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Londoners still have faith in buy-to-let

Despite falling yields in the city 82% of Londoners think buy-to-let would be a good investment.

Uncertainty due to Brexit (33%) and increased tax and stamp duty rates (38%) are the main reasons Londoners are put off investing.

The research comes from Perrys Chartered Accountants.

Donna McCreadie, a buy-to-let tax specialist at Perrys, said: “Buy-to-let is still a solid long term investment despite what current market indications and the drop off in purchases might suggest.

“It’s interesting that the younger generation still sees it as a way to plan financially for the future.

“However, there are many things to consider before jumping in, including stamp duty charges, how income tax might be affected and what the return on the investment is likely to be.”

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McCreadie added: “Investing in a property is a long term plan rather than a quick fix to financial freedom so it’s important to gather as much information as possible and speak to a professional tax specialist and mortgage advisor before making a commitment.”

The most likely type of property a Londoner would consider for a rental investment would be a flat or apartment, with 46% picking this option.

Some 30% would choose a two-bedroom house and 17% a house with three bedrooms or more. London is hit the hardest by stamp duty due to the higher value properties in the city.

A reduction in stamp duty and other relevant taxes (43%) would do most to encourage Londoners to buy rental property.


Source: Property Wire

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Mortgage lenders must innovate to survive

Mortgage lenders UK – If you are a medium-sized mortgage lender you have got a rather large problem at the moment.

You probably want to grow your loan book, say by 10 or 20 per cent. That is a healthy ambition.

The issue is how on earth do you go about it when some of the bigger banks are absolutely knocking the socks off the competition?

There is no way that you can compete with HSBC or Barclays on price.

Ringfencing has given them a mountain of disposable cash and not even some of the other big players can keep up with them.

So, perhaps you want to look at other bits of mortgage lending – maybe coming up with new ways of underwriting differently on affordability, or by lending on types of property that you may not have lent on before.

But again, there is a problem, and this time in comes in the shape of the regulator.

Who wants to be the organisation that goes out and does something different?

There is no way that you can compete with HSBC or Barclays on price.

After all, the rule in mortgage lending for decades has been, if Nationwide and Halifax do not do it, then neither shall we.

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All of this creates a mortgage market that is in an awkward stasis.

Market exits

No wonder the Financial Conduct Authority in its sector view update a couple of weeks ago said it feared that some mid-sized lenders would drop out of the market, alongside some of those smaller companies that have already shut up shop.

We have seen reactions to regulation already.

A separate piece of work by the FCA published last month showed how, while the cap on income multiples of 4.5 times had been adopted in one way, in another way it has been stretched.

The actual value of loans above the 4.5 times cap had gone up – so, bigger loans for fewer people.

And it is movers and those on joint incomes who have benefited.

This is just the start of it all, as margin increasingly in this mortgage market comes from service.

The bog standard business is being gobbled up and so if you are a medium-sized player you are going to have to start offering something a little bit different.

We have already seen this in some form with building societies Cumberland, Ipswich and Family who are all carving out a reputation for clever underwriting.

You can slowly see it creeping elsewhere.

This is great for brokers, because again value is where this business thrives.

As the heft of Barclays and HSBC forces the market to narrow, the smaller companies must innovate to survive.

In return, we will see a return to more individual underwriting, and hopefully a demand for better record-keeping.

“As long as the books make sense, the regulator won’t mind,” one industry expert explained to me the other day.

This will help to reflect changes in the property market, where structures previously known as non-standard are becoming increasingly common – flats above shops and so on.

Lenders have to move with the times and they are providing loans for the types of business that is needed.

This is progress and it is to be welcomed. It is also innovate or die.

Trusting insurers

I just can not trust the insurance industry.

It demolished any faith I had in it during the widespread mis-selling of annuities, and then continued to eat away at it with the hokum pricing on general insurance products.

Five years into the freedoms and we have not seen the dash for cash as was predicted, but that is not to say some consumers are not at risk of draining their pots.

So when the Association of British Insurers issued a report on the pension freedoms, excuse me if I did not jump around with glee.

The ABI has much work to do before it ever convinces me that it is on the side of consumer protection, rather than the safeguarding of its own members’ interests and profits.

