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Coronavirus Other Finance News

Escape to the Country: City Dwellers Seek Sanctuary in Record Numbers

Slowly but surely, some semblance of normality is returning to the way we live our lives in England. Covid-19 hotspots in some regions continue to cause concern but lockdown restrictions are gradually being eased across the country as a whole.

As predicted, pent-up demand among movers is now being released on England’s real estate sector, with some operators having experienced record activity levels in July. But what’s interesting is the way in which both home buyers and job-hunters now appear to be taking their social distancing habits to an entire new level – all entirely of their own accord.

Not only has the past fortnight seen a huge increase in the number of jobseekers looking for positions outside London, a similar spike has been noted in the number of city residents looking to relocate to quieter corners of the country.

An Exodus Underway

According to the latest figures from the Escape the City careers advisory service, the last two weeks saw twice as many jobseekers proactively looking to escape the capital as during the same period last year. For April as a whole, the number of active home buyers in London who registered their interests with estate agents in other parts of England also doubled compared to 2019.

Importantly, the apparent exodus is by no means exclusive to London. Hamptons estate agency has also reported growing interest in relocation to rural locations among buyers in Birmingham, Manchester and other major cities.

For Londoners, some of the most attractive postcodes for those looking to escape the city included Milton Keynes in Buckinghamshire, Ipswich in Suffolk and Worthing in Sussex. One of the few things all of these destinations have common is a resident population at least twice as spread out as in London.

Aylesbury Vale in rural Buckinghamshire attracted a particularly heavy attention from London-based movers during April. Whereas the proportion of people from London organising viewings in the region would normally have been less than 30% for April, approximately 44% of those signing for viewings in post-Covid England were currently located in London.

Home-Based Workforce

Along with the desire to seek safe and quiet refuge outside the big cities, the UK’s shift towards a predominantly home-based workforce for many businesses is also credited with fueling this ongoing exodus. A growing number of businesses have announced that they will not be returning to their prior and predominantly office-based operational model, even when lockdown restrictions are entirely eliminated.

The benefits of working from home for businesses and employees alike are predicted to radically change where and how millions of workers across the UK live their lives. Whether it is avoiding crowds, eliminating time-consuming commutes or simply staying safe, the potential benefits of working home are appealing to more people than ever before.

As is the prospect of escaping the city for a safe, relaxed and vastly more cost-effective lifestyle – a combination of factors expected to continue fueling the accelerating exodus for some time to come.

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Mortgages

Over 1 Million Brits Could Be Overpaying on Their Mortgages

Mortgage applicants naturally seek the best possible deals, which for most means choosing lenders that offer the best introductory rates. Unfortunately, research suggests that a surprising proportion of home buyers do not realise that when their initial deal comes to an end, the mortgage is automatically switched to a standard variable rate (SVR) mortgage.

Banks and lenders are legally obliged to explain this caveat when organising and issuing mortgage contracts, though thousands are apparently unaware of the terms of their home loans.

A new study conducted by MoneySuperMarket suggests that a full 12% of mortgage payers have lapsed onto SVR rates by accident. This results in an average additional monthly repayment of approximately £133, with a typical SVR mortgage costing around 15% more than an introductory mortgage deal.

Worse still, among those who accidentally wound up on an SVR and found themselves essentially out of pocket, many claimed they were not made aware of the automatic switch at the end of their initial deal. The same study from MoneySuperMarket found that around 15% of all mortgage borrowers do not know that the transfer to an SVR at the end of the introductory period is automatic.

Switching Deals at the Right Time

In total, MoneySuperMarket estimates that around 1.3 million Brits could have lapsed onto an SVR mortgage, amounting to total collective added costs of more than £175 million per month. By contrast, those who switch to a better deal at the right time – i.e. prior to their introductory rate comes to an end – stand to save an average of £340 per year.

For those already tied into an SVR, the potential monthly savings increase to approximately £1,602 per year.

According to MoneySuperMarket, the importance of switching to a competitive deal at the right time simply cannot be overemphasised.

“Standard Variable Rates on mortgages are notoriously expensive and with 15% of those remortgaging being unaware of how they work, automatically lapsing onto them is a common and costly financial pitfall,” commented MoneySuperMarket’s Emma Harvey.

“Regardless of whether you’re on an SVR mortgage or another type, there could still be significant savings to be made when your initial mortgage deal comes to an end. In fact, we found that the average saving for mortgage holders still within their initial product period is £28.36 per month, which really adds up,”

“In order to stay on top of how much you’re spending on your mortgage, be aware of when your current mortgage deal is due to come to an end and start researching rates several months in advance,”

“You can arrange your new deal three months before the end date so that you switch over at the end of your initial term, ensuring you are always on the best deal.”

