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Orkney takes over top spot in survey of best places in UK to live

“Orkney is the best place, the poet, Edwin Muir, once observed. “Happy are they who never leave it.”

Now, the archipelago prized for its breathtaking landscapes and archaeological treasures can expect a rush of enquiries from prospective new residents after being crowned as the best place to live in the UK.

Having been named the runner up in the Bank of Scotland’s quality of life survey for the past two years, Orkney has finally taken the top spot. High employment levels, low crime rate, strong exam results, smaller primary school class sizes and good health and happiness scores helped propel Orkney to number one on the survey, according to Halifax.

In a sign of the unique attractions of island life, the only other Scottish entry in the top 50 places across the UK was Shetland, which came in 39th place. Orkney, Shetland, and the Western Isles were named as the top three places in Scotland, the same as the year before.

Those places ranked bottom of the Scottish list – Glasgow, Inverclyde, and North Lanarkshire – was also unchanged. The annual survey looks at a range of data covering the labour market, the housing market, the environment, education, health, personal wellbeing and leisure to rank the areas with the best quality of life.

In naming Orkney as the place to beat, the survey pointed to the fact the average house price stands at just £173,349, which is 5.2 times the average annual pre-tax local income, compared with the national average ratio of 7.3.

It also boasts the highest employment rate with nearly nine in ten (88 per cent) 16 to 64 year-olds in work and weekly average earnings of £671.

Ricky Diggins, network director for the Bank of Scotland, said: “Orcadians will be thrilled to learn that not only is their home the best place to live in Scotland, it’s now taken the crown for the whole of the UK.

“With Shetland and Eilean Siar coming second and third in Scotland, it’s a clean sweep of the podium places for these island communities. He added: “Their more remote locations may not appeal to everyone but with benefits including high employment, low crime rates, smaller class sizes and more affordable housing, people around the country will now be dreaming of a life spent on the isles.”

At a UK level, Richmondshire in North Yorkshire took second place, followed by Rutland in the East Midlands, Hambleton in North Yorkshire and Eden in Cumbria in fifth place. There were just two areas of London – Westminster and Richmond-upon-Thames – to the make top 50 UK 
places, with the bank 
pointing out that areas 
outside the capital benefited from lower house prices when compared to average earnings.

Source: Scotsman

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UK mortgage lending slows in December

British banks approved fewer mortgages last month than in November and the value of lending for home purchases rose by the smallest amount since 2016, an industry survey showed on Friday.

Seasonally-adjusted data from the UK Finance industry body showed banks approved 38,779 mortgages last month. While up more than 6 percent on a year ago, this was down from 39,205 in November.

The value of net mortgage lending increased by 1.235 billion pounds, the smallest rise since August 2016.

The figures largely add to signs of a slowdown in Britain’s housing market ahead of Brexit.

Last week the Royal Institution of Chartered Surveyors said its members had the most negative outlook for house sales over the coming three months since its records began in 1999.

UK Finance also said it saw signs that businesses were building up cash reserves, particularly in the construction and retail sectors, in preparation for uncertain trading conditions.

With little time left until Britain is due to leave the EU on March 29, there is no agreement in London on how it should exit the world’s biggest trading bloc, and a growing chance of a ‘no-deal’ exit with no provision to soften the economic shock.

Source: Investing

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More First-Time Buyers Enter Property Market in November

UK Finance figures show that more first-time buyers got their foot on the property ladder in November, before the Christmas slowdown.

Its Mortgage Trends Update for November 2018 indicated that 36,200 new mortgages for first-time buyers were completed that month. This is a 5.8% increase over November 2017. At £6.0bn, the new lending was up by 9.1%  year-on-year. The figures revealed that the average first-time homebuyer is 30 years old and has a £42,000 gross household income.

Land Registry figures show that in England, the average first-time buyer purchases their first property for £207,538. This is 2.3% higher than last year, but property prices are the same from the month before.

In London, however, first-time buyers in 2019 will pay £413,744 on average to get on the property ladder. This is a drop of 0.9% from a year ago and an increase of 1.1% from October 2018.

In November, 36,200 new homeowner mortgages were completed, which 1.1% higher than in October. New lending totalled £7.8bn, which is 4% higher year on year. In London, the average first-time buyers in 2019 are 39 and have a £55,000 gross annual income.

The total number of new buy-to-let purchase mortgages in November was 6,100, which is 9% fewer than in November 2017. Value-wise, this was £0.8bn of lending, down 111% from the year before.

UK Finance Director of Mortgages Jackie Bennett said that a combination of competitive schemes and dealers helped a growing number of first-time buyers purchase a home during November.

