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Home-buyer mortgage approvals at five-month high in June

The number of mortgage approvals being made to home-buyers jumped to a five-month high in June, Bank of England figures show.

But annual growth in consumer credit, which includes borrowing using credit cards, overdrafts and personal loans, slowed to its weakest level for more than five years.

Some 66,440 mortgages were approved for house purchase in June – the highest total since January, the Bank’s Money and Credit report showed.

Meanwhile, consumer credit increased by 5.5% annually in June, down from 5.7% in May, marking the weakest 12-month growth since April 2014.

The Bank said annual growth in consumer credit has fallen steadily since a peak in late 2016.

Howard Archer, chief economic adviser at EY Item Club, said: “Despite being at a five-month high of 66,440 in June, mortgage approvals were well in the 63,000 to 68,000 range that has broadly held since late 2016.

“They were also not that far above the average of 65,267 seen over the first half of 2019.

“June’s mortgage data tie in with the view that housing market activity got some help from the avoidance of a disruptive Brexit at the end of March, but the overall benefit has been relatively limited.

“Improved consumer purchasing power and robust employment growth has also recently been helpful for the housing market but latest developments have been somewhat mixed, with employment growth in particular showing signs of slowing.”

Commenting on the consumer credit figures, Mr Archer said households “have seemingly become relatively careful in their borrowing amid concerns over the economic outlook”.

He continued: “It is also evident that consumer credit growth has recently been limited by markedly weaker private car sales as this has reduced demand for car finance.

“Meanwhile, lenders have become more careful about advancing unsecured credit – the second quarter of 2019 saw lenders further reduce the amount of unsecured credit available to households and again tighten lending standards.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Monetary indicators provide reassurance that the economy isn’t grinding to a halt ahead of the October Brexit deadline.”

By Vicky Shaw

Source: Yahoo Finance UK

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Business chiefs warn Boris Johnson UK not ready for no-deal Brexit

Britain is still “underprepared” for a no-deal Brexit in October, a major business lobby group has warned Boris Johnson.

In a new report, the CBI – which represents 190,000 UK businesses – said firms had been undermined by unclear advice, cost and timelines on what leaving the EU without a deal would mean.

And they make clear that the European Union itself is also not ready for a no-deal outcome.

The warnings came as it was reported that the Government is planning a £100m no-deal advertising blitz over the next three months, as Mr Johnson ordered a shake-up of Whitehall to ready the UK to leave without an agreement on 31 October.

In its new report, the CBI says 24 out of 27 areas of the UK economy will face disruption if the country leaves the EU without a deal, and it calls on ministers to “step up” preparations for a hard exit.

The CBI calls on the Government to “immediately” put the civil service “back onto a no-deal footing” and review all Brexit preparedness advice drawn up for the previous exit date of March 2019.

The Government should meanwhile launch a “targeted” communications campaign and adopt a “refreshed, transparent” approach to its planning, the CBI says.

Ministers are also urged to consider shortening the summer Parliamentary recess and curtailing party conferences to allow enough time to pass vital no-deal Brexit legislation.

Meanwhile the EU is told to “come to the table and commit” to matching the “sensible” planning already carried out by the UK.

‘DAMAGE’

The CBI’s deputy-director general Josh Hardie said: “Businesses are desperate to move beyond Brexit. They have huge belief in the UK and getting a deal will open many doors that have been closed by uncertainty.

“There is a fresh opportunity to show a new spirit of pragmatism and flexibility. Both sides are underprepared, so it’s in all our interests. It cannot be beyond the wit of the continent’s greatest negotiators to find a way through and agree a deal.

“But until this becomes a reality, all must prepare to leave without one. It’s time to review outdated technical notices; launch an ambitious communications campaign for every firm in the country and rigorously test all Government plans and IT systems.”

While the CBI is urging businesses and government to do all they can to prepare for a no-ldea, Mr Hardie warned that neither side of the negotiations could completely “mitigate” the disruption of Britain leaving without a deal.

“We can reduce but not remove the damage of no-deal,” he said.

“It’s not just about queues at ports; the invisible impact of severing services trade overnight would harm firms across the country.”

