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Bridging Loans

Jade Buswell at UKPF Nominated for Outstanding Senior Female Executive of the Year 2022

She is outstanding Senior Female Executive of the Year 2022 (East Midlands).

At UK Property Finance, we are always delighted to receive positive feedback for the services we provide. We are particularly proud when a member of the UKPF team is recognised for their achievements and their contributions to the industry we work in.

That is why it is with huge pride and pleasure that we can announce our own Jade Buswell has been nominated for the ‘Outstanding Senior Female Executive of the Year’ award at the 2022 Women’s Awards. And it is with even greater pride that we can confirm Mrs Buswell has been shortlisted for the final stages of the competition.

Outstanding Senior Female Executive of the Year 2022 (East Midlands)

“The Women’s Awards is a prestigious multidisciplinary award celebrating the outstanding achievements of women. The purpose of these Awards is to raise awareness, recognise and honour the hard work and valuable contribution women of all cultures, communities, races, and beliefs, in all sectors make. 2022 is our 6th year as we continue to grow. There are many ways to get involved, least of all through making a nomination or sponsoring an award category.  Become part of the movement to help women see their worth.”The Women’s Awards

According to the organisers of the Women’s Awards, the Outstanding Senior Female Executive of the Year category is dedicated to individuals who have held senior roles within organisations for a minimum of three years and are able to demonstrate the outstanding impact they have had on both their company and its workforce.

Shortlisting for the Outstanding Senior Female Executive of the Year award (for the East Midlands) took place in late July and we are now counting down to the Women’s Awards Gala Dinner and Presentation set to take place later this year.

The event has been scheduled for Friday September 9th, and will be held at Colwick Hall in Nottingham. Special guests set to make an appearance at the ceremony include Her Majesty’s Lord-Lieutenant of Nottinghamshire Sir John and Lady Peace and tickets are already on sale via the following link:

Award Gala Event Tickets Here

Huge Congratulations From the Team at UKPF

Once again, we would like to congratulate Mrs Buswell on her nomination for Outstanding Senior Female Executive of the Year and express our gratitude to all those who have supported UK Property Finance over the years.

For more information on any aspect of our business or the financial services we provide, contact a member of the UKPF team anytime for an obligation-free consultation.

Categories
Bridging Loans

Buy-to-Let Property Investments: What First-Time Landlords Need to Know

Established and aspiring landlords alike continue to question the potential benefits of purchasing BTL properties via a limited company. Understandable, given the government’s no-holds-barred approach to BTL legislation over recent years.

Landlords were first hit (and hard) back in 2016, when the government introduced a new 3% stamp duty level on BTL property purchases. Next, policy reforms slashed mortgage and loan interest relief on second homes, which would eventually be removed entirely by 2021.

2019 brought more bad news for landlords in the form of the Tenants Fees Act, imposing much greater restrictions on what tenants could and couldn’t be charged for by property owners.

Whichever way you look at it, turning a profit as a private landlord is becoming trickier all the time. But as demand for quality rental homes skyrockets and average monthly rents break every record in the books, there’s still good money to be made with savvy BTL investments.

In total, the value of the UK’s BTL sector has grown from £239 billion in 2017 to more than £1.7 trillion today.

“There have been many challenges that have subdued investment into the private rented sector over the past few years,” comments Stephen Clark of Finbri bridging finance broker 

“But the sector has proved resilient and we have seen continued demand for finance in this vibrant part of the economy.”

Safety and Stability

UK’s property market, in general, remains a relative safe haven for investors. Even the catastrophic events of the past two years have done nothing to quell the public’s appetite for quality homes in desirable locations.

In fact, figures from the Nationwide suggest that from March 2020 to December 2021, average house prices in the UK grew by more than 16%.

Responding to demand from homebuyers and investors alike, major banks have been diversifying their mortgage portfolios as of late. BTL mortgage products, in particular, are available in abundance – more than 2,235 specialist mortgages at the end of last year.

What’s more, many banks have also been cutting interest rates on five-year fixed mortgages for BTL borrowers, as means to encourage more landlords to make their moves.

“The BTL sector has faced its share of upheaval and changes to regulations and requirements, so it is highly encouraging to see that providers are still keen to attract first-time landlords,” said Eleanor Williams at Moneyfacts.

“Rents have risen at the fastest rate on record, while tenant demand has almost doubled.”

Still, with inevitable Bank of England base rate hikes on the cards, mortgages across the board are not going to get any cheaper than they are now.

But when it comes to maximising profits and minimising tax liability on a BTL property, is it better to purchase homes through a limited company?

The Pros and Cons of Limited Company Investments

Forming a limited company to purchase real estate is not something that should be done without careful forethought. In addition, the advice and input of an experienced broker could prove invaluable.

