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‘Landlords should get stamp duty surcharge exemption’

The government should make landlords exempt from the 3% stamp duty surcharge on second homes, argued Mary-Anne Bowring, managing director at property management firm Ringley Group.

She added that a rise in buy-to-let investment could also support housebuilding, as landlords are an important source of development finance through off-plan sales that are necessary to get debt funding for construction.

Bowring said: “There is a huge opportunity still for buy-to-let investors in the UK rental market, which is only predicted to grow in size.

“That’s why institutional investors such as pension funds and insurers are investing billions in building homes for rent, as they see an opportunity to secure income-producing investments that hold up well during a downturn.

“Government efforts to restart the housing market should reflect long term pre-existing trends and that includes the continued growth in private renting.

“If the government wants to kill two birds with one stone – boost activity in the housing market and provide much needed rental homes – it should exempt landlords from the second home stamp duty surcharge immediately.”

She added that rental housing is likely to prove more resilient during this downturn than other real estate sectors such as retail and offices, as people are more likely to rent rather than buy during a recession.

The number of renters was predicted to increase before the virus, as housing affordability and changes in lifestyle and the jobs market mean more people are renting and for longer. Bowring said these fundamentals should remain post-virus.

BY RYAN BEMBRIDGE

Source: Property Wire

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Homeowners set to be able to extend mortgage payment holidays

Those struggling to pay their mortgage due to coronavirus are set to be able to extend their payment holidays for three more months, or start making reduced payments, in proposals published today.

On 17 March, banks agreed with the Chancellor that they would offer ‘forbearance’ (tolerance and help) on mortgages, meaning they all should offer those struggling a three-month ‘holiday’, allowing customers a temporary break from having to make mortgage payments during this time.

Over 1.8 million mortgage payment holidays were taken up, and the first of these will be ending in June. But an extension of another three months will now likely be available.

The Financial Conduct Authority’s (FCA’s) new draft guidance also includes an extension of the application period for an initial mortgage holiday until 31 October 2020, so that customers who haven’t had a payment holiday and are experiencing financial difficulty will be able to ask for one.

The current ban on repossessions of homes will be continued until 31 October as well.

Full info on what the FCA expects mortgage lenders to do?

At the moment, these proposals aren’t confirmed. The FCA says it welcomes comments on them until 5pm on Tuesday 26 May, and then expects to confirm them shortly afterwards. Here’s what it’s proposing:

  • If you’ve not had a mortgage payment holiday, you’ll have until 31 October 2020 to apply. Customers who are making repayments now but get into financial difficulty later will be able to request a payment holiday until 31 October.
  • If your payment holiday’s ending, you can ask for another three months if you’re still struggling. Lenders should continue to support customers who have already had a payment holiday where they need further help, unless granting a further mortgage holiday would create its own financial difficulties.
  • Firms are expected to contact customers on mortgage payment holidays and find out what they can repay and, for those who remain in temporary financial difficulty, offer further support. As part of this, firms should consider a further three-month payment holiday.
  • If you can make full or partial payments, you should do so. At the end of a payment holiday, firms should find out if customers can resume payments, or part payments. If so, your lender should contact you to agree a plan on how the missed payments will be repaid, which could include spreading the cost of payments over the remaining mortgage term, or extending the mortgage term.
  • The current ban on repossessions of homes will be continued until 31 October 2020.
  • Payment holidays and partial payment holidays won’t go down as a missed payment on your credit file. However, the FCA says that consumers should remember that credit files aren’t the only source of information that lenders can use to assess how creditworthy someone is.

The FCA adds that these recommendations are minimum standards and that they don’t stop firms from going above and beyond, for example, by offering reduced interest.

Buy-to-let mortgages aren’t technically covered by today’s announcement as they’re not regulated by the FCA. Yet if a lender is regulated for its residential mortgage business, the FCA says it also looks carefully at how these firms carry out their unregulated buy-to-let business, so it’s hoped that some mortgage lenders will offer the extensions to their landlord customers too.

What impact could a mortgage holiday have on my credit score?

As Martin and the FCA have pointed out, while mortgage payment holidays won’t be marked as missed payments on your credit report, they could still have an impact on your wider creditworthiness, as lenders can find out about them through bank statements or ‘Open Banking’ data, and can factor them in. As Martin says…

‘We wait to see how substantial the impact will be – but those who need a mortgage holiday should still do it’

The FCA has confirmed, sadly, that while credit files shouldn’t be impacted by mortgage or other payment holidays, lenders are still allowed to take them into account when making their acceptance decisions.