The CBI’s warning came as The Telegraph reported that Mr Johnson is planning to channel £100m into a no-deal spending advertising blitz over the next three months.

The push could include a leaflet on no-deal preparations being sent to every home in the country.

According to the paper, Chancellor Sajid Javid will unveil wider plans for an extra £1bn in no-deal prepartion spending later this week.

Mr Johnson has meanwhile set up a new “exit strategy committee” in Whitehall to lead on Brexit planning, The Times reports, with Cabinet Office minister Michael Gove heading up a new “operations committee” that will meet daily and lead on no-deal work.

Written by: Matt Honeycombe-Foster

Source: Politics Home

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UK mortgage lending perks up in Brexit lull, consumer credit softer

Britain’s housing market appeared to benefit from a brief lull in Brexit worries last month, Bank of England data showed on Monday, but consumer lending growth was the weakest in over five years, adding to the mixed signals coming from the economy.

Uncertainty about Brexit has weighed on house prices, especially in London and southeastern England, since voters decided in June 2016 to leave the European Union.

But there have been signs of a stabilization coinciding with the decision to extend the original March 29 deadline for Britain’s EU departure until the end of October, and the closely watched RICS poll of surveyors has recovered in recent months.

The BoE said the number of mortgages approved for house purchase rose to 66,440 in June from 65,647 in May.

That was the highest since January and above the average forecast from economists in a Reuters poll.

Net mortgage lending, which typically lags behind approvals, also rose more than expected, up by 3.7 billion pounds ($4.6 billion) in June.

“June’s mortgage data ties in with the view that housing market activity has got some help from the avoidance of a disruptive Brexit at the end of March,” Howard Archer, economist at EY ITEM Club, said.

Faster wage growth and a jobs boom are also supporting house prices but Archer said he expected them to rise by no more than 1.5% this year, roughly their current growth rate.

If Britain leaves the EU without a deal on Oct. 31 – something Prime Minister Boris Johnson says his government is actively preparing for – then house prices could quickly fall by around 5%, Archer added.

Last week industry body UK Finance reported the number of approvals for house purchase near a two-year high in June, while its measure of consumer lending growth picked up slightly.

The BoE said net lending to consumers in June alone rose by 1.046 billion pounds, again faster than forecast and stronger than in recent months.

However, it is lower than the average monthly increase of around 1.5 billion pounds chalked up in the 12 months to June 2018 and the annual rate of lending growth slowed to 5.5% from May’s 5.7%, the weakest since April 2014.

British consumer spending has been a driving force of growth since the Brexit referendum, helping to offset a drying up of business investment. But in recent months it has lost momentum.

The slowdown partly reflects strong spending a year ago, boosted by major sporting events, such as the men’s soccer World Cup, and better weather.

By contrast, business lending rose by 2.6 billion pounds in June – above its post-referendum average – to give an annual growth rate of 4.4%, the highest since the series started in 2012.

“Firms haven’t suddenly adopted a defensive mindset, despite the risk of a no-deal Brexit,” Samuel Tombs, an economist at Pantheon Macroeconomics, said.

Increased borrowing was concentrated in larger firms, however, and borrowing by small businesses was almost flat.

A separate survey by Bibby Financial Services, which offers trade finance, reported that half of small businesses feared a recession this year and 44% were struggling with cashflow, in part due to pre-Brexit stockpiling of raw materials.

Reporting by David Milliken; Editing by Raissa Kasolowsky

Source: UK Reuters

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Unchanged interest rates amid Brexit uncertainty, predicts EY

Despite recent expectation that the Bank of England could either raise or even cut the UK interest rates, EY’s economic analysts have predicted the will likely remain the same.

As recently as June, the focus on UK monetary policy has been when the Bank of England is most likely to raise interest rates.

A turnaround in sentiment, however, has led some to believe the Bank of England could be just as likely to cut them.

According to EY’s ITEM (Independent Treasury Economic Model) Club, it would be a surprise for the Monetary Policy Committee (MPC) meeting to result in anything other than a unanimous 9-0 vote in favour of keeping UK interest rates at 0.75%.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “We expect the Bank of England to keep interest rates unchanged at 0.75% on Thursday following a unanimous 9-0 vote of the Monetary Policy Committee (MPC) at their August meeting. This would match the outcome of the MPC’s last meeting in mid-June.

