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Displaying ROOF Blog articles tagged with Housing Market
14/02/2024
LAST YEAR saw yet another boom in buy to let, according to the Council of Mortgage Lenders. Loans to landlords rose 48% by volume and 57% by value over 2005.
Buy-to-let now makes up 11% of the entire mortgage market – not bad for an idea that has existed for only ten years. After a brief pause for breath at the start of 2005, with a record 177,800 gross advances in the second half of 2006. Overall, the year saw 330,300 worth £38.4 billion.Can the boom go on? So far, public appetite for buy to let seems to be insatiable. While many professional investors may be focussed on long-term rental returns it is hard not to believe that many are looking entirely on capital growth, particularly when gearing can multiply that many times over.
For lenders, buy to let represents a highly profitable new area (see the 20% increased in business in Bradford and Bingley’s results yesterday, for example) with, so far, very little risk. The rate of repossession is marginally higher than in the traditional mortgage market but arrears are lower, and lenders have the option to appoint a court receiver to carry on collecting rents.
The consequences are becoming increasingly clear though. Private renting rose by 20% between 2000 and 2005 whereas the number of people buying with a mortgage fell. Up to half of new-build apartments in big cities are being bought by investors. And an acceleration in the redistribution of wealth to existing home owners.
09/11/2023
WORRIED BY rising interest rates? Why not spread your payments over a longer period? According to a new survey, lenders are offering mortgages running for up to 57 years boasting more affordable monthly payments. The only catch, according to mortgage brokers, is that a borrower with a £150,000 mortgage over 57 years would end up paying £120,000 more in interest than one with a 25-year loan.
The Bank’s move was no surprise and the Council of Mortgage Lenders warned borrowers to expect another increase early next year. Also today, the Halifax said annual house price inflation is now running at 8.6% after a 1.7% increase in October alone.
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02/11/2023
IF ANYONE NEEDED reminding that house prices can go down as well as up, they should take a look at a new report published today by the accountancy giant Price Waterhouse Coopers.
In contrast to more bullish recent forecasts, The UK Economic Outlook predicts a one in three risk of a UK house price fall by 2010. The report uses a new model of house price uncertainty based on the statistical technique known appropriately enough as the Monte Carlo simulation. This involves three scenarios that have different assumptions about the degree of structural change in the market over the last decade.
PwC’s favoured ‘main scenario’ puts the risk of price falls at one in three. Under the ‘optimistic scenario’ the risk falls to just 6%. But in the ‘historic parameters scenario’ (which assumes prices are significantly above their long-term equilibrium level) the risk is a sobering two in three.
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02/11/2023
IT’s NOT OFTEN that the Sun and the Guardian agree on anything but the Abbey’s five-times earnings mortgage offer has got them both in sceptical mood this morning.
A leader in the Guardian concludes:
‘For a decade, property ownership has seemed a risk-free way for people to get rich. But buyers should remember that the most generous lenders have a habit of turning nasty when the monthly mortgage payment is missed.’
Ian King in The Sun predicts strong demand for the new product and says other lenders are likely to follow suit, with some offering mortgages worth 25% more than the value of their home. But he also warns us to ‘beware of the more-gage’ at a time when interest rates are expected to rise.
Still, anyone in real trouble can simply turn to the adverts that helpfully run alongside his story on the web. ‘Debtbuster Mortgage’ anyone? If you have ‘Bad credit? Get an instant personal loan online’.
LATEST: The Yorkshire Building Society points out its Accord Mortgages subsidiary has been offering five-times salary mortgages since February. Go here for details.
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01/11/2023
WHERE WILL IT STOP? The housing market is on fire and there seems to be no shortage of people willing to pour petrol on it.
The FT reports this morning that Abbey, one of the UK’s largest mortgage lenders, is planning to lend homebuyers up to five times their single or joint salaries. This is the same Abbey that published research a few days ago that one in eight people cannot afford to get on the property ladder.
Abbey is not on its own – last week two other lenders increased their income multiples to 4.5 – but it is also relaxing its other lending criteria, including those for approving mortgages without proof of income. Abbey spokesman Dave Stewart told the BBC:
‘Our customers are continually asking for more money to purchase the house they want and subsequently we looked into the affordability ratings of certain people. We found that people could afford to pay out for bigger mortgages but there just wasn’t anything on the market at the moment offering them what they needed.’
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31/10/2023
THE NUMBER OF PEOPLE taking out a mortgage worth more than the value of their home has soared by 70% in a year, according to mortgage brokers quoted in today’s Daily Mail. The ‘100% or more mortgages’ allow them to get on to a property ladder that is still moving out of reach but leave them highly exposed to negative equity if the market cools.
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20/10/2023
TODAY’s PAPERS have some interesting takes on the report from the Conservatives’ Tax Reform Commission.
According to The Telegraph the plan to scrap inheritance tax on primary residences would ‘pour petrol on the flames of the British love affair with bricks and mortar’. It says the plan would create a perverse incentive to trade up in the property market in old age because people would cash in assets like shares that would still be subject to capital gains tax. Go here and scroll down.
Meanwhile, the Independent’s Andrew Grice writes that the Tories and Labour have indentified the baby boomer vote as a crucial factor in the next election. Go here.
‘The Tories believe the group can be won over because they are worried that the prosperity they enjoy will not be passed on to their children, who may struggle to get on the housing ladder and enjoy less generous pensions. But Labour regards them as natural supporters because many have progressive values and favour spending on public services rather than tax cuts.’
Grice quotes a speech by shadow education secretary David Willetts at the Conservative conference:
‘We baby boomers haven’t just bought our houses cheap and written off the borrowings with high inflation. We’ve then pulled up the ladder behind us by restricting the supply of housing as well, further pushing up prices.’
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12/10/2023
HOW LONG before the government works out that the housing boom might be caused by demand as well as supply? The officlal solution is to build more homes in the long term and subsidise first-time buyers in the short term.
In the meantime overpaid City bankers and traders have fat Christmas bonuses to spend. Where do they invest it? Pensions? Shares? Or the under-taxed housing market? You guessed it. Gazumping is on the way back. Helpful lenders are even offering special mortgages to let them pile in before they trouser the cash.
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04/10/2023
WHY ARE house price rises always seen as good news? It’s hardly surprising given the fact they underpin the earnings of mortgage lenders, estate agents and journalists but it’s worth asking the question again after a week that’s seen both the Nationwide and the Halifax report a fresh surge in prices.
Prices rose 1 per cent in September alone, said the Halifax today.
‘Sound fundamentals, underpinned by a stronger economy and record high levels of employment, will continue to support a healthy housing market over the coming months.’
Healthy? Prices rising at four times the rate of inflation? That’s like saying a ten-year-old stuffing himself with burgers and chips and turkey twizzlers has a ‘healthy’ appetite.
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03/10/2023
AT THE SAME TIME as the government was relaunching its flagship scheme to help key workers on to the housing ladder (see yesterday), a leading specialist lender was releasing research that shows a major reason why they need it.
Paragon Mortgages told the Daily Mail that booming house prices had created thousands of buy-to-let millionaires. The average professional investor apparently now has a portfolio of 12 properties worth £1.5 billion.
The government still argues that lack of supply is responsible for the house price boom. It has increased output of new homes from 140,000 to 170,000 and plans 200,000 by 2016.
Yet with buy to let rising by 20 per cent in the first six months of this year, how many nurses and teachers are being priced out by speculators?
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