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Mixed reactions to Nationwide house price index fall and BoE mortgage lending figures

The mainstream media naturally fell upon the news from Nationwide that property prices took a major hit with the onset of the Covid crisis, and an announcement from the Bank of England yesterday that mortgage lending has plummeted.

Headlines such as ‘House price drop takes economists by surprise.’ ‘House prices see largest monthly fall for 11 years’ were typical, as if somehow the writers thought the market might have been immune to a total lockdown.

In the Twittersphere there were comments aplenty:

“If you really are stupid enough to buy a house this year, make sure you get at least 20% off the asking price, then another 15% off the agreed price”

“Though this may seem a dramatic fall, it is not as steep as many had expected and prices still remain nearly 2% higher than they were this time last year.”

“It’s good news day, unless you’re a BTLetster.”

“RICS surveyors expect a huge fall in prices ahead, although they have been wrong before…”

The cause of all this came from the publication of the Nationwide House Price Index –

“UK house prices fell by 1.7% over the month in May, after taking account of seasonal effects–this is the largest monthly fall since February 2009,” said Robert Gardner, Nationwide’s Chief Economist.

“As a result, the annual rate of house price growth slowed to 1.8%,from 3.7% in April.

“In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum.

“Activity levels and price growth were edging up thanks to continued robust labour market conditions,low borrowing costs and a more stable political backdrop following the general election.

“But housing market activity has slowed sharply as a result of the measures implemented to control the spread of the virus.

“Indeed, data from HMRC showed that residentia lproperty transactions were down 53% in April compared with the same month in 2019.

“Mortgage activity has also declined sharply.

“Nevertheless, our ability to generate the house price index has not been impacted to date, as sample sizes have remained sufficiently large (and representative) to generate robust results.

“Low transaction levels may still make gauging price trends difficult in the coming months–especially for regional indices, which by their nature have lower sample sizes.”

The Nationwide Index added to the downbeat news from the Bank of England that mortgage approvals tumbled to a near 30-year low in April as the Covid-19 pandemic and lockdown measures brought the UK property market to a halt.

According to the Bank, the number of mortgage approvals for house purchase was 15,800 in April, down from March’s figure of 56,100 and some 80% lower than February.

This is the lowest level since the tracking began in 1993, and is about half the number of approvals seen during the lowest point of the 2008/09 financial crisis.

Reacting to the news Ross Counsell, Director at house buyers, Good Move, said:

“These numbers are largely down to the reduction in market activity due to social distancing measures, and is a real tell-tale sign for the future of home buying.

“The bounce back in the housing market is reliant on how the wider economy performs, however, the bigger challenge is how consumer behaviour has changed and how sellers need to adapt to continue to sell their properties.

“For example, they will begin to adjust their expectations on the price they will achieve and may be more inclined to accept a lower offer.

“Buyers are now putting more importance on aspects such as outdoor space which will mean a divide in how properties sell.

“We expect to see house prices bounce back fairly soon, but flats and other similar dwellings may take a much longer time to recover.”

Simon Gammon, Managing Partner, Knight Frank Finance gave his view:

“Mortgage lending fell off a cliff at the onset of the pandemic as surveyors were unable to conduct physical inspections.

“Thankfully, surveyors are now able to return to work safely and are working their way through a backlog of applications built up over the course of the lockdown.

“We expect to see the time it takes for borrowers to get an approval decline steadily in the weeks ahead.

“It’s worth remembering, mortgage markets had been at their most active in five years in February as the Boris bounce took hold.

“We expect a post-lockdown surge in approvals as the backlog is cleared, and those that had wished to move home or remortgage become able to do so.”

Miles Robinson, Head of Mortgages at the online mortgage broker, Trussle, commented:

“It’s certainly not a surprise to see figures out today around tumbling house prices and comparisons to ten years past, it has been a period of time like no other.

“However, we’re starting to see green shoots appearing.

“May has seen a resurgence in interest in the housing market and with lockdown easing, Estate Agents are starting to get back to business with more properties being marketed daily.

“At Trussle, we saw a 48% increase in mortgage customers in May compared to April – this figure includes both first time buyers as well as remortgages.