It’s impossible to say yet how widespread this will be or how substantial the impact will be – we’ll start to learn that over the next year. Each lender’s assessment process is different; it’s a dark art that’s hidden from the public and never published, so this is likely to be yet another factor applicants will need to navigate.

Certainly many new challenger financial firms talk about their new, more sophisticated customer assessment models, that they believe are better than just relying on credit files. It’s that very fact that sparked me to look at this in the first place. And as they will be able to see that someone has temporarily not paid their mortgage, they can spot payment holidays.

My hope is that as these holidays are specifically for the short-term financial hit of coronavirus – and as the practice is so widespread – it won’t be used by many firms, and where it is it won’t tarnish individuals’ credit reputation for too long. But there’s no real way to know.

Most importantly, I don’t believe this should stop anyone who needs a mortgage holiday from getting one – if it’s crucial for cash flow, just do it. Yet for those on the border, who may find it temporarily useful but can cope without it, add this to the fact that interest racks up during the payment holiday and I’d err on the side of caution.

What does the FCA say?

Christopher Woolard, FCA interim chief executive, said: “Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to restart mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a mortgage payment holiday will also continue to be able to apply until 31 October.”

By Callum Mason

Source: Money Saving Expert

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Reopening of housing market ‘not so smooth but welcome’, says Wellington estate agent

The reopening of the property market is a ‘truly wonderfully cautious first important step in the right direction’, a Shropshire estate agent has said.

Dean Millington, business proprietor of Harwood The Estate Agents, Wellington, said the Government’s green light for agents to return to work had been akin to ‘dropping the bombshell onto the property world’.

“Nothing like a little advance notice whilst also forgetting to mention the finer details to the public and the agents,” said Mr Millington.

“They have since released the really important reality about viewing restrictions, guidelines and practices agents must implement and put into practice sharpish before being able to commence safely.

“The Government and the National Association of Estate Agents have now given strict guidelines on how things are to be handled and the safety measures that should be implemented.

“I have noticed that the media language is now a little less gunhoe and more subtle, such as ‘the property market has been released from some elements of the lockdown’.

“I believe it truly would have been all round a more common sense approach to have distributed the guidelines of the return to agents in advance, then made a more timely announcement of a forwarding date to enable agents to fully prepare correctly and safely.

“That all said, it truly is a wonderfully cautious first important step in the right direction, although the property world has been slightly thrown into a little turmoil.”

He added: “I have been in live webinars, client calls, emails, texts and a constantly non-stop avalanche of communications since the announcement explaining the finer details and I am pleased to say we are now ready.

“At the end of the day we truly wholeheartedly support the Government in their amazing efforts during these incredibly testing times and will continue to play our small part in ensuring the safety of our clients, staff and the public.

“We are so proud and in awe of all the key workers and our NHS and we pray, hope and plan for brighter days ahead.

“We must keep faith, things will always get better – and they will.”

By Lisa O’Brien

Source: Shropshire Star

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Bank of England not ruling out negative interest rates

Government bonds have been sold in Britain for the first time with a negative yield.

And the Bank of England has admitted it would be “foolish” to rule out cutting interest rate to below zero.

The negative yield bond (a £3.8billion three-year gilt auction with an interest rate of -0.003 per cent) effectively means investors are paying lend money to fund the Government as it deals with the financial impact of the coronavirus pandemic.

And Bank of England governor Andrew Bailey said how low the cost of borrowing could go would be kept under “active review”.

He said: “We do not rule things out as a matter of principle. That would be a foolish thing to do. But that doesn’t mean we rule things in either.:

Minimal or negative interest rates deter savers with the intention of them spending what money they have to stimulate the economy.

Tim Watkins, managing partner of Shurdington-based accountants Randall & Payne, said: “Another first!. Britain had never sold a government bond with a negative yield until Wednesday.

“The interest rate is 0.75 per cent but the price investors paid for the bonds was more than they will receive when the bond is repaid.

“A first for Britain but we join Japan, Germany and some others. It doesn’t mean investors will make a loss as bonds are traded but it’s a position no one would have imagined a few months ago.”

