Tag Archives: knowledge
Millions of UK home owners fail to get a survey on their property
Over seven million UK home owners have taken a serious financial risk by choosing not to have a survey completed on their current property, new research has found. Some 13 million home owners have needed unexpected building work completed on their property since moving in and 56% of those who had major building work said knowing this in advance would have influenced their decision to buy the property. Surveyors say the top three problems with properties which can be detected by a building survey are damp, roof issues and subsidence, according to the research rom Churchill Home Insurance. But millions choose not to do so and this includes 3.5 million who did not have any type of independent checks completed and 3.6 million who assumed a mortgage valuation was sufficient. With the price of property stretching many home owners’ budgets, it appears people are scaling back on the level of surveys completed on their property pre-purchase and choosing to go down the cheapest route. The number of people having at least a base level survey has increased over time, from 63% 20 years ago to 91% in the last 12 months. The number of home owners, however, having the comprehensive building survey has reduced significantly from 28% 20 years ago to just 6% in the last 12 months. The research also found that 36% of UK surveyors have seen a change in the trend for people requesting surveys in recent years, the main one being an increase in the number of surveys requested compared to previous years. Some surveyors said buyers look for the cheapest survey as they want to save money throughout the property purchase. ‘It’s encouraging to see the number of people having a survey has increased over time. Only by having a qualified surveyor assess a property are prospective buyers fully informed of the true state of that property, so it is an essential part of the buying process,’ said Martin Scott, head of Churchill home insurance. ‘Those relying on a mortgage valuation alone should be wary as this is just a cursory look at a property from a mortgage lender to assess how much it is worth, not a survey looking at the state of the property,’ he added. The research also reveals that 23% of surveyors have had clients who needed expensive building works doing to their property soon after moving in, which would have come up in a more comprehensive survey. Indeed, one home owner had a Home Buyers report that missed the full extent of subsidence affecting the property while others needed roof repairs, had problems with dry rot, damp or heating issues, all of which would have come up in a full building survey. Overall 42% of UK home owners have needed unexpected works doing to their property within 12 months of moving in, some 9% needed major works completed, while 15% needed moderate remedial work. Demonstrating that scrimping on a thorough survey can be a… Continue reading
Call for more to be done for older home owners in the UK
The Council of Mortgage Lenders, to which most mortgage lenders in the UK belong, has outlined a range of calls to action for regulators, government and the industry itself to improve the market for older people who legitimately wish to borrow in retirement. In a new report, the CML demonstrates that the issues around lending to older borrowers are complex and interconnected. The overarching message is that improving this market in a meaningful way requires significant collaboration both inside and outside the mortgage industry. However, it is clear that the will to improve this market exists and the CML says that one of the most significant achievements of the work to date goes beyond the production of this report itself, and lies in the fact that so many different participants have come together with a common will to address the issues. Those involved range from mainstream lenders and lifetime mortgage providers, from across the spectrum of CML membership, to pension providers, financial advisers, compliance experts, groups representing older customers, retirement housing providers, think tanks, other trade bodies, and regulators. The report follows the publication last month of externally commissioned research on the demand for retirement borrowing and identifies a range of next steps and calls to action. These include continuing to work with the intermediary sector towards a more seamless advice framework. In particular, there needs to be work to identify how to improve ‘hand-off’ arrangements between different advisers when this would best serve the customer's individual needs. There ought to be monitoring of emerging evidence about how pension freedoms are interacting with the mortgage market, including whether access to pension pots is feeding through to some customers repaying their interest only mortgages, for example. This knowledge can be used to inform future action, the report says. It will also involve exploring the potential for a market in the 50 to 75 age group for a product that can flex between capital repayment and interest only rollup over time, and also the potential for further product innovation for the 65 to 74 age group. The CML is calling on the Financial Conduct Authority to consider addressing how regulation could encourage a more holistic approach to mortgage, lifetime and investment advice in the round, which is what many older borrowers really need. Also to look at how different reasons for borrowing should be reflected in sales channels, for example health may sometimes be even more important than age in determining the quality and suitability of products and the sales advice that accompanies them. The report says there needs to be a standard definition of retirement and some of the Mortgage Conduct of Business rules would need to be changed to allow, for example, for a lifetime mortgage to be an acceptable repayment strategy for interest only mortgages. On top of this the CML is asking the Treasury to consider introducing tax relief on professional advice received at retirement, to encourage take-up, and ensuring that the… Continue reading
Bank of England closely monitoring UK buy to let lending
The Bank of England has confirmed that it is closely monitoring the buy to let sector in the UK following changes announced in the sector in the autumn statement. Its latest Financial Stability Report says that the buy to let sector continues to drive growth in the UK mortgage market and the Bank of England believes it is more interest rate sensitive than the owner occupied sector and warns that strong growth may have implications for financial stability. It means that more buy to let lending controls may therefore be on the cards. That would be another blow to the sector. Landlord wishing to enter the sector and those looking to expand their portfolios already face paying an extra 3% in stamp duty from next April and there have also been changes to tax on earnings. The Financial Stability Report says that since 2010, credit loss rates incurred on buy to let loans in the UK have been around twice those incurred on lending to owner occupiers. It points out that the buy to let sector continues to drive growth in the mortgage market and while greater competition in this sector has not to date led to a widespread deterioration in underwriting standards of UK banks, strong growth in buy to let lending may have implications for financial stability. ‘The FPC remains alert to financial stability risks arising from rapid growth in buy to let mortgage lending and notes the difference in underwriting standards in the owner occupier and buy to let mortgage markets, in particular in the typical interest rates used in affordability stress tests,’ it says. ‘New loans to buy to let investors are often subject to less stringent affordability tests than loans to owner occupiers. According to industry standards, the affordability of a buy to let loan is typically tested by ensuring that the rental income exceeds 125% of loan interest payments at a mortgage interest rate of 5% to 6%. In contrast, and in accordance with the FPC’s June 2014 Recommendation, the affordability of loans to owner occupiers is tested by ensuring that the borrower has sufficient income to cover their mortgage payments at a more stringent mortgage interest rate of around 7%, despite owner occupier mortgage rates tending to be around 0.7% lower,’ the report continues. ‘Assessed against these affordability metrics, buy to let borrowers may be more vulnerable than owner occupiers to an unexpected rise in interest rates or a fall in income. For example, if mortgage rates rose by 300 basis points, the increment by which the FPC recommended the affordability of mortgages to owner occupiers is tested, nearly 60% of buy to let borrowers who took out loans recently would see their rental income no longer covering 125% of their interest payments. By comparison, only 4% of recent owner occupier borrowers would see their mortgage debt costs rise to above 40% of income, a level above which households… Continue reading
