Autumn statement
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Autumn Statement: ‘Missed opportunity’ for homebuyers and housing market

The Mortgage Guarantee Scheme is to be extended by another year, it was announced in today’s Autumn Statement.

It was one of only a few measures mentioned by Chancellor Jeremy Hunt which would benefit homebuyers, homeowners or those grappling with soaring mortgage costs.

The scheme, which aims to help more first-time buyers with small deposits of 5% to 9% to take out a mortgage, will now continue until June 2025. It had been due to end this year.

Under the initiative, the government guarantees mortgages of 95% loan-to-value issued by mortgage lenders. This offsets the risk for the lender of offering such high loans, meaning they can provide these low deposit deals to greater numbers of first-time buyers.

Although this has been welcomed, many mortgage and housing experts were disappointed about the absence of other support for those struggling to pay mortgages following steep rate rises in the last two years and the cost-of-living crisis.

Shadow Chancellor Rachel Reeves, speaking in response to Jeremy Hunt’s Autumn Statement observed there had been no announcements which would ‘remotely compensate’ for the impact of mortgage hikes and the rising cost of living.

The Chancellor announced he would be cutting National Insurance by 2% to 10% and increasing the National Living Wage to £11.44 per hour from 6 January.

He also said he would be unfreezing Local Housing Allowance, a move which will help low-income renters by giving them a financial boost of £800 a year on average.

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But there was no mention of improvements to the Lifetime ISA savings scheme for first-time buyers nor the Stamp Duty cuts which many had been hoping for.

Sam Mitchell, CEO of Purplebricks, was among those who had been hoping for more to help the housing market in today’s statement.

“By failing to cut stamp duty and cut it permanently, the government has missed an opportunity to set the already fragile housing market on a clear path to recovery,” he said.

“Rumours will now grow that we will see a cut in the spring, meaning decisions on buying and selling will be delayed and the economy will suffer. This has already been a difficult year for the property sector, and the lack of support will threaten a recovery in 2024.”

He added: “Despite this, the silver lining is the confirmation of the extension to the Mortgage Guarantee Scheme. Not only does this support the green shoots we are already seeing in the lending market, but is great news for first time buyers, especially if coupled with the declining rates we are seeing in the market.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

We need ‘long-term stability for new homeowners’

But not everyone was convinced the scheme’s extension alone was enough for first-time buyers.

Karen Noye, mortgage expert at Quilter, said the extension was the least the government could do. “The scheme has so far not been particularly impactful,” she said, “and will likely continue not to be.

“Generally, first-time buyers will find themselves limited to a maximum of 4.5 times their annual income. For those on the average salary this means they can only borrow just over £150k giving the buyer not much choice in the market.

“Saving for a bigger deposit or raiding the Bank of Mum and Dad can therefore offer more choice. This extension makes little difference today and had Hunt instead opted to simply get rid of it, it likewise wouldn’t have had much impact.”

She added: “While the scheme’s intentions are positive, it’s crucial to implement measures that ensure long-term stability for new homeowners and the housing market.

“This might include more stringent eligibility criteria or additional support mechanisms to safeguard against market fluctuations.”

By Kate Saines

Source: What Mortgage

housing market
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The housing market is booming – if you know where to look

Residential property prices in some parts of Britain have continued to increase strongly over the past year despite the wider housing market slowdown, according to Halifax.

More than 300 local authority areas across Britain were analysed during Q3 2023 based on Halifax’s house price index.

This was compared with Halifax’s house price data covering the corresponding period last year.

The study revealed that house prices rose in more than 70 areas, led by gains in the Brecon Beacons, Powys, in Wales, where house prices rose by an average of 17.4% year-on-year.

Kim Kinnaird, director at Halifax Mortgages, said: “There are multiple factors which can impact house prices in your local area, ranging from the mix of properties available and the extent of any new housing, to the quality of schools and abundance of job opportunities.