“It’s positive to see these initial signs of recovery in the housing market..”

Source: Property Industry Eye

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Liverpool named UK’s best buy-to-let area to invest in

New research has identified Liverpool as one of the best places in the UK for buy-to-let investors, with yields as high as 10.30%.

The findings are from analysis by Mojo Mortgages using the UK Land Registry, Zoopla, On The Market and property data portal, PropertyData.co.uk in a bid to find where the current investment hotspots are.

Mojo said: “From our analysis, the North West is one of the top regions for strong buy-to-let yields. As well as a number of profitable areas in Liverpool, the area of M14 in Manchester, which covers Fallowfield, has a yield of 7.60%.

“Both these cities have a solid student population, plus property prices are relatively low.”

In the UK there are an estimated 2.6 million buy-to-let landlords, and despite the pandemic, those who do have the cash to invest believe investment opportunities will emerge, with lenders cutting rates on buy-to-let products and raising affordability thresholds.

There’s also market sentiment which is leaning towards limiting competition from other buyers and even pushing up demand for rental property.

From its analysis, Mojo found that Liverpool is currently the best place to consider.

The city’s L7 postcode tops the buy-to-let yield table, generating yields of 10.30% and an average asking price of £95,000.

The postcode covers the area of Edge Hill and is in close proximity to Liverpool city centre.

Five more Liverpool postcodes feature in the top 20 list of best places to invest, with yield returns ranging from 7.40% to 10.30%.

Birkenhead’s CH41 postcode came in at 17th in the list, with a return of 7.10% and an average asking price of £84,000.

Eight of the top 10 worst places to invest were in London or the South East, topped by Kensington and Chelsea, with an average yield of 2.1% and an average asking price of £1,612,797.

By Neil Hodgson

Source: The Business Desk

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Mortgage payment holidays extended for three more months

Those struggling to pay their mortgage due to coronavirus will be able to extend their mortgage payment holidays for three more months, or start making reduced payments, the financial regulator has confirmed.

The Financial Conduct Authority (FCA) published draft guidance last month with proposals for helping those with mortgages, including extending 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 would be able to ask for one up to this date.

The measures proposed have now been confirmed after a brief consultation and the guidance will come into force from this Thursday (4 June).

What the FCA expects mortgage lenders to do

Here’s a full rundown of the new rules being put in place by the FCA:

  • 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 continue 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. MSE revealed last month that taking a mortgage or other payment holiday could still have an impact on future credit applications. 

The FCA adds that these rules 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 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 does the FCA say?

Christopher Woolard, interim FCA chief executive, said: “The measures we have confirmed today will mean anyone who needs to can get help from their lender, if they are still struggling to pay their mortgage due to coronavirus.

“It is important that if a consumer can afford to restart mortgage payments, it is in their best interests to do so. Customers should talk to their firm about the best option available for them.”

By Callum Mason

Source: Money Saving Expert

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Investment in construction can kick start the UK economy say experts

An £11.27bn investment in construction and a series of strategic decisions around new home building can kick start the UK’s economic recovery and deliver a £33bn return for the Government, according to experts at Birmingham City University.

The Build Back Better: Covid-19 Economy Recovery Plan features a blueprint for a safe return to construction, a set of recommendations to help stimulate demand for new homes and home improvement, and details on how to build essential infrastructure and train a new generation of skilled workers – acting as a catalyst for growth and delivering income for HMRC.

The plan also calls on the Government to stand by its commitment to “do everything it takes” to fight the virus and support the UK economy, by investing £11.27bn in a wide reaching programme, designed to create mass employment and produce a £33 billion return.

Written by Birmingham City University’s Dr Steve McCabe, Associate Professor at the Institute for Design and Economic Acceleration and Mike Leonard, Visiting Professor of Manufacturing and Construction and founder of the Get Britain Building campaign, the plan brings together all sectors of the construction industry for a solution-led approach.

