Tag Archives: economy
Over half of UK home borrowers will struggle if interest rates rise, says new poll
Some 52% of borrowers in the UK believe they will struggle or fall behind with mortgage repayments when interest rates rise, according to new research published by the Building Societies Association. The survey has revealed that one tenth would experience real financial problems. A further 14% said they would be able keep up with repayments, but it would be a constant struggle, while almost a quarter, 23%, said that they would experience difficulty from time to time. When questioned about the impact on their lifestyle, 18% of borrowers said they will have to cut back on essentials such as food or clothing in order to make their monthly repayments. A further 15% said they will have to work more hours in order to keep on top of their mortgage commitments. ‘Concern from borrowers is natural when it comes to interest rate rises. There are at least 1.85 million home owners that have never experienced a rate rise, we have a record low Bank Base Rate for so long, it is unsurprising that some people are concerned that a rise in rates will affect their lifestyles and ability to make mortgage repayments,’ said Paul Broadhead, head of mortgage policy at the BSA. ‘Clearly some of the actions borrowers say they would take may not be within their control, for example working additional hours. Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs. This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards. Free money advice is available for those that are concerned,’ he explained. ‘The good news is that the results of our survey show nearly a quarter of borrowers will not have to make any changes to their lifestyle when interest rates rise. With the economy more stable than it has been for years, this is a positive result,’ he pointed out. ‘That said, with inflation near zero and the Monetary Policy Committee voting by a majority of eight to one to maintain the Bank Rate at 0.5%, it is looking unlikely that things will change before well into 2016,’ he added. Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said that after years of low rates, borrowers’ minds are beginning to focus on the prospect of higher interest rates, and what this will mean for their finances. ‘Nevertheless, many mortgage payers are still in for a big financial shock when rates do start to climb and we remain concerned that many will fall into problem debt as a result. We must not forget that renters, too, are likely to be affected as extra mortgage costs are passed on by landlords,’ she explained. ‘Households now have a window of opportunity to re-assess their budgets, look again at their borrowing and think about how they will cope with higher interest rates. It is crucial… Continue reading
Scottish property market still seen as a good investment despite tax changes
The Scottish property market is still adjusting to political and taxation changes but overall remains an attractive place to invest in real estate, according to a new analysis report. Scotland remains comparatively good value for money, and this is the key driver in the majority of buying decisions but the introduction of Land and Buildings Transaction Tax (LBTT ) in April has had an impact. It has contributed to the growth of Scotland’s mainstream residential market, but delayed the recovery of the prime sector in the medium term, says the report from real estate firm Savills. However, Edinburgh is the exception to the rule, where the prime market is attracting buyers from London and overseas who remain cautious about investing outside the capital and the report says that one year on from the Referendum on Scottish Independence, there has been a notable transfer in balance within the residential property market north of the border, with a shift to bottom up growth. The report explains that during the summer of 2014, the Scottish property market was recovering from the economic downturn. The prime residential market was leading the way in the resurgence, with a growing demand for properties above £400,000, particularly in key property hotspots. Consumer confidence was beginning to ripple out, both to other locations and to lower price bands. However, the Referendum raised a number of difficult questions, and the resulting uncertainty stalled the property market. ‘This was felt acutely at the top end, the bracket that had long been boosted by the prevalence of London buyers. A year on, this key target group remains anxious about LBTT and the forthcoming Scottish Rate of Income Tax,’ said Faisal Choudhry, director of Scottish residential research at Savills. ‘In addition, both UK and Scottish Governments have introduced initiatives to support the lower value sector of the market in an attempt to revive both the house building industry and buyers on the early steps of the property ladder,’ he said. ‘Buyers of homes below £400,000 are now receiving further assistance in the form of favourable rates of LBTT. Meanwhile, buyers of more expensive homes are taking on the burden of the new progressive taxation in Scotland,’ he added. The report says that Scotland’s million pound market has felt the biggest brunt of the new taxation changes. The vast majority of sales in this bracket completed prior to 01 April, before LBTT was introduced. While there has been a slight uplift in activity in recent weeks, sales have mostly been focussed on the core locations of Edinburgh, East Lothian, East Renfrewshire and East Dunbartonshire and also in Aberdeen, which saw the most expensive sale since April this year at £2.78 million. ‘As the economy improves, and buyers from both sides of the border adjust to the new taxation structure, we expect this upward trend to continue. While the million pound market is beginning to recover in Scotland’s capital, buyer activity in more provincial locations remains subdued,’… Continue reading
REO and distressed property still an important part of the US housing market
Once a stain on the US housing market, Real Estate Owned property and short sales are now regarded as a critical market indicator and the number increased by 0.7% in August, the latest data shows. While this type of property is a reminder of the legacy of the housing downturn, real estate investors, seeking discount prices, have transformed what was once undesirable into a more popular way of investing in the market. The data from Clear Capital shows that the quarterly distressed saturation rose from 15.4% to 16.1% and the firm says that increases in distressed activity leading into winter could shift momentum towards peak distressed saturation levels of 40%. Typically, distressed saturation fluctuates with the seasons and increases in the winter season. Distressed saturation rates have exceeded that of the nation in the West and Midwest, up by 0.9% and 1.2%, respectively, while the largest gains in distressed saturation have been in the South, with a 1.5% increase from 18.6% to 20.1%. The Northeast was the only region to experience a decrease in distressed saturation, where rates dipped 0.3% from 14.3% to 14%. The report shows that for the past three years, distressed saturation in the San Juan metropolitan area has been steadily increasing, having grown 8% from 9% in 2013 to 17% today but says that this trend is unusual in the current housing environment. ~ Over the same three year period, nearly all of the major metro markets have experienced steady declines in distressed saturation. In terms of pricing, this near doubling of the saturation rate has corresponded with a rapid change in price declines from a yearly loss of 1.5% in 2013 to a yearly rate of decline of 10.2% today. The Midwest is the only region to see quarterly gains in price appreciation, nearly doubling from 0.4% to 0.7%. The region still lags behind the West, which experienced declining gains of 0.1% yet still continues to report highest quarterly growth at 1.2%. The South and Northeast appreciation rates remained stagnant, reporting 0.8% and 0.2% growth over the quarter. There are differences in regional performance. The San Jose and Detroit metropolitan areas both report healthy growth rates of 2.1%. While the South did not see accelerated price gains, continued growth through August could be a sign that this region is on firm footing moving forward. Seven of the 15 top performing markets are located in the South, while four of the lowest performing metropolitan areas are in the Northeast. Distressed saturation continues to be a challenge in today’s housing market, according to Alex Villacorta, vice president of research and analytics at Clear Capital. ‘In fact, today’s traditional housing market continues to be defined by distressed saturation levels. At the start of the downturn, distressed properties were an albatross around housing’s neck but between 2011 and 2013 investors stepped in, buying, rehabbing and selling or renting distressed properties, which gave way to higher demand and rising prices,’ he… Continue reading