From a general perspective, the benefits of using a limited company to purchase a BTL property are as follows:

  • All profits generated on limited company BTL property purchases are subject to flat-rate corporation tax at 19%. By contrast, private landlords are subject to standard income tax bands – 20% in the normal band and up to 45% for higher-rate taxpayers.
  • Mortgage interest is classed as a business expense for limited companies, meaning it is tax-deductible. For private landlords, a tax credit of just 20% can be claimed on mortgage interest payments.
  • Revenue withdrawal options are also broader.  All profits received by private landlords are taxed, whereas profits taken out of limited companies are only taxed once.
  • There are also options for decreasing overall tax liability, such as forming a family investment firm or a limited liability partnership. Assets can also be transferred to family members to avoid or reduce inheritance tax.

Downsides also apply with limited company BTL investments, including the following drawbacks:

  • Mortgage options are much more limited for businesses looking to purchase BTL properties, and it can be more difficult to qualify.
  • Larger deposits are the norm for these kinds of property investments, along with higher rates of interest and elevated borrowing costs.
  • Along with corporation tax, dividends withdrawn from the company are also taxable.
  • In order to transfer a property you already own into a company holding, it needs to be sold in the normal way. This means paying stamp duty at the normal rate, along with all associated conveyancing and legal fees, plus Capital Gains Tax.

Despite this fairly even split of pros and cons, more landlords are purchasing properties through limited companies than ever before. In fact, the figures suggest that around 80% of all BTL mortgages are being issued to limited companies.

“Getting the ownership structure right might make a tremendous difference in the amount of tax you pay throughout your lifetime,” commented Rob Dix (the Property Geek).

As a general rule of thumb, experts advise considering forming a limited company where a landlord has a minimum of three private rental properties. By contrast, landlords with two properties or a single rental home may find it more cost-effective to simply hire an accountant to oversee their affairs.

Categories
Mortgages

What You Need to Know About Buying Homes at Auction (and How to Pay for Auction Properties with a Mortgage)

Whether you are looking to pick up your dream home at a rock-bottom price or turn a quick profit with a fixer-upper, auction property purchases can be just the thing. Buying homes at auction is quicker and easier than becoming part of a conventional property chain, and the savings on offer are unbeatable.

But as properties purchased at auction call for prompt payment, typically within 28 days, conventional mortgages have little practical value; with the typical residential mortgage currently taking around three months to arrange, this 28-day payment deadline calls for an alternative funding solution.

The Benefits of Property Auctions

One immediate benefit of buying properties at auction is the speed and simplicity of the transaction. Within 28 days, the property purchase and transfer process in its entirety are complete. You benefit from the lower prices afforded to cash buyers and there is zero risk of being ‘gazumped’ by competing bidders.

If yours is the winning bid on the day, the property is yours – and at the exact price quoted.

In addition, a much broader range of homes go under the hammer at auction than appear on the conventional property market. Homes that need to be sold as quickly as possible, properties in need of repairs and renovations, non-standard properties considered ‘unmortgageable’ by major banks – all potential bargains in the making.

You can even buy rental properties at auction that already have tenants living in them, enabling you to begin collecting regular rent payments in less than a month.

The Drawbacks of Property Auctions

On the downside, the shorter transaction times associated with auction property purchases can prove problematic.  If your bid is successful, you will be expected to pay a non-refundable reservations fee on the spot.

This may be 2.5% of the property’s agreed price (plus VAT), or a set fee of around £5,000. The contracts do not need to be signed and exchanged right away, but you will forfeit this initial reservation fee if you back out of the deal.

Upon signing the contract and agreeing to purchase the property, you will be expected to pay a 10% deposit. At this point, you will usually have 28 days (sometimes slightly longer) to come up with the rest of the money.

Another drawback to property auctions is the risk of being outbid, which could happen after paying for a formal survey of the property. There are also no guarantees yours will be the winning bid, irrespective of how many lots you bid on, and how many auctions you attend.

Financing an Auction Purchase

The time-critical nature of auction property purchases calls for something much swifter than a conventional mortgage. In addition, it is essential to arrange the necessary funding before the auction, in the form of pre-approval or a decision in principle. This will enable you to access the funds you need if your bid is successful, without having to start your application from scratch.

Most buyers pay the 10% deposit on the homes they buy at auction out of their own pockets, or perhaps by way of a personal loan or a credit card payment on the day. It is therefore important to ensure you have access to this 10% deposit on the day itself, or your bid will be cancelled and the property sold to someone else.

Bridging Loans for Auction Property Payments

One of the most convenient and cost-effective ways to fund an auction property purchase is bridging finance. Where approval is obtained in advance, a bridging loan can be arranged and accessed within a few working days.

