’t have to break the bank, with standard landlord insurance available from as little as £93 a year from simple insurance, which covers loss of rent. For £134 a year, acumus will provide landlords with cover for legal expenses should they arise from incidents such as repossession, tenant default, and debt recovery.

Julie Owens, head of home insurance at moneysupermarket.com, said:

“Whether you’re looking at buy-to-let property for investment, extra income, or because you cannot sell your house, it is essential to have sufficient insurance to cover any financial losses connected with letting out a property. I advise anyone contemplating becoming a landlord to seek advice and get all of the relevant information before taking this venture on.”

“Landlord insurance which includes Rent Guarantee cover or legal expenses can be more expensive, however if things go wrong between a landlord and tenant legal proceedings can involve a hefty cost. It is important to have a good contract in place to know where each party stands should the tenant and landlord relationship fall sour.

“I advise insuring yourself against these circumstances before they arise, it is always better to be prepared and there are a number of suitable insurance policies for landlords on the market. The varying levels of cover available means it’s essential to do your research and pick the policy that is the best fit for your circumstances, policy wording can differ so it is vital to check the small print to determine exactly what is covered.”

Landlords Looking To Buy Residential Property For Investment Purposes Has Nearly Doubled

Tuesday, June 22nd, 2010

The number of landlords looking to buy residential property for investment purposes has nearly doubled, according to buy-to-let lender Paragon Mortgages.

Paragon’s Trends research, a quarterly panel survey of landlords, shows that 21% of landlords plan to purchase property during the third quarter of the year, up from 11% who said they planned to purchase during the first quarter and 12% who planned to purchase in the second.

Terraced housing topped the popularity list of those looking to buy, with 74% of landlords stating that they intended to purchase this type of property, followed by semi-detached housing, flats and detached property.

However, mortgage finance remains a major obstacle. Four out of 10 landlords said that they attempted to secure buy-to-let finance for purchase or remortgage purposes during the second quarter. Of those that did, 52% said that it was more difficult than previous attempts to secure finance, with just 13% stating that it was easier. The remaining 35% said they noticed no difference in the availability of finance.

The Trends research showed that a wider availability of mortgage finance was the main factor that would encourage a landlord to expand their portfolio. 46% said wider mortgage finance would encourage them to expand their portfolios, followed by better tax incentives (43%) and sustained levels of tenant demand (42%).

Less important factors were greater levels of Government support (26%) and property supply (14%).

John Heron (pictured), Paragon Mortgages’ managing director, said: “There has been a significant jump in the percentage of landlords looking to purchase property, which reflects the increased level of confidence across the landlord community. Tenant demand is strong and expected to grow in the coming years because of significant socio-economic and demographic changes, such as a rising population and growing numbers of net migration, one person households and students.

“However, there remains a dislocation between landlords’ desire to purchase property and their ability to do so. Accessing mortgage finance remains difficult for a large number of landlords. We have seen new entrants into the buy-to-let market, but the criteria attached to the majority of buy-to-let mortgages is targeted at small scale investors rather than professional landlords. If the market, and the private rented sector, is going to expand, then criteria needs to be adapted to allow larger-scale landlords to grow their property businesses.”

Rents Exceed Mortgage Repayments

Tuesday, June 15th, 2010

Research by Santander showed that buying a property is now cheaper than renting in every area except London, with would-be buyers outside the capital able to save an average of £1040 a year by owning their own property.

The average monthly rent in the UK, excluding London, is now just over £420 compared to monthly mortgage repayments of £334 for the average first-time buyer.

Only people living in the capital are better off by continuing to rent, despite rental prices being roughly 56% higher than the rest of the UK at £701 a month. To buy, first-time buyers in London face paying an extra £359 a month.

The savings to be made by buying as opposed to renting have increased 67% in the last six months from a saving of £52 a month last October to £87 now.

Phil Cliff, director of mortgage marketing at Santander UK, said: “People have been justifiably cautious in approaching the housing market in recent months but this research strongly supports the idea that in the majority of cases owning can be less expensive than renting.

“The now average LTV of 75% for first-time-buyers has provided an obstacle in some cases but saving for a deposit is clearly a wise move. Lenders are also looking to offer higher LTV products, while the Government’s announcement that it will help boost the number of new homes is all positive news for those wishing to take their first steps on the property ladder.”

Government Promise To Landlords: No More Red Tape

Tuesday, June 15th, 2010

Housing Minister Grant Shapps has today announced that he will be scrapping plans to introduce new regulations on private landlords.

There are one million landlords in England – nearly three quarters of which are individuals who may be renting a single room out. Of the three million private tenants in this country, the vast majority report they are satisfied with the service they receive from their landlords.

Speaking in Parliament, Mr Shapps confirmed that with the private rented sector already governed by a well established legal framework, the Government has no plans to introduce any further regulations.

Instead, he urged councils to use the wide range of powers they already have at their disposal to tackle the minority of rogue landlords that blight some communities, provide a poor service to tenants and damage the reputation of the private rented sector.