“What’s clear is that the UK housing market is not a single entity that performs in a uniform way across the country, there are differences. While at a national level the current squeeze on mortgage affordability has seen property prices fall over the last year, in many regions there remain pockets of house price growth. While a limited supply of properties for sale could be a factor, this also suggests in some areas, local market activity – and demand among buyers – remains strong.

“Many of the places highlighted in our research also benefit from more remote or rural surroundings and incorporate areas of outstanding natural beauty. These are traits which continue to be desirable for prospective homeowners, bucking the trend of the wider performance of the housing market.”

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Here are the top 10 local areas of Britain with the strongest house price growth over the past year, according to Halifax:

  1. Powys, Wales, £216,307, £253,958, +17.4%, or £37,651
  2. East Lindsey, East Midlands, £194,533, £220,421, +13.3%, or £25,888
  3. Moray, Scotland, £162,258, £179,606, +10.7%, or £17,347
  4. Babergh, Eastern England, £317,383, £349,965, +10.3%, or £32,583
  5. Sunderland, North East, £138,579, £150,862, +8.9%, or £12,283
  6. Ealing, London, £494,100, £531,127, +7.5%, or £37,027
  7. Westminster/City of London, London, £714,242, £767,350, +7.4%, or £53,108
  8. Bolsover, East Midlands, £167,398, £179,453, +7.2%, or £12,054

=9. Cumberland, North West, £165,346, £176,470, + 6.7%, or £11,124

=9. Rossendale, North West, £185,658, £198,102, + 6.7%, or £12,444

Here are the local areas with the strongest house price inflation in Scotland, Wales and the English regions over the past year, according to Halifax:

– East Lindsey, East Midlands, £194,533, £220,421, + 13.3%, or £25,888

– Babergh, Eastern England, £317,383, £349,965, + 10.3%, or £32,583

– Ealing, London, £494,100, £531,127, + 7.5%, or £37,027

– Sunderland, North East, £138,579, £150,862, + 8.9%, or £12,283

– Cumberland, North West, £165,346, £176,470, + 6.7%, or £11,124

– Moray, Scotland, £162,258, £179,606, + 10.7%, or £17,347

– Runnymede, South East, £439,825, £462,301, + 5.1%, or £22,476

– Torridge/West Devon, South West, £295,521, £306,436, + 3.7%, or £10,915

– Powys, Wales, £216,307, £253,958, + 17.4%, or £37,651

– Sandwell, West Midlands, £178,755, £185,798, + 3.9%, or £7,043

– Kingston-upon-Hull, Yorkshire and the Humber, £121,289, £127,523, + 5.1%, or £6,234

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Commenting on the data, Tom Bill, head of UK residential research at Knight Frank, said: “The UK is made up of tens of thousands of individual housing markets, which means price growth can also diverge between two areas in the same local authority.

“Broadly speaking, more affordable parts of the country are gradually closing the gap with London, where affordability is at its most stretched. The gap will get narrower without closing as buyers look beyond the capital for better value.

“The more important point for anyone interpreting house prices at the moment, is that fewer transactions can distort the data. The underlying health of the housing market is not necessarily gauged by what is happening to house prices but rather transaction volumes, which are down by more than a fifth.”

Nigel Bishop of Recoco Property Search, commented: “An increasing number of house hunters discover the upsides of rural living and favour areas that not only sit within close proximity of parks but also offer a community feel and an array of lifestyle choices.

“It’s particularly city dwellers as well as young families, who wish to raise their children in a more quaint environment, that are driving this demand for properties in a more rural setting. Boutique towns and villages with restaurants, cafés, entertainment as well as sporting facilities are especially sought-after which has resulted in property prices in such locations to go up.”

Jeremy Leaf, north London estate agent, added: “These numbers are interesting because they show the pattern of values in different areas and how markets are not the same. There is no real substitute for studying the market and area you are interested in carefully because it may well be in front of ,or behind, the national average or pattern.
“The market is made up of many different micro markets, producing different results, which is why it is so important to do the groundwork. A national average figure should be relied upon as a guide only.
“In any event, we tend to be a bit too fixated on prices. There are other factors also worth taking into consideration such as transaction numbers, discount to asking price and time on the market, as well as supply and demand. From neighbourhood to neighbourhood the picture can alter significantly.”