Bridging finance can be secured against most types of property or land and can also be used to purchase any type of property – irrespective of its condition.  This makes it a particularly suitable facility for auction property purchases, where non-standard homes in questionable states of repair often go under the hammer.

A strictly short-term facility, bridging finance is designed to be repaid within a few months – charged at a monthly rate of around 0.5%. It can therefore be ideal for investors looking to flip properties for fast profits, using the funds raised at the point of sale to repay the loan.

It is also possible to repay a bridging loan by transitioning it to a conventional mortgage or similar long-term repayment facility.

Auction Preparation

In the weeks and months leading up to an auction, full details of the properties set to go under the hammer will be released. This will include a “guide price” for each home, which in most instances will be significantly lower than the price it sells for.

If there is a property you are interested in buying, you will need to arrange an in-person viewing and a professional survey. Particularly if it is a home in need of renovations and repairs, you need to know exactly what kind of work will be needed to bring it up to acceptable standard.

At this point, you could also contact a local architect or builder to provide you with an estimate regarding the proposed renovations. They may be willing to conduct a survey and provide an estimate for free if you subsequently use their services if/when your bid is successful.

Take a good look at the legal pack for the property you intend to buy and have a solicitor examine its contents on your behalf. If this is to be your first property auction, visit one or two auctions as a visitor in advance to get a feel for how the whole thing works.

On the Day of the Auction

Arriving early will give you the best shot at securing a good seat in the auction room. Ideally, you should be in a spot where you can see your competing bidders, but also where the auctioneer can clearly see you.

When the auction begins, don’t be tempted to exceed your budget and try to keep your emotions in check. Even if you have your heart set on a property for sale, you need to remain grounded and bid objectively.

If your bid is successful, you will need to provide two forms of identification, along with evidence that you can pay the deposit.

Should the property you are interested in fail to sell having not reached its reserve price, request the contact details of the seller; you may be able to negotiate with them directly, and perhaps pick up the lot for less than you intended to spend.

Can You Buy Property at an Auction with a Mortgage?

In terms of conventional mortgages, the answer is no. Based on standard mortgage processing times alone, it would be practically impossible to arrange a traditional mortgage within the 28-day time limit.

There may be the occasional exception to the rule, where an agreement is reached with a lender in advance to secure the required funds as promptly as possible. But this simply isn’t an option with most major lenders, where typical mortgage application processing times average around 12 weeks.

In addition, many (if not most) of the properties that go under the hammer at auction would not qualify for a conventional mortgage with a mainstream lender. Auction properties are often deemed ‘non-standard’ or ‘unmortgageable’ due to their repair and renovation requirements.

Fast-access funding is available in the form of bridging finance, along with specialist auction finance and development finance loans for established investors. Issued as short-term facilities, fast-access loans like these can be repaid using longer-term mortgages, once the property has been restored to an acceptable standard.

Consult with an independent broker ahead of the auction to discuss the most cost-effective funding options available.

What Happens if You Can’t Meet the Completion Deadline?

If a buyer is unable to pay for their property in full within the 28-day deadline, the transaction is cancelled, and they forfeit their deposit. Depending on the terms and conditions of the agreement, they may also be liable for the costs of listing the property once again at a future auction.

However, there is usually some leeway where buyers raise their issues with the vendor ahead of time. For example, if you simply need an extra few days/weeks to come up with the money, they will most likely demonstrate a good deal of flexibility.

After all, it is in nobody’s best interests to take the whole thing back to the drawing board.

If you have any questions or concerns regarding your ability to meet the completion deadline, ensure they are discussed with the seller at the earliest possible stage.

Pros and Cons of Buying at Auction

In summary, a brief overview of the pros and cons of buying properties at auction:

Pros

  • The opportunity to secure an unbeatable bargain
  • A much faster and simpler transaction
  • No reliance on risky property chains
  • Zero risk of being gazumped by competing buyers
  • A broader range of properties to choose from

Cons

  • No guarantees you will walk away with a property
  • Full payment is required within 28 days

Auction property purchases can therefore be advantageous in many ways, but will always call for careful planning and forethought.

For more information on how to fund auction property purchases or to discuss the benefits of buying at auction in more detail, contact a member of the team at UK Property Finance today.

Categories
Mortgages Other Finance News

Increased Mortgage Interest Rates Combined with the Cost of Living Crisis Forces Buyers and Homeowners to Dip into Savings

It’s no secret that times are hard for millions of UK residents, with the cost of living escalating at a speed not seen since the big recession back in 2008 and with the cost of mortgages constantly on the rise, affordability for new buyers is becoming increasingly out of reach with many not having enough savings for a deposit and others struggling to meet their current monthly mortgage obligations.

