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UK property prices record surprise 1.3% rise in June
Property prices in the UK increased by 1.3% in June but the underlying pace of growth is slowing with year on year prices down to 8.4% from 9.2% in May, the lowest since July 2015. This takes the average price to £216,823 and the data from the Halifax house price index also shows that quarterly growth was 1.2%, also down, compared to 1.5% the previous month and the lowest since December 2014. ‘House prices continue to increase, albeit at a slower rate, but this precedes the European Union referendum result, therefore it is far too early to determine any impact since,’ said Martin Ellis, Halifax housing economist. He pointed out that the month on month changes can be erratic and the quarter on quarter change is a more reliable indicator of the underlying trend. The figures show that despite Brexit the UK housing market is fundamentally strong, according to Russell Quirk, chief executive of eMoov. ‘With a continuing, acute shortage of new housing being built and a growing population even if immigration numbers are now curtailed, the demand and supply imbalance and the prospect of even low interest rates will underpin the market,’ he said. David Cheetham, market analyst and FX broker at XTB, pointed out that the month on month rise could be regarded as unexpected following an increase of just 0.6% the previous month. ‘The rise is somewhat surprising considering the impact on house building shares and property funds that has been seen following Britain's decision to leave the EU last month,’ he explained. ‘The worst hit shares in the FTSE100, in both the immediate aftermath and days that followed the Brexit were in the building sector with the majority of observers forecasting the decision to be negative for UK house prices. So far this week numerous asset managers have taken the steps of suspending trading in their property funds as withdrawals have surged amongst jittery investors,’ he pointed out. Sales should start to pick up in the coming months, according to Rob Weaver, director of investments at property crowdfunding platform Property Partner. ‘The fundamentals in the housing market remain unchanged. People still need a roof over their heads. There’s been a stand-off between sellers and buyers with transactions dropping off since the stampede in March to beat the stamp duty deadline. But sales should start to pick up in coming months with the weight of uncertainty now partially lifted,’ he said. ‘While people clearly delayed house purchases in the lead-up to the referendum, that backlog in transactions should unwind through the second half of the year. Life decisions like moving house can’t be put on hold forever. During periods of volatility in the stock and currency markets, investors tend to prefer assets which can provide a reliable income, combined with lower risk to preserve their wealth. For investors, residential property offers both of these attributes,’ he pointed out. ‘Historically, residential property has been the best performing… Continue reading
Bridging lending makes positive start to 2016 in UK
Gross annual bridging lending in the UK increased to £3.6 billion in February, up from £3.5 billion at the end of 2015 according to the latest sector index to be published. However, this expansion represents a modest 3% lift in gross annual lending since December, showing that growth has stabilised somewhat from the previous year, according to the West One Bridging index. The index report suggests that growth in short term finance has been driven by a number of factors including an uplift in demand for bridge to let loans in advance of April’s Stamp Duty surcharge. It points out that with property transactions rising 16.1% year on year in February, there has been a surge in demand for bridging finance in order to unblock property chains and raise additional finance. The sale of residential properties at auction also hit a record high in February, rising more than 25% compared to the same month last year. Bridging loans are usually the best option for buyers requiring additional finance for auction purchases because traditional forms of borrowing typically won’t be approved by lenders in time to complete on the sale. This continued growth in auction sales has provided a significant boost to bridging lending in the first two months of the year, the report explains. However, total bridging lending growth was tempered by a month on month flattening of construction output in February which was down by 0.3% alongside a slight 2% contraction of the commercial property market. With smaller developers using short term finance to aid in the completion of projects and specialist finance providers helping fill the post-recession gap in commercial lending, the dip in these markets has had some influence on growth in the short term finance sector. However these markets should improve following the reduction in Stamp Duty announced in March’s budget. ‘A 3% rise in lending may seem moderate, but that’s relative to some significant recent sector expansion. Moreover, we’ve seen healthy growth continuing in the weeks since February. A major contributor is professionals using bridging as part of their strategy to buy residential properties in need of renovation, improve them and re-sell at a healthy profit,’ said Stephen Wasserman, managing director of West One Loans. ‘In this case, the flexibility of bridging finance is well suited to financing such activity. With this group often buying at auction, our experience fits with the surge in auction buying noted. Moreover, we anticipate further growth from this group, favoured by the underlying lack of supply of new homes’ he pointed out. ‘Recently released DCLG figures showed that housing stock growth of 0.73% lagged population growth. That means renovating undesirable properties will continue to be a profitable and attractive business, from which bridging will benefit. DCLG data also showed a greater rise in private rented housing over owner occupied. We’ve also observed strong growth in bridging to acquire properties,… Continue reading
Thousands of home owners with interest only mortgages have no pay off plan
Up to one in 10 home owners aged 55 and over across the UK are still paying interest only mortgages with some unsure of how they will pay off their debt. Research shows that 10% of the 1.4 million owners in this age group still paying a mortgage have an interest only deal, amounting to 143,500 households, according to research from Homewise. It also found that while the majority are confident of clearing the debt some 17%, or 24,300, admit they will be unable to clear the debt. The average amount owed by over 55s with interest only mortgages is around £91,000 with one in seven owing more than £150,000. Homewise, which offers the Home for Life Plan enabling over-60s to buy homes at discounts of up to 59% under a lifetime lease, is urging those with interest only issues to start planning ahead. The Council of Mortgage Lenders estimates that at end of 2015 there are around 1.7 million pure interest only mortgages outstanding with another 500,000 part repayment and part interest only loans. That represents a major success by mortgage lenders and the Financial Conduct Authority which has campaigned since 2012 to help borrowers focus on repaying loans and the number of outstanding interest-only loans has been cut from 3.2 million in three years. Mark Neal, managing director at Homewise, said that the mortgage industry has made massive strides in tackling the interest only issue and has helped borrowers to take action and it is good news from the research that the majority have plans in place to ensure they can pay off the capital but there are still substantial numbers who do not appear to know what they will do. Homewise’s research also shows 34% of over 55s plan to clear their interest only mortgage with cash from savings and investments while 10% aim to use pension cash to clear the debt. Another 11% are banking on an inheritance. Continue reading