“However, a fair amount has changed since the last MPC meeting in mid-June and this will lead to a lot of interest in the tone of the minutes of the August meeting as well as in the new growth and inflation forecasts contained in the simultaneously released Quarterly Inflation Report.”

The direction interest rates move hinges on Brexit developments. Should the UK leave the EU with a deal in place, the EY team expects that the current rate of 0.75% will remain the same well into 2020, and gradually rise in-line with a slowly growing economy.

The expectation is that the Bank of England will acknowledge the recent increased risk facing the UK economy due to uncertainty surrounding Brexit, but are unlikely to react by cutting interest rates unless there is a damaging ‘no-deal’ Brexit in October.

“Increased belief that the Bank of England’s next move will be to cut interest rates rather than increase them is the consequence of a number of factors,” said Archer. “These include the weakened performance of the UK economy in the second quarter, domestic political uncertainties, a slower and more uncertain global economic environment which is expected to see the Federal Reserve and ECB shortly cut interest rates, and Brexit uncertainty.”

“If the UK ultimately leaves the EU without a “deal”, the Bank of England has repeatedly held to the view that interest rates could move in either direction.”

The view mirrors Bank of England Governor Mark Carney’s comments saying that the prospect of a no-deal is slowing down economic growth, and that the BoE would likely be required to provide stimulus to the economy should a no-deal occur.

Speaking to MPs, Governor Cerny said: “It’s more likely we would provide some stimulus. We have said we would do what we could in the event of a no-deal scenario but there is no guarantee on that.”

“There is not a business investment boom going on in the country right now. I think we all know why that is not the case.”

The fear of further Brexit uncertainty is also reflected in economic predictions. The likelihood is that further delay in leaving the EU could also lead to a cut to interest rates, or at the very least a long delay before any hike.

Archer said: “If Brexit is delayed again – most likely until the end of March 2020 – we expect the Bank of England to hold off from hiking interest rates until further into next year as it gauges how the economy is performing after the UK’s exit from the EU.”

By Chris Jewers

Source: Accountancy Age

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Average property values up £2,000 in first half of 2019 but London home owners have lost £13,000

London home owners have seen the value of their properties slide by £13,035 on average in the first six months of the year, Zoopla claims.

Analysis of house price data by Zoopla – using its valuation tool that regularly collates property data on all 29m homes in the country – found that an average of £11 a day has been added to home values since the start of the year or £2,046 in total.

But home owners in the capital are not benefiting and have seen their property valuations fall by £71.23 a day.

Scotland also saw a £20.59 daily drop or £3,768 in total.

The west midlands was Britain’s best-performing region, with the average value of homes increasing by £36.58 per day, or £6,695 in total, since the start of the year.

The south-east was close behind, where home owners have seen their properties gain on average £35.32 each day and £6,463 in total over the past six months.

Zoopla also analysed who in the UK at a local authority level uses its house price tools to research the value changes in their local property market the most.

The research found that those in Birmingham are the most frequent users of the house price pages, whilst three London boroughs also made up the top ten most viewed locations, with those living in Wandsworth, Bromley and Croydon featuring in the list.

Laura Howard, spokesperson for Zoopla, said: “The UK housing market gained £60bn in value during the first six months of the year.

“An increase in the total value of housing was recorded across nine of the 11 regions analysed, with average property values in the west midlands making the most money for home owners.

“Perhaps then, it is no coincidence that in the past six months residents in the west midlands, more specifically those in Birmingham, have been the most regular visitors to Zoopla’s house prices tool, which gives a price estimate for the value of homes, down to a single address.

“At the other end of the spectrum, residential values in London have continued on the downward trajectory of the last three years.

“However, a patchwork of micro-markets in the capital means there are a number of neighbourhoods – from Notting Hill to Forest Hill – that are bucking the trend of price falls and registering price rises.”

