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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
Rents rise in every county in Ireland, latest quarterly rental report shows
Rents are now more expensive than they were at the same stage last year in every county in Ireland, according to the latest quarterly rental Report by Daft. Nationally, rents have risen by over 11% in the space of 12 months with the national average rent now €933 compared to €842 a year previously, the data from the property firm also shows. However, Dublin's annual rate has slowed for the first time in five years, but prices have still risen by over 14% in the capital since the last three months of 2013. In the other city centres, rents continue to climb. Waterford experienced an annual rise of 5%, Limerick 6%, Galway 7% and Cork 8%. Most of Dublin's neighbouring counties also continue to see double digit inflation with Meath witnessing growth of 11%, Wicklow 13% and Kildare 14%. The number of properties available to rent has continued to plummet. At the beginning of November there were fewer than 5,400 properties to rent nationwide, the lowest figure since May 2007. ‘In many ways, the lack of available properties to rent is more concerning than the high rental rates, although clearly the two phenomena are inextricably linked,’ said Ronan Lyons, economist at TCD and author of the Daft Report. ‘The only silver lining is the fact that this quarter was the first time in five years that rent inflation in the capital eased somewhat. However, even if an easing in Dublin inflation continues and stops the affordability crisis from worsening, it does nothing to change the availability crisis,’ he added. A breakdown of the figures shows what has been happening in the major cities. In Dublin rents are up 16.6%, in Cork 7.9%, Galway 7.2%, Limerick 6.4% and Waterford up 4.5%. Rents continued to rise throughout the country between August and October, according to the figures published in the report. Over the last two years, the average rent nationwide has risen by almost €150, from €790 a month to €933. As has been documented in previous issues of this report, that national trend is being driven by Dublin, where rents are up an average of €300 a month since 2012. But the latest figures show that rental inflation outside the cities is above what might be considered a healthy rate, in line with the rest of the economy. While prices in the rest of the economy were roughly flat in the year to October, rent inflation stayed above 10%. An analysis of the figures show that while there has been some uptick in non-city rents, particularly in Leinster, average monthly rents remain well below their 2007 levels, typically by about 20%. In Dublin rents are now almost 30% above their lowest point in 2012 and less than 10% below their 2007 peaks. Lyons said that this is very damaging for Dublin's competitiveness as a location for foreign direct investment. ‘The goal of housing policy should be to ensure that, regardless of whether it's to rent or to buy, rural… Continue reading
Asking prices in London push up averages in the UK as a whole, latest index shows
Property asking prices in London are still increasing and have helped push up the average prices of a UK home for the tenth month in a row, according to the latest index figures. Overall average asking prices increased by 0.2% in October and 8.2% year on year, taking the average asking price to £267,466. But outside of London home prices fell in all English regions except the East Midlands and the South East, Scotland and Wales. The Asking Price Index from Home.co.uk says that coupled with last month’s rise of 1.1% it puts London back on a rising trend following a dip in the summer which it says was caused by a correction in prime property prices. The supply of property for sale in Greater London is up by 54% compared to October last year but the typical London property is now 15% more expensive. But excluding London, the UK property market is cooling in line with seasonal expectations, the index report says. Prices are edging back in most regions after what was a solid year, especially in the South but prices continue to stagnate in the North. The worst performing region over the last six months has been the North East with a fall of 0.9% since May. The firm describes this as ‘a very poor performance’ for what has been the best year for UK property prices since the onset of the financial crisis. Wales, the North West and Scotland are not much better and only just managed to keep in positive territory. ‘Within those areas, it is only the more upmarket locations that are supporting the regional averages,’ the report explains. Across the UK, supply of property for sale is steadily increasing but remains historically low. The number of properties that entered the market last month was 14% higher than during October 2013. ‘Areas of great demand, such as London, will be less sensitive to rising demand, while Scotland, which has a much weaker property market, has registered an annual rise of 18% in the number of properties for sale. This will likely thwart further price rises in 2015 north of the border,’ the report points out. ‘In Wales and the other English regions, we have observed only minor increases in the volume of sales properties coming onto the market,’ it adds. The data also shows that the average mix-adjusted 12 month change in asking prices for England and Wales reached a maximum in June at 9.6% and this is steadily falling back. The average year on year price change trend for England and Wales reflects an end to the accelerating price growth observed over most of the last two years. The firm says that annualised gains are being eroded in the current cooler market, and it expects this gentle downtrend to continue into 2015. Continue reading