By Marc Da Silva

Source: Property Industry Eye

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UK house prices set to rise by almost 18% in five-year forecast

UK house prices have fared better than expected over this past year, according to new research from Savills, as it reveals its outlook for the next five years.

Despite the fact that the Bank of England is yet to lower its base rate, instead holding it at 5.25%, the fact that lenders have continued to slash prices and offer new products over recent months has helped to buoy the housing market more than had been anticipated this year.

In its revised outlook for UK house prices, estate agency Savills predicts that next year will be the second and final year of overall property price falls, with a -3% dip by the end of 2024. After this, it expects the market to return to growth for the proceeding years up to 2028.

In numbers, this looks like a 3.5% uptick in UK house prices in 2025, followed by a stronger gain of 5% in 2926, a further hike of 6.5% in 2027, and a 5% rise in 2028. Overall, this equates to a cumulative increase across mainstream residential markets of 17.9% over the next five years.

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UK house prices and transactions to recover

Much of the current outlook is based on what is expected to happen with interest rates and inflation, which will impact mortgage rates overall. The general consensus is that rates will begin to come down, with the Bank of England expected to bring its base rate down at least by the latter part of 2024.

Mortgage rates have a direct impact on affordability in the property market, and can therefore begin to affect UK house prices and transaction levels. Thankfully, Savills points out that while interest rates have now peaked, so have house price falls in this cycle.

Savills head of research Lucian Cook notes: “The expectation of a gradual reduction in rates suggests a progressive restoration of buying power and steady recovery in demand.

“We expect growth to accelerate as affordability pressures ease, with the strongest growth forecast for 2027 when rates reach their long-term neutral level. From there we expect growth to settle at a rate broadly in line with income growth.”

Transaction levels have undoubtedly suffered in some – but not all – parts of the market, although some of this drop-off in activity can be attributed to a slowdown in relation to the post-Covid boom. Of course, the cost of living crisis and high inflation have also had an impact on this.

Cash buyers have been more active than ever in the current climate, which is unsurprising, and this is another factor conrtibuting towards keeping UK house prices afloat. However, by mid-2024, Savills expects transaction levels to coincide with recovery of UK house prices, as mortgage affordability improves.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

North, Wales and Scotland hold their own

According to the report, the strongest performing markets at the moment remain the north of England, as well as Scotland and Wales. However, Savills also points towards a faster recovery taking place in London, as the economic outlook improves, after it has lagged behind the rest of the UK for some time.

The report hones in on each of the UK’s regions, while also noting that the UK property market as a whole is “in the late stages of a typical housing market cycle”. But it offers an interesting insight into how the more affordable property markets can often show the most resilience.

For example, between now and 2028, the top-performing regions in terms of house price growth are predicted to be the north east with 21.4% cumulative growth, the north west with 20.2% cumulative growth, and Yorkshire and the Humber and the West Midlands, both with 20.2% cumulative growth.

These figures are all comfortably above the average level of growth for UK house prices, and far surpass London’s prediction of a 13.9% total house price rise over the five-year period.

The report notes: “In 2024, further modest price falls will be driven by stretched affordability across all regions, though slightly more so in London and the South East where buyers continue to need to accumulate much bigger deposits and borrow more relative to their income than the national average.

“Once the Bank of England begins to cut the base rate in the second half of 2024, we expect affordability to ease with every region seeing improving conditions compared to 2023. The more affordable markets in the North, where mortgaged buyers are under less strain, should see the most recovery initially.”

By Eleanor Harvey

Source: Buy Association

Interest rates
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As the Bank of England puts rate rises on hold, what are the ups … and the downs?

With Britain appearing to have hit peak interest rates, homeowners and buyers may feel like celebrating, while savers will be shaking their heads.