RankRegionJanuary value (£)July value (£)£ total change£ change per day
1West Midlands230,676237,371£6,695£36.58
2South East England406,821413,284£6,463£35.32
3North West England198,446202,177£3,731£20.39
4Wales190,610193,910£3,300£18.03
5Yorkshire and The Humber181,918184,181£2,263£12.37
6East of England360,707362,823£2,116£11.56
7East Midlands224,352226,177£1,825£9.97
8North East England192,388193,663£1,275£6.97
9South West England309,333310,165£832£4.55
10Scotland194,942191,174-£3,768-£20.59
11London670,535657,500-£13,035-£71.23

By MARC SHOFFMAN

Source: Property Industry Eye

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UK private sector contracts again, but outlook improves – CBI

British business activity, which has been buffeted by the country’s Brexit crisis, fell again in the three months to July but is expected to pick up over the next three months, the Confederation of British Industry said on Sunday.

The balance of firms reporting growth stood at -9%, indicating a less widespread slowdown than June’s -13%, which was the weakest reading in nearly seven years, the CBI’s monthly Growth Indicator showed.

An indicator measuring expectations for the next three months was the strongest since October last year at +9%.

Britain’s economy has been whip-lashed by the twists and turns of Brexit so far in 2019 and by a slowdown in the global economy, caused in large part by rising trade tensions between the United States and China.

Growth was strong in the first three months of the year, as many companies tried to complete work before possible disruption after the original March 29 deadline for leaving the European Union, which has since been pushed back.

The hangover from that early 2019 rush is widely expected to have caused gross domestic product to flat-line or even contract in the second quarter.

“We expect underlying growth to remain subdued with risks from Brexit and global trade tensions remaining high,” Annie Gascoyne, the CBI’s director of economic policy, said.

Britain’s new Prime Minister Boris Johnson has said he is prepared to lead Britain out of the EU without a deal on Oct. 31 if necessary.

That new Brexit deadline could cause a repeat of the stock-building seen in early 2019, some economists have said.

Reporting by William Schomberg, editing by David Milliken

Source: UK Reuters

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Let’s get the property market thriving again

Keith Street, chief commercial officer at The Mortgage Lender, says people are fed up with B word and instead of holding out to see what happens are now making moves in the property market.

At the beginning of this year I said 2019 was going to be an interesting year in the mortgage market, and that was probably an understatement.

Seven months into 2019 and we’ve failed to leave the European Union, the property market looks like it’s on the up and competition among lenders is fierce.

And home sellers, buyers and buy-to-let investors who were watching but not doing much for the first three months of the year, choosing instead to see what happened when Brexit was out of the way – have started doing something in the last three months.

Fed-up with uncertainty and fed-up with politicians more interested in playing politics than delivering on an instruction from their paymasters, the collective house owning/buying and selling public appears to have decided to get on with their lives irrespective of Brexit and what’s going on in Westminster.

House prices
Mortgage approvals are up, Zoopla is predicting house prices will rise over the next six months and the decline in property prices in the capital is slowing. One removal company, reallymoving, has suggested the market could see a 9% surge in property prices over the next three months based on the number of bookings it has received from people who are planning to move home.

The latest figures from Rightmove show online asking prices are beginning to rise again. The average price of a property coming onto the market in June 2019 was £309,348 compared to £309,439 a year ago.

The overall UK house price is being held up by all-time price highs recorded in the East Midlands, North West, Wales and Yorkshire and the Humber, which saw rises of 0.7%, 1.2%, 0.9% and 0.5% respectively.

In contrast, London saw monthly average asking prices fall by 0.4% where buyers were also more reluctant to commit with a yearly fall of 7.1% in sales agreed compared to a 1.7% fall in the North.

And it does feel like things are changing, landlords are telling us that properties which were sticking on the market are now being sold and properties coming onto the market at the right price are under offer within a week.

Mortgage applications
We’ve also seen it in the applications we’re receiving for residential and buy-to-let. Volumes are significantly up and landlords are refinancing portfolios to raise cash so they can invest in more properties.

Research we carried out among landlords found 84% are looking to maintain or increase the number of properties they own over the next 12 months compared to just 16% who are looking to reduce their portfolios.