He continued: What does it signal? It’s an indication, if another was needed, that there could be a major recession coming, central banks want to own safe assets in these circumstances and our debt is considered safe.

“It’s a relief at the moment with such a borrowing requirement that Britain is considered safe and the cost of borrowing is low.

“If that were to change it would add even further to the debt mountain we could have when this is all over.”

Martin Day, director of The Bespoke Banking Consultancy in Gloucester believes the spectre of negative interest could encourage spending as the economy shrinks.

He said: “It seems the policymakers will come under more pressure to take action to boost the economy as the UK sells bonds with a negative yield for the first time.

“The sale does reflect rising expectations that the Bank of England will increase its £200billion bond purchase shortly.

“Bank of England governor Andrew Bailey recently told MPs that the possibility of negative rates is being kept under review.

“This move could be used to urge corporates and companies to spend rather than hold funds in bank accounts.”

By Rob Freeman

Source: Punchline Gloucester

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House Prices Set For Short-Term Hit

Coronavirus-hit buyer confidence will translate into short term house price falls of between 5 and 10 per cent, said researchers at international property agents Savills.

But such a drop would be smaller than the price falls experienced in the early 1990s recession or in the Global Financial Crisis, suggested authors of the firm’s May UK Housing Market Update, Ed Hampton and Chris Buckle.

The pace of recovery in prices after the initial falls will depend on the state of the wider economy, although the signs are not too encouraging. The May forecast from Oxford Economics anticipates the UK’s Gross Domestic Product 0.7 per cent lower by the end of 2024 than it expected in April, says the Update. ‘This will have a knock-on effect on household incomes’.

On the plus side, interest rates are also now expected to be lower for longer. ‘Our November forecast for 15 per cent UK house price growth over the five years to 2024 included an assumption that the Bank of England base rate would rise to 2 per cent by the end of that period. Oxford Economics’ current forecast is for it to be 1 per cent’, say Hampton and Buckle.

‘The trade-off between borrowing costs and income rises will determine the medium term outlook for house prices, once the initial crisis has passed’.

But at least the market is moving again. And ‘short term activity will be supported by a degree of pent up demand and some buyers may now have a greater inclination to move following lockdown. There is now particular emphasis on moving for more space, and to the countryside.

It is also possible that the new homes market may recover faster, due to it being easier to perform virtual and socially distanced viewings in new build homes.

‘While this bodes well for an increase in activity, it is starting from the exceptionally low levels observed during lockdown. Data from the main property search portals suggests that sales agreed and new listings were at around 10 to 20 per cent of the levels seen immediately before the lockdown, although buyer browsing levels have been higher’.

Low activity levels are also reflected in mortgage lending data. New mortgage approvals fell to their lowest level in March since early 2013. The drop was particularly sharp as it followed an exceptionally strong February, which had been the strongest month since early 2014, said Savills.

Source: Residential Landlord

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Lenders return in week after lockdown

Lenders have reintroduced physical valuations and higher loan-to-value lending after the government gave the green light to restart the housing market in England last week after seven weeks of lockdown.

Accord Mortgages announced today (May 20) that it is accepting residential applications up to 90 per cent LTV following the renewal of physical valuations.

Buy-to-let remortgages are currently available up to 65 per cent LTV, although a spokesperson for Accord said an announcement on this was due on Friday.

Meanwhile, Virgin Money and Clydesdale Bank confirmed “a wider range of products supported with a mix of physical and non-physical valuations” would be introduced next week, including residential mortgages up to 90 per cent LTV and buy-to-let mortgages up to 80 per cent LTV.

Temporary limits on loan sizes and property values will also be withdrawn.

Additionally, physical valuations will be booked in England for pipelines cases with Virgin Money and Clydesdale Bank that require such a valuation.

Some lenders had already resumed offering high LTVs last month. Halifax Intermediaries reintroduced lending up to 85 per cent LTV in April, followed by BM Solutions’ return to buy-to-let lending up to 75 per cent.

Nationwide also extended lending via brokers up to 85 per cent LTV after focussing support on existing borrowers and processing ongoing applications.

Providers had previously withdrawn high LTV lending after the government announced a lockdown on March 23, which effectively brought the property market to a halt.

Additionally, Nationwide has confirmed that valuers will be able to resume physical inspections this week (from May 18) after the government published its new guidance on moving home.