Five years into the freedoms and we have not seen the dash for cash as was predicted, but that is not to say some consumers are not at risk of draining their pots.

So the FCA must conduct a proper study so we can see for good what really is happening.

Pensions ‘success’

There was much crowing from the Department of Work and Pensions about the success of auto-enrolment in an annual assessment recently.

While the numbers enrolled are terrific, we must not be complacent.

When defined benefit schemes were more common, the average total contribution of employer and employee was around 22 per cent.

Today the average total contribution across defined contribution is 5 per cent. You do the maths.

By James Coney

Source: FT Adviser

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New Refreshed Buy To Let Product Range From Landbay

Specialist buy to let property lender Landbay has refreshed its buy to let product range as of yesterday.

The changes to the Landbay buy to let product range includes the addition of fees to 80 per cent LTV products.

The Landbay Standard 5 Year 80 per cent LTV product rate now stands at 3.89 per cent, and fees can now be added across all revised Standard 80 per cent LTV products.

Across the wider product range, the buy to let lender has reduced the minimum landlord income to £15,000, cut the minimum loan value from £50,000 to £30,000 and revised the minimum property value, which was reduced to £75,000 for standard properties, and HMOS in qualifying areas.

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Additionally, the maximum standard property loan amount increased to £2 million for up to 75 per cent LTV products.

The reworked products will be available to buy to let landlords from today, via Landbay’s intermediary partners.

Changes to the buy to let product selection come a few months after Landbay announced the closure of its retail investment arm, in order to focus on building on the firm’s presence in the mortgage intermediary market, driven by institutional funding.

Paul Brett, Managing Director of Intermediaries, Landbay said: ‘We are constantly working to improve and update the products we already have, as well as working to develop new ones. It is critical for us to be keeping our ear on the ground of the buy to let marketplace, and today’s product revamp will ensure that our customers can take advantage of the competitive propositions we have to offer.’

He continued: ‘As part of our product refresh, we’re especially pleased with the changes to the 80 per cent LTV products. These changes are part of our strategy to extend our product offering to an even wider range of borrowers, helping our partners support more landlords across the country.’

Source: Residential Landlord

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Nationwide re-enters interest-only mortgage market – exclusive

Nationwide Building Society has re-launched into the interest-only residential mortgage market after an eight-year absence, Mortgage Solutions can exclusively reveal.

Interest-only will be offered through mortgage intermediaries up to a maximum loan to value of 60 per cent.

Borrowers must have minimum equity of £300,000 if they live in London, £250,000 in the South East and £200,000 for those living elsewhere in the UK.

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The exit strategy is restricted to the sale of the main residence only. Part and part mortgages are also allowed, subject to the same criteria.

The society has set these parameters to mitigate the risk of future negative equity and to make sure there is a realistic means of repaying the debt at the end of the mortgage term, Mortgage Solutions understands.

The minimum income requirement is £75,000, or £100,000 for joint income. There is a maximum term of 25 years, or retirement if sooner.

Mortgage Solutions understands this is because Nationwide wants to target the proposition at higher earners who want to use interest-only for flexibility, not because they cannot afford a full repayment mortgage.

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Henry Jordan, Nationwide director of mortgages, said: “As the UK’s second largest lender, it is natural that we continue to look at ways we can support the mortgage market.

“At almost seven per cent, interest-only remains an important part of the market and one we are keen to support by providing access to our standard product range to applicants with good equity and stable income profile.”

The launch is expected within the next two months.

By Samantha Partington

Source: Mortgage Solutions

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UK mortgage approvals jump as political uncertainty eases

Mortgage approvals have risen to their highest level since February 2016, data published by the Bank of England on Monday showed.

The central bank said there were 70,888 mortgage approvals for house purchase in January, a 4.4% improvement on December’s figure and the highest for 47 months. It was also comfortably above analyst expectations for around 68,000.

Remortgage rates also grew, by 3.9% to 52,100.

Net mortgage borrowing by households, which lags approvals, was £4.0bn, slightly below the £4.3bn six-month average. The annual growth rate for mortgage borrowing remained at 3.4%.