The Bank of England’s decision to hold rates at 5.25% for a second time came after 14 increases. So what does this mean for consumers? Are we likely to see more affordable mortgage deals? And can we no longer expect bumper savings rates from the banks?

What just happened?

It was widely anticipated that rates would be left unchanged at 5.25% – their highest level for 15 years.

Over the past two years, mortgage borrowers have seen the cost of a home loan spiral. At the same time, savers finally started to enjoy some decent returns after years in the doldrums. A number of accounts are currently paying more than 6% interest, particularly some of those offered by the so-called challenger banks.

But the Bank of England was keen to point out that dropping rates was not on the agenda yet. Governor Andrew Bailey said last week: “It’s much too early to be thinking about rate cuts.”

Damien Fahy, at website Money to the Masses, says that if we are at peak rates, what is important now is how long we stay there. “The worry is that most consumers seem to believe that rate cuts will be around the corner, but they are probably getting ahead of themselves,” he says.

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Are there any good savings rates?

After the highs of the summer, there has been a definite slowdown, with only a handful of providers offering fixed-rate savings bonds paying more than 6%.

But this does not mean there are no opportunities, says Sarah Coles at investment platform Hargreaves Lansdown. “We may well have passed the peak, with some of the best fixed rates gradually disappearing. However, there are still decent rates around that we’d have given our left arm for a year ago.

“So if you have savings you won’t need for the next year or so, it’s still worth taking advantage while you can,” she adds.

Fahy says people should move now to secure the best rates, as banks will not hesitate to pass on any decreases (even though many did dawdle when it came to passing on increases).

However Rachel Springall, at financial information site Moneyfacts, says challenger banks may continue to offer good deals as they aim for funding targets and not alignment with the Bank of England.

When comparing rates, considering the more unfamiliar brands is always wise, assuming they have the same deposit protections as a big high street bank, she adds.

Savers looking for a good deal may find some value in notice accounts – once they can plan how they may want to withdraw their money – which limit the number of withdrawals a year. For example, Monument Bank has increased the rate on its 35-day notice account to 5.22%.

But consumers must be able to move quickly. “Whichever deal is appropriate, they must be clear on the rules and eligibility an account sets from the outset, and need to be quick to apply for a deal when monitoring the best rates,” says Springall.

What about mortgage rates?

The cost of new fixed rates – the vast majority of UK mortgage borrowers are on this type of deal – has been falling for some time. Figures from property website Rightmove on Thursday showed the average new five-year fixed-rate deal was 5.36%, down from 5.97% a year ago. The average two-year fix is 5.81%, down from 6.22% a year ago.

David Hollingworth, of broker firm L&C Mortgages, says borrowers can now look forward with a little more confidence, but adds that we will not see a return to the rock-bottom deals of the recent past.

“Remortgage borrowers shouldn’t fall into the trap of holding off from shopping around in the hope of dramatic cuts to rates, especially as the gap between standard variable rates [SVRs] and the best rates has only widened,” he says. “Getting a rate in place well before the end of your current deal still leaves flexibility to review it if they continue their downward trajectory.

“In the meantime, having a rate ready for a smooth switch will avoid being hit by a high SVR, which could prove costly, even for a short period.”

Fahy says borrowers should be aware of lenders trying to attract them with low interest rates but “eye-wateringly high” product/lender fees. “Consider the full cost of a mortgage and, if rates remain high for an extended time, we might see more of these types of deals.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

And pensions?

If there is an end to volatility as a result of the decision to keep interest rates on hold, pensions – which rely on market stability – could benefit, according to Becky O’Connor of PensionBee, a company that helps people combine old pension plans into one new plan.

“For those approaching, or in retirement, who have found managing their retirement and withdrawal plans stressful because of market ups and downs, this potential change in monetary policy direction might offer some respite,” she says.

“For those with money tied up in savings, it will be important to keep chasing decent rates, as high-paying accounts may not hang around for long.”

However, the good returns offered by annuities, which typically pay out a set income for life to a pensioner, may be limited.