Cost of Living Crisis

Adding to the misery is the fact that inflation rates are at the highest seen for thirty years pushing monthly outgoings through the roof for the vast majority of the population. Wages are certainly not keeping up with the rapid price increases resulting in many accessing savings just to meet their monthly commitments. With inflation at a thirty year high of 9% and expected to reach 10% by next year, households will need to tighten their belts even further.

And it’s not just inflation that is causing chaos for many, the enormous gas and electricity price hike is a worry for almost every household in the country. This is due to the impending increase in the energy price cap coming in October and the embargo on oil and gas from Russia. Diesel and petrol prices are at the highest ever seen which is having a detrimental effect on drivers and in turn causing further increases in prices, due to the added costs of manufacturing and logistics.

Bank of England Increases the Base Rate for Fourth Time in a Row

Despite increased mortgage interest rates, the property market remains surprisingly buoyant, but experts are predicting a marked slow down over the next year, when house prices are expected to stabilise and with any luck the economy will start to recover, although there is still a lot of uncertainty surrounding this expectation as inflation continues on an upward trajectory.

The main reason for the interest rate hike is that the Bank of England has raised the base rate four consecutive times since December 2021, increasing base rates from 0.1% to 1%. Their reasoning for doing this is to try and tackle the huge increase in inflation. The concept behind this is to discourage people from spending and encourage saving instead.

A Third of Income Needed for Mortgage Repayments

Average monthly mortgage repayments are now approximately a third of monthly income. Annual income, on average, in the UK is currently £31,447. So for example, a home bought for the average price of £276,019, on a 25 year loan period, with a 75% LTV (£69,000 deposit) and a fixed rate at the current average mortgage rate of 1.84%, will equate to monthly repayments of £859.41.

Current figures show homeowners using 32.8% of their monthly wage to meet their repayment obligation which is up 5% since before the Covid pandemic and close to levels seen during the credit crunch of 2008 when the UK was plunged into a crippling recession.

CEO of Octane Capital, Jonathan Samuels, commented: “The cost of living crisis is a current cause of great concern and many homeowners are not only combating the inflated cost of day to day living, but also the monthly cost of their mortgage following a string of interest rate increases.

“At the same time, wage growth has simply failed to keep pace with these rising costs and so the proportion of our income required to cover our monthly mortgage commitments is now substantially higher than it has been for many years.

“Unfortunately, this cost only looks set to increase as we expect to see interest rates increase further throughout the year. The best advice for those currently struggling is to consult a mortgage professional and see if they can swap to a product offering a better rate. For those currently looking to buy, it’s vital to factor in any potential increase and not to borrow beyond your means based on current rates.

“While the current cost of borrowing may still remain fairly favourable, it’s vital you consider what any further increases may mean for your financial stability, as those borrowing right up to their limits initially are sure to struggle further down the line.”

Savers Forced to Access Funds to Survive

It’s not surprising that a huge number of UK residents have been forced to use savings to get through the month particularly in the last year. That is true for those lucky enough to have savings to fall back on, but the financial strain on those who have little to no savings is on the up, with many getting deeper into debt and the forecast for the next twelve months does not look bright.

According to a to report from Yorkshire Building Society, aptly named “Inflation Nation”, 17% of UK households had no savings at all. The report, which surveyed 4000 households, revealed that 39% had withdrawn funds from their savings account with a further 17% taking out over £1,000 to meet their financial obligations.

The report went on to reveal that the vast majority of people were either unable to save anything at all or were saving significantly less than they would typically be able to save.

The report went on to show that, of those surveyed, around 40% predicted increases of between £100 and £500 in monthly bills over the next year, making it even harder if not totally impossible to increase savings.

Government Help for Millions

On the 26of May, Rishi Sunak announced a £15 billion package to help UK households with the escalating energy prices. Poorer households will be eligible for a one off £650 payment to help towards gas and electricity bills with the rest of UK households to receive a £400 discount.

He stated: “We know that other countries in Europe have taken measures to help households with their energy bills, so this is obviously very helpful from an economic perspective, unlike the previous plan that was made available in March.”

“The government’s measures are really quite important because we know that there are a lot of people in this country who don’t have any form of savings.

“If a large proportion of the population starts to reduce their expenditure in other parts of the economy, then I think we could be in a very, very difficult economic situation.”

Although this help is welcome, for many households it will not be nearly enough to keep them out of an impending financial hole over the next twelve months with the cost of living crisis not expected to end any time soon.

Categories
Development Finance

What Investors Need to Know About Development Finance in 2022

Development Finance is an ideal solution for developers and property investors looking to fund the construction or refurbishment of their properties using short term funding solutions. When looking at funding for your development project it is imperative that you familiarise yourself with all the options available so that you can make an informed decision.

What is Development Finance?

Development Finance is a short-term loan for property development that is exclusively used for the construction or refurbishment of a property or properties. It provides funds for investors and developers to manage project purchases and build costs.

