Tag Archives: financial
Non standard UK home borrowers face lack of clarity on mortgages
Fears of a future clampdown by regulators are preventing mortgage lenders from offering loans that stretch into people’s retirement, according to a new report. The report from the Intermediary Mortgage Lenders Association examines the impact of post financial crisis mortgage regulation on the growing army of ‘non-standard’ customers who fall outside the traditional core of salaried borrowers with no credit blemishes who can pay off their loans before a set retirement date. IMLA argues that people seeking a loan which is likely to remain outstanding beyond their normal retirement age are suffering from a lack of clarity in the Mortgage Market Review (MMR) rules, which is resulting in older borrowers being frozen out. Most private sector employees now hold defined contribution (DC) pensions, which often prevent accurate predictions of their pension income making it hard for lenders to determine how affordable a loan may prove beyond the point of retirement. With the MMR requiring lenders to ensure mortgages are affordable for the lifetime of the loan in order to ‘protect borrowers from themselves’, the scope for interpretation has convinced many lenders that lending into retirement now carries extra risk if borrowers find at a later date that their retirement income disappoints. In response, many mortgage lenders have imposed lower maximum age limits rather than risk future accusations of breaching the rules where customers’ pensions prove insufficient to keep up their mortgage repayments after they retire. With house prices rising faster than incomes, many borrowers are not managing to purchase an appropriate family home until their forties or even fifties. But anyone over the age of 40 is seeking a loan with a standard term of 25 years will be borrowing beyond a normal retirement age of 65 and is liable to find their options restricted. IMLA argues the upcoming thematic review of the MMR by the Financial Conduct Authority, which is set to examine responsible lending in the first half of 2015, must provide extra clarity so that lenders can offer the flexibility required to meet borrowers’ changing needs without fear of future censure. ‘This issue goes beyond the transitional arrangements for existing borrowers, and means that efforts by the lending community to follow the spirit of MMR with new customers are being hampered by the very real concern that it may be cited against them in future,’ said Peter Williams, executive director of the IMLA. ‘Uncertain pension incomes make it difficult for lenders to assess mortgage affordability in later life, and this may become even harder when the new pension freedoms take effect next year. To avoid a situation where regulation brings about the extinction of mortgage terms that stretch into retirement, we need clarity and confirmation about where the boundaries of responsible lending truly lie,’ he explained. ‘MMR has been a big step forwards but having put a strong framework in place for the future, attention must now… Continue reading
House price recovery spreads out in UK, but growth is slowing, says Hometrack index
The top 20 cities in the UK are all registering annual house price growth of 5% or more for the first time in a decade, according to a new index. It is a sign that the housing recovery is spreading, however upward price momentum is slowing, Hometrack’s UK Cities House Price Index shows. It also points out that the annual house price growth is more than three times the current growth in average UK earnings which is 1.3% and explains that pent up demand has fed back into the market supported by low mortgage rates and a pick up in the economy. However, there is clear evidence that the upward pressure on house price is starting to slow on weaker demand for housing. In the last three months, average UK house prices have grown by 0.6% per month compared to 1.1% in the three months to May 2014. The majority of cities are now starting to show signs of a deceleration in the underlying rate of growth but cities with the lowest growth in Spring 2014 such as Glasgow, Edinburgh and Newcastle, have recorded an acceleration as house prices rise off a low base. This latest analysis shows that 11 cities have an average house price below that of the UK with Liverpool and Glasgow house prices 41% lower than the UK average. However, London bucks the trend with an average house price of more than double that of the UK at 117%, illustrating how the capital dominates the rest of the country and is distorting the national picture. The Cities Index also showed a post-referendum bounce in house prices in Edinburgh and Glasgow as confidence improves with average prices up 4.1% and 2.2% respectively in the last quarter. However the market in Aberdeen was down 2% in last quarter and the report says it is being impacted by a weak oil price with house prices declining off a high base. Oxford and Cambridge have seen average prices come off the boil quite sharply in the last three months with a fall of 1.2% and 2.3% respectively, with house prices starting to fall back after very strong gains of 42% and 52% in the last four years. The firm says that these smaller cities are seeing pricing levels respond more quickly to weaker demand. ‘The pick-up in house prices that started two years ago has spread across all UK cities with growth ranging from 5.5% in Liverpool and Glasgow to 18% in London. This latest analysis shows that momentum in house price increases is starting to slow with less pent up demand for housing than two years ago,’ said Richard Donnell, research director at Hometrack. ‘Whilst mortgage rates remain low, new mortgage affordability tests and loan to income caps are impacting on the ability of marginal buyers to access the market, especially in the higher value markets such as London. On top of this, concerns over… Continue reading
Research reveals the diversity of overseas buyers in London’s prime market
Over 30 different nationalities are buying prime property in central London with African making up the biggest group at 43.7%, new research shows. The next biggest group of overseas buyers are from the Middle East, making up 17.1% and then Asian and UK buyers both at 10%, according to the research from independent property buying agency Black Brick. Overall, Black Brick has represented 35 different nationalities, with Africans forming the highest percentage of buyers at 43.7% of all deals, followed by Middle Eastern buyers at 17.1% and then tied in third place Asian and UK buyers at 10% respectively. According to Camilla Dell, founder and managing partner of Black Brick, although the perception is that the majority of prime central London’s overseas buyers are Russian or Middle Eastern, Africans have always had a big affinity with the UK and London. ‘Over the last eight years, we have successfully acquired £236 million of residential property for African buyers from Nigeria, Kenya, Zambia, South Africa and Uganda,’ she said. ‘In particular, we’ve represented numerous buyers from Nigeria. Like a lot of our owner/occupier international clients, many wealthy Nigerians were educated in the UK and send their children to school here,’ she added. Typically, Nigerians like gated, secure developments, as this is what they are used to back home, where most houses and apartments are located within secure compounds. Even though London is of course, much safer than Nigeria, they still prefer to be in secure developments, preferably with a 24 hour concierge or porter, the research report points out.. In terms of location, for lower budgets, many Nigerians love new build developments such as Imperial Wharf, which is even known as ‘mini Lagos in some circles. However, high net worth Nigerian clients prefer to explore new areas and have privacy and opt for properties in areas such as Belgravia and the parts of Chelsea. The research shows that 39% of the firm’s Nigerian clients have bought in either SW3, SW10 or SW1, closely followed by 35% buying in North West London postcodes such as NW8, NW6 and N2. In addition, 58% of our Nigerian clients have been purchasing homes in London with the remaining 42% buying for investment. The data also highlights the fact the services of buying agents are not just for wealthy overseas buyers, with UK purchasers forming the third highest percentage of Black Brick’s buying clients. ‘The property market in London is time consuming, frustrating and difficult to navigate even for local buyers, hence the growing number of UK buyers within our client base. Our British clients tend to be busy executives from the financial services sector, who may have previously been looking for some time on their own, but have become increasingly disillusioned with not being able to find the right property, getting gazumped or having access to off market opportunities,’ explained Dell. She also revealed that 88% of the firm’s UK client base have been owner… Continue reading
