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Research shows hundreds of thousands of UK landlords are not protecting tenant deposits
Some 284,000 residential landlords in the UK have failed to protect renters’ deposits despite the fact that it is a legal requirement to do so, new research has found. A report from the Centre for Economics and Business Research (Cebr) for financial comparison website money.co.uk says that these landlords are sitting on £514 million of deposits that should be protected by an official third party service. With 4.6 million households privately rented and the average protected deposit at £1,040, the total value of deposits paid by tenants and placed in protection schemes by landlords has now reached £3.2 billion, the report claims. Despite the risk of fines for landlords who fail to protect their tenants’ deposits, 15% are still failing to do so running the risk of a £2,400 penalty and the report adds that landlords that flout the rules could together be earning up to £8.5 million a year in interest on unprotected money, while leaving themselves and their tenants with no third party protection when their agreement comes to an end. The government imposed deposit protection schemes to stop landlords unfairly taking money out of deposits for things such as wear and tear or pre-existing damage when tenants move on. With this protection in place, an alternative dispute resolution scheme will step in and assess the case and make sure any money held back by the landlord is a fair deal for both the tenant and the landlord. However, compliance with these rules are not being monitored effectively and the onus to report and take action against the landlord lies with the tenant, the report also explains. ‘While many landlords are doing the right thing and protecting deposits in one of the official government backed schemes, a worrying amount of money is falling through the cracks and far too many tenants are being left vulnerable,’ said Hannah Maundrell, editor in chief of money.co.uk. ‘It’s not right that tenants are left responsible for taking their landlord to court if their deposit hasn’t been protected. The government needs to step in and take decisive action. Introducing a compulsory register listing every landlord that rents out property in England and Wales would be a start. This works for Scotland and Northern Ireland and it seems crazy this hasn’t been brought in across the UK,’ she explained. ‘Add in tenants’ ratings and reviews to this too and you have both the beginnings of a solution that helps renters make an informed choice about who they’re handing over buckets of cash to; and the foundation for policing landlords that are currently going unchecked,’ she added. Maundrell also pointed out that it is not just renters that stand to benefit from deposits being protected. ‘Landlords need a safeguard against renters that misbehave too. I can’t understand why any landlord wouldn’t do this. It doesn’t have to cost anything to place money with a tenancy deposit scheme and could save so much hassle later on,’ she added. Continue reading
Rental prices up year on year in 11 out of 12 UK regions, latest index shows
Residential rents prices have increased in 11 out of 12 regions in the UK with the South East of England and the East Midlands showing the highest annual rent increases. Overall the average rent in the UK, excluding Greater London, is now £740 per month while in the capital city it is £1,510 per month, according to the latest rental index from HomeLet. Only the North West of England has seen rental prices drop with a fall of 3.4% from £646 per month to £624 per month. However, rent prices for new tenancies in Greater London are rising at the slowest rate for almost two years. The January index data shows Greater London rent prices are 6.2% higher for the three months to January 2016 compared to the same period in 2015, the slowest rate of growth seen in Greater London, the slowest since March 2014. By comparison, rent prices in other regions continue to rise steadily with the South East of England and the East Midlands seeing the highest rent price rises in the three months to January 2016, at 7.2% and 6.8% respectively. Monthly data gives a different picture. Rent prices in the UK, excluding Greater London, were 0.2% higher in the three months to January 2016 than in the three months to December 2015. In Greater London, rent prices have fallen by 0.9% in the three months to January 2016, compared to the previous month. Overall, six out of 12 UK regions have seen rent prices rise in the three months to January 2016 compared to last month, while six have seen prices fall. ‘It’s notable that there has been a further fall in the rate at which average rents in the Greater London area are rising. In recent years, the capital has seen much faster rates of increase than the rest of the country, but it may be that an affordability ceiling has now been reached in London and that rents will now track other parts of the UK more closely,’ said Martin Totty, chief executive officer of the firm’s parent company Barbon Insurance Group. ‘The fact that UK wide average rents in the private rented sector continue to show sustained upwards growth reflects there is still strong demand for rental properties, driven mainly by the impact of the long term structural imbalance in supply and demand of property,’ he pointed out. ‘Landlords achieving higher average rents over time also suggests that tenants starting a new tenancy are proving they can afford higher average rents. With demand outstripping supply, some would-be tenants may be able to outbid rivals for properties, which could drive higher rents,’ he added. Continue reading
Call for relaxation of mortgage affordability rules in UK
A relaxation of mortgage affordability rules in the UK could help more lifetime mortgage customers take up the option to make interest repayments initially before switching to a roll-up arrangement, it is claimed. Such a move for residential rather than lifetime lending could benefit consumers and encourage innovation, according to the Equity Release Council which has asked the Financial Conduct Authority to look into it. Amendments to the Mortgage Conduct of Business (MCOB) rules following the Mortgage Market Review (MMR) mean that lifetime mortgage contracts which permit, but do not require, consumers to pay interest for a period are subject to the requirement of providers to assess their affordability. This is despite the fact that payments of interest are always optional and that customers will never be at risk of losing their home as a result of being unable to continue with interest payments. As a result, says the ERC, some customers who would have taken out a lifetime mortgage giving them the option to repay interest for as long as they wished might not now pass affordability assessments, may be reluctant to subject themselves to the assessment process or be recommended alternative products. The Council has asked the FCA to consider whether a relaxation of rules originally designed for residential rather than lifetime mortgages would help more consumers unlock their housing wealth while protecting a larger amount of equity in their property. A relaxation might also support existing providers' ability to expand their product range and encourage new entrants. The request from the Council formed part of its evidence submission to the FCA's Call for Inputs on competition in the mortgage market. The FCA is set to outline next steps in the form of a summary statement in the first quarter of 2016. The Council's submission included a separate request for the FCA and Government to consider the long-term impacts of decisions relating to tax and regulation which may affect equity release lending. It also recommended that the FCA engages with the Prudential Regulatory Authority (PRA) to consider how equity release is currently funded, the extent to which current prudential requirements create barriers for firms and whether a broader approach could be taken which would enable alternative sources of funding to be accessed. ‘We welcome the proactive decision by the FCA to review whether there are any barriers to competition in the mortgage sector. Retirement lending is a crucial part of this and there needs to be careful consideration of the factors which differentiate residential and lifetime borrowing,’ said Nigel Waterson, chairman of the Equity Release Council. ‘As part of our wide-ranging input we highlighted that revisiting affordability rules may help more consumers to make use of options already offered by equity release providers in later life, as well as encouraging more new entrants to the market,’ he explained. ‘There is a growing recognition that equity release has an important part to play in the planning of funding for later life, and we look forward… Continue reading