Recommendations and observations in the plan include:

  • A phased return to work following specific guidelines can ensure the protection of construction sites during pandemic
  • Small house builders, often highly efficient and providers of local employment and procurement, must be given encouragement
  • Address fuel poverty through direct intervention by local authorities using local companies
  • Construction can offer long term skilled employment opportunities that can act as a catalyst in achieving inclusive economic growth
  • Provide incentives and highlight environmental benefits for consumers to replace inefficient and outdated gas boilers
  • 30,000 new social houses built per year for the next three years will address living standards, mobility and some shortfall
  • Proposed Building Regulation changes should be delayed in light of exceptional circumstances posed by pandemic
  • Construction must be made more attractive as a career choice to young people through regional marketing campaigns

Of particular focus in Build Back Better: Covid-19 Economy Recovery Plan are SMEs, who dominate the sector, with a suggestion that UK Plc fully engages such businesses in order to build the infrastructure and new homes the UK needs, alongside investments to deal with fuel poverty and the upgrading of existing housing stock to meet the net zero 2050 obligations.

Leonard, who is also CEO of Building Alliance, said: “History tells us that the construction industry is the tried and tested solution to drive economic recovery, not least due to the fact we manufacture the vast majority of building materials in the UK which provides resilience, skilled jobs and fast returns on investment. The upstream and downstream jobs in manufacturing, architecture, planning, engineering, distribution and construction, creates an unrivalled multiplier that can achieve inclusive growth, building back better and helping to rebalance our economy. Saving lives must remain our priority but we now have the signal to begin to safely unlock and begin the long path to economic recovery. Construction and the building materials manufacturers are now returning to work with the proper safeguards in place. We must now “Get Britain Building” and “Get Britain Working” delivering the scale of economic multiplier the county needs to bounce back stronger.”

Research carried out in 2018 by Birmingham City University and The Building Alliance calculated that building 300,000 homes a year using, as much as possible, British-made building materials and local builders, would generate an economic ‘uplift’ of more than £90 billion for the UK.

Dr McCabe added: “Covid-19 has resulted in the loss of over 30,000 lives. The Government, quite rightly, locked the nation down to reduce the spread of the virus. However, ONS data clearly demonstrates that effectively closing down the economy through ‘lockdown’ has caused profound economic shock. It’s estimated that at least £2bn a day is being lost during the pandemic. The overall cost to the UK economy will exceed £300 billion and, depending on the speed of recovery, could be significantly higher. As and when it is safe to do so, a return in construction activity as well as the building materials manufacturing supporting it will underpin a fast and effective way to begin to begin the process of recovery from what is the greatest shock to the UK’s economy in living memory.”

Source: BMJ

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House prices UK: where they will rise in 2020 – and where they will fall

House prices are still rising in parts of the UK, despite the property market having stood still for nearly two months between March and mid-May, when property viewings, mortgages and evaluations were finally allowed to resume.

Despite the grim prognoses by many property experts and financial think tanks, the latest house price Index by Zoopla reveals that many of the country’s regions are continuing to grow, with house prices up significantly from last year.

The most interesting finding in the latest issue of Zoopla’s monthly research is the fact that the growth trend in the north of England and the Midlands appears not to have been disrupted by coronavirus, at least thus far. Nottingham is showing a 4.1 per cent growth year-on-year in April – the highest rate in the UK.

Leicester, Manchester, and Leeds are showing house price increases of between 3.1 and four per cent, which is not surprising given that these cities have had a boost from regeneration projects and attractive buy-to-let developments aimed at students and young professionals in recent years. These cities remain a solid option for buy-to-let investors in particular.

Edinburgh is another city on the city index list that is showing strong house price growth of 2.9 per cent, which again proves that in the longer term, it’s not coronavirus that will determine house prices, but ongoing regional trends. Edinburgh has been experiencing something like a London housing bubble for quite some time, with demand for its period housing stock far outstripping the limited supply. The Scottish capital is unlikely to see a downward house price trend any time soon.

The London property market is showing signs of recovery, with a very modest rate of growth of 1.1 per cent – which is, nonetheless, a substantial improvement on last year’s drop of one per cent. It is likely that the pent-up demand now being released is boosting house prices in London, but home owners who were hoping to sell at a profit might be disappointed.