Where people were uncertain, they’ve become fed up and decided it’s time to get on with their lives and plans irrespective of the uncertainty around Brexit.

And there couldn’t be a better time for people to be buying with a mortgage or remortgaging. Competition on rates is fierce and so is the appetite in the wholesale market for mortgage backed securities.

LendInvest has securitised £259 million of buy-to-let mortgage loans, Foundation Home Loans £329 million and we also completed our first UK mortgage-backed securitisation of residential assets for £238.5 million.

Competition
Overall the remainder of 2019 is likely to mirror what’s happened in the first half of the year.

Lenders have been tweaking their mortgage products and shaving their margins to gain ground in the residential and buy-to-let lending markets.

For us the remainder of the year will also be more of the same. Through innovative product developments and testing, to gauge market response to rate and criteria changes, we’ve seen record volumes in the first half of the year.

We’ve also added expertise to the sale team with the appointment of Steve Griffiths as sales director and we’ve now got a four-strong team of onsite underwriters to support our introducer partners.

At the beginning of the year I said: “Increased competition will mean lots of activity and innovation as lenders jockey to find their sweet spot and ensure visibility of their proposition to the widest market possible.”

We’ve seen that play out in the first half of the year. What’s left of 2019, I believe, will see those lenders who are investing in the quality of the relationships with their introducer partners pull further ahead of those who rely on sourcing systems and best buy tables to generate new business.

Source: Mortgage Finance Gazette

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More lenders are offering limited company buy-to-let mortgages

More than half (59%) of all buy-to-let mortgage lenders offered products to landlords who use limited companies as borrowing vehicles in Q2 2019, Mortgages for Business has found.

Its Buy to Let Mortgage Index showed the number of providers serving corporate buy-to-let borrowers has been growing steadily since the cut in mortgage tax relief was introduced.

Steve Olejnik (pictured), managing director of Mortgages for Business, said: “The Index points to some good news for landlords, particularly those using limited companies who now have a greater choice of lenders than ever before, to help them finance their rental properties and access to better rates.

“In particular, we’ve seen the options increase at the more specialist end of the market, and we’re delighted that the number of lenders in that space is growing.”

The restriction of income tax relief on mortgage interest has meant that limited companies can be a more tax and financially efficient method of operating property portfolios than the self-employed route which was used predominately by landlords in the past.

In addition, the findings are also reflected in the total value of buy-to-let mortgage applications completed in the quarter at Mortgages for Business.

By value, more than half (52%) were from landlords using limited companies.

Furthermore, the gap in pricing between the average buy-to-let mortgage rate (3.1%) and the average rate available to limited companies (3.7%) diminished by 0.02% when compared to Q1.

Lenders’ margins over the cost of funds fell slightly to 0.54% from an average of 0.55% in Q1 2019.

While this is not a huge cut, it demonstrates that lenders are really having to squeeze margins to remain competitive.

Low loan-to-value products fared the best, with margins dropping below the 0.5% mark (0.48%) for the first time since Mortgages for Business started tracking costs and fees back in 2013.

There was an increase in the proportion of fee-free and flat fee-based products, up to 20% and 38% respectively.

This was to the detriment of percentage-based fees which fell to 40% despite having peaked at 48% at the end of 2018.

Mortgages for Business said this is a positive outcome for borrowers, who tend to dislike percentage-based fees and another sign that lenders are vying for business in a challenging market.

Flat lender arrangement fees, sitting at £1,504, fell slightly quarter on quarter which bodes well for landlords in need of finance.

By Michael Lloyd

Source: Mortgage Introducer

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More landlords shift to 2-year fixes

More landlords are shifting to 2-year fixed buy-to-let deals, broker Commercial Trust has claimed.

At the end of 2018, 68% of its buy-to-let applications were for 5-year fixed rate terms and 26% for 2-year fixes. 

However, by the end of Q2 of 2019, 5-year fixed-rates account for 59% and 2-year fixed rate deals are at 39%.

Andrew Turner (pictured), chief executive of Commercial Trust, suggested this could be because of political and economic uncertainty.

He said: “5-year fixed rate buy-to-let deals have proved dominant over several quarters, notably since the introduction of the PRA rules, which tightened lending criteria for shorter-term products in 2017.

