by admin | Jul 16, 2021 | Investment, Mortgage News
With the Stamp Duty Holiday winding to a close, it’ll soon be time for the housing market to go back to standing on its own two feet. It’s always managed this pretty well in the past. Can it keep ploughing ahead now?
The drivers behind house-price growth
Since July 2020, the UK has seen extraordinary house-price growth. Given the timing, it seems reasonable to assume that the SDLT holiday was a factor in this. The key question, however, is whether or not it was the only factor. If it was, then, at a minimum, house-price growth should stop. If it wasn’t, then house-price growth should continue albeit possibly at a slower rate.
Why were people moving?
Anyone who’s ever moved home knows just how much hassle it involves. What’s more, even with the SDLT holiday, it’s generally an expensive undertaking. The SDLT holiday, for example, did not cut the costs of mortgage applications, valuations and conveyancing. Similarly, it did not cut the costs of physically moving from A to B.
It, therefore, seems fair to assume that the SDLT holiday simply prompted people to get on and do something they were planning on doing anyway. This raises the question of why they were doing it.
Upsizing and downsizing
If you need more space than you have and can’t extend then moving is really your only option. If you have more space than you need, then moving can be an attractive option. Less space generally means less cleaning and maintenance. It can also mean less cost.
Of course, if you’re really short on space or really have too much of it, you will effectively be forced to move. If, however, you’re just about managing, then you may need an incentive to go through the hassle of moving home. The SDLT holiday might have been the boost you needed to get moving.
If this is the case then it’s questionable whether house prices can continue to rise over the near future. Quite simply, if the majority of people who needed or wanted to move have done so recently, who is going to be buying new houses? Of course, it’s to be expected that there will be some activity, for example from first-time buyers, but will it be enough to sustain growth?
Changing location
The need to change location might be forced on you or it might be through choice. In fact, it might even be a bit of both. This might have been the case for a lot of people in COVID19. Remote-working became the new normal. Remote-/hybrid-working is looking increasingly likely to be the new frontier of knowledge work. That has serious implications for the housing market.
Although some employers have spoken out against remote working, many others are interested in it. They may not be prepared to go 100% remote (although some companies are). They may, however, be perfectly happy to switch to a hybrid model. This allows employers to reduce the cost of office space while still maintaining a base for meetings and collaborative work.
It also allows employees to move further away from their work location if they wish. In fact, it may strongly motivate them to do so to get the space for proper home offices. If this is the case then demand may continue after the SDLT holiday ends. Some employees may have been waiting to see what their employer’s long-term policy would be before committing.
Investing
People buying second (or subsequent) homes still had to pay the surcharge but they qualified for the main SDLT holiday. If this was one of the drivers behind the price rises then it’s questionable whether or not price growth will continue.
Investors need to make their numbers add up. It’s hard to see how they can make suitable returns buying houses at high prices without the benefit of the SDLT holiday to offset them.
Please contact us for mortgage advice.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
by admin | Jun 18, 2021 | Investment
Eviction protection for tenants is now running out. The exact date it ends varies by country. In England, it’s the 1st of June. Furthermore, the notice period will be reduced from six months to four. Theoretically, therefore, it’s back to “business as usual” for landlords and tenants. In practice, landlords may still have to move carefully. Here are a few points to consider.
Remember the law extends beyond COVID19 measures
If it’s been so long you can’t remember, here are the key points you need to keep in mind when dealing with any tenant.
You are responsible for keeping the property safe
There is no if, but or maybe about this. For as long as a tenant has legal possession of your property, you have to keep it safe and habitable. If a tenant is being difficult about granting you/your representatives access to your property, then it’s highly advisable to document all steps you take to resolve the situation.
It’s also advisable to contact your local authority. They may be able to help, especially if the issue could potentially have a negative impact on other properties. Realistically, however, the aim of contacting a local authority is generally just to make sure they know your side of the story. Otherwise, they might get a garbled version of events from other sources.
Any eviction proceedings must follow due process
Do not be tempted to take any shortcuts here, not even if they seem to be benign, for example, offering your tenant financial assistance to leave. Follow the process to the letter. It may be frustrating. It is, however, likely to be a whole lot less frustrating than the possible results of trying to work around the law.
Keep the Equality Act 2010 in mind
These days, it’s not just enough to avoid discrimination on the basis of protected criteria (direct or indirect). You need to be able to demonstrate that you have avoided discrimination on the basis of protected criteria. Effectively, this means that you don’t just need an audit trail of what you did but a log of why you did it. This will show that you use a legally-robust process to reach your decisions.