Whether you are considering a residential, commercial, or mixed-use project- development finance could be a funding option available to you, including ground-up new builds, knock-down and rebuild projects, conversions, and refurbishments.

Development loans are typically arranged very quickly as opposed to other long term funding products, such as mortgages, which can take considerably longer to be approved. 

Most lenders will offer a loan period of 6 to 24 months however some, but not all, may extend this should you need to.

Although similar to bridging finance, development finance can provide both an upfront loan towards the site acquisition as well as further funding released at different stages throughout the project.

The Advantages & Disadvantages of Development Finance

Development finance offers unique benefits to property developers that other loan products can’t, however, it is vital that you take into consideration both the advantages and disadvantages before starting your development project.

Advantages

  • Quick to Arrange

Development finance can be made available quicker than applying for a traditional mortgage. Funds can be arranged in a short space of time, typically between 1 to 4 weeks which allows the development project to get underway while alternative funding is arranged.

  • Short-Term Loan

Development finance loans are available for a short term, usually between 6 and 24 months. The transient nature of this type of finance reduces the risk of being burdened by debt for an extended period or facing high early repayment penalties should you wish to repay early.

  • Roll-up Interest 

Development Finance offers developers the opportunity to repay all the capital and interest in a single payment at the end of the term. The interest ‘rolls up’, eliminating the need for regular monthly payments.

  • Competitive Interest Rates

If you are an experienced developer, you may be able to secure a development loan at a lower interest rate than inexperienced developers. Loans can be secured at a lower interest rate for larger projects and can be further lowered if you borrow a lower proportion of the gross development value (GDV).

Considering all these factors leaves us with a realistic range of 16% per annum as the upper limit for the interest rate on a development finance project that can go as low as 5% per annum for experienced developers borrowing a large amount at a low proportion of the GDV. 

  • Take On Large Projects 

Development finance paves the way for developers to take on ambitious projects with higher complexity and enables them to work on multiple development projects simultaneously. Traditional financing options can restrict developers from experimenting with more complex projects, whereas development finance offers the flexibility to work on projects of varying size and complexity.

  • Available For a Wide Range of Projects

Development finance is ideal for new build, residential, commercial, and semi-commercial property development projects. It is especially beneficial for properties that require remedial works prior to being funded using traditional forms of financing. Developers can borrow loans even for derelict properties that would be impossible to get a mortgage for. The short-term financing option allows developers to refurbish any property and sell at a profit.

  • Limited Capital Outlay

Development finance doesn’t require any upfront payment other than your deposit. Instead your cash on hand can be used for other expenses or simply to improve your cash flow position.

Disadvantages

  • Eligibility Criteria

Most lenders have strict eligibility criteria when approving development finance, particularly when the borrower is a first time property developer. Developers with extensive portfolios will find it significantly easier to be approved for this type of finance.

  • Planning Permissions

Many lenders will require you to have all planning permissions needed for the development to be in place before considering any application for development finance. Issues with planning may cause considerable additional costs and problems down the line and therefore the lender will want to see evidence that planning has been approved prior to approval.

  • Paper Work

As the application process for development finance can be complex, it is imperative that you have all your paperwork in order before you apply. Lenders will expect to see an extensive plan detailing all aspects of the development including planning permission, designs, drawings and most importantly, costings.

  • Additional Fees

It is important to take into account any additional fees when costing your development project. These include arrangement fees, valuation fees and legal fees which can usually be added to the loan amount and therefore will not need to be paid upfront. There is also likely to be an exit fee at the end of the loan period when full repayment is made.

  • Development Finance for Limited Companies

For limited companies applying for development finance, most lenders will require some form of personal guarantee from the company’s directors to minimise the risk to themselves. It is worth noting that individuals applying will be personally liable for the entirety of the loan.

Who Uses Development Finance?

As the name suggests, development finance is primarily used by property developers and investors, for ground-up and extensive renovation projects. Funding can be used for land purchases as well as for the entire building costs. It is not unusual for a lender to fund, for example, 50% of the land purchase and 70% for the building costs, meaning that the developer will have less upfront costs which in turn positively effects their cash flow which can be utilised in other areas.

Is Development Finance Right for Me?

Once you have conducted your due diligence, it is time to make a final decision. So, how do you determine whether development finance suits you and your business needs? Answering a few simple questions can help you gain a better understanding:

Evaluating your business needs is the first step to determining if Development finance is ideal for you:

  • Analyse whether your business needs a short-term cash inflow or long-term financial aid.
  • Assess your current financial situation to determine your ability to repay the loan on time without disturbing your finances.
  •  Lastly, gauge if you can provide the necessary paperwork to qualify for and access the development loan.

If you can answer these questions comfortably, development finance might be what you need to fund your project. An experienced development finance broker can help developers access the most comprehensive list of development finance lenders at the lowest market rates.