Independent Broker Support

If you are reaching the end of your introductory deal or believe you are paying too much on your current mortgage, we can help. You can contact a member of the team at UK Property Finance and we will conduct a whole of market search on your behalf, enabling you to find a more competitive deal and make on-going savings on the life of your loan. Along with this you can even use our UK mortgage calculator to work out the costs more accurately yourself.

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Mortgages

Is Now the Time to Reconsider Buy-to-Let?

Prior to the government’s decision to more or less declare war on private landlords, buy-to-let was a safe haven for investors. If not, a veritable goldmine for those who made the savviest moves. But it wasn’t to last, as sweeping tax reforms hit current and prospective landlords hard, removing much of the appeal from the sector as a whole.

More recently, Chancellor Rishi Sunak announced a temporary stamp duty adjustment. Detailed in early July, the new policy would see the threshold at which homebuyers are required to pay Stamp duty increased from £125,000 to £500,000. Coupled with comprehensively affordable mortgage deals and the easing of eligibility requirements among many major lenders, things could once again be working in favour of landlords.

But does this mean that now is the right time to consider a buy-to-let investment? Or do these potential incentives for landlords simply not go far enough? Use our UK mortgage calculator to find out what kind of mortgage suits you best and the exact costs

Sizeable Stamp Duty Savings 

In the wake of Chancellor Rishi Sunak’s stamp duty break announcement, some of the UK’s leading buy-to-let brokers, experienced enormous spikes in both website visits and client enquiries. Likewise, both Strike and Zoopla reported increases of up to 15% in the number of people looking to buy homes or considering buy-to-let investments.

The prospect of saving thousands of pounds on stamp duty having apparently piqued the interests of once-reluctant investors.

It’s important to note that landlords will still be required to pay a flat 3% surcharge on buy-to-let properties. This means that on a £300,000 investment property, the usual stamp duty of £14,000 would be reduced to a much more manageable £9,000.

Meanwhile, many lenders have begun both reinstating their buy-to-let mortgage products and improving the competitiveness of their deals. Qualifying is becoming easier and buy-to-let products are currently available with rock-bottom interest rates, adding up to an appealing prospect for those who act fast.

Particularly in key locations outside the capital – the North West, for example, having seen year-on-year rent price gains for June of more than 5%.

On-going Uncertainty

Unfortunately, landlords and private renters alike are being forced to contend with a period of on-going and indefinite uncertainty. Potential job losses and income reductions in particular are prompting movers and investors alike to think twice about making any major decisions for the time being.

Hence, basing buy-to-let investment decisions purely on stamp duty reductions isn’t considered advisable by most real estate experts.

A number of mortgage business owners feel that many will jump at the chance to pick up investment properties before the offer expires, while stating that buy-to-let can still be a valuable vehicle for those who get it right.

“Landlords will rush to buy homes before the stamp duty holiday ends in March next year, after which I think there will be a natural drop in activity,” he said,

“The UK is bracing itself for a slowdown in the economy, so I think it will be 2022 before the market rebounds again, assuming the taxman has no more nasty surprises,”

“It may never be the golden goose it once was, when amateur investors made easy money, but for the professional landlord, buy-to-let is still a profitable venture.”

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Other Finance News

A Brief Roundup of UK Housing Market News

It has been a busy few weeks for the UK housing market, so we thought we would put together a brief summary of everything you need to know right now.

Halifax Reports Record House Price Gains for July

July saw average property prices reach new record highs. According to the latest Halifax House Price Index, average property prices reached £241,604 for July – an increase of 1.6% on the previous month and a full 3.8% higher than July last year.

“Following four months of decline, average house prices in July experienced their greatest month on month increase this year, up 1.6% from June and comfortably offsetting losses in 2020,” commented Halifax’s managing director, Russell Galley.

“The average house price in July is the highest it has ever been since the Halifax House Price Index began, 3.8% higher than a year ago.”

Pent up demand and the chancellor’s temporary ‘stamp duty holiday’ have been credited with sparking this unprecedented monthly spike.

Rightmove Share Prices on the Up

Record levels of housing market activity following the easing of lockdown restrictions have had a knock-on effect on Rightmove’s share prices.

According to the company’s chief executive, Peter Brooks-Johnson, Rightmove stock has surged more than 7% after more or less grinding to a halt during the national housing market shutdown. Welcome news for Rightmove shareholders, following a confirmed slump in operating profits of 43% for H1 2020.

