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Residential mortgages unlikely to be affected in short term by Brexit vote
Home mortgages in the UK are unlikely to be affected immediately by the decision to leave the European Union, according to finance commentators. However, it could be good news for first time buyers if price growth slows and interest rates fall with some experts predicting that the Bank of England might reduce rates even further than the current historic 0.5%. In the short term, people’s attention will be on interest rates and what impact this will have on mortgage costs, according to the Council of Mortgage Lenders. ‘While markets are bound to react to the news, the question will be how long it takes for them to settle. We know the authorities will be mindful of this,’ said the CML spokesman. In the medium term, there will also be interest in the extent to which housing transactions are affected by economic uncertainty, and whether this will impact on house prices. The more quickly markets resettle, the lower the impact on the housing market is likely to be. However, any prolonged disturbance would inevitably impact the housing market. ‘For lenders, the treatment of customers and of mortgage applications will be business as usual. People who have received mortgage offers will not see them affected. People facing financial difficulty will continue to be treated constructively and positively,’ the CML spokesman explained. ‘Lenders remain open for business as usual. Mortgage pricing is unlikely to react instantly, although pricing may be affected in the foreseeable future because of the effect on lenders’ cost of funds arising from the perception of economic uncertainty. How long this lasts will depend on how quickly markets resettle,’ he added. Indeed, Mark Carney, governor of the Bank of England, quickly announced that any measures needed to support financial markets and the UK economy would come into play. These measures could include a cut in interest rates that could reduce home owners' monthly mortgage payments, a measure repeatedly taken during the financial crisis of 2008. James Roberts, chief economist at real estate firm Knight Frank, believes that an interest rate cut is on the cards. ‘We expect the Bank of England, seasoned by the experience of financial crisis, to respond quickly. An interest rate cut of 25 basis points is a strong possibility at the Monetary Policy Committee's July meeting, or perhaps earlier if required,’ he said. Continue reading
Sales in US reach highest level for a decade and prices reach all time high
Existing home sales in the United States increased in May to their highest pace in almost a decade and median sales prices reached an all-time high. While the uptick in demand this spring amidst lagging supply levels pushed the median sales price to an all-time high, according to the National Association of Realtors®. All major regions except for the Midwest saw strong sales increases last month. Total existing home sales, which are completed transactions that include single family homes, town homes, condominiums and co-ops, were up by 1.8% to a seasonally adjusted annual rate of 5.53 million in May from a downwardly revised 5.43 million in April. The data from the National Association of Realtors (NAR) shows that with last month's gain, sales are now up 4.5% from May 2015 and are at their highest annual pace since February 2007. ‘This spring's sustained period of ultra-low mortgage rates has certainly been a worthy incentive to buy a home, but the primary driver in the increase in sales is more home owners realizing the equity they've accumulated in recent years and finally deciding to trade-up or downsize,’ said Lawrence Yun, NAR chief economist. ‘With first time buyers still struggling to enter the market, repeat buyers using the proceeds from the sale of their previous home as their down payment are making up the bulk of home purchases right now,’ he pointed out. ‘Barring further deceleration in job growth that could ultimately temper demand from these repeat buyers, sales have the potential to mostly maintain their current pace through the summer,’ he added. Surpassing the peak median sales price set last June of $236,300) the median existing home price for all housing types in May was $239,700, up 4.7% from May 2015 and the 51st consecutive month of year on year gains. The data also shows that total housing inventory at the end of May rose 1.4% to 2.15 million existing homes available for sale, but is still 5.7% lower than a year ago while unsold inventory is at a 4.7 month supply at the current sales pace, which is unchanged from April. ‘Existing inventory remains subdued throughout much of the country and continues to lag even last year's deficient amount. While new home construction has thankfully crept higher so far this year, there's still a glaring need for even more, to help alleviate the supply pressures that are severely limiting choices and pushing prices out of reach for plenty of prospective first time buyers,’ said Yun. The share of first time buyers was 30% in May, down from 32% both in April and a year ago. First time buyers in all of 2015 also represented an average of 30%. Properties typically stayed on the market for 32 days in May compared to 39 days in April, which is below a year ago when it was 40 days and the shortest time since NAR began tracking in May 2011. Short sales were on the market the longest… Continue reading
Northern UK seaside towns provide better yields for landlords than those in south
The Hull area has been named as the top seaside postal area for landlords in England and Wales in terms of offering the best average rental yields. Research shows that property investors who buy within the Hull postcode area can realise rental yields of up to 10.7% in seaside resorts like Withernsea. According to the data from online property investment firm LendInvest the next best postal area for landlords is Blackpool. Landlords who invest in property in the town itself can achieve rental yields of 8.2%. Colwyn Bay North Wales is third with buyers seeing rental yields of 6.1%, followed by Barry in Cardiff at 6%, Caister on Sea near Norwich as 5.7% and then Egremont in Cumbria also at 5.7%. Next comes Morecambe in Lancashire and Scarborough in Yorkshire, both with average yields of 5.5%, followed by Ramsgate in Kent and Portslade in Brighton both at 5.2%. Then comes Ryde on the Isle of Wight at 5.1%, Clacton-on-Sea in Essex, Bournemouth and Chapel St Leonards all at 5%, and finally Plymouth at 4.9%. ‘When you think about investing in property in a seaside town, many will immediately think of places like Brighton and Eastbourne. But as our research makes clear, investing in the right Northern seaside towns, for example, could prove a lot more lucrative,’ said Christian Faes, chief executive officer of LendInvest. He pointed out that seaside towns often enjoy strong demand from renters, whether that’s for yearlong tenancies or for a couple of weeks over the holiday months. ‘However, it’s crucial that would-be property investors do their research on the area to gauge just how much demand there is, and what sort of competition they face. It’s not enough to rely on the allure of ice cream and sea air,’ he added. Continue reading
