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Bank of England says it is watching mortgage price war ‘like a hawk’

Regulators are watching a price war in mortgages “like a hawk” and may need to impose stricter minimum capital requirements on lenders, Bank of England Deputy Governor Sam Woods said on Friday.

The price war over the past two years may be good news for consumers wanting to buy their first home, but it was less good for a bank or building society concentrated in mortgages, Woods told the Building Societies Association.

High loan-to-value ratios and higher loan-to-income home loans can be well captured by the BoE’s capital requirements.

“But we should be watching them like a hawk,” Woods said.

Falling capital levels have been seen at lenders who use their own computer models to work out the riskiness of loans on their books and therefore how much capital to hold.

“The amount of capital being set aside to cover mortgages has been falling,” Woods said.

The BoE’s supervisors were making strenuous efforts to check on how models are being used.

“Still, I think we should approach this trend with a very sceptical eye and need to consider whether there is a case to impose more floors in firms’ models, particularly given the current stretch in some measures of house price valuation,” Woods said

(Graphic – BOE high loan to value chart, tmsnrt.rs/2X3xkZl)

RING FENCE FACTOR

Woods’ warning comes after the Bank forced Metro Bank to correct how much capital it was setting aside to cover mortgages after under-reporting the risk from its loan book.

Metro raised 375 million pounds to bolster its capital buffers earlier this month.

Tesco Bank said this week it was quitting home lending due to tough competition, and Nationwide Building Society its measure of underlying profitability fell in the year to April 4.

Credit ratings agency Fitch has said that rules requiring big banks to “ring fence” their retail arms with capital have led to increased competition as lenders seek to boost revenues.

Europe’s biggest bank HSBC has renewed its focus on home loans to boost revenue in its ring-fenced arm.

Asked if ring-fencing was to blame for the price war, Woods said: “Everyone involved agrees to some extent that that has been a factor in the intensification of pressure in the mortgage market.”

“We don’t think it’s the dominant factor. We think that the effect so far is manageable,” Woods said, adding that his staff were seeking to measure the impact of ring-fencing.

The regulatory system is also unable to properly capture risks from margin loans, or loans are granted using shares held by the borrower as collateral, Woods said.

Banks in London lost more than a billion euros in a single deal in 2017, Woods said.

Britain’s departure from the European Union could give Britain more leeway to adapt rules that are currently written in Brussels.

“My view is that a simpler system of regulation for smaller firms would be a good thing,” Woods said.

Reporting by Huw Jones

Source: UK Reuters

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Quickest Places To Sell Buy To Let Investment Property

When investing in buy to let investment property, it is worth knowing how quickly you can sell if you wish to.

New research from property sales company Sellhousefast has looked into how long it would take to sell property in 10 locations recently suggested by LendInvest as perfect for buy to let investment.

The locations, namely Stockport, Coventry, Wolverhampton, Birmingham, Peterborough, Colchester, Manchester, Canterbury, Luton and Enfield, were analysed using postcode data compiled by Thomas Sanderson to reveal where properties are likely to go fastest.

The fastest postcode to sell properties in was found to be Stockport, where properties sell an average of 104 days, with the fastest postcode being SK4 where properties are expected to stay on the market for no more than 60 days and are worth £280,768 on average.

Second place went to Coventry, where properties take 124 days to sell. The fastest-selling postcode in Coventry is CV6, where property sells within 76 days and typically costs £158,742.

The last podium place went to Wolverhampton, where on average it takes 138 days to sell a property, with the fastest postcode being WV8 taking just 92 days.

Managing director of Sellhousefast, Robby Du Toit, commented: ‘From our research, it’s plain to see sales in the north and central England, in particular, are very promising. Locations like Stockport, Coventry and Wolverhampton have the benefit of lower property prices (in comparison with the south) and fast-paced, growing markets; something investors should take advantage of; should they be able to.’

He continued: ‘However, it is also promising to note that no matter where you want to invest there is a location available where property sells quicker than most. It is so important therefore to make sure you do your research before you take on an investment property. Shop around, ask questions, compare prices – don’t just choose the most amenable, obvious property. When it comes to selling, this is not always what makes a success.’

Source: Residential Landlord

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Changes in the law means home owners can build bigger extensions without planning permission

The changes will cut out the red tape for many people, making extension building more stress free.

Extending a house can be a costly and time consuming task.

Usually you need to approach your council and get planning permission to build an extension if its bigger than the permitted development rules.