For years, rates on annuities had been derisory, leading them to be dismissed as an option for many approaching, or in, retirement. But with higher rates came better offers.

Chris Flower, at wealth management company Quilter, says: “For retirees looking to purchase an annuity, as interest rates level off, this may mean the level of income they can secure levels off, too.”

By Shane Hickey

Source: The Guardian

BTL auction purchase
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Buy-to-Let Landlords Target Long-Term Returns

Landlords Showing Faith in the UK Buy-to-Let Market

Landlords nationwide are optimistic about the buy-to-let market moving forward, according to Leaders Romans Group.

LRG conducted a nationwide landlord survey, trying to understand how landlords felt about the current market.

How Do Landlords Feel About the UK Rental Market?

According to the survey, 75% of landlords see the current supply and demand issue as an opportunity to make money in the private rented sector.

Demand is currently up by 32% year-on-year. August 2023 saw 197 potential tenants register for property listings – up from 149 in 2022.

This robust demand for rented accommodation is opening the door for landlords to step into the market.

62% of landlords cited current market conditions as an opportunity to increase yields.

For instance, the average UK rent has risen by 10.09% in the last year (according to the Homelet Rental Index), while the UK House Price Index shows price growth has only increased by 0.2%.

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How Do Landlords Feel About the UK House Prices?

The survey shows landlords are also optimistic about property prices moving forward. 40% of participants expect house prices to go up from 2024 onwards.

There are numerous resources that back up this outlook. For instance, easyMoney predicts house prices to reach £300K by 2025 – they are currently at £291,044 according to the Land Registry UK House Price Index.

While inflation and rising interest rates have caused a price slump in the housing market, falling inflation and halted interest rates give some hope that the market will correct itself in the near future. It remains to be seen whether prices will improve in 2024. However, once interest rates come down and wages come up – people will have more money to spend, and we should see real movement in the housing market again.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

How Does LRG View the Property Market?

LRG acknowledges the issues facing the current market but also anticipates that interest rates will decrease in the run-up to the 2024 general election, boosting the housing sector for landlords and homebuyers. If you are looking to invest in Property, now is a good time.

LRG’s National Lettings MD Allison Thompon said:

“Demand for rental properties has seen a 32% increase since last year, with rental prices continuing to rise. This shows the return on investment for landlords remains positive. Those landlords we have recently surveyed remain optimistic about the opportunities available in the coming year. LRG’s resounding message to landlords is to remain committed on the basis that property investment is a reliable and lucrative long-term option.

“Furthermore, due to high levels of demand for rental properties and a slow-down in property sales, we’re increasingly providing lettings advice to homeowners who need to move but are struggling to sell or don’t want to reduce their house price. Across the country, across different property types and locations, many people in this position are taking advantage of unparalleled demand in the lettings sector.”

LRG’s research shows landlords share the same optimism.

68% of landlords responded to the survey and said they would maintain the current holdings, while 6% looked to expand their investments.

While challenges still face the UK housing market, both landlords and industry experts believe there are plenty of positives in the BTL market for the foreseeable future.

By Dale Barham

Source: RW Invest

UK house prices
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UK house prices rose unexpectedly in October, index shows

UK house prices unexpectedly rose last month, according to Nationwide building society, with some economists who had predicted a fall calling it a “massive surprise”.

The 0.9% month-on-month increase – which added more than £1,600 to the cost of a typical property – has been linked to a shortage of homes on the market for buyers to choose from. The last time Nationwide’s index showed a bigger monthly increase was in March 2022.

However, Britain’s biggest building society said the average property value was still down year on year – with a 3.3% drop in October compared with the same month last year. This is down from an annual drop of 5.3% recorded in September.

Nationwide said the average price of a UK property was £259,423 at the end of October – up from £257,808 a month earlier.

Robert Gardner, the lender’s chief economist, said: “The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained.”