In the meantime, there has been a steadying in homeowner remortgaging, after reaching its highest point in a decade as many fixed-rate deals concluded. In the buy-to-let market, purchases continue to be slow while remortgaging is on the rise due to attractive rates.

Source: CRL

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BoE’s Haldane sees higher rates if UK economy ‘ticks along’ – Daily Mail

The Bank of England is likely to continue to raise interest rates gradually if the economy keeps growing, but will be “flexible” if there is a downturn, the central bank’s chief economist said in an interview published late on Wednesday.

“If the economy continues to tick along, as we expect, then we might expect some further limited and gradual rises,” central bank rate-setter Andy Haldane told the Daily Mail newspaper, repeating familiar BoE language.

The BoE raised interest rates for only the second time since the 2008-09 financial crisis in August 2018, and almost all economists expect further increases to depend on Britain avoiding a disruptive exit from the European Union in March.

“On the assumption that some deal is done, that would reduce uncertainty and, we think, cause people to take their finger of the pause button and do a bit more investment spending,” Haldane was quoted as saying.

“If the economy begins to change direction, we will be flexible in the face of that,” he added.

BoE Governor Mark Carney has previously said that a disorderly Brexit could cause sterling to slide while damaging the productive capacity of the economy — potentially boosting inflation at the same time as slowing growth.

Foreign ownership of British companies had been important in improving management practices and economic productivity more generally, Haldane said.

The BoE will publish its next interest rate decision on Feb. 7.

Source: UK Reuters

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Bank of Mum & Dad are failing to seek advice

The number of parents failing to seek financial advice before lending money to their children to buy a property is dramatically high, a report by the London School of Economics (LSE) has revealed.

The report showed only 8 per cent of parents who gave money to a child for a deposit sought advice from a financial adviser, while only 14 per cent took legal advice.

Of those that helped children with mortgage payments, only 14 per cent took financial advice, while only 12 per cent got legal advice.

LSE, which surveyed 1,066 respondents representing a wide cross-section of depositor and mortgage members, including customers of Family Building Society, stated parents and children must be more business-like when money is given to get on the property ladder.

The LSE stated despite the ‘Bank of Mum and Dad’ now being the sixth largest lender, there are usually no written record of transactions or arrangements for repayment.

LSE’s report also warned that families are failing to make clear whether the money is a loan or a gift.

Mark Bogard, chief executive of Family Building Society, said failing to carry out basic planning and documentation can store up a host of problems if things go wrong.

Mr Bogard said: “Things such as the break-up of relationships, the death of one or both parents, or the need for parents to contribute to care costs in future, all need to be considered. So do the requirements of the taxman.”

The survey showed the median parental contribution was £30,000, while the mean was much higher at £59,200 in the higher-cost areas of London and the south east.

Mean contributions have more than doubled in the last two decades, from £31,300 reported by respondents who provided help in the 1990s to £68,700 for contributions since 2010, according to LSE.

Most of the transactions involved parents giving or lending money to their adult children; about half of the transactions were for deposits on house purchases, with the remainder used for mortgage payments, stamp duty and legal costs.

Two thirds (68 per cent) of assisted transactions were first-time buys, while 27 per cent were second or subsequent purchases.

Relatively few who offer financial help will channel it through a specialist financial product such as a family or guarantor mortgage, or a joint mortgage, even though such products can be advantageous for both parties, LSE reported.

Of the 11 per cent that said they had supported a family member’s mortgage, 3 per cent acted as a mortgage guarantor, while 2 per cent had taken out some kind of family-assistance mortgage (where a proportion of the mortgage loan is secured on the parents’ house, or where the parents deposit a sum of money with the lender).

Just 1 per cent mentioned a joint mortgage.

Some interviewees, including both customers and professional stakeholders, were concerned family parental help could be fuelling house price inflation – although financial intermediaries saw the effect on property prices as small.

A number of respondents saw the need for parental help as a symptom of broader-based problems in the housing market.

They identified shortage of housing supply as a fundamental problem, LSE stated.

Nicholas Morrey, product technical manager at John Charcol, said parents should ensure any money they give is legally classified as a gift if not being repaid back.

“This way, they can legally declare no interest is being charged and that they have no interest in the property,” he said.

He added there was a shortage of lenders offering guarantor mortgages, although there had been an increase in joint borrower sole proprietor mortgages, where the parents are put on the mortgage, but not on the title deeds.

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, said his firm had seen the importance of the ‘Bank of Mum and Dad’ in helping first-time buyers in particular get onto the property ladder.