This can often take months and just submitting an application costs money.

But a change in the law means a lot of extensions, within a certain size, will now be able to go up without having to seek the  formal permission.

While this change is big – and gives home owners and developers a lot more freedom, it is not a green light to build whatever you like.

How big can it be?

Under the new rules, single storey extension limits have been doubled to up to 6m for terraced and semi-detached homes, and larger extensions up to 8m long for detached houses.

As well as good news for homeowners, under the new reforms shops will now be able to change office space without the need for a full planning application.

The move builds upon changes to the law which allow business owners to change the use of buildings from takeaways to new homes without undergoing a full planning application, according to the MEN.

To help deliver a greater mix of uses on the high street, the changes also allow the temporary change of use from high street uses such shops, offices, and betting shops to certain community uses such as a library or public hall.

Can I just go ahead?

The short answer to this is no.

You do still need to involve your local planning department.

Since 2014, over 100,000 homeowners have taken advantage of the temporary rules which have not only doubled, but don’t require planning permission from local authorities.

Instead of waiting months for approval, homeowners now notify their local council of the building work beforehand, who in turn then inform the neighbours to the property.

However if neighbours raise objections, the council then decides if the extension is likely to harm the character or enjoyment of the area.

Why has this change been imposed now

Kit Malthouse, the housing minister, says these changes have been made so people are not forced to move to bigger properties.

He said: “These measures will help families extend their properties without battling through time-consuming red tape. By making this permitted development right permanent, it will mean families can grow without being forced to move.

“This is part of a package of reforms to build more, better, faster and make the housing market work – and sits alongside our drive to deliver 300,000 homes a year by the mid 2020s.”

By Saffron Otter

Source: Kent Live

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Brexit uncertainty fails to slow Scottish housing market

THE Scottish housing market has hit an 11-year high for sales after a surge in transactions in the north-east and East Lothian, according to new figures.

Aberdein Considine’s Property Monitor report shows homes collectively worth £3.4 billion changed hands during January, February and March this year – the highest since the credit crunch hit the global economy in 2008.

Sales for the quarter are up £80 million (2.3%) on last year and £225m (7%) on 2016.

A total of 19,491 homes in Scotland were sold in the first quarter of 2019, up 2.8% year-on-year due to significant growth in Aberdeen, Aberdeenshire and East Lothian.

With the UK’s negotiations with the EU stalling, Parliament gridlocked and a change of prime minister in the offing, economists had expected the property market to slow across the UK.

Managing partner Jacqueline Law said the report, published today, showed that Scots were “getting on with their lives” amid the political uncertainty.

“It had been feared that Brexit may bring the property market to a halt,” she said. “However, quite the opposite has turned out to be true so far with the value of property changing hands returning to near-record levels.

“In fact, the only time that first-quarter sales have been higher was in the years leading up to the global financial crisis.

“Businesses and consumers across Scotland can’t escape the uncertainty which Brexit is creating, but what is clear is that people are getting on with their lives whilst the politicians try and resolve the situation, which we hope will be sooner rather than later.”

The average cost of a property in Scotland is 8.6% higher compared with the same period in 2016, with prices now at £166,334.

Despite the sales surge, the report does show a sudden halt to the house-price growth in the country’s biggest cities.

Edinburgh, which has had its best period of property price growth since before the recession, has recorded falling prices so far this year.

The capital remains the most expensive place to buy a home in Scotland, with an average sale price of £258,822.

Prices have fallen 1.7% in Glasgow so far in 2019 to an average of £152,079.

Average prices continue to fall in Aberdeen and Aberdeenshire, Scotland’s other major market.

But after years of decline caused by the oil and gas downturn, confidence is returning, with sales in Aberdeen alone up by nearly 13% year-on-year, and sale values in Aberdeen up 11.6%.

Other notable area include Shetland – which has seen a 13% rise in sale values and a 15% rise in sale numbers – and West Lothian, which has seen a 19% rise in sales value.

For the first time, the Property Monitor report also include research on levels of personal debt in Scotland.

Increased borrowing can be an indicator of households being stretched. However, all but one of Scotland’s 16 postcode regions have managed to cut the amount owed to lenders through personal loans.

Unsecured loan debt across the country is down 8.3% year-on-year, with Aberdeen and Aberdeenshire leading the way.

Overall, debt levels in Scotland are falling at twice the UK average.

Source: The National

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Is A Bridging Loan Right For You?