Lender forbearance also extends beyond COVID19 measures
A lot of the “COVID19 support measures” were essentially just variations on standard lender-forbearance requirements. In fact, the only real difference was that people could self-certify rather than having to go through a lender’s standard approval procedure. That is now ended and hopefully, it will not need to be brought back.
There is, however, still support for people who need it. That includes landlords who are struggling to make their mortgage payments for any reason. If the reason is due to a tenant not paying rent, then the lender would be expected to work with the landlord to come to an arrangement everyone can manage.
If you’re having issues with a tenant (or anything else), it’s advisable to contact your lender as early as possible. Remember, it’s in their interests to work cooperatively with you. Leaving aside the regulators, they have public opinion to think about, especially after 2008.
Landlord forbearance should also extend beyond COVID19 measures
Just because you can now evict your tenants, it doesn’t mean that you should. If a tenant is generally “low-maintenance”, then it may be in your best interests to give them some breathing space to get back on their feet.
After all, if you evict them, then not only will you have the eviction expense but you could also have a void period. What’s more, there’s no guarantee that any future tenant will be an improvement on the current one, at least not over the long term.
The reality is that the UK economy is probably going to need some time to recover from the pandemic (and Brexit). Until then, any tenant could potentially struggle for a while. In most cases, learning to work with this will prove better than resorting to evictions.
Please contact us for any more information
by admin | Sep 14, 2020 | Investment, Mortgage News
As part of the post-COVID transition, the government has introduced a new package of support measures for renters. Here is a quick guide to what you need to know.
The new rules in brief
From now until (at least) 31st March 2021, landlords will need to give tenants a minimum of six months’ notice before commencing any legal action to regain possession of their property. There are five exceptions to this where shorter notice periods may be applied. These are:
- breach of “Right to Rent” rules (3 months)
- over 6 months of accumulated rent arrears (4 weeks)
- anti-social behaviour (4 weeks)
- making a false statement (2-4 weeks)
- domestic abuse (2-4 weeks)
Additionally, from 20th September, if legal proceedings are raised, landlords must provide judges with all relevant information about their tenant’s circumstances, including the impact of COVID19. If they do not, the judge may adjourn the proceedings.
What the new rules mean in practice
Realistically, the only one of these rules which is likely to be a major issue for landlords is the one about accumulated rent arrears. This is likely to be particularly grating for landlords with mortgages. They will be expected to make their monthly payments even though they have no income from the property.
Hopefully, most, if not all, landlords in this situation, will have insurance and/or some other way of making the payments. If not, then they may need to work with their lender to determine a path forward. This may involve an agreement to sell the property as soon as feasible. In the worst case, it may involve foreclosure.
The path towards the long-term post-COVID future
In principle, nobody knows what the future will bring until it arrives. In practice, the current direction of travel in Westminster seems to be one of more protection for tenants. At some point, the government (or a government) is going to need to address the increased risk this creates for landlords. Until then, however, landlords are going to need to select their tenants very carefully (or exit the residential buy-to-let) market
Rather ironically, however, landlords will also need to be very careful not to put themselves on the wrong side of the law when they select their tenants. Firstly, it is legally questionable to place a blanket ban on letting to tenants on benefits. It’s also questionable how much sense this makes given that tenants can end up on benefits during a tenancy. Secondly, landlords must be very careful to avoid breaking the Equality Act 2010, particularly when carrying out “Right to Rent” checks.
Alternatives to residential buy-to-let
The dynamics of the UK’s property market mean that it’s hard to see residential buy-to-let becoming unprofitable – provided that investors approach it in the right way. At the same time, it’s understandable that some buy-to-let investors may want to investigate other options. Here are some you may wish to consider.
Taking in lodgers
Instead of letting out whole properties, you could look at properties which are large enough for you to live in yourself and have space left over to let out.
Short-term lets
In cities, short-term letting has become somewhat controversial. In rural areas, however, short-term lettings often provide a much-welcomed boost to the local economy. At present, the “staycation” market is keeping the sector going very nicely. Over the long term, it’s to be hoped that international tourists will return.
Holiday lets are one area which might actually benefit from Brexit. If the UK’s exit from the EU leads to a weaker pound, then the UK will become more affordable to international tourists.
Commercial property
Even if there is a reduced demand for office space, there will still be a need for other kinds of commercial property.
For more information, please contact us
by admin | Jul 17, 2020 | Investment, Mortgage News
The plight of first-time buyers has been a matter of concern for some time now. With COVID19 restrictions ongoing and Brexit around the corner, it looks like life could be about to get even tougher for (potential) first-time buyers. Here are some of the challenges they may face – and what might be done to help them.