He said: “Lenders have shown some real innovation in this space in recent years, with various lenders now in the later life lending space, as an example, helping parents who want to remortgage to release equity to pass to their children to get on the ladder.

“We have also seen joint borrower sole proprietor options becoming very popular. These solutions come from a mortgage broker knowing the options available that best suit the needs of the overall scenario, and independent legal advice is then also encouraged as part of the process.”

Source: FT Adviser

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Political uncertainty ‘takes toll’ on Scottish commercial and industrial property market

The “protracted uncertainty” caused by the ongoing Brexit standoff is taking its toll on commercial and industrial activity in Scotland, according to the Royal Institute of Chartered Surveyors (RICS).

The results of the Q4 2018 RICS Construction and Infrastructure Market Survey show that growth in workloads within Scotland’s commercial and industrial segments declined with a net balance of -14% and -7% of respondents reporting a drop in activity, respectively, during Q4 2018.

However, the activity across construction sectors varied, with a net balance of +17% of contributors to the RICS survey reporting growth in private housing workloads across Scotland. Public sector workloads were mixed, but surveyors reported growth in housing with a net balance of 8% seeing an acceleration to growth in public sector housing. Infrastructure workloads also remained steady with a net balance of 8% seeing a rise in workloads over the quarter.

Anecdotal evidence from respondents suggests that the housing market slowdown, coupled with ongoing policy ambiguity related to Brexit, is weighing on business investment decisions. When asked how business enquiries for new projects or contracts have fared in the past three months, 10% more respondents across the UK reported an increase rather than a decrease compared to 24% in Q3. Growth in repair and maintenance work remains modestly positive.

Looking at factors across the UK constraining activity, financial constraints are reported by 78% of surveyors to be by far the most significant impediment to building. Difficulties with access to bank finance and credit, along with cash flow and liquidity challenges, are often cited reasons alongside generally less favourable cyclical market conditions. When asked how credit conditions have changed over the past three months, 20% more respondents report a deterioration rather than improvement.

Shortage of skilled labour continues to pose a significant challenge almost half of respondents in Scotland, particularly with regard to professional services such as quantity surveying. The challenges for the procurement of labour differ by role. Looking at the UK as a whole, 64% of surveyors expressed the view that workers from the EU were not important to their hiring requirements of surveying professionals, and the solution to this issue remains firmly domestic within the training and education areas with 68% of contributors to this survey citing education as the most effective policy tool in addressing the current skills dilemma, compared to 15% for immigration.

However, as the Brexit deadline draws near it should be noted that EU nationals are an important part of the mix particularly with regards to addressing the skills issue in increasing capacity to build on construction sites. With EU nationals accounting for eight percent of the UK’s construction workforce, this accounts for well over 175 thousand people, according to recent RICS figures.

In terms of geographical breakdown across the UK, workload growth is now reported to be decelerating across all regions. London and the Southeast were particularly affected with a lack of growth across the private housing, commercial and industrial subsectors buoyed by positive momentum in infrastructure and public spending. Over the past three months, new business enquiries were strongest in the North (+24%) and weakest in Northern Ireland (-21%). Meanwhile, year-ahead expectations for workloads and hiring are the most resilient in Scotland with net balances of +38% and 31%, respectively.

Tender price expectations over the next twelve months throughout the UK are expected to be squeezed with 51% and 40% more respondents envisaging greater price pressures in the building and civil engineering areas, respectively. The expected increase in tender prices reflects higher input costs and ongoing competitive bidding pressures for businesses. Expectations on industry profit margins have been flat for the second consecutive quarter in Q4 2018.

Jeffrey Matsu, RICS senior economist, said: “The protracted uncertainty engendered by the Brexit impasse is becoming ever more apparent with workloads in the commercial and industrial sectors grinding to a standstill. While the challenges are particularly acute in London, the additional £1 billion in additional HRA borrowing to fund council housing has begun to stimulate activity. The subsequent scrapping of the cap in last year’s Budget has the potential to accelerate this positive trend in the public sector over the coming years.

“Capacity remains an ongoing constraint for activity more broadly, however, with surveyors reporting a ramping up of new hiring even despite a moderation in business enquiries. Continued access to a qualified pool of non-UK workers to support this growth will be as important as ever, particularly for work on construction sites.”

Source: Scottish Construction now

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Housing Complaints Resolution Service will cover entire housing market

A new housing complaints service for both homeowners and tenants is to be set up, and private landlords will be legally required to join a housing redress scheme.