Sarah Coles, the head of personal finance at the investment platform Hargreaves Lansdown, said: “October’s bump comes down to a shortage of property for sale, making it more difficult for buyers to drive a hard bargain.” Sellers “sat on their hands” in October, she added.

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Gardner said there was little sign of “forced selling”, which would exert downward pressure on prices, as labour market conditions were solid and mortgage arrears were at historically low levels, despite difficulties for some homeowners.

Other commentators said the Bank of England’s decision on 21 September to keep interest rates on hold after a string of increases gave an autumn fillip to the housing market and would have calmed the nerves of many would-be buyers.

The housing market in Britain has slowed in recent months as the Bank has raised rates sharply to counter a rise in inflation triggered in part by Russia’s invasion of Ukraine, which sent energy prices soaring.

Gardner said that, despite last month’s unexpected bump, UK housing market activity had “remained extremely weak”, with only 43,000 house purchase mortgages approved in September – about 30% below the monthly average in 2019.

He added: “Activity and house prices are likely to remain subdued in the coming quarters. Despite signs that cost of living pressures are easing, with the rate of inflation now running below the rate of average earnings growth, consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer inquiries.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Imogen Pattison, an assistant economist at the consultancy Capital Economics, which had forecast a 0.6% fall in October, said last month’s large increase in house prices “was a massive surprise, given higher mortgage rates should be severely restricting the number of people able to buy and the amount they can spend”.

Most experts agreed that this was not the start of a recovery for the property market.

Last week, Lloyds Banking Group predicted UK house prices would continue to slide this year and in 2024, and would not start to recover until 2025.

Santander expects a larger drop of about 7% for the whole of 2023, followed by a 2% fall in 2024. The estate agent Knight Frank also predicts a 7% fall this year but a 4% decrease next year.

By Rupert Jones

Source: The Guardian

house prices
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UK house prices rise at slowest post-summer rate since 2008 crash

UK house prices are rising at the slowest rate for this time of year since the 2008 financial crash, according to new data that highlights the impact on the housing market of higher interest rates.

The average new asking price rose by 0.5% in the month to 7 October to £368,231, but it was the smallest post-summer bump since the 2008 crisis, according to property website Rightmove.

House prices dropped by 0.8% in the 12 months to early October as the lower activity fed through, Rightmove said, while the number of agreed house sales fell by 17% compared with a year earlier.

Separate figures from Halifax bank earlier this month showed the fastest fall in annual house prices in 14 years in September.

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The Bank of England had raised interest rates at 14 consecutive rate-setting meetings up until last month as it tried to tame inflation. In September, its monetary policy committee finally voted to hold its key rate at 5.25%, but that is still the highest rate since the financial crisis of 2008.

Tim Bannister, who studies property data for Rightmove, said asking prices usually rise after the end of the summer holidays, but that the increase this year was “much more subdued” as sellers adjusted to the weaker market.

He said that estate agents were describing the market as “the most price-sensitive ever”. The number of people enquiring about each property advertised on its website was still up by 8% on 2019, before the Covid-19 pandemic.

Renters are being squeezed as landlords try to pass on their higher mortgage costs, amid a continued shortage in housing across much of the country. Separate data from estate agent Hamptons showed that the average rent in Great Britain rose to £1,325 per month in September, up from £1,186 a year earlier.

The steepest rent increases were in outer London, where prices rose by 16.2% on average, compared with 5.2% in Wales, the region with the slowest rental price growth. Overall, rents in Great Britain rose by an average of 11.7%.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Mortgage interest costs for landlords rose by 40% in the year to August, to £15bn a year, according to Hamptons analysis of data from lobby group UK Finance and the Bank of England. The company said interest costs could hit £20bn a year within the next two years, as more and more landlords come to the end of their fixed-rate deals.

Aneisha Beveridge, Hamptons’s head of research, said: “Even if there are no further rate hikes by the Bank of England, we could see the amount of mortgage interest paid by landlords exceed £20bn over the next two years. This has the potential to eat up just over half the amount mortgaged landlords receive in rent.”