Council powers include powers to require landlords to take action to rectify hazards in their property; where landlords resist, the ability to make and charge for improvements and to prohibit use of the affected parts of the property; and discretionary licensing powers to tackle areas blighted by poorly managed privately rented stock.

New regulations were proposed by the previous administration in response to the Rugg Review of the Private Rented Sector, but have been judged by the new coalition to introduce too much additional red tape. These included a National Register of Landlords, regulation of letting and managing agents, and compulsory written tenancy agreements.

Grant Shapps said: “With the vast majority of England’s three million private tenants happy with the service they receive, I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords. So today I make a promise to good landlords across the country: the Government has no plans to create any burdensome red tape and bureaucracy, so you are able to continue providing a service to your tenants. But for the bad landlords, I am putting councils on alert to use the range of powers already at their disposal to make sure tenants are properly protected.”

The Communities & Local Government department also announced that plans to increase the annual rental threshold for assured and assured shorthold tenancies from the current level of £25,000 to £100,000 will go ahead. The Statutory Instrument raising the threshold, “The Assured Tenancies (Amendment) (England) Order 2010 – SI 2010 No. 908″ was laid on 25 March and the change will come into effect on 1 October 2010. This will apply to all existing and new tenancies and will restore the

Buy-To-Let Will Remain A Strong Investment, Even If CGT Rises

Monday, June 14th, 2010

Leaders, a UK letting agent, are confident that buy-to-let will remain a popular investment option, even if the rate of Capital Gains Tax (CGT) rises.

CGT is currently set at a flat rate of 18 per cent but there has been widespread speculation that this will be converged with Income Tax bands at 20, 40 or even 50 per cent under the new coalition government.

Leaders’ managing director, Paul Weller, says:

“The potential of buy to let to provide an annual rental yield, as well as to provide capital gains in the long-term, has long appealed to a wide range of investors and will continue to appeal as an enduring asset class.

“We do not believe landlords will act hastily in the face of a possible CGT rise. They know that buying to let is a long-term investment which brings with it a good chance of a capital gain – unlike many other assets classes – and after all, a taxed gain is better than no gain or a loss. Besides, assets other than property that achieve capital growth will also be subject to CGT.

“At the same time, with rents now rising as they are because of high demand, the income earned through property is likely to be much higher than derisory interest payments on any cash realised through selling an investment property, particularly as only the net proceeds after any CGT will be available to invest. Interest rates are currently around 1% whilst rental yields of 6% are now achievable.”

Mr Weller also points out that CGT only dropped to the current rate of 18 per cent in 2008; prior to that, when many landlords began investing, it was significantly higher.

For any landlords considering whether they should cash in on their investment ahead of a potential CGT rise, Leaders advise caution.

Mr Weller continues:

“Firstly, you need to consider where else you would put your money right now. As well as interest rates being so pitifully low, stocks and shares are no more enticing; you only have to look at what is happening to BP, a blue-chip British company whose share price has almost halved over the last 6 weeks, and who may consider suspending dividend payments. Property values tend to rise over the long-term making bricks and mortar a more solid investment.

“Secondly, your rental property may have increased in rental value over the last few years; we have seen rents gradually rising and if you have been renting your property for some time and not had it valued recently you may be pleasantly surprised by the rent it can command in the current market.

“At Leaders we will be happy to give free, impartial and expert advice on your property’s rental value and we are not conflicted by the possible sales fee an estate agent may be considering if your property is sold.

“Thirdly, for anyone thinking about selling their property before any CGT rise and then re-investing in a new buy-to-let property, they need to bear in mind the dual transaction costs and stamp duty that may be payable on the new property. Any potential savings on CGT would need to outweigh these costs to make this course of action worth taking.”

Whilst Leaders does not believe that an increase in the CGT rate will cause sensible landlords to dismiss buy-to-let or cash in their chips, the firm is concerned about the disconcerting short-term effect the uncertainty of a possible rise is having on the market, which currently needs more investment.

Mr Weller adds:

“We have written to the Housing Minister ahead of the Emergency Budget on 22nd June urging the government to dispel the uncertainty over CGT and to give careful consideration to the UK’s private landlords.

“The Private Rented Sector (PRS) currently accommodates 13% of UK households and needs nurturing if it is to continue to provide a good choice of homes to the millions of people who either choose to rent, or rent because they are unable to buy. We are seriously concerned about the current shortage of good quality property available to rent and urge the government to do all it can to encourage new investment in this sector.”

Mr Weller points out that with demand outstripping supply, rents are rising and more tenants and would-be tenants are finding rents increasingly unaffordable. This situation will worsen if investment in the sector is not encouraged.

Mr Weller concludes:

“If there is to be an increase in CGT we would urge the government to ensure that suitable concessions are introduced alongside. Many private landlords are not wealthy people, but ordinary individuals who have chosen to invest in property to provide for their retirement so that they will not be a burden on future taxpayers.

“It would be wrong for them to be penalised by the tax system for doing so. If CGT rates do rise then appropriate concessions, such as generous taper relief, that will support long-term investment are essential.”