Summary

Individuals, builders and businesses looking for quick, short-term funding can benefit from development finance to fund their development projects. It provides access to the funds developers need to develop or renovate residential, commercial, or mixed-use properties.

Working with an experienced Development Finance broker, such as UK Property Finance Ltd, ensures that the funds you require will be delivered on time and professionally. Talk to our team today for flexible, fast property development loan financing.

Categories
Other Finance News

Inflation on Property Prices remains at 11.2% but Signs Show an Expected Slow Down in the Property Market

According to a report by Nationwide, property price inflation is currently stuck in double digits, but it is predicted that we will soon see a slowdown in the market.

The average home price has dropped from a growth of 12.1% in April to 11.2% in May. The current average property price sits at £269,914, equating to an increase of £27,082 from the same time last year.

Nationwide remarked that the property market was faring better than predicted despite the spiralling cost of living and recent mortgage rate increases, but that we should expect to see the rise in home prices slowing down in the coming months.

Robert Gardner, Nationwide’s chief economist said: ‘Despite growing headwinds from the squeeze on household budgets due to high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum.

‘Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows, and with the number of job vacancies at a record high.

‘At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices.

‘We continue to expect the housing market to slow as the year progresses. Household finances are likely to remain under pressure with inflation set to reach double digits in the coming quarters if global energy prices remain high.

‘Measures of consumer confidence have already fallen towards record lows. Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.’

Since the beginning of the pandemic house prices have seen such a rapid increase that, when compared with the average income, the cost of buying property has never been higher. This impacts affordability and has resulted in many potential buyers being totally priced out of the market.

The ratio of earnings to house price, has increased from a long term average of 4.5 to an alarming 7 times.

Previously buyers have been able to take advantage of low interest rates to buy more expensive homes, however with the recent interest rates being increased four times in succession by the Bank of England, from 0.1% to 1%, affordability has taken a serious hit.

Over just a year, fixed interest rate deals as low as 1% have risen to just under 2.5% for a similar mortgage. This impacts negatively on the amount buyers are able to borrow, particularly at this time, when cost of living expenses and the energy crisis are already affecting how much people can spend.

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages said: ‘The tide could be turning as a number of clients who have been house hunting for the past six months are now finally getting offers accepted where, before, they were consistently being outbid by other buyers. 

‘A lot of buyers currently are committed to the idea of moving but once they finally complete we believe the housing market could start to dramatically change with a lack of new people considering moving.’

Categories
Mortgages

Boris Johnson Planning to Bring Back Right to Buy

As part of his pledge to put an end to the UK’s escalating housing crisis, Boris Johnson has laid out plans to introduce a new take on the Right to Buy initiative. Initially devised by Margaret Thatcher, the Right to Buy scheme gave millions of council house tenants across England the legal right to purchase their homes, following a certain length of residency.

The new proposal would result in around 2.5 million individuals and families who rent from housing associations the legal right to purchase their homes at a discounted price. The original scheme was limited to council homes – separate schemes were available for housing association tenants, but with significantly lower discounts up for grabs.

According to a government source, the scheme would be identical to the original Right to Buy initiative, though would extend the same rights to housing association tenants.

Downing Street insiders believe that the extension of the Right to Buy scheme would bode well for the conservative party in the Midlands and the Northeast, where a significant proportion of those who would benefit from the initiative reside.

Following the party’s disappointing performance in the recent local elections, the Tories are now setting their sights on helping more people become property owners to boost their approval rating in key regions.

An Opportunity for up to 5 Million People

Originally introduced in 1980 by Margaret Thatcher, the Right to Buy provided council tenants who had lived continuously in council housing for a specific period of time the opportunity to purchase their home at a discounted price.

The same scheme remains in place to this day, and has helped hundreds of thousands of council property tenants get on the property ladder. Now, Boris Johnson intends to extend the same rights to housing association tenants which would see around 2.5 million households, or up to 5 million people, benefiting from the right to buy their homes at a discounted price.

Under the scheme, housing association tenants would be able to purchase their homes at a discount of up to 70%, depending on how long they have lived in the property. The government trial had a pilot of the scheme in 2018 in the Midlands, after which no immediate plans to extend the initiative were announced.

While the move has been welcomed by many, critics argue that average UK house prices are still too high for most first-time buyers – even when taking Right to Buy discounts into account. Elsewhere, others have said that the scheme does nothing to improve the UK’s growing housing shortage, and that the government should be investing more heavily in the construction of more affordable housing.

Speaking with the Telegraph newspaper, Robert Jenrick was nonetheless adamant that extending Right to Buy to all housing association tenants in England was the right thing to do.

“Now is the time to extend the right to all tenants,” he said.