Howard Archer, chief economic advisor to the EY Item Club, said: “The data very much fuels the view that the housing market is currently benefiting markedly from increased confidence and reduced uncertainties following December’s general election.

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“A stream of recent data and surveys suggest that the housing market has shifted up a gear after a lacklustre 2019, with particular softness around the third quarter.

“Certainly there is compelling evidence that the housing market has benefited from increased optimism and reduced uncertainties following December’s decisive general election, as well as a greater near-term clarity on Brexit.

“We had been expecting the housing market to continue to benefit in the near term from reduced uncertainties, but it is possible that concerns and uncertainties over the coronavirus outbreak could have an impact.

“We currently expect house prices to 3% over 2020.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The effective interest rate on all new mortgages dropped to 1.85%, from 1.88% in December, remaining well below the effective rate on the outstanding stock. As a result, the refinancing tailwind to growth in household’s disposable incomes remains on track to strengthen modestly this year. Lower mortgage rates also have underpinned the recover in house purchase mortgage approvals in January.”

The Bank also reported on Monday that the annual growth rate of consumer credit – defined as credit used by consumers to buy goods and services – remained at 6.1% in January. That represented growth of £1.2bn, above both the average seen over the last six months and the consensus, both of which were £1.0bn. The Bank said the rate was “stabilising after the downward trend seen over past three years”.

By Abigail Townsend

Source: ShareCast

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More UK women investing in buy-to-let properties

The number of women investing in buy-to-let properties in the UK has increased slightly to almost half the total, a new study has found.

Women now account for 47% of the 2.5 million buy-to-let investors in the UK up from 46% the year before, narrowing the gender gap in the investment class, according to the research by London estate agents Ludlowthompson.

The number of female residential property landlords rose by 5% to 1.2 million for the 2016/17 tax year, up from 1.1 million the previous year, according to the latest available HMRC data.

The narrowing of the gender gap in buy-to-let investment reflects how property has become an increasingly popular investment among women Ludlowthompson said.

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The company cited research from Kings College London that suggests that women are generally less likely to make high-risk investments. The relatively transparent business model, regular pay-outs, and low price volatility associated with buy-to-let property as opposed to shares has contributed to the rise in popularity of the asset class among women.

The narrowing of the gender gap among buy-to-let investors stands in contrast to the gender split across other asset classes such as cryptocurrency where women represent just 8.5% of investments, and stocks and shares ISAs where women account for only 43%, owning 957,000 shares ISAs compared with 1.2 million men.

Stephen Ludlow, chairman of Ludlowthompson, said: “The buy-to-let sector has a reputation of providing stable, long-term returns. Whilst some investors have become distracted by more speculative investments, buy-to-let continues to build increasing interest amongst investors who value income and long-term growth.

“It may not be long before we see a 50/50 gender split amongst buy-to-let investors, which is significant given the much wider gaps in other asset classes, such as equities.”

By Kalila Sangster

Source: Yahoo News UK

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Mortgage approvals surge to four-year high: BoE

Mortgage purchase approvals rose by 4.4% between December and January to 70,900 – the highest figure seen since February 2016, according to the latest Money and Credit statistics from the Bank of England.

Approvals for remortgage also rose on the month, by 3.9%, to 52,100.

Net mortgage borrowing – which lags approvals – by households was £4.0 billion in January, slightly below the £4.3 billion average seen over the past six months.

Director of Benham and Reeves, Marc von Grundherr, said: “The highest rate of mortgage approvals in almost three years and particularly so early in the year is yet further proof, if it were ever needed, that buyers are returning in their droves following December’s election result.

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It is this huge influx of demand that has seen prices increase at such notable rates of late and as a result, the market is now in the best shape it’s been since the EU Referendum itself.

Not only are seeing performance exceed expectations but there is a very real chance of an interest rate cut on the horizon, which will further boost buyer sentiment, borrowing, and overall market performance.”

Vikki Jefferies, proposition director at Primis, commented: “With the support of a professional, borrowers will be better-informed on how to manage their finances in the long-run and are less likely to fall into a mortgage deal that could leave them financially worse off.

“Advisers are also a big help for clients whose circumstances change during their term, having the resources to be able to offer customers a better deal that aligns with their new financial situation.”