Raising a deposit
Back in 2017, Lifetime ISAs were introduced to help people save either for their first home or for a pension (or both). In response to the impact of the Coronavirus pandemic, the government changed the rules on Lifetime ISAs to allow borrowers to withdraw funds without an active penalty. In other words, borrowers lost the government bonus but did not have to pay the 5% withdrawal fee.
Once the UK has established a post-COVID19 “new normal” (and possibly after Brexit if that is later), it might be feasible to reassess the Lifetime ISA situation and see if there is any way to use it to help undo the damage of the pandemic (and, if relevant, Brexit).
At the very least, the government could look at ways to make it possible for people to “get back where they were”, even if they can’t afford to replace the money they withdrew during this financial year. It may even be possible for the government to increase the savings limits (and corresponding bonus) and/or the length of time over which first-time buyers can save.
Satisfying the affordability criteria
The Mortgage Market Review obligated lenders to stop making lending decisions purely on headline data such as income and, instead, to look in more detail at a potential borrower’s ability to afford the loan in their personal circumstances. Making this work in practice requires being able to make reasonable predictions about what the future is likely to hold for the person in question. This could be extremely challenging in a post-COVID19/peri-Brexit environment.
On the one hand, nobody wants to see a return of the behaviours which led to 2008. On the other hand, nobody wants to see buyers, especially first-time buyers, frozen out of the market due to lenders being unable to offer them any flexibility in case they wind up on the wrong side of the FCA. Again, this looks like an area where parliament could potentially assist.
The government has already extended the Help to Buy Equity Loan scheme albeit only for first-time buyers. This could possibly be expanded further, albeit with appropriate caution. For example, the rules could be adjusted to allow for the purchase of existing properties. This could open up some interesting opportunities for first-time buyers such as the option to take on former investment properties, perhaps even the homes they are currently renting, or even to buy properties in need of refurbishment.
Dealing with the fear of a market downturn
Buyers, especially first-time buyers, may be wary of buying into the property market in the near future for fear that the property market will be hit by a slump or, even worse, by a crash. While these fears are understandable, they are also a sign that buyers need to be educated about the realities of property purchase.
In particular, property professionals need to ensure that buyers are clear about the fact that property should be seen as a long-term investment purchase rather than a short-term impulse buy. They should expect periodic fluctuations in the market, including occasional, sharp, downturns, and be prepared to ride them out.
This may involve working with the broader financial services industry and maybe even the government to ensure that first-time buyers have the necessary financial education to understand the financial practicalities of home-ownership.
Your property may be repossessed if you do not keep up repayments on your mortgage.
For Investments we act as introducers only.
The FCA does not regulate some forms of Buy to let Mortgages.
by admin | May 15, 2020 | Equity News, Investment, Mortgage News
The (hopefully) short-term impact of the Coronavirus, although undeniably brutal, may turn out to be nothing compared to the long-term economic damage it could cause. Quite simply, people may find that their lives have been saved but their livelihoods have been lost. The government is clearly aware of this and is working hard to keep the UK’s economy moving insofar as it can – and it is placing the financial services industry to come on board with its plans.
Keeping the money flowing
The UK government has pledged to pay 80% of the salaries of all employees furloughed due to the Coronavirus. Separately to this, it has pledged to provide government-backed loans to businesses. When the loan scheme was initially announced it was overwhelmed with applications, but relatively few loans were issued. This fact was blamed on the restrictive rules and the government is believed to be looking at revising the scheme. It’s therefore advisable to keep an eye on the news for updates. The new “Bounce Back” loan has just been released aimed and small businesses, offering loans of a quarter of turnover up to £50,000 over 5 years with 0% interest on the first twelve months and no repayments for twelve months.
It has further pledged to help the self-employed or at least some of them. As has already been pointed out, there are significant cracks in this help. In particular, it does nothing for those who became self-employed during the 2019/2020 financial year nor for those people who are part employed and part self-employed but who earn less than 80% of their income from self-employment.
Theoretically, these people can fall back on the Universal Credit system. Unfortunately, this has been plagued by problems and if reports are to be believed is struggling to cope with the sudden upsurge in applications. It’s also unclear how the minimum income floor will be assessed for people in non-standard situations, like the newly self-employed or the part-employed/part-self-employed.