“Conservatives must be the party of home ownership, and along with building more homes, finding new routes to ownership should be at the heart of our mission.”

Categories
Other Finance News

20% of Brits Now Use Loans to Buy Gifts for Parties and Events

UK households may be feeling the pinch of unprecedented living cost increases, but it seems even record inflation cannot quell the country’s collective craving for good times. According to the latest data published by Forbes Advisor, around 20% of Brits are now using loans (and other financial products) to buy gifts for important events and celebrations.

According to Forbes, 11% of UK residents have used personal loans to cover the costs of attending and buying gifts for events like birthdays, weddings and christenings. Similarly, 11% said they had resorted to potentially expensive payday loans to ensure they were able to attend parties and events, while a full 26% said that they put the costs of attending events on their credit cards.

Elsewhere, 12% said that they had borrowed money from family or friends to cover the attendance and gift costs of these ‘life events’ and other important happenings.

Cost of Living Increases Hit Hard

With UK inflation at a 30-year high of 5.5%, every UK household is feeling the pinch of unprecedented cost of living increases. As a result, 26% of those surveyed by Forbes said that they have had to spend less on parties and events (attendance and giving gifts) due to rising fuel, energy and food costs.

Around 13% said they have been rendered unable to buy gifts for such events or attend them in the first place due to ongoing living costs hikes.

Even so, Brits continue to spend surprisingly significant amounts of money on attending important events. According to the Forbes survey, this is how much the average person spends on attending and buying gifts for major life events:

  1. Family wedding – £235
  2. Hen/stag party – £199
  3. Friend’s wedding – £199
  4. Graduation – £189
  5. Baby shower – £165
  6. Engagement party – £159
  7. Anniversary party – £156
  8. Naming ceremony – £154
  9. Adult birthday party – £142
  10.  Housewarming – £138

The financial crisis is putting a major strain on relationships, with more than 40% of those surveyed admitting they had fallen out with friends and family members over event attendance and gift costs. In addition, more than 50% said that if it were socially acceptable to do so, they would prefer not to give gifts when attending important events like those above.

“The end of Covid-related restrictions on international travel, guest numbers at events such as weddings, self-isolation and mask wearing, is a massive breath of fresh air as we head towards a brighter spring and summer of 2022,” commented Laura Howard, personal finance expert at Forbes Advisor.

“Yet, as we come out of one crisis, the weight bears down heavier on another – the soaring cost of living. Of course, this is in no way comparable to the suffering that millions of Ukrainians fleeing their homes as a result of the war are facing right now. But, for those of us on UK soil it’s the kind of worry that can keep us awake at night.

“Inflation as measured by the Consumer Prices Index (CPI) measured 5.5% in January – a 30-year high – while the figure for February is almost certain to be higher still. And even that figure will not reflect the next hike in energy costs set to whack household budgets in April.

“We have little choice but to power our homes, fill up our cars with fuel, and do the weekly food shop – all costs which have soared since the pandemic began. But for more and more households, this is simply where the money runs out and ‘extras’ such as life celebrations become unaffordable,”

“It’s little surprise then that an increasing number of us are resorting to borrowing to fund these celebrations – in some cases even using payday loans,”

“Cutting back on expenses is no easy feat, especially now when cheap energy deals are no longer available. But it’s worth seeing if there are some unnecessary expenses to tackle.”

Is it Time to Switch?

Ms Howard went on to highlight the potential savings many households could make by switching to new lenders and Financial Service providers.

“Are you paying interest on credit card debt, for example, when you could transfer the outstanding amount to a 0% balance transfer deal? Are you free to switch your better mortgage deal or reserve your next one (which you can do between three and six months in advance) before the next likely rise in interest rates?” she said.

“It could simply be that you are paying for services or features that you don’t use, such as on your broadband and TV deal, for example,”

“Any cash that’s being unnecessarily spent is always likely to find a welcome home, such as to fund life events and celebrations this year. But if it’s simply not available, the key is not to buckle under pressure and spend what you don’t have. Being creative and thoughtful with gift-giving can be a remarkably effective substitute that’s also often likely to be remembered for longer.”

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Bank of England Announces Yet Another Hike in Interest Rates as Cost of Living Crisis Escalates

On Thursday this week (5 May) the Bank of England is expected to once again increase interest rates as the cost of living and inflation rates spiral out of control. The Bank of England are doing this in an attempt to stabilise the constantly increasing inflation rate. This rise will see a thirteen year high in interest rates.

Rates are precited to rise from the current rate of 0.75% to 1%, the highest seen since 2009. Due to the ongoing war in Ukraine, inflation is expected to continue to rocket with the rise in the cost of living making it very difficult for many to deal with crippling financial responsibilities.

