Home Ownership

Owning your own home is a dream come true for everyone but given the current economic crisis, owning your own homes might just have to wait.

Reports shows that the number of privately rented homes has risen from 2.1 million to 3.4 million, in less than a decade. Though these tenants would love to be able to own their own homes, they are unable to do so due to job insecurities and the ongoing economic crisis.

And to make matters worse, banks and building societies are demanding large sums as deposit before approving any loans. As a result, potential homeowners have no choice but to put off acquiring their own homes and just be contented with renting instead.

This means that the age for first time buyers is now in their 40s and even if they do managed to finally get in on the property ladder, they will be faced with the possibility of paying up their mortgage till they are well into their 70′s.

The global economic woes that have left first-time buyer numbers at record lows will shatter the goals and aspirations of many as they face the reality of renting for far longer than they originally planned.

Trapped renters over the age of 40 could face the prospect of being an OAP mortgagee, or face difficulty getting a 25-year mortgage term if it takes them beyond lenders retirement- age criteria.

Lenders have been slashing their charges as the Bank of England’s base rate remains at a historic low of 0.5 per cent – but with rents predicted to rise due to a shortage of supply, tenants will find it increasingly difficult to save an adequate deposit.

According to reports published last week, rents in England ans Wales reached a record high of £718 per month in September and while the financial crisis is already putting a strain in household spending power, the soaring inflation and the rise in energy prices is only making matters worst.

The momentum of the runaway rental train shows little sign of slowing, Mr Shipside said. New tenants are still looking to clamber aboard in their search and are finding a dwindling number of places to rent, as existing tenants have limited exit opportunities and stay put.

The rental journey is the only real option for many, and the majority seem resigned to having to pay more.
Last year, a study by insurance specialist Aviva found that one in ten homeowners over the age of 75 is still paying off a mortgage, with an average outstanding debt of £72,500.

With that said, those who were wise enough to enter into the buy-to-let market is set to profit in these trying times. What more with the Olympics that will be held in London next year, homeowners who have chosen to rent out their property is sure to benefit from their decision.

On a more positive note, mortgage-approval rates showed signs of recovery in August. The Bank of England recently reported 52,410 home-loan approvals during that month – the most since December 2009. But despite the improvement, the figure is still well below the 90,000 monthly average seen before the crash.

Buy-to-let market

Demand for buy-to-let mortgages has increased significantly in recent months as landlords rush to cash in on the continuing boom in rental prices, according to the Bank of England. The scramble to purchase rental properties is even leading would-be buyers to put in sealed bids in some areas of the south-east.

In its latest Trends in Lending Report the Bank said most major UK lenders reported demand for buy-to-let lending continuing to increase over the summer, reflecting rising rental yields.

Rents rose in every region of the UK in September 2011, pushing the average rent to a record high of £718 per month – £1,029 in London – according to the latest LSL Property Services buy-to-let index. Lea Karasavvas, director of broker Prolific Mortgage Finance, says this is driving demand for properties, We’re having sealed bids with buy-to-lets because the rental market is just so strong.

Landlords are now getting an average yield of 5.3%, up from 5.2% in August, LSL says. Meanwhile, tenant arrears have dropped to their lowest level since April 2010, with just 8.6% of all UK rent unpaid or late by the end of September.

There were 32,000 buy-to-let loans, worth £3.5bn, taken out between April and June, the highest number and value since the last quarter of 2008, according to the Council of Mortgage Lenders (CML). Director general Paul Smee called this “encouraging news”, and said first-time buyers were not being displaced by buy-to-let landlords.

But Matt Griffith of first-time buyer campaign site PricedOut, disagrees. He says: “In a market where equity is king, investors are able to outbid first-time buyers for available lower-level properties.

In the housing market, equity is nearly always a result of longevity – which gives older homeowners a head-and-shoulders advantage. Housing wealth and ownership is more generationally lopsided than it has been since the 1940s, and we appear to be seeing older groups pressing home their advantage through investment buying.”

Both tenants and first-time buyers, then, face a bleak future: squeezed out of the market by house prices that remain high across swathes of the country, and soaring rents charged by landlords.

According to the Association of Residential Lettings Agents, the problem is a lack of supply, and the government should be doing more to encourage landlords. It says the private rental sector is nearing capacity – three-quarters of its 6,000 members believe there are now more tenants than properties, with the increase in demand particularly acute in London and the south-east.

Tim Hyatt, president ARLA, says: “There is a finite amount of rental property and unless both housing supply and mortgage availability improves, renters will find their options in the market are reduced.

The government is doing little to encourage landlords to invest in new properties, therefore we are running out of quality stock to offer to tenants. This is reflected in rent increases and a lack of choice for consumers.

