Tag Archives: lending
Prime London property market still adjusting to tax changes
Prices of prime London residential properties fell marginally in the first quarter of 2016, as uncertainty regarding the global and domestic economic outlook continued, says a new analysis. Overall values across the whole of the prime property market in London fell by an average of 0.3% in the three months to the end of March, according to the report from real estate firm Savills. But there continues to be a distinction between the higher value, discretionary prime central London markets and the more domestic, needs-based outer prime London locations. In the most expensive markets of prime central London prices fell by 0.8% in the first quarter. This leaves values at the very top end of the market some 6.7% below their 2014 peak, when an adjustment was triggered by the Chancellor’s announcement of new stamp duty rates for higher value properties in his autumn statement. By contrast, in the less expensive and more domestic outer prime London housing markets, which run from Richmond and Wimbledon, though Battersea and Wandsworth in the south and west, and Islington, Wapping and Canary Wharf in the north and east, prices remained flat in the first quarter of the year, having risen between 2.6% and 4.2% over the past 12 months. The report points out that it is notable that price growth across all prime London markets has been slower than the mainstream over the past three years. It says that this is because the lower value outer London markets were slower to recover post downturn, have benefited from stamp duty reform and remain more accessibly priced. ‘Unlike other parts of the London housing market, the prime markets remain fairly price sensitive and increasingly dominated by needs based buyers,’ said Lucian Cook, Savills head of UK residential research. “’he recent Budget statement confirmed that the stamp duty take form the top end of the market has risen following the reforms of December 2014, despite lower transactional activity, effectively signalling that this policy is here to stay and will continue to influence buying and selling decisions and assessment of value,’ he explained. ‘Given historic levels of price growth, the increased tax burden and political uncertainty stemming from the pending mayoral election and EU referendum, our view is that we are unlikely see any price growth over the course of 2016 as the market continues its adjustment,’ he added. Continue reading
UK buy to let landlords face tougher lending rules
Some buy to let landlords in the UK face tougher regulation when it comes to getting a mortgage for expanding their portfolio, the Bank of England has announced. In what may be seen as another blow to the buy to let market but the Bank’s Financial Policy Committee (FPC) says that some lenders are applying ‘weaker’ standards when it comes to applications in this sector. The FPC also believes that the rapid rise in buy to let lending, while likely to slow when the new stamp duty levy comes into play on 01 April, the sector is still not without potential threats in terms of financial stability. So there will be stricter affordability checks. Landlords with four or more properties will be expected to declare the rental income they expect to receive from tenants and also their own income and spending habits. This is to ensure they can still afford the mortgage if a tenant defaults on their rent or the property is left vacant. Landlords will also have to prove they can cope if interest rates rise sharply and can afford all the costs associated with renting out a property. This includes tax, which will rise on buy to let properties from next year. ‘The FPC remains alert to potential threats to financial stability from rapid growth in buy to let mortgage lending,’ the statement says, showing that the outstanding stock of buy to let mortgages has risen by 11.5% in the year to the fourth quarter of 2015. ‘The macro prudential risks centre on the possibility that buy to let investors could behave pro-cyclically, amplifying cycles in the housing market, as well as affecting the resilience of the banking system and its capacity to sustain lending to the wider real economy in a stress,’ the FPC explains. ‘The FPC welcomes and supports the Supervisory Statement issued by the Board of the Prudential Regulation Authority (PRA) to clarify its expectations for underwriting standards in this market, including guidelines for testing the affordability of interest payments,’ it points out. ‘The PRA's review of lenders' plans revealed that some lenders are applying standards that are somewhat weaker than those prevailing in the market as a whole. The PRA's action is a prudent supervisory measure intended to bring all lenders up to prevailing market standards. It will guard against any slipping of underwriting standards during a period in which rapid growth plans could be challenged by the impact of forthcoming tax changes,’ it adds. The FPC statement also points out that the growth of buy to let mortgage lending is likely to slow in the second quarter of this year as changes to stamp duty take effect and that forthcoming changes to mortgage interest tax relief and the implementation of the PRA Supervisory Statement will probably dampen growth further. ‘The FPC will continue to monitor closely these developments and potential threats to financial stability from the buy to let mortgage market,’ it adds. The… Continue reading
Equity release lending hits new record in UK
Equity release lending activity on homes in the UK surged in the second half of 2015, recording its strongest growth rates since 2008. The in-depth report from the Equity Release Council shows the average initial amount of housing wealth unlocked by equity release customers via drawdown mortgages in the last six months of 2015 was £49,607. It points out that continued house price growth across much of the UK means many homes can 'earn' more than the average salary. This increases the appeal for home owners over the age of 55, who may no longer be working themselves, to improve their finances in later life by unlocking wealth tied up in their home, while retaining the right to tenure. The most common age to draw money through equity release is 65 to 74 but there has been particular growth in the 55 to 64 age group and those aged 85 and over. Over half of 55 to 64s opt for lump sum lifetime mortgages, while from 75 onwards four in five plans are drawdown mortgages Every region in England saw drawdown mortgage customers take an initial advance worth more than a year's take home pay for the average full time worker in that region. In London, drawdown customers withdraw the equivalent of 130 weeks' pay at £72,858. For lump sum customers in all UK regions except Scotland, where 91 weeks' worth of pay is released, the average withdrawal of housing wealth was equal to more than two year's take home pay. London again had the greatest sums taken out at £209,739 or 373 weeks' income. The five years from 2011 to 2015 have all seen a surge in equity release activity during the second half of the year. Indeed, the second half of 2015 saw a 26% rise in the value of lending compared with the first half, from £710 million to £898 million, the biggest half year growth rate of the post-2008 era. The Council's analysis of data for the second half of 2015 also shows product choice differs by age group, however. Between 65 and 74 product preferences closely match the overall market and 68.2% of plans taken out by this age group are drawdown and 31.8% are lump sum. The UK average is split 66.6% drawdown to 32.8% lump sum, and home reversion made up the remainder. Customers aged 55to 64 bucked the overall trend with the majority, 54.5%, choosing lump sum products. In contrast, from age 75 onwards four out of five opt for drawdown plans, taking an initial sum in later life while preserving an additional sum to withdraw as the need arises. ‘Equity release products continue to prove versatile in helping customers meet a range of financial needs before, at and during retirement. As a result, there is growing recognition from UK consumers, regulators and politicians that housing wealth can, and should, play a greater role in financial planning for retirement,’ said Nigel Waterson, chairman… Continue reading