Members of the MPC (Monetary Policy Committee) have previously raised interest rates during the last three meetings in order to try and get inflation under control. Inflation currently sits at a 30 year high with a 7% inflation rate by the end March, a far cry from the 2% target set by the Bank of England.

Things are expected to go from bad to worse with the predicted energy price cap revision due to be increased again later in the year. There is a warning also that inflation may at the same time rise to a worrying 9%, with some experts believing that it could actually reach double figures.

By raising interest rates when prices are increasing faster than wages, the Bank of England hopes that people are encouraged to save as opposed to borrowing. This tends to slow down the economy and in turn help to bring down inflation rates.

With businesses and households being forced to tighten up on their finances, the growth of the UK economy is likely to suffer with he expectation that the Bank of England will further trim the economy on Thursday according to the experts.

Investec economists said: “The UK is in the grip of the cost-of-living crisis. Coupled with tax rises, this leaves a rocky road ahead.”

The expectation from the experts at Investec, is that we will be able to avoid a full on recession. This is primarily due to many being able to save during the covid pandemic but spiralling inflation and slow economic growth “leaves the MPC in a bind”.

Investec have stated that they are predicting another hike in August from 1% to 1.25% but expect a pause after “to assess how big the effect of the real income squeeze on activity turns out”. Further increases in 2023 are a very real possibility, with two more rises expected to be implemented.

February saw a sharp decrease in growth as the cost of living crisis really took hold. Official data released revealed that in February there was growth of just 0.1% down from 0.8% seen the month before.

The Bank of England stated that it thought in this year’s first quarter growth would sit at around 0.75% which is higher than the expected GDP (gross domestic product) which was expected to remain flat.

Many experts however are predicting a flatlining of the GDP in quarter 2, as escalating prices further decrease consumer confidence.

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Cost of Materials and Labour Spells Disaster for Self-Build Boom in the UK

It’s everyone’s dream to have a home built specifically for them. Designed with lifestyle and taste in mind, home builds have proved to be very popular over recent years.

More recently, spiralling inflation and shortages in materials and labour, alongside the war in Ukraine, have caused costs of building a new home to sky rocket. With most of the most commonly used materials used for construction rapidly increasing in price, developing and building properties is set to take a downturn across Britain.

Neil Rogers of Honeywood Joinery, a carpentry business in Newcastle-under-Lyme, says: ‘I was told by my local merchants that if you’re pricing up a job and it’s longer than a month away, add another 15 to 20 per cent for more timber inflation.’

With the announcement from British Steel of a 25% hike in prices on some of their products it isn’t surprising that developers and individuals are being more cautious when costing up development projects. Cement companies have reported an eleven per cent reduction in the production of cement signifying a lowering in demand.

According to data from the National Federation of Roofing Contractors, around 60% of roofing firms have increased their charges.

Figures provided by the Department for Business, Energy and Industry Strategy, shows that there has been a massive 21% increase on general materials in the last year. This data was calculated before the onset of the Ukraine war and the energy crisis, meaning prices can be expected to continue on an upward trajectory for some time to come.

So, whether you are doing a self build or just a modest extension, price rises are sure to make your eyes water.

According to price comparison site Quotationcheck, roof tiles have risen by a whopping 24%, underfloor heating by 15% and loft conversions by 20% over the last 12 months. Plywood is 44% more expensive and UPVC has soured by 42%.

The most shocking of all price increases has to be for rolled sheet joists which have risen by an unbelievable 82%.

Mike Fairman, the chief executive of Checkatrade, said: ‘The current global raw materials shortage has had a profound impact on the UK trade and construction industry. 

Soaring demand, the impact of Brexit, continued pandemic recovery and shock factors like forest fires in North America are all reasons behind the shortages,’

These massive increases are leading to a rapid decline in the growth of the self-build market. Analysis by estate agency, Savills, reveals that between 7 and 10% of all home built in the UK are self-builds, equating to around 130,000 per year. The government has plans to increase this to between 30,000 and 40,000 annually and has requested that councils keep a register of self-builders who are looking to purchase plots to develop. The aim is to use spare land that can be developed be offered to those on the register, however, the uptake has been somewhat patchy.

But dreams of your perfect self-build do not need to be forgotten necessarily. Instead it is worth considering options to keep costs down to a minimum for new builds and extensions.

Getting quotes for labour and materials before the build starts will help to realistically cost the project.  Also bear in mind that the design may cause additional costs, for example an open-plan design will most likely need load bearing steel which is one of the materials which has seen the largest price increase.

Purchasing an ‘off-the-shelf’ home will likely save you some money, in other words, considering a kit built house is an option to keep costs down. The advantages of this is that buyers are paying a one off payment for the design including all the materials and fixtures and fittings.

One bit of positive news is that the government have scrapped VAT for all materials intended to make homes and properties more environmentally friendly and energy efficient.

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