By Jasper Jolly

Source: The Guardian

rental market
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The net zero U-turn is bad news for the housing market

This time last year, former prime minister Liz Truss’s “mini” Budget sent interest rates soaring, thereby compounding the pain the housing market was already feeling due to rising rates. One year later, her predecessor also wants to shake up the housing market – albeit Rishi Sunak’s approach is at least intentional.

In a speech last week, the prime minister moved the deadline for the phase-out of gas boilers in new homes from 2025 to 2035 and scrapped planned energy efficiency targets for rental properties.

This is bad news for the climate and the whole housing market. Sunak presented the phase-out of gas boilers as saving homeowners money. That may be true, but it looks more like the government avoiding hard work. In 2020, it pledged £1.5bn in order to fund the replacement of gas boilers with heat pumps. This was abandoned a year later, with the National Audit Office blaming rushed implementation, delays and a lack of certified tradespeople able to do the work. The government has since replaced that scheme with other, less ambitious ones.

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Meanwhile, heat pumps remain prohibitively expensive and very hard to come by. As such, the question of how gas boilers will eventually be replaced remains open. Homeowners are left none the wiser on whether to save up for a heat pump or to factor the cost of replacing a boiler into their decision to buy a home. By kicking the can down the road, the government seems to be hoping that it can ignore the issue. For homeowners, it does not go away.

How does this impact the UK’s housebuilders? On the one hand, they have past form in lobbying against green policies. On the other hand, some – such as Redrow (RDW) – had already made strides towards phasing out gas boilers in their new homes. With the government backtracking, they now need to consider whether to change course.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

The scrapping of energy efficiency certificate (EPC) requirements for buy-to-let landlords will also impact the housing market. According to the old policy, new tenancies from 2025 would only be possible on properties with an EPC of C or higher. From 2028, this would have applied to existing tenancies, too. Not anymore.

As with housebuilders, buy-to-let landlords will have two different reactions to this. On the one hand, the move saves them money in the short term. On the other hand, the lack of clarity on the direction of travel will be frustrating for those planning long-term – especially for those who have already spent money on improving their rental properties.

It is hard to see how the decision benefits renters, either. The prime minister said that the costs of improving energy efficiency could have been passed onto renters in the form of higher rent. But this ignores the cost that will now certainly be passed on to renters by not improving the energy efficiency of homes – from concrete costs such as higher energy bills to social costs like poorer quality of life.

What housebuilders, landlords and renters need more than anything else is clarity. But with this U-turn and a general election on the horizon, it’s even harder than usual to know what the UK’s housing stock will look like in five years’ time – or what anyone should be doing about it.

By Mitchell Labiak

Source: Investors’ Chronicle

UK property market
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UK’s housing market is now being driven by the over 50s

The UK’s housing market is increasing driven by older, affluent individuals already firmly entrenched in home ownership, in the latest sign that younger generations are being squeezed out.

The cost-of-living crisis, skyrocketing interest rates and stubbornly high house prices have made it increasingly hard for younger generations to move up the housing ladder, research from data science firm Outra reveals.

The average age of those tipped to move home in the next six months has surged 3.5 years in just 12 months amid signs younger households are being paralysed in their efforts to move home. That leaves the median age at 52.5 years-old, from 49 years-old last year.

The data indicates that every age band below the age of 45 is set to find it more difficult to move. The market is expected to be driven by older households, in particular those that already have significant equity in their homes over the age of 55.

Outra founder Giles Mackay said: “The UK’s housing market is now the preserve of the old and rich, and while a boom now will be welcome news to those involved in the day-to-day transactions given fears of a slowdown, there’s a real danger that what this trend indicates is the start of an inheritocracy.

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“Retiring boomers may be looking to move to a house in the country, seek a new life abroad or downsize and pass on that wealth to their millennial children who otherwise would not be able to get onto the ladder.”

Separate research by Savills shows that more than half of downsizers – 51% – have owned their homes for over 20 years, and three quarters – 75% – for more than 10 years.