However, communities and local government minister Greg Clark said in early October that the private rental sector is “destroying family life”. Similarly, MP Caroline Flint , in a speech at the Labour Party conference, said she wanted stronger private tenants rights.

Improved tenure rights, such as longer notice periods for eviction, are favoured by some landlords because they offer them greater security, too, and Griffith thinks they could make the market more stable.

Stronger tenure rights would help reduce the level of short-term investment flows into the sector as well as improving the experience of the renter, who is steadily getting older and as a result requires stability for children, family and schools, he says.

But many lenders will only issue buy-to-let loans on a property with an assured shorthold tenancy in place (typically a tenancy term of at least six months and no more than 12 months).

“It’s the bankers, not the landlords, to blame here,” Griffith adds. Halifax and Accord Mortgages, for example, both demand that properties be let on an assured shorthold tenancy basis – although some, including Woolwich mortgages, do not.

If the opportunities for lenders and borrowers evaporate, the buy-to-let boom may run out of steam. LSL’s David Newnes points out that while rental yields have hit 5.3%, total returns over the past year fell to 1.8% (a result of house prices falling outside London).

Griffith says banks may be underestimating the risks of buy to let. “Yields are still very low in historical terms, further declines in house prices look likely and tenant arrears have been climbing steeply. Both the later trends may intensify as we move into a very difficult period for UK household income.”

Loans on offer

This year has seen a number of small lenders return to the buy-to-let mortgage market but things have changed since the credit crunch.

“Borrowing 85% [of a property's value] was easy pre-credit crunch, and the fees on those loans were a lot lower,” says Lea Karasavvas, director of Prolific Mortgage Finance. Now charges of £1,999 are not uncommon and borrowers will find little choice above 75% loan to value (LTV).

Rates are not as competitive as they were. “Before the credit crunch there wasn’t a huge difference between residential and buy to let rates,” says property funding specialist Adrian Anderson.

For landlords with at least a 40% deposit, Principality building society is offering a two-year fixed-rate deal at 3.89% and a fee of £999, while Woolwich has a lifetime tracker at base rate plus 2.98%, with a fee of £1,999.

Other criteria have also tightened – for instance Lloyds banking group now lets landlords take just three loans from its lenders, which include Birmingham Midshires and Halifax, but the minimum rent required is still typically 125% of the monthly cost of repaying the mortgage.

Source

Buy-To-Let

Over three quarters (76.8%) of UK property investors are considering buying additional investment properties over the coming year, reveals a new survey of the Assetz investor database.

Confidence in the UK buy to let market is robust, with investors highlighting strong rental demand as their main incentive for expanding their portfolios, followed by high and rising rental values, and thirdly the belief that prices are at or near the bottom. Just 10% of investors believe now is a bad time to invest in UK buy to let, with the majority citing concerns about the economy as the main deterrent.

Investors are taking a long term view of the property market, with 50% stating that long term capital gain is their top priority, closely followed by rental income (44%). Just 6% stated that they were hoping to benefit from short term capital gain.

Nearly half of those surveyed (45.9%) said they are currently achieving gross rental yields of more than 5.5%, with almost a fifth (19.4%) achieving 9% yields or higher.

Stuart Law, Chief Executive of Assetz, commented on the research:

“The buy to let market is booming with landlords returning in considerable numbers, encouraged by the excellent rental returns currently available as well as the prospect of long term capital growth if property prices continue to strengthen. UK residential property in the right locations is increasingly viewed as a safe haven, offering investors a long-term, low-risk investment for their cash.

“Risk-averse lenders are making no secret of the fact that they would rather allocate the limited funds they do have to the lower risk option of buy to let loans with deposits of typically 25 – 40%. The sector has not been as hard hit by the recession as originally feared, due to the fact that interest rates have remained extremely low. This has protected landlords by giving them cashflow, and future rate rises, which are likely to be small and gradual, will be covered largely by rental increases.”

Assetz has seen sales of UK investment property more than double in the last twelve months and predicts it will expand at least 50% again over the next year.

Source

Mortgages for Professionals is a specialist mortgage broker offering lenders from the whole UK market. We provide a service dedicated to individuals with professional qualifications and high projected earnings – from doctors and dentists, to accountants and engineers
Our offices are based in central London, although we arrange mortgages for professionals throughout the UK.
All of our mortgage brokers are professionally qualified and have many years experience in dealing with the particular demands of professional clients. The relationships we have established with all of the UK’s major lenders enables us to negotiate with senior underwriters on our clients’ behalf for favourable terms and enhanced income multiples

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