Source: Financial Reporter

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Annual price growth at three year-high as supply lags demand – Zoopla

House prices across all English cities have risen above their 2007 pre-crisis peaks for the first time but Zoopla is warning sellers not to get over-excited when pricing their properties. Figures from the portal – based on Land Registry price paid data and mortgage valuations – found annual price growth among the UK’s largest cities last month hit a three-year high of 3.9%.

All cities, except for Aberdeen, where prices fell 4.3% annually, recorded annual house price inflation of at least 2% last month for the first time since February 2017.

The highest growth was in Edinburgh, up 5.9%, while Nottingham and Leicester each recorded growth rates of 5.3%.

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Zoopla highlighted that stock is also up 2.6% annually, but is lagging behind demand which is up 26%.

Stock levels in nine cities are lower than a year ago by as much as 6%, Zoopla said, with most of the shortages in areas where prices are rising fastest.

Richard Donnell, research and insight director at Zoopla, said: “It has taken 12 years for house prices in all English cities to return to their previous pre-crisis levels.

“Some cities returned to 2007 levels within four years, as the economy and job growth rebounded. In others, it has taken much longer as the mismatch between demand and supply has been less pronounced.

“An imbalance between supply and demand is supporting the current rate of house price growth – a trend we expect to remain in place over the first half of 2020.

“We do not expect a material acceleration in the rate of growth in the foreseeable future, as affordability pressures will limit the scale of price growth, especially across southern England.

“There is a risk that, in some markets, sellers may become unrealistic about the expected sales price for their home. This is more likely in London and southern England where the market has been weak, and supply remains constrained. Housing demand is up, but there remains a price sensitivity amongst buyers, especially in the highest value markets.”


Source: Property Industry Eye

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Gap between property supply and demand widens

The number of house hunters registered per estate agent branch increased by 22% to 382 from December to January, NAEA Propertymark’s January Housing Report has found. However, the number of properties available per member branch fell from 41 to 38, meaning the gap between supply and demand has increased.

Mark Hayward, chief executive, NAEA Propertymark, said: “It’s positive to see the New Year has brought some much-needed confidence to the market, with a significant increase in demand from house hunters following the General Election result.

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“As the Spring Budget fast approaches, we hope to see housing as a priority for the new Chancellor.

“A clear strategy is needed to tackle key issues such as stamp duty costs, which needs to be addressed in its entirety to encourage more frequent moves, improve affordability and relax punitive financial tax on home movers.”

The number of house hunters is the highest figure seen since September 2019, when there were 387 prospective buyers registered.

The amount of properties available has fallen to its lowest level since June 2019, when there were 37.


Source: Property Wire

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Mortgage product numbers rise by 9.3%

The number of mortgage products available on the market has risen by 9.3% over the past 12 months to a record high of 14,437, according to the latest data from Mortgage Brain.

Within this increase of 1,233 products, remortgage deals saw the strongest growth, with product numbers increasing by 7.4% to a total of 9,718.

Despite the upheaval seen in the buy-to-let sector in recent years, the number of products for landlords to choose from has still grown by 4.5% since February 2019 to 4,263.

Product numbers rose across all LTV bands, with deals available at an LTV of 70% or more seeing the sharpest uplift.

There are 9,350 deals to choose from at this level, an increase of 15.1% since February 2019.

At the other end of the scale, the number of products available to borrowers at 90% LTV has grown by 3.2% over this time period.

Looking over a three-year period the rise in products is even more significant, with the total number of mortgage deals on the market jumping by 72.7%.

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This rise is most pronounced in buy-to-let, with product numbers rising by 2,007 (89%).

Mark Lofthouse, chief executive officer of Mortgage Brain, said: “Mortgage borrowers are the big beneficiaries of the heightened competition within the mortgage market now, with a greater level of choice than ever before.

“What’s more, this increase isn’t limited to a single area of the market, with products of all types and across all LTV bands seeing an uplift over the last year.

“The sheer number of deals to choose from demonstrates the value provided by mortgage brokers in helping their clients navigate these competitive waters.

“But they too need to think carefully about what technology they can use to help them sift through the many home loans lenders have on offer.”

By Jessica Nangle

Source: Mortgage Introducer