Investors are, it seems, apparently setting their sights on the long-term picture for the housing market, with the sector having shown signs of slowly but surely returning to strength.

Fewer Construction Jobs

Despite the fact that construction firms are experiencing the fastest rebound in activity recorded since 2015, the sector continues to record a reduction in employment. The latest figures suggest that one in every three construction companies in the UK reduced its employment rate over the past month.

A similar proportion indicated that they expect to continue hiring fewer employees for the next year at least. Both the coronavirus crisis and Brexit, being blamed for making property developers and construction companies apprehensive about making major hiring decisions or committing to new projects.

Property Capital Gains Tax

Last up, the Social Market Foundation (SMF) has suggested the introduction of a new “property capital gains tax” to help plug the UK’s growing budget deficit.

The move would see all homeowners face a 10% tax payment on the increase in value of their home from the time they bought it to the date of its subsequent sale. According to the SMF, this could generate in excess of £421bn within the next three decades, as property prices across the UK continue to skyrocket.

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Other Finance News

Does the Government’s Home Energy Upgrade Initiative Go Far Enough?

While the government’s recent decision to financially support homeowners and social landlords willing to conduct energy-efficient retrofits, the current measures simply do not go far enough. Worse still, social landlords who fail to take advantage of the offer at an early stage run the risk of missing out altogether.

Chancellor Rishi Sunak recently confirmed the allocation of funding to the tune of more than £3 billion for ‘green job’ creation over the coming years. The vast majority of it was earmarked for private sector initiatives, including a new ‘Green Homes Grant’ worth £2 for every £1 landlords and owner occupiers spend on energy efficient upgrades.

The funds would be available up to a maximum of £5,000 for most, increasing to £10,000 for low-income households. According to the official government statement, the initiative will benefit a minimum of 600,000 homes in England, potentially “saving households hundreds of pounds per year on their energy bills” as a result.

Though the Chartered Institute of Housing also warned that “social landlords who don’t act now could find themselves struggling to meet a target because they haven’t given it the priority it deserves.”

Right Incentive, Wrong Time?

On one hand, some argue that the mathematics work and should therefore be taken advantage of.  Where relatively basic home improvements like cavity wall insulation or loft insulation are concerned, a contribution of £2 from the government for every £1 spent seems pretty generous. Especially when considering the ongoing benefits of energy efficiency – i.e. reduced energy bills.

The problem being that as it stands, there’s no real certainty as to whether homeowners or landlords will have the confidence right now to fork out for any kinds of major home improvements. As the vast majority of households are still reeling from the financial impact of the Covid-19 crisis – which is set to linger for some time – it seems likely that the incentive will expire before most are able to take full advantage of it.

Redistribution of Funding

Experts at the Chartered Institute of Housing believe it may be necessary for the allocation of the full £3.8bn Social Housing Decarbonisation Fund to be modified, in order for the initiative to have the desired effect. One of the ideas floated by the institute is that of zero-interest loans for the private sector, where major updates and improvements are required.

They also believe that local authorities should have more of a say in how the funds are allocated and spent.

“There’s a case for local authorities and possibly housing associations to lead the way in the private sector – for example by retrofitting Right to Buy properties on estates or tackling all the homes in fuel-poor neighbourhoods,” suggests the Chartered Institute of Housing.

In the meantime, the Institute also advises landlords to make full use of the initiative at the earliest possible stage, rather than delaying their decisions to act for too long.

“As well as considering whether to bid for money from the pilot scheme, they (landlords) shouldn’t delay in assessing their stock in detail to establish how much retrofit will cost and where the biggest challenges are,”

“Some landlords are already doing this, but those who don’t are taking a risk. Not only might they miss out on funding, but they could find themselves struggling to meet a target because they haven’t given it the priority it deserves.”

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Other Finance News

House Prices for July Hit a New Record High

The UK’s property market is bouncing back at a rate few could have predicted, with the easing of lockdown restrictions having a knock-on effect on property prices across the country. According to the latest figures published by Halifax, average house prices for July reached a new record high – a full 1.7% increase on the previous month.

The Halifax House Price Index showed an average property price for July of £241,604, compared to the £237,834 average recorded in June. This would also mean that average property prices for July were up an impressive 3.8% on the same months in 2019.

According to Russell Galley, managing director of Halifax, the sudden spike is indicative of a pent-up wave of demand being released in the wake of eased lockdown restrictions. In addition, the chancellor’s recent introduction of a temporary ‘stamp duty holiday’ is also credited with motivating sellers and buyers to take action.

Until March next year, the threshold at which homebuyers will be required to pay stamp duty has been increased to £500,000 in England and Northern Ireland. An increase which, according to the government, will significantly benefit at least 90% of all buyers during this time period.