The Communities Secretary James Brokenshire MP has announced that a new Housing Complaints Resolution Service will help people with unresolved disputes about problems with their home – such as repairs and maintenance.

Unlike other sectors, such as financial services, the housing market has several different complaints bodies, with homeowners and tenants having to navigate their way through a complicated and bureaucratic system just to work out where to register a grievance.

Establishing a single housing complaints service for all residents – no matter whether they rent or own their home – should prevent people from battling with their landlord or builder to resolve issues on their own and make it easier to claim compensation where it’s owed.

Communities Secretary Rt Hon James Brokenshire MP, said: “Creating a housing market that works for everyone isn’t just about building homes – it’s about ensuring people can get the help they need when something goes wrong.

“The proposals I have announced today will help ensure all residents are able to access help when they need it, so disputes can be resolved faster, and people can get compensation where it’s owed.”

Compulsory scheme for landlords

At the moment in the private rented sector, landlords do not have to register with a complaints system – leaving thousands of renters without any course for redress.

To combat this, the Communities Secretary has announced that private landlords will be legally required to become members of a redress scheme – with a fine of up to £5,000 if they fail to do so.

Government still working on New Homes Ombudsman

And to protect the interests of homeowners who buy new build homes, government has also reiterated its commitment to establishing a New Homes Ombudsman to protect home buyers Legislation will be needed but it will mean that all house builders must sign up to the Ombudsman scheme. Developers will also have to belong to the new body by 2021 if they wish to participate in the government’s Help to Buy scheme.

The Housing Complaints Resolution Service will be developed with a new Redress Reform Working Group made up of representatives from across the sector, working with industry and consumers.

Announcement welcomed 

Mark Hayward, chief executive, NAEA Propertymark and David Cox, chief executive, ARLA Propertymark, welcomed the announcement.

They said: “Propertymark welcomes this approach and is pleased to see the government taking a holistic approach to redress right across the property industry; creating the beginnings of a more integrated housing strategy rather than the piecemeal, sectoral and issue-specific approach that we have all had to deal with for too long.”

Source: Mortgage Finance Gazette

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London buy-to-let sales down 5.8%

The south east of England has overtaken London as the region with the most buy-to-let purchases in a calendar year for the first time, with the north west almost edging the capital into third place.

Specialist buy-to-let mortgage broker Commercial Trust said the south east accounted for 16.5 per cent of purchases in 2018, up 1.7 per cent on the previous year.

London, which has traditionally held the top spot, saw purchases falling 5.8 per cent year-on-year to 12.9 per cent of the total in 2018, and took second place.

Andrew Turner, chief executive at Commercial Trust, said the figures backed up the consensus that investors were currently looking outside London and noted the continued growth in the south east, which is prime commuter-belt for the capital.

Mr Turner said: “With a multitude of transport and infrastructure projects underway in and around London, it will be interesting to see if this trend continues.”

The capital only narrowly held on to second place, as purchases picked up in the north west, too.

This region accounted for the biggest growth at 4.7 per cent, meaning it was home to 12.5 per cent of buy-to-let purchases.

Year-on-year, the north east also made big regional gains, with proportional growth of 3.22 per cent, the second highest increase.

Mr Turner said: “North west and north east are proving to be increasingly popular, typically offering cheaper house prices and better rental yields.”

Overall, Commercial Trust saw a 24 per cent year-on-year increase in the volume of buy-to-let purchases to the end of 2018, despite changes to the application process by many lenders following Prudential Regulation Authority rules introduced in 2017.

Mr Turner said: “These figures are encouraging for two reasons: they demonstrate that many investors still have confidence in buy-to-let and are continuing to invest in rental property.”

At 55 per cent, remortgages represented the biggest portion of applications, according to the broker.

“Remortgaging continues to be a leading trend and undoubtedly investors have been keen to take advantage of low interest rates,” said Mr Tuner.

“2018 also saw the anniversary of two-year deals, taken out in the surge that came ahead of the additional stamp duty surcharge, introduced in April 2016.

“As those two-year anniversaries approached, many landlords were looking to remortgage, before their mortgage payments reverted to the lender’s standard variable rate.”

Landlords have been subject to a number of regulatory changes in recent years, with the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016, which was closely followed by cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

The Intermediary Mortgage Lenders Association (Imla) said this week it believes this year’s tax return will be the first time many landlords will see the effects of these policies on their earnings.

Source: FT Adviser

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Refurbishment loans: the three key factors for clients to consider

The reduction in demand and values in the London residential property market have been well documented over 2018. With changes in taxation, stamp duty and Brexit uncertainty putting off buyers, some areas in the City of London fell by 13.4% in the 12 months to October 2018.