Like all financial products, bridging loans are more suitable for some applicants than others. For the most part, people tend to associate bridging loans with financing to ‘bridge’ the gap between property sales and purchases. In reality, a bridging loan can be used for pretty much any legal purpose whatsoever.

Bridging Loans: The Basics

One of the best ways of getting to grips with the basics of a bridging loan is to check out an online bridging loan calculator. Enter a few simple details, hit the button and learn how bridging finance works. See how rates vary in accordance with several key variables and determine your capacity to meet your repayment obligations, should you decide to go ahead.

Understandably, bridging loans are available exclusively for applicants aged 18 years or over. Open to private and business borrowers alike, bridging loans are almost always secured against the applicant’s property, which can be a commercial or residential building. Multiple properties may also be combined to cover the cost of a bridging loan, while some lenders will consider other valuable assets on a case-by-case basis.

Bridging loans can be particularly useful for borrowers with an adverse credit history, along with those who are unable to provide comprehensive proof of income. Just as long as sufficient collateral can be provided to cover the cost of the loan, the funds required can be made available in as little as five days. After which, it’s a case of repaying the loan in one lump-sum payment, anything from a few days to around 18 months later.

Bridging Loan Suitability Examples

Producing a definitive list of bridging loan suitability examples is difficult, given the enormous flexibility of bridging finance. Nevertheless, there are certain common examples and applications for bridging loans that make full use of their unique properties.

Examples of which include the following:

  • You intend to buy a property at auction and do not have sufficient funds on-hand to cover the costs. In such instances, applying for a traditional mortgage in the conventional way is simply out of the question.
  • A homeowner or developer wishes to finance extensive renovation, extension or home improvement works, in order to increase the market value of a property which will subsequently be sold.
  • The prevention of repossession, using a bridging loan to pay off an outstanding mortgage balance, prior to selling the property for its full market value, repaying the loan and retaining any additional profits made accordingly.
  • A business owner faces an unexpected financial shortfall, which calls for an immediate yet short-term cash injection. Bridging loans can typically be secured against a variety of business assets and commercial properties.
  • When a homeowner looking to relocate finds their dream property at an unbeatable price, but the sale on their current property hasn’t been finalised. They purchase the home of their dreams with a bridging loan and repay the balance in full when their former home is sold.
  • An investor or everyday buyer wishes to purchase a property a traditional mortgage provider refuses to finance. Examples of which could be partially-built properties or properties with major structural issues, which can be purchased quickly and affordably with a bridging loan.

These are just a few examples of some of the most common applications of bridging loans in private and professional circles alike. Across the board, bridging finance specialists are able to tailor their loans and associated terms to meet the exact requirements of each borrower individually. All with monthly interest rates as low as 0.5% — sometimes even lower!

Eligibility for a bridging loan is typically determined exclusively on the provision of acceptable collateral. Most of the usual measures like credit checks, proof of income and general financial history simply do not apply.

If you think a bridging loan is right for you, speak to an independent broker and organise a whole-of-market comparison, before submitting your application.

Source: Shout Out UK

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Plan to convert Worcester B&B into 13-bed HMO looks set to be approved

A PLAN to convert a city bed and breakfast into a 13-bed house of multiple occupation (HMO) looks set to be approved.

The application would see Wyatt Guest House in Barbourne Road transformed into the apartments with a number of shared facilities.

The guest house, which sits in the Shrubbery Avenue conservation area and is designated as being within an archaeologically sensitive area, is split over four floors all of which are proposed to be converted.

Permission to demolish a conservatory at the back of the eight bedroom B&B to make way for two studio apartments, three flats and a town house was approved in March 2018.

The demolition and extension would work still go ahead if Worcester City Council’s planning committee goes along with its planning department and approves the plan at a meeting on Thursday (May 23).

The building has been up for sale since April 2015. The B&B owners wanted to sell the building to a developer to carry out the work but it gathered little interest resulting in the request to convert the building into a HMO.

The new plan shows 13 bedrooms each with an en-suite with a shared kitchen and a shared communal area.

Three bedrooms spread across the extension would share another kitchen and communal area.

According to council planners, approving the application would push the percentage of homes within a 100 metre radius up to 9.5 per cent.

The council’s planning policy on HMOs allows for no more than ten per cent of homes within a 100 metre radius to be classed as HMOs.

Council planners were also satisfied the other HMO policies – which ensures no more than two adjacent properties are HMOs and supports applications for HMOs unless it has a negative effect on parking, results in insufficient space for waste and recycling or is out-of-keeping with the character of the area – were not broken.