Indefinite Uncertainty

Mr Galley stated that while an increase in activity had been expected as lockdown restrictions were eased, none had predicted such a dramatic spike.

“The latest data adds to the emerging view that the market is experiencing a surprising spike post lockdown,” he said.

However, he also went on to warn that while things are starting to look better for the housing market, the sector must be braced for a period of on-going and potentially indefinite uncertainty.

“As government support measures come to an end, the resulting impact on the macroeconomic environment, and in turn the housing market, will start to become more apparent,” he said.

Along with the long-term fallout of the Covid-19 crisis, the real estate sector in the United Kingdom is widely expected to be impacted negatively by Brexit.  Particularly if the United Kingdom leaves the European Union without a deal – a prospect that is becoming increasingly likely – the repercussions for the UK economy as a whole could be devastating.

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Mortgages Other Finance News

Short-Term Holiday Lets Increase in Demand as Lenders Diversify Mortgage Options

Staycation spots are on a rise in the United Kingdom, and mortgage lenders are making their best attempts to meet the rising demand for them.

Do you think short-term lets are the new direction property lenders and investors should be eyeing for the next couple of years?

Before the onset of Covid-19, the UK holiday market was thriving in the face of world competition. British locals, along with foreigners, were taking advantage of the depreciating pound rate and booking more staycations than in previous years.

From a consumer’s perspective, environmental issues have become an important aspect when choosing a holiday destination. Research shows that a significant percentage of people are on a lookout for ‘more sustainable’ or ‘greener’ holidays in the future.

From the angle of a property investor, many factors such as long-term rentals and short-term lets, can motivate landlords to diversify their ownerships. The latter carry tax and financial benefits, including increasing demand from consumers and a more attractive business model for higher profit margins.

The outbreak of Covid-19 has restricted international travel, resulting in a rise in demand for staycations. While people are reluctant to go abroad for travel, they are on the lookout for closer and cheaper alternatives – a trend that is likely to survive until the virus subsides completely.

A number of Adapting to the times and new trends, mortgage lenders are giving more opportunities to borrowers. A number of companies such as YBS Commercial Mortgages and Teachers Building Society have attempted to profit off and open the market for staycations. YBS, for example, is now offering a buy-to-let product that targets holiday lets in the UK’s top tourist sites. The offer comprises a loan amount of £1m, and the opportunity for a five-year fixed rate at 3.85% with a loan-to-value (LTV) ratio of 75%. Work out what a mortgage would cost you using our Mortgage calculator UK.

On the other hand, Teachers Building Society has launched some products in which the lender offers a 3.49% three-year fixed rate and a 3.74% five-year fixed rate with a 75% LTV for borrowers. These products aim to meet the demands of new and preexisting property investors.

Diversifying short-term lets is also imperative to its specific location along with the property on the market. Many believe that coastal resorts are a great option as these tend to be the most popular summer vacation destinations. However, seasonal-prone areas may not be the best choice when it comes to staycation lets.

One of the primary locations in the UK with the highest short-term let yields is Liverpool. Research shows that such city locations remain busy all year round, attracting business ventures and tourists. Most cities are geared up for hosting and attracting major sporting events, which automatically pulls people closer to the location. As mainland cities such as these have ideal transport links, restaurants and cafes, tourist sites, and employment hubs, they will continue to attract more people.

As the market trends continue to shift, the opportunities for lenders and borrowers alter as well. It is interesting to note how short-term lets thrive in the market, and if they will break traditional long-term rentals.

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Mortgages

The 90% LTV Mortgage is Back – What This Means for Buyers

Recent months have seen most major lenders become increasingly reluctant to offer high LTV mortgages, primarily due to the economic uncertainty brought about by the Covid-19 crisis. As life slowly begins to show signs of normality once again, some of the nation’s leading lenders are once again introducing higher LTV home loans.

Nationwide in particular appears to have first-time buyers in its sights, having for the first time in months begun offering 90% LTV mortgages.

Affordable and Accessible Borrowing

Exactly as the name suggests, a 90% LTV (or Loan to Value Mortgage) is a home loan offered to the value of 90% of the property’s total purchase price.  The remaining 10% being picked up by the buyer by way of a deposit.

In a typical working example, this would mean that a 90% mortgage on a £200,000 property would be offered to the value of £180,000 – the remaining £20,000 being the initial deposit requirement from the buyer.