It’s also worth noting that the impact of the loss of income experienced by these individuals has the potential to spread far beyond the individuals themselves, even if they aren’t breadwinners for a family. As a minimum, it has the potential to impact the income of landlords and companies which provide essential, basic services such as utilities. Under normal circumstances, non-payers might be evicted and/or have their utilities cut off but right now that would be politically-sensitive, to put it mildly.
Finding other ways to help
The government seems to be aware of this and looks to be trying to address the problem from both ends. In other words, if people are falling through the cracks of the income-support measures, then the government can still help them by reducing their expenses. It has to act with a little caution here, to avoid causing problems along essential supply chains. It can, however, certainly ask, or potentially force, certain industries to adapt their behaviour to contribute to the common good and the financial services industry is clearly in its sights.
At the end of March, for example, the Bank of England’s Prudential Regulation Authority contacted banks to make it clear that it expected them to cancel dividend payouts and bonuses to staff. It took a softer line with insurers, just advising them to “think carefully” before making payouts. Another regulator, the FCA has also been communicating with the banks to propose emergency measures to help struggling borrowers.
It has proposed that customers with arranged overdrafts should be allowed to use them interest-free for up to three months and that customers with loans and/or credit/store card debt should be granted a repayment freeze also for up to three months. As with many of these emergency measures, however, they answer some questions but raise others.
For example, if borrowers are in a situation where they are paying more in interest (fees and charges) than they are in capital repayments, taking a payment holiday could hurt them over the long term unless their lender also agreed, or was forced, to freeze interest on the debt. Some people might see this as a very reasonable action on their part given the help the industry received in 2008.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Apr 25, 2020 | Equity News, Investment, Mortgage News
Our financial situation can be a bit like a spider’s web. Decisions taken in one area of our financial lives can have implications for other areas of our financial life. In some cases this is obvious (if you spend money, you can’t also save it), in other cases, however, it can be much less obvious. For example, any decisions around equity release could have subsequent implication for anything from estate planning to access to means-tested benefits. With some people considering this as a way to help their families through coronavirus, here is some useful information.
The basics of equity-release
In principle, equity-release simply means tapping into the value of your home. In practice, it can mean different things to different people. In fact, it can mean different things to the same person at different stages of their life.
For younger people, equity release may mean increasing the loan-to-value ratio on their home. Essentially, they are swapping some of the equity they already own for cash in hand, but do intend to make monthly repayments of the loan principal until it is ultimately cleared.
For older people, equity release may mean swapping some or all of the equity in their home for a lump sum or income, without committing to making any repayments during their lifetime. The repayments are made out of their estate after their death, or when they move into permanent care and the house is sold.
Both forms of equity release can have significant implications and so it is strongly recommended to get professional advice before entering into either. Here are some ways they could impact your finances.
Inheritance
This is perhaps the most obvious way in which equity release could impact your finances and/or the finances of your estate. On the one hand, reducing the amount of equity you have in your home could lower the value of your estate and hence the amount of inheritance tax which is ultimately payable on it. On the other hand, if your heirs wish to keep the property, then it may result in them having to pay more to do so.
Tax
Tax laws can and do change and so it’s always advisable to check the rules in place at the time of taking out a financial product or service and to familiarise yourself with any changes which are likely to be in the pipeline. As a rule of thumb, however, if you have any income or assets there’s a good chance that HMRC is going to want to claim a share of them somewhere along the line. For example, even if a lump sum is tax-free, if you put it in a bank, then you may end up paying tax on the interest.
Investments
If you are planning on releasing equity from your home via a standard, repayment mortgage in order to fund the purchase of investments, then you have to be aware that the performance of an investment is not guaranteed whereas your mortgage repayments are an unbreakable commitment assuming you want to keep your home.
If, however, you are planning on releasing equity from your home via a lifetime mortgage, in other words, one in which repayments are only made after your death, then the situation is a little different. You are not at risk of losing your home, but you may be at risk of making a sub-optimal financial decision, which could leave you or your heirs worse off. This is definitely a situation in which professional advice is to be recommended in the strongest possible terms.
Pensions and benefits
Pensions are not currently means-tested, but should they become so then any funds received through equity release could impact your ability to claim them. As it currently stands, they may impact your ability to claim means-tested benefits. If you are considering the possibility of releasing equity from your home to build up your pension pot then, again, getting professional financial advice is strongly recommended.
For Equity Release we act as introducer only
Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration
Your home may be repossessed if you do not keep up repayments on your mortgage
For inheritance tax planning (IHT), estate planning, tax planning, investments and pensions we act as introducer only
The FCA does not regulate some forms of tax planning, inheritance tax planning and estate planning
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