Tag Archives: financial
RICS backs idea of older home owners downsizing to boost supply crisis
The Royal Institution of Chartered Surveyors has waded into the debate over housing supply in the UK, saying that measures such as downsizing could help alleviate the current problems. Last week the head of mortgages at the Financial Conduct Authority was criticised for saying that older people should move out of family homes to make way for younger families but RICS appears to also back the idea. In its latest policy review RICS suggest it is one measure that could help the current shortage of supply in the housing market and that more downsizing could release almost three million homes. It also suggests other measures such as the expansion of affordable ownership via planning controls insisting developers offer a percentage of new homes for affordable rent, regulations to oblige second home owners to release their properties for rental, and the creation of Self Invested Personal Pensions which would allow investors to put their money into Build To Let schemes. But it adds that downsizing is considered perhaps the most effective way of improving supply in the market. ‘Britain’s older home owners are understandably reluctant to move out of much loved, but often under occupied family homes,’ said Jeremy Blackburn, head of policy at RICS. ‘Clearly, it’s an emotive issue and one that needs to be treated with sensitivity, but we would like to see central and local government provide older people with the information, practical and financial support they need to downsize if that is their choice,’ he added. He explained that this might include offering a fund to support with moving costs and pointed out that Bristol City council is already piloting a scheme along these lines, and another suggestion is a stamp duty discount for retired people who are downsizing. RICS believes that the most consistent feature of the housing market over the last 18 months has been a shortage of homes on sale with stock levels on surveyors’ books dropping to lows not seen for at least three decades. ‘Almost a third of over 55s have considered downsizing in the last five years yet we know only seven per cent actually did. If we are to get to grips with this country’s housing crisis, we need to look at supply-led measures across government and the wider industry in order to get the market moving,’ Blackburn added. Continue reading
Research suggests potential buyers are not savvy about UK mortgage rules
Two thirds of potential house buyers in the UK do not understand the new mortgage rules which were introduced last year, new research has found. Some 31% of people who plan to buy a property within the next two years are unaware that mortgage rules were overhauled more than a year ago and a further 35% did know that the regulations had changed, the study by lender and broker Ocean Finance shows. In April 2014, the biggest piece of mortgage regulation in a decade came into force. The changes, brought in by the Financial Conduct Authority, mean lenders must take additional steps to ensure borrowers only get a mortgage they can afford. In practice, the new mortgage rules mean that borrowers face increased scrutiny from lenders about their incomes and their expenditure including spending on things such as childcare, holidays and entertainment. Yet 70% of those questioned were unaware that lenders are required to look closely at their spending. Consequently, a quarter said they haven’t changed their spending habits to help them qualify for a mortgage. Of those who do know that lenders are now required to examine spending, more than a fifth have reduced their spending on treats and have stopped contributing to life assurance and pensions to keep a greater proportion of their income in their bank accounts. The research also found that just 24% of aspiring home buyers questioned were aware that the new rules also test their ability to afford a mortgage if interest rates rise. And even fewer, 16%, knew that the rules would also test their ability to withstand changes to their personal circumstances. To help demystify the new rules and ensure they are prepared to apply for a mortgage, almost a fifth of potential buyers have sought advice from an independent mortgage broker and 30% have looked online for information about the rules. But 14% have relied on their friends or family for advice and a third have not sought any advice on applying for a mortgage. The research shows that a third of potential home buyers are so concerned about the tougher mortgage rules that they expect to have to delay buying a house so they can save for a bigger deposit and get into a stronger position to obtain a mortgage. 'More than a year after the new mortgage rules were introduced, potential buyers are still in a state of confusion about what they mean in reality. Even more worrying is that a large chunk of people who are gearing up to apply for a home loan are not even aware that the mortgage rules have changed,' said Gareth Shilton, Ocean’s spokesperson. 'As an industry, we need to do more to educate buyers and to guide them through a process which many people are finding understandably daunting. For anyone who plans to apply for a mortgage in the next year, it's key that their finances are in order, including checking their credit file… Continue reading
Research suggest a million UK home owners heading for an interest only mortgage time bomb
Around a million home owners in the UK could end up seeing their home repossessed if they have no way of paying off their interest only mortgages, new research has found. It is estimated that some 934,000 people have interest only mortgages and do not have a plan on how to pay it off when their term ends, according to the research by consumer charity Citizens Advice. Time is running out for some people who will either have to sell their homes, find the capital to pay off the debt or could risk having the property repossessed, the Yougov poll found. Some of the people who came to the consumer champion said they were not made aware that they would need to repay the capital at the end of their term. The average shortfall was previously estimated to be £71,000. Overall there are around 3.3 million mortgage holders who have interest only products of which 1.7 million have no linked repayment vehicle, such as an endowment or ISA and 934,000 of these have no plan for repayment and 432,727 of these people have not even thought about how they will repay the capital. Rules were tightened in 2012 to ensure interest only mortgages were no longer available without a repayment plan, which has resulted in a major drop in the number of products sold. Citizens Advice supports this change, but says people who already hold these mortgages need more support. The charity is concerned that interest only mortgage holders do not have the same protections when their term ends than when mortgage holders fall into arrears. A protocol was launched three years ago which gives lenders a legal obligation to consider alternative options before starting possession action, including extending the length of a mortgage, changing the type of mortgage and giving people reasonable time to sell their property if necessary. But these protections do not apply to interest only mortgages at the end of the term which is at the very point when many customers discover they are in trouble. 'People buy a home for stability but interest only mortgages have forced many into a financial black hole. It is good rules around these mortgages have changed, but there are many people who previously took out these products and face losing their home,' said Gillian Guy, chief executive of Citizens Advice. 'Lenders have to exhaust all other options when borrowers get into arrears and it’s time to level the playing field so that interest only customers get the same protections when their mortgages mature. It is also important that people can get independent advice, guidance and support about how they can plan and manage their finances,' she added. The Financial Conduct Authority (FCA) has said that due to previous peaks in the sale of interest only mortgages, they expect there to be waves of potential repossessions from 2017 to 2018, from 2027 to 2028 and in 2032. In 2013 the FCA called on banks to contact all borrowers with interest only mortgages ending before 2020 about how they… Continue reading