The vast majority of first-time buyers have traditionally favoured 90% or even 95% LTV mortgages, due to the difficulties most encounter when attempting to put together a deposit. Over the past few months, most lenders have been unwilling to offer anything more than 80% or even 75% LTV on home loans for first-time buyers, meaning deposits of 20% or 25% payable.

On the same £200,000 property, this would mean coming up with a deposit of £40,000 or even £50,000 – the kind of cash most first-time buyers simply cannot save in a reasonable time.

There are no immediate signs that the return of the 95% LTV mortgage is imminent, though the reintroduction of the 90% mortgage has come as welcome news to first-time buyers across the UK. Work our what a mortgage would cost you, using our UK mortgage calculator.

Leading the Charge

Nationwide is so far leading the charge for affordable and accessible borrowing, having announced that its 90% LTV mortgage product is once again available as of July 20. Experts believe that the flexibility of major banks and lenders will play an important role in restarting the housing market and the wider economy, in the wake of the Covid-19 crisis.

Speaking on behalf of Nationwide, Mortgage Director Henry Jordan stated that the decision had been made on the back of Rishi Sunak’s recent announcement regarding the temporary cut to stamp duty tax. Initial signs of housing market activity returning to pre-Covid levels are also giving lenders the confidence to offer more competitive deals for first-time buyers and existing homeowners alike.

In addition, Nationwide stated that there will be no initial limitations placed on the number of 90% LTV loans available, or the loan amounts on offer for those who qualify.

Stringent Eligibility Checks

Though the reintroduction of the 90% mortgage is welcome news for buyers at all levels, applicants can still expect comparatively stringent eligibility checks when applying with major lenders. Particularly where proof of income and credit history is concerned, most mainstream lenders remain unwilling to take chances during the current period of economic uncertainty.

Whether you are planning your first home purchase or considering relocation, working with an independent broker could save you time, effort and money.  Particularly if you have concerns regarding your credit history or your ability to provide comprehensive proof of income, it is advisable to apply via a specialist broker, rather than approaching any mainstream lender directly.

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Mortgages

Equity Release Advice Standards Still Subpar, FCA Review Suggests

The Financial Conduct Authority (FCA) is the body responsible for ensuring businesses and consumers in the UK are provided with honest and accurate financial advice on key financial matters. Unfortunately, a newly published review of equity release advice suggests that many service providers are not fulfilling their obligations.

Significant efforts have already been made to ensure prospective equity release customers are offered the frank and objective advice needed to make sound decisions for their financial futures. Most established and reputable providers are doing just that, but the report published by the FCA indicates that further progress must be made.

Much of the issue has been attributed to the fact that the sector has experienced such rapid growth over the past few years. The coronavirus crisis has resulted in a temporary slowdown, but the figures confirm that more people than ever before are considering equity release. This growing demand is being responded to by a rapidly evolving specialist lending sector, which is proving difficult to oversee and regulate effectively.

The Importance of In-Depth Advice

Entering into an equity release scheme is one of the most important financial decisions a typical homeowner will ever make. The type of scheme entered into (along with the terms and conditions of the deal) will have a significant and permanent impact on the customer’s financial future. Nevertheless, there will always be those who attempt to rush equity release applicants into making a quick decision, purely for their own financial benefit. See whether a mortgage would benefit you using our Mortgage calculator UK.

The establishment of the Equity Release Council (which has improved its services significantly over the past few years) has helped, providing new and existing service providers alike with professional advice – including a helpful ‘adviser checklist’. Though it remains the responsibility of each individual adviser and provider to ensure they operate with their customers’ best interests in mind.

Outlined below is a selection of just a few of the more important points highlighted by the FCA, aimed at those providing support on equity release products and services:

• Obtaining the necessary information from a client to assess their situation and suitability for equity release is not the same as asking them to complete a form.
• Equity release is often entered into (or considered) without careful consideration of the potential consequences and can be an emotive subject.
• The FCA expressed concern that advisers do not always actively challenge the thoughts and assumptions of clients, where they may be inaccurate or misguided.
• Alternative options to equity release should always be discussed openly and honestly where relevant – particularly if they could be more suitable for the client’s needs.
• In instances where equity release is both appropriate and recommended, the adviser should be able to explain why it is a better choice than the alternative options available.
• Where clients have significant on-hand savings they would simply prefer not to touch, the potential benefits of doing so as an alternative to equity release should be discussed.
• The full costs, risks and potential inheritance issues associated with equity release should be discussed frankly, openly and in an uncomplicated manner.

Whether you are interested in releasing the equity tied up in your home or simply looking to discuss your financial future in more detail, we would be delighted to provide you with an obligation-free consultation.
Contact a member of the team at UK Property Finance anytime for more information.

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