Tag Archives: financial
Downsizing in UK could bring windfall of up to £200,000 on average
Nearly half of home movers in the UK plan to downsize in the next three years and on average realise up to £200,000 by doing so, according to new research. Some 46% plan to sell and buy a smaller property and by downsizing from a detached to a semi-detached home they could realise a windfall of £117,230 of £200,000 in London. Downsizing was cited as the single most popular factor for moving, according to data provided by Lloyds Bank with research showing that the popularity of downsizing has grown in recent years, buoyed by the anticipated returns. The figures show that average age for a downsizer is 53, at which point the greatest number, 37%, of downsizers had lived in their home between 11 and 20 years. The main reason people cite for downsizing is to move somewhere which better served their circumstances with 53% wishing to do so while 39% want to reduce bills or free up equity and 31% to provide extra cash for retirement. A fifth say that they are downsizing earlier than they had anticipated, citing reasons such as health, changes in relationship status and a need to be closer to better local amenities. A third also say that they are planning to move to a more affordable area. Some 72% of those downsizing said they expected to profit from their move, with 35% saying that they planned to reinvest their additional capital in a new property, 29% said that they would invest in other financial products, whilst 21% planned to invest in their pension or pass the earnings on to their family. ‘People may consider moving home for a variety of reasons, often tied to their next big step in life whether that’s getting married, starting a family or children growing up and flying the nest,’ said Mike Songer, mortgage director with Lloyds Bank. ‘We typically think of people moving to bigger houses as they move up the housing ladder, but people are increasingly looking to downsize their home because their circumstances or priorities have changed. Whilst financial gain may not be the main driver for those looking to trade down their property it is clearly a factor, with three quarters of downsizers expecting to profit from such a move,’ he explained. ‘There are definitely financial benefits to be gained from trading down, with an average potential windfall of £117,230 when moving from a detached home to a semi-detached house. Downsizing is also healthy for the market, as it helps keep it moving and frees up larger properties which could be perfect for young families about to take their next step up the property ladder,’ he added. A breakdown of the figures show that house prices in the capital mean that London home owners could make the most from downsizing, as they stand to free up an average of £201,052 from trading down from a detached to a semi-detached home. Downsizers from the South West saw the highest rise over… Continue reading
Property lenders in UK ready for new European wide mortgage directive later this month
UK lenders are ahead of most of their European counterparts in implementing the mortgage credit directive (MCD), a process that is due to be formally completed on 21 March. With UK firms having been given the opportunity to adopt the revised rules up to six months early, many have chosen this option and are therefore already complying with the directive’s requirements. In practice, borrowers will notice few changes in the process of taking out a mortgage as we pass the MCD implementation date, according to the Council of Mortgage Lenders (CML) which does not expect the move to have any significant effects on the market or on the availability of mortgages. However, in a report, the CML says that over time, borrowers may notice changes in the disclosure documents presented to them by lenders when they are considering taking out a new mortgage. Other changes as a result of the directive include the creation of a new class of consumer buy to let borrowing, sometimes abbreviated to CBTL, as well as modifications affecting foreign currency loans and second charge lending. It points out that in many ways, implementation of the directive in other European countries will align them with standards already applying in the UK, where the mortgage industry has been operating for the last two years under a system of enhanced consumer protection following the mortgage market review (MMR). Nonetheless, the UK, like other EU countries, is required to implement the MCD, which is intended to set minimum regulatory requirements across Europe. An assessment from the European Mortgage Federation (EMF) of how different countries were working towards implementation the directive said that the MMR in the UK already went beyond the core provisions of the MCD. The EMF also estimated that many firms in the UK were six months ahead of most of their European counterparts on implementation. Firms in Belgium and Denmark had also made rapid progress, and had almost completed the process of adopting the directive by last autumn. At that stage, the EMF was predicting that a handful of European states, including Finland, Latvia, Portugal, Slovenia and Malta, might not meet the 21 March deadline. But all of those countries were expected to have adopted the directive within four to eight weeks thereafter. Government, regulators and firms in the UK have all supported the adoption of the MCD, even though consumer protection in this country has already been comprehensively re-appraised and reinforced through the MMR and the directive does little in practice to extend protection for UK borrowers. The process of implementing the MCD has been overseen by HM Treasury, although the rules will be supervised by the Financial Conduct Authority (FCA). The CML report also points out that the transition towards implementation of the MCD has been smoothed by the decision to give lenders a six month window, within which they have been able to adopt the directive’s measures to their own timetable. This means that firms have,… Continue reading
Bridging lending in the UK reached new record in 2015
Gross annual bridging lending in the UK broke through the £3.5 billion barrier in 2015, equating to £13.9 million worth of transactions every working day, new research shows. The data from the latest West One Bridging index also shows that the bridging sector is now expanding significantly faster than the mainstream mortgage market, which only grew 8% in the whole of last year according to the Council of Mortgage Lenders. But despite the growth, the bridging sector is still only worth approximately 1.5% of the traditional mortgage sector which was valued at £220 billion in 2015, meaning there is plenty of scope for further expansion. The index report suggests that the growth in short term finance is part of a five year trend, which began with economic recovery, post-recession. The current housing crisis has led to demand for properties easily outstripping supply, with house prices rising 6.7% in 2015, according to the ONS. A significant component of the housing crisis has been the shortage of land available for development especially in London and the South East due to current greenfield restrictions. This has driven redevelopment and conversions of any available properties in the capital with permitted development rights. These projects often require short term financing during conversion. However high street mortgage lenders have been reluctant to increase their short-term and commercial lending after the recession. While commercial property prices have increased 21% since their trough in 2013, bank lending to property firms is still only around £135 billion, just over half its value in 2009 according to MSCI. The bridging sector has been able to grow due to flexible underwriting that considers cases on an individual basis and a greater appetite for lending on commercial projects than that exhibited by the high street banks, the report says. There has also been a significant growth in the number of properties sold at auction in 2015, supporting the upswing in bridging. In the last two years alone, the total value of properties sold at auction has risen by approximately £800 million. Buyers will typically turn to bridging if they need to raise capital for their purchase as high street banks are unwilling to lend for auction purchases. The report points out that incoming regulation from the European Union’s Mortgage Credit Directive (MCD) should help lift future growth. The new rules mean that some bridging loans will now be regulated by the Financial Conduct Authority, namely those which are secured on an individual’s home or are not predominantly for business purposes. It explains that these will fall under the new MCD led rules, as will certain buy to let related finance particularly the new category of consumer buy to let loans. As more bridging products become regulated, the sector’s reputation will be enhanced, with more demand from FCA regulated brokers. Also, the new rules should encourage lenders to remain responsible, while also… Continue reading