Likewise, Santander announced the following day (May 19) its valuation partners would aim to contact intermediaries’ clients, or the property owner, by May 29 to arrange a date for cases in England that required a physical inspection and had been put on hold.

It anticipated that most valuations will be carried out before June 10.

Santander said it would be holding rates while increasing the maximum loan size to £1m on some residential products, and to £750,000 on its buy-to-let range.

This followed recent changes from Santander such as raising the maximum LTV for residential lending to 85 per cent, and for buy-to-let remortgage products to 60 per cent LTV.

Meanwhile Leeds Building Society is working with Countrywide to complete the “outstanding minority” of valuations on mortgage applications as physical inspections resume in England.

Jaedon Green, chief customer officer at Leeds Building Society, said desktop valuations will continue to be used where appropriate and “for homeowners particularly concerned about social distancing, we’re also piloting external inspections which mean a valuer will still visit their home but doesn’t need to enter it”.

Specialist lenders have also been adapting to market conditions. As well as resuming physical valuations, on May 19 West One Loans relaunched buy-to-let products at 70 per cent LTV, subject to a maximum loan size of £250,000.

For many brokers the renewal of physical valuations is likely to be welcome news.

Andrew Brown, managing director at Bennison Brown, said the main challenge during lockdown was that an estimated 60 per cent of their cases were not suitable for remote valuation.

Commenting on the return of physical valuations and viewings, Mr Brown said: “It is likely to take some time to clear the backlogs and for consumers to gain confidence but it is the first major piece of good news we’ve had for some time.

“We hope this is the start of the recovery of our sector.”

Some advisers had pointed to issues with undervaluations as remote valuations were carried out during lockdown.

Kevin Dunn, director at Furnley House, said some of his remortgage clients, who had properties valued remotely, felt they would have received a higher figure if a physical valuation had been carried out.

By Chloe Cheung

Source: FT Adviser

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London house prices increase at fastest rate since 2016

London house prices jumped by nearly 5% in the year to March, the fastest rate of annual growth in the capital since 2016, according to official figures.

Prices in the capital increased by 4.7% to reach £486,000 on average.

The Office for National Statistics (ONS), which released the figures jointly with the Land Registry, said it was the biggest 12-month growth London has seen since December 2016.

Its report said: “There is some anecdotal evidence to suggest that the period between December 2019 and March 2020 has brought more certainty to the market than in previous quarters, which may have boosted transactions at the top end of the price scale.”

Across the UK, the average price in March was £232,000, a £5,000 increase compared with March 2019.

Housing market experts have previously suggested December’s general election result brought more confidence to the market, although that was before the impact of coronavirus.

The data used for the March index does not reflect the impact of coronavirus on the market, the ONS said. The figures used are based on completed house sales, which can take up to two months to go through.

The market has effectively been shut down in recent weeks and only started to reopen in England last week, with stringent guidance in place for home movers and property professionals to protect people from coronavirus.

The ONS said that, from the April figures which were due to be released next month, the official house price index will be suspended until further notice.

It said: “The impact of the coronavirus is expected to greatly reduce the amount of housing transactions that took place in April 2020, making it very difficult to produce a measure of UK house prices that would be representative of any true transaction activity within the housing market.”

It also cautioned that there may be some volatility in its March figures, due to fewer transactions taking place.

The March figures also show that average prices increased over the year in England to £248,000 (2.2%), in Wales to £162,000 (1.1%), in Scotland to £152,000 (1.5%) and in Northern Ireland to £141,000 (3.8%).

The English region with the weakest annual growth in March was Yorkshire and the Humber, where prices fell 1%.

The North East continued to have the lowest average price, at £127,000, and is the only English region yet to surpass its pre-economic downturn peak of July 2007.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the March pick-up “reflected post-election momentum in the market, not resilience in the face of the Covid-19 shock”.

He added: “Year-over-year growth in house prices was strongest of all in London; the 4.7% rate was the biggest gain since December 2016 and put a stop to a three-year period of prices in the capital underperforming the national market.

“The market in the capital might have been buoyed by the Conservatives’ threat of increasing stamp duty for non-resident buyers of UK property soon, as well as the reduction in near-term Brexit risk.”

Mr Tombs said that when the index is produced again after the temporary suspension, “we expect prices to be about three to 5% below March’s level”.

He added: “Lenders are pulling back from high loan-to-value ratio lending, and the forthcoming rise in unemployment will force some home owners to sell up.