“5-year applications remain predominate, but there has been a definite shift to two-year applications during the first half of 2019.

“There could be a number of factors at play here, with the obvious explanation being that the first half of 2019 has seen political and economic uncertainty, largely as a result of Brexit negotiations.

“The Bank of England has at different times hinted at rates rises, should the economy grow in line with their forecasts, but then suggested that a no-deal Brexit could see the base rate cut.

“Many landlords are perhaps looking to hedge their bets for the short-term, with a competitive, low rate buy-to-let mortgage, which will hopefully last beyond all of the uncertainty, without locking them into a long-term agreement.”

Turner said that at the same time, many experienced landlords have had two years to digest the implications of the PRA changes and have perhaps already made a move to a 5-year deal.

He added: “Of course locking in for two years gives a landlord the opportunity to reassess the market much sooner and to consider remortgaging in two years’ time, without necessarily incurring additional early repayment charges.

“It will be interesting to see whether this trend towards shorter term deals continues, particularly given data that suggests the gap between 2-year and 5-year fixed rates has reduced.”

Turner said three regions in the UK have seen consistent growth in their overall proportion of buy-to-let purchase application business, with the South West leading the way.

He said: “After five consecutive quarters where year on year, the South West’s proportion of applications fell, this region made considerable ground up in Q2 of 2019 with a 3.5% increase.

“Other areas to see gains in overall proportion so far in 2019, compared to the whole of 2018, are the East of England and the East Midlands, while there has been a fall in the overall percentage of applications from London and the South East.”

In London, there has been a 3.7% fall in the overall proportion of buy-to-let applications, from Q1 to Q2 of 2019.

The capital was on a par with the North West, contributing 12.4% of buy-to-let application business during the most recent quarter.

Turner added: “During Q2 of 2019, the East of England proved the leading region, responsible for 12.9% of applications.

“The South East saw a notable fall in its proportion of buy-to-let applications from Q1 (14%) to Q2 (7%).

“Affordability may still be an issue in London and the South East and regional house price variation and the effects of stamp duty, may be encouraging buy-to-let investors to investigate potentially cheaper properties and better yields elsewhere.”

By Michael Lloyd

Source: Mortgage Introducer

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Buy To Let Property Investors Spend Over £3k Per Year On Investments

Buy to let property investors in the UK spend over £3,000 per year on their properties on average according to new research by LV General Insurance.

The insurance company found that landlords collectively spend a total of almost £4.7 billion over the year, equating to £3,134 each.

The spend was found to include renovations and refurbishments (£370), replacing/repairing (£370), fixing structural damage (£313), decorating (£265) and garden maintenance (£203).

Extra spend also came from damage caused by tenants, with carpets the most likely thing that landlords had to spend out for to replace, repair or clean, as reported by 66 per cent of landlords asked.

Damage to walls was next at 45 per cent, white goods (27 per cent) and doors (24 per cent).

Landlords therefore spend the most money replacing/repairing flooring (£322), white goods (£298), other items (£256), cleaning at the end of a tenancy (£178) and removing forgotten items (£149).

The amount of spend required varied across the UK. The South West saw the most money spent on repairing damage made by tenants (£3,461), whereas landlords in the North West spend the least on repairing damage (£2,738).

Tenant disputes were another thing that landlords often had to spend out on. Although 46 per cent have never experienced a tenant dispute, almost a quarter (23 per cent) have disputes at least once a year, with 6 per cent even quoting once a month.

The most common causes for tenant disputes are delayed rent (43 per cent), damage to property (41 per cent), cleanliness (33 per cent), disputes over bills or deposits (10 per cent), pets (9 per cent) and sub-letting (7 per cent).

Managing director of LV General Insurance, Heather Smith, said: ‘Finding the right tenant is crucial. Although the majority rarely experience tenant disputes, it’s clear that, when they do, the disputes are challenging and potentially costly.

‘Our research found that 13 per cent currently don’t have landlord insurance, meaning they are missing out on things such as cover for accidental damage by tenants, loss of rent if the property becomes uninhabitable, and contents cover.’

Source: Residential Landlord