Finally, the cities that have seen noticeable house price drops in April are Oxford (-0.8 per cent) and Aberdeen (-1.7 per cent). Although they are located on the opposite sides of the UK, these two cities have one thing in common: a reliance on industries (oil and higher education) that have been severely disrupted by Covid-19, which may explain the slowing down of their property markets. If you live in either, we’d hold off selling, at least until there is some degree of a return to normal life.

BY ANNA COTTRELL

Source: Real Homes

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Majority of borrowers ‘could resume full mortgage payments’

The majority of customers could afford to start making full payments on their mortgage at the end of their payment holiday, according to UK Finance.

The industry body estimated that around 60 to 70 per cent of customers can demonstrate affordability to resume full payments at the end of their current payment deferral.

Last month (May 22) the government confirmed that homeowners struggling to pay their mortgage due to coronavirus can extend their payment holiday for three months, or start making reduced payments in proposals published by the Financial Conduct Authority (FCA).

In response UK Finance said the FCA’s draft guidance “contains a presumption that firms should offer all borrowers who have already taken a payment deferral a further payment deferral for three monthly payments”.

The industry body described the presumption as “unnecessary and may even be detrimental to a customer who is able to resume payments”. It suggested that a “more tailored approach would be more appropriate at this time”.

According to UK Finance, the draft guidance creates a risk that “customers who do not need a full payment deferral for a further 90 days nevertheless self-select to take a further deferral… when maintaining repayments, in whole or in part, would be more appropriate for the customer in the longer term, without creating short term financial hardship”.

Clayton Shipton, managing director at CLS Money, expressed concern over customers who may have taken a payment holiday without needing one.

He said borrowers who take a payment holiday for six months could experience a “shock to the system” when the support scheme ends.

UK Finance has previously said mortgage lenders were committed to supporting borrowers reaching the end of their three-month payment holiday to choose the next steps that best suited their needs.

Possible next steps include reduced payments, a move to interest-only payments for a period, extending the mortgage term to reduce payments or a further extension of the payment holiday, depending on the borrower’s circumstances.

The industry body said for customers “that have already taken a payment holiday on their mortgage, it may be appropriate in some circumstances for this to be extended”.

By Chloe Cheung

Source: FT Adviser

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Lockdown Easing Releases Burst In Housing Demand

Re-opening of the housing market in England following the coronavirus lockdown, led to a burst of enthusiasm from would–be buyers and a small increase in sales agreed. But, reported online property portal Zoopla, the starting point for renewed activity is a market bumping along at sales levels 90 per cent down on this time last year.

The firm’s latest UK Cities House Price Index found buyer demand across England shooting up by 88 per cent after the market reopened, exceeding pre-lockdown levels. But, said Zoopla, this jump in demand ‘is temporary and expected to moderate in the coming weeks’.

There was less of a bounce in cities in Scotland, Wales and Northern Ireland registered where housing markets remain closed.

Continued Government support for the economy and the availability of higher loan-to-value mortgages will shape the market outlook for the second half of the year, Zoopla concluded.

Although 60 per cent of would-be home movers across Britain said they plan to go ahead with their property plans, 40 per cent have put their plans on hold.

‘After the market was suspended for 15 per cent of the year at one of the busiest times for market activity, a return of pent-up demand was to be expected, especially given the strong start to the year.

‘The scale of the bounce back in demand over the last week (to 17 May) varies across cities depending upon the country in which they are located. Despite a large rise in demand, London’s recovery is lagging behind, alongside cities in countries where the housing market is yet to reopen. Scotland, Wales and Northern Ireland have not recorded any major rebound in demand like that seen across English cities. Demand for homes in London has been partly diluted as would-be buyers look to commuter towns outside the capital in response to COVID’.

Zoopla’s latest data shows that demand has rebounded faster in cities along the south coast and in northern England. Portsmouth and Southampton are registering demand some 40 per cent higher than in February this year with strong growth also recorded in Newcastle and Leeds’.

Zoopla estimates there are currently 373,000 pre-lockdown house sales in progress. By reopening the market, the Government has improved the chances of a higher proportion of these stalled transactions completing.