“That said, forced sales should be less numerous than during the last recession, as home ownership has declined, especially among low-paid workers who usually are more vulnerable to losing their jobs in a downturn.

“And the pullback in lending should be relatively mild, given that banks are well-capitalised and are incentivised by the new Term Funding Scheme to increase the size of their loan books.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “Not surprisingly, this is the last of these reports for a while until sales begin to pick up, and certainly on the ground we are finding that although activity is starting to gain momentum now we are returning to work, it will be some time before it is sufficient to give some credence to these numbers.”

Jamie Durham, an economist at PwC, said: “It is important to take the figures with a pinch of salt.

“We would expect the market, and in particular transactions, to remain subdued over the coming months.”

Source: Express and Star

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UK economy will take time to return to normal after lockdown – Sunak

British finance minister Rishi Sunak said on Tuesday it would take time for the economy to get back to normal even when the government’s coronavirus shutdown is lifted.

“It is not obvious that there will be an immediate bounce-back,” Sunak told lawmakers, saying the retail sector, for example, would still face restrictions when it reopens.

“In all cases, it will take a little bit of time for things to get back to normal, even once we have reopened currently closed sectors.”

Reporting by David Milliken and Andy Bruce

Source: UK Reuters

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Government to extend mortgage payment holidays

Mortgage payment holidays are likely to be extended past June, according to a report in the Financial Times.

Chancellor Rishi Sunak is said to be in discussions with the banking sector about an extension.

Salman Haqqi, personal finance expert at money.co.uk, said “The government’s initial launch of mortgage holidays brought welcome relief for homeowners who had their income affected by the COVID-19 crisis.

“The scheme, where payment could be deferred with zero negative impact to credit ratings, resulted in up to one in nine homeowners making use of the initiative.

“Though a formal announcement is yet to be made, many businesses are still closed and the full extent of job losses is still becoming clear, so any extension to the scheme will be welcomed.”

As it stands more than 1.6 million mortgage customers have taken a payment holiday.

The government’s furlough scheme has already been extended until the end of October.

Haqqi added: “Should homeowners wish to look into a payment holiday on their mortgage, it’s important to remember that you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid.

“This means that your monthly payments will likely go up slightly after the payment holiday ends.

“While the option to take a payment holiday on mortgages will have been a lifeline for many, if you are still able to make your payments in full, you should continue to do so.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Uneven rise in rental stock as housing market restarts

The number of rental properties reaching the market has increased 5 per cent on average since the government announced the restart of the housing market last week but not all areas have fared the same, according to property management platform Howsy.

The platform analysed the number of available rental properties listed on Rightmove and Zoopla on May 13, when renters and buyers in England could resume moving home.

It found a 5 per cent growth on average in the number of properties available to tenants across 23 major UK cities, when compared to the number of properties listed on April 1.

While the increase was prominent in seven cities, including Edinburgh, Oxford and London, other places saw stocks decline.

The largest rise, based on the number of properties, was in London where an extra 6,838 rental properties were listed by May 13, rising 15 per cent from April 1.

Meanwhile, the largest percentage change was in Edinburgh, despite the property market in Scotland remaining effectively closed.

Callum Brannan, founder and CEO of Howsy, said: “Many in the rental sector will be breathing a sigh of relief with such immediate green shoots of market activity returning to a number of cities following an ease in lockdown market restrictions.

“Of course, other pockets of the market will take longer to see this positive trend emerge as agents and landlords find their feet operationally.”

Kat Tymon, director at Mansfield Money, said the buy-to-let mortgage market was also bouncing back during the coronavirus due to LTV requirements being lower than for residential mortgages.

She said: “Lenders have quickly re-entered this market to make the most of the opportunities out there.

“Demand for renting will still be high as people who previously wished to buy may no longer be able to do so due to lower income or lack of savings due to Covid-19.”

Separately, research by rental deposit replacement scheme Ome found the buy-to-let market declined 1 per cent every year in the past five years.

The latest data from UK Finance found a total of 640 buy-to-let mortgaged properties were repossessed in Q1 2020, marking an 8 per cent rise on the same quarter last year.

Earlier this month Citizens Advice warned that 2.6m private renters were at risk of eviction and possible homelessness when the government’s stay on evictions of residential tenants is expected to end on June 25.

By Chloe Cheung

Source: FT Adviser