In response to these pressures, property investors are using refurbishment more and more, as a way of adding value and increasing rental yields. There are huge opportunities here, but investors must also keep in mind the wider market dynamics.

Keep an eye on GDV and purchase price

With Brexit looming there is likely to be further falls in property prices over the coming months, therefore investors should be aware that their perceived gross development value (GDV) on purchase today, may not be as high once a refurbishment is finished.

This also means properties need to be bought at the right price up front. Negotiation will come into play here, with investors ensuring they have enough headroom in the deal to make a healthy profit.

It’s fair to say buyers markets have been rare in London for almost two decades and investors should now look at this period as a good opportunity to secure a competitive purchase.

Following Brexit, a likely revival in overseas interest and economic stability should help the market recover slightly, with us seeing a modest return to growth Q4 2019 and onwards.

Planning gain and enhancement

With some investors finding the planning process cumbersome and confusing, planning gain and enhancement is where our borrowers are seeing the biggest opportunity. That said, there is an overarching feeling that some local councils could be doing more to make the planning process simpler and faster.

Converting commercial to residential

Octopus Property has also seen an increase in borrowers seeking planning for converting commercial property to residential and subsequently renting them as a house of multiple occupation (HMOs) or a holiday let.

The expected increase in rental yield for HMOs and holiday lets following a refurbishment, is particularly attractive to developers looking re-gear and retain their property as part of a portfolio.

In November, Octopus overhauled its refurbishment loans to support the increase in demand. To help borrowers increase their leverage and reduce the need for third party investment or high interest debt, it increased its max loan-to-cost to 90%.

It also updated its pricing, loan size and works limit and support underserved areas of the market such as foreign nationals, complex company structures and expats.

These changes have resulted in a strong year end with our highest level of enquiries and applications coming in November and December, an increase of 130% in comparison to the prior two months.

Despite the pressures on house prices and wider market uncertainty, refurbishment provides plenty of opportunities for investors.

Source: Mortgage Introducer

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Bank must make right call on interest rates if no-deal Brexit, Mark Carney says

The Bank of England governor says ‘it’s not automatic which way policy would go’ if Britain crashes out of EU.

Interest rates will not automatically go up or down if Britain crashes out of the European Union without a deal, the governor of the Bank of England has said.

Speaking at a panel at the World Economic Forum in Davos, Mark Carney said: “It’s not automatic which way policy would go in the event of a hard Brexit.

“And we’re remembering that we’re not predicting that, but we’ve got to be prepared for that”.

MPs are set for another crunch vote on the Prime Minister’s so-called “Plan B” Brexit deal on January 29, exactly two months away from Britain’s scheduled departure from the EU.

Theresa May’s first deal was rejected by Parliament by a majority of 230.

He said if the UK goes “through a period of de-integration, de-globalisation and reduction in trade openness” it would be “akin to a supply shock to the economy” with both demand and supply declining and currency and tariff pressures on inflation.

In those circumstances, he said the Bank “has to make the right judgment about the right path of bringing inflation back to target while doing what it can to support. But it is not an automatic approach.

“Particularly at times when there are big changes, you have to have some constants and for a central bank there are two constants: have a financial system that functions, which we would have if that were to happen, and keep your focus on your democratically given mandate, which is to achieve the inflation target.”

Inflation last month fell to 2.1%, within touching distance of the Bank’s 2% target.

Mr Carney also said that British businesses cannot completely prepare for a no-deal Brexit due to a lack of infrastructure at UK ports.

“There are a series of logistical issues that need to be solved, and it’s quite transparent that in many cases they’re not.

“So, port infrastructure is not there, border infrastructure is not there to the extent that it would need to be from jumping from an absolutely seamless trading environment to one with frictions that aren’t just tariffs, but are rules of origin of products, safety standards and other inspections that would need to be done.

“There is a limited amount businesses can do to prepare if there are going to be substantial delays on the logistical side”.

He used the example of logistics and supply issues that could arise for UK carmakers from a no-deal Brexit.

“If you are a car plant that relies on 40 18-wheelers [trucks] coming through Dover a day, and they have to show up within minutes of each other in order to meet the just-in time-requirements of the plant, you can’t stack things up all over Wales in order to ensure that you can continue to run it for months. That’s just reality.”

At the panel, the audience was asked for a show of hands to indicate if they were in favour of a second Brexit referendum. Mr Carney abstained, but UBS boss Sergio Ermotti raised his hand.

Source: Shropshire Star