Neighbours were incorrectly told by the council the new HMO would be breaking the ten per cent threshold because of a miscalculation.

Neighbours were told of the mistake through a letter.

Council planners said the building being used as a more permanent residence rather than a temporary B&B would increase activity in the area.

The size of the HMO would usually require at least four parking spaces but planners have accepted the lack of parking due to its close location to the city centre.

By Christian Barnett

Source: Hereford Times

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Inflation takes off on higher air fares and energy prices

UK inflation was higher in April, as the Easter getaway rush boosted air fares and the higher energy price cap was introduced.

Figures from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) was 2.1% last month compared with 1.9% in March.

Economists had been expecting inflation to rise to 2.2%.

It is the first time in 2019 that the rate has risen above the Bank of England’s 2% inflation target.

Household bills were one of the main contributing factors to the higher rates, after increases to Ofgem’s energy price cap came into effect.

Electricity and gas prices rose 10.9% and 9.3% respectively between March and April.

Transport costs were also higher, especially for flights, due to the timing of Easter. Coming at the end of the month, the holiday helped to push air fares up by 26.4%.

But travellers also paid more for other forms of transport, with international rail, coach and sea fares all rising.

However the timing also contributed to a downward effect from hotels, where the cost of overnight stays rose by less than a year ago.

Meanwhile, drivers faced higher costs at the pumps as motor fuel prices rose.

ECONOMY Inflation
(PA Graphics)

Petrol prices rose by 3.8p on the month to 124.1p per litre. This was a bigger rise than the same time last year, when prices were up 1.5p.

Diesel was also pricier, climbing 2.3p to 133p per litre.

The largest downward contribution came from recreation and culture, especially in the volatile computer games category. Prices for games are calculated based on the bestseller charts, meaning they can vary depending on the number and popularity of new releases.

Prices in the games, toys and hobbies category were down 5.8% on the month, compared with a smaller decline of 1.6% last year.

(PA Graphics)
(PA Graphics)

Cigarettes and beer, especially cans of lager, also had lower prices. The wider alcohol and tobacco category was down 0.4%, despite a 2.1% uplift in the price of spirits.

The CPI, including owner-occupiers’ housing costs (CPIH) – the ONS’s preferred measure of inflation – was 2% in April, up from 1.8% in March.

The Retail Prices Index (RPI) was 3%, up from 2.4% in February.

Higher inflation would usually bring pressure on the central bank to raise interest rates – but these are far from normal times

Ben Brettell, Hargreaves Lansdown

Ben Brettell, senior economist at Hargreaves Lansdown, said the inflation rate had received a muted reaction from the markets, and may have little weight in the Bank of England’s decision on whether to raise interest rates.

“Higher inflation would usually bring pressure on the central bank to raise interest rates – but these are far from normal times,” he said.

“The MPC is rightly reluctant to tweak policy while Brexit hangs over the economy like the Sword of Damocles.”

Source: BT.com

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Buying in to build-to-rent

Corporate landlords are tapping into healthy demand for rented property in the UK.

Professional landlord Tipi is urging people to “join the rental rebellion”. Its Soviet-style advert shows a clenched fist holding a key, and the tagline boasts that it is “throwing the rental rule-book out of the window and making renting better for everyone”. Its competitors have similarly utopian slogans. Get Living offers people “a new way of renting”, while Fizzy promises that it is “reinventing renting” with “zero faff”.

These companies are part of the fast-growing build-to-rent sector in the UK, where corporate landlords, often institutional investors, rent out flats in purpose-built towers. These flats are a cut above your typical grotty flatshare: they often come with access to posh gyms, cinemas and additional security. The build-to-rent model is already very popular in the US, but until recently it had been slow to take off in the UK.

The build-to-rent trend crosses the Atlantic

At the end of March there were more than 30,000 completed build-to-rent properties in the UK, according to estate agent Savills. This is an increase of 34% on the same time last year. When you include properties under construction or in planning, the total number of build-to-rent homes increases to 140,000, with the average scheme in planning comprising more than 320 flats.

There are several reasons why build-to-rent is becoming more popular in the UK. Clearly there is a shortage of affordable housing, whether for people to buy or rent, with housebuilding not keeping up with demand. In an effort to level the playing field between landlords and private buyers, the government cracked down on the buy-to-let sector, making it increasingly difficult for landlords to make money from it. As a result, landlords have left the sector in droves, further reducing the supply of rental properties (the number of landlords has fallen by 120,000 in the past three years, according to estate agent Hamptons International).