‘That said, latest data suggests a small pick-up in the rate of fall-throughs since 12 May, but at levels well below the average for this time of year’, said Zoopla.

‘We currently expect a significant proportion of agreed sales to continue, but increased uncertainty over the economic outlook will see housing chains tested in the coming weeks’.

The coronavirus lockdown has created an unexpected boost to housing demand, said Zoopla director of research and insight, Richard Donnell.

‘The economic impacts of COVID will grow in the coming months and uncertainty is building. The majority of would-be movers plan to continue their search, encouraged by low mortgage rates and continued Government support for the economy.

‘However, we expect the latest rebound in demand to moderate in the coming weeks as buyers and sellers start to exert greater caution. Further support from the Government can’t be discounted and would help limit the scale of the downside risks’.

Source: Residential Landlord

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UK Finance: Finance sector committed to supporting commercial landlords

UK Finance has confirmed that the banking and finance industry will continue to support commercial landlord customers with the June/July rent quarter rapidly approaching.

The trade body said that lenders recognise that commercial landlords and their tenants may have concerns about their ability to make their payments and that support was available including the providing of capital payment holidays and amending current facilities.

Stephen Jones, chief executive of UK Finance, said: “Commercial finance providers are working hard to support business customers through these difficult times and lenders recognise that the current situation poses particular challenges for commercial landlords and their tenants.

“A wide range of flexible support is available, including amendments to facilities and capital payment holidays to help landlords and their tenants manage through the disruption.

“As part of the support being provided ahead of the June quarter day all the main commercial lenders are proactively contacting their major commercial landlord borrowers to identify concerns they have and provide support where appropriate.”

Those commercial landlords who are concerned about making loan repayments or require financial assistance during this time and who have not yet been in contact with their lenders should do so through the usual channels.

By Ryan Fowler

Source: Mortgage Introducer

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Remortgage instructions back at pre-COVID levels

Remortgage instructions were up by 7.2% between the third and fourth weeks of May representing the highest activity since before the lockdown, according to the LMS remortgage tracker.

Completions fell slightly between the third and fourth weeks of May, in line with normal monthly trends. Completion volumes for the 15 working days of May so far are 18% higher than April, and 21% higher than March.

Total pipeline volumes are currently on track to be 16.3% lower than May 2019.

Nick Chadbourne, CEO of LMS, said: “It’s promising to see that the instructions spike in the third week of May continued into the fourth week, as the housing market builds momentum.

“A wider range of available products and loosening restrictions are giving borrowers more freedom to choose the right option for their individual circumstances.

“Together with a consistent volume of completions and falling cancellations, we’re seeing a slightly better picture of the future pipeline than last week, and hope to see this continue as confidence, demand and choice keep coming back to the market.

“Borrowers are likely to be looking for a speedy remortgage, and Fee Assisted Remortgaging (FAR) offers the best option to secure efficiently a good deal in good time.

“It’s also the most secure, especially at a time when fraud risks across the whole economy are higher than normal.

“Managing increasing demand while retaining high standards of service will mean cross-industry collaboration is as important as ever, and we’re committed to leading these efforts as a firm.”

By Ryan Fowler

Source: Mortgage Introducer

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Broker confidence holding up

Some 71% of brokers are confident in the mortgage market’s prospects in the next 12 months, despite the difficult few months they have encountered.

The research, from Masthaven, found that only 3% of intermediaries are not confident.

Rob Barnard, director of intermediaries at Masthaven Bank, said: “Broker confidence is holding up well and that’s such an important part of the market, as it directly feeds through into the conversations intermediaries are having with customers.

“Now that the housing market has reopened and with the news that mortgage payment relief may be extended to help those customers in need, it’s good to see positive sentiment for the next twelve months from the intermediary community.”

More than half (51%) of specialist lending intermediaries are using video calls to liaise with their customers, while 42% are sending regular email updates.

Nearly a third (32%) of specialist lending intermediaries said that they are recommending lenders based on their access to reliable funding.

BY RYAN BEMBRIDGE

Source: Property Wire