Yet, over the past ten years the number of rental households has increased by 74% to 4.7 million. So American-style corporate landlords are entering a market with healthy demand – either from people who might have accepted they’re not in a position to buy property, or who don’t want the commitment of home ownership but will pay for a slick rental flat in a fancy block. And it is a lucrative business. On average, the rent on build-to-rent flats is 11% higher than surrounding rented homes, according to an analysis of 25 rental schemes by real-estate services firm JLL. And investment in this sector is going mainstream. For example, investment bank Goldman Sachs recently made its first foray into build-to-rent, putting £184m into what is set to be Birmingham’s largest residential tower. By 2025, investors will have allocated £75bn to the professionally managed private-rented sector, says estate agent Knight Frank.

One way to invest in the build-to-rent trend is through Grainger (LSE: GRI). Grainger is the UK’s largest private landlord with 8,237 units in cities such as Manchester, Birmingham and London. In April it signed a deal with Transport for London to build 3,000 properties above and around Underground stations. Between 2017 and 2018, the group’s earnings grew by 26% to £94m, partly driven by like-for-like rental growth of 4%. Grainger’s shares currently trade at a discount of around 20% to net asset value.

By: Sarah Moore

Source: Money Week

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London house prices suffer UK’s steepest annual fall ahead of original Brexit deadline

House prices in London plunged 1.9 per cent in the year to March, the largest annual fall in the country, ahead of the UK’s original Brexit date.

UK-wide house prices jumped 1.4 per cent over the twelve months, but in London the average property price fell almost two per cent to £463,000, according to HM Land Registry figures.

Homes in the capital also fell 0.4 per cent month-on-month in March as the drop continued in the run up to the anticipated Brexit date of 29 March.

Despite the fall, the figures show an improvement on the 2.7 per cent annual drop to February.

Former RICS residential chairman and north London estate agent Jeremy Leaf said: “Once again, we are seeing London acting as a drag on the rest of the UK housing market as despite improvements in affordability, almost record low mortgage rates and unemployment, combined with a shortage of stock.

“With prices down one month, up the next – no real pattern has emerged.”

Chief executive of online estate agent Housesimple, Sam Mitchell, said the data provided a “distorted picture” as they were based on sales completed during peak Brexit chaos.

He said: “January and February, when offers would have been made for March completions, was approaching the eye of the Brexit storm.

“That uncertainty, and the political squabbling in Parliament, fed through to buyer and seller confidence, particularly in London and surrounding areas.”

He added: “The market has now settled down, and with the EU leave date extended to the end of October, we are expecting more buyers and sellers to take advantage of this Brexit limbo, and relatively calm market conditions, to proceed with sales and purchases.”

By Callum Keown

Source: City AM

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Property transactions dip in April

The number of residential property transactions in April fell on a monthly basis but were up from the same month a year ago, data shows.

Year-on-year, the seasonally adjusted number of property sales rose by 0.8% from 98,620 in April 2018.

Non-residential property transactions

The number of non-residential property sales in April was up on both a monthly and yearly basis.

Year-on-year, transactions rose by 7.1% last year to 11,300 from 10,550 in April 2018.

On a monthly basis, these sales saw a rise of 9.5% from March 2019 where they stood at 10,320.

Investors’ confidence brings transactions up

Joshua Elash, director of property lender MT Finance, said that it comes as no surprise to see transactional volumes in the residential space falling month-on-month.

“We expect this trend to continue while uncertainty over Brexit specifically impacts the end-user market and overly aggressive tax treatment continues to dampen investor activity and appetite.

“However, it’s a tale of two cities as investors turn instead toward commercial property where yields remain attractive and less oppressive tax policies support and encourage investment. Whatever the Brexit debate, investors are buying into commercial property and it is great to see confidence in this sector translating into transactional growth.”

Adrian Moloney, sales director at OneSavings Bank, said: “With house price growth stalling and in some areas falling, and take home pay packets increasing, there are tentative signs that some prospective buyers are taking the opportunity to purchase their first home.

“Nonetheless, caution has not been entirely cast aside as we are unlikely to see any significant activity without more housing stock and some closure to the political and economic uncertainty which is still in the back of many buyers’ minds.”

Written by: Antonia Di Lorenzo

Source: Your Money