Savills research into attitudes to moving reveals that older sellers, typically downsizers and empty nesters are amongst the most committed buyers in the market, with a net balance of +52% planning to move in the next one to two years. But, emotions play a significant role in the decision to move.

Savills survey of almost 2,000 buyers and sellers probed feelings about moving home. When asked what was the driving motivation behind moving, lifestyle factors are revealed to be the most important to downsizers and empty nesters. Almost half (48%) hope to ‘right size’, looking to live in a more manageable sized property, while a quarter (24%) are seeking a lifestyle change .

Releasing equity to fund retirement, or to help family members was a top priority for 18% of downsizers and empty nesters surveyed. This comes as 164,000 first-time buyers are expected to receive family assistance in getting their mortgage in 2023, according to latest estimates from Savills research.

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According to the Savills survey findings, owner-occupiers aged 65-plus hold a record estimated £2.587trn of net housing wealth in homes worth a total of £2.735trn. The vast majority of which is held by mortgage-free homeowners (£2.038trn). This has risen by £1.111trn over the past 10 years.

Frances McDonald, director of research at Savills, commented: “Those looking to downsize or move on from long-term family homes are in a strong position in today’s market, many having benefitted from the strong house price growth of the past 20 years.

“Many in this cohort are likely to become cash buyers when they sell their family home, and are therefore less exposed to the concerns around rising interest rates. This means they place a greater significance on the emotions of moving, as opposed to the financials.”

By Marc Da Silva

Source: Property Industry Eye

HNWIs
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What do high rates mean for HNWIs seeking mortgages?

Interest rates have dominated the headlines in 2023. As inflation remains sticky and well above its 2 per cent target, the Bank of England’s monetary policy committee has voted on 14 consecutive occasions to hike the base rate.

The impact on mortgage customers has garnered a great deal of political and media interest.

Understandably, the fate of high-net-worth individuals seldom enters the conversation, but within the mortgage market we cannot afford to overlook the issues affecting such borrowers.

Indeed, now is an opportune moment for lenders and intermediaries to take stock of the challenges that HNWIs face when looking to secure, and in the current climate repay, a mortgage.

Moreover, we must consider what can be done to ensure wealthier borrowers are offered suitable support in the higher interest rate environment.

The challenges involved in HNW mortgages

It may seem entirely counter-intuitive to think that HNWIs will regularly struggle when it comes to securing a mortgage. Yet this remains the reality; they run a surprisingly high risk of being turned away by conventional lenders.

For context, Butterfield Mortgages conducted research in the past, surveying more than 500 UK adults who all had a net worth in excess of £1mn. We found that 12 per cent had been rejected for mortgages in the preceding decade.

But why are so many HWNIs turned down for a mortgage?

It comes down to the often complex and diverse nature of HNWIs’ wealth – their income, investments and liquidity.

As a rule of thumb, the wealthier an individual is, the more complicated their income structure and finances are likely to be.

For instance, HNWIs tend to have their capital locked up in illiquid assets, spread across multiple jurisdictions. Meanwhile, they may have irregular or no formal source of income, and perhaps have not built up an attractive credit profile by repaying regular debts.

As a result, the process of applying and being approved for a mortgage can be far more complex for these individuals.

The standard ‘tick-box’ methodology applied by many high street lenders can pose unexpected complications, simply because how HNWIs make, spend and invest their money typically differs significantly from most prospective borrowers.

Further, HNWIs may not be UK residents, and they may also differ in the reasons they want or need a mortgage, both of which would create additional obstacles.

Many lenders will not supply finance for a property that will not be an individual’s primary residence, nor to an overseas buyer.

As such, HNWIs seeking finance for a buy-to-let investment or a second home will often struggle to find a mortgage on the high street.

Lenders and brokers require skill and experience

HNWIs being rejected for mortgages remains a prevalent issue.

As noted, they are ill-suited to the methodology that many mainstream, high street lenders apply to assess mortgage applications.

Meanwhile, their desire for a loan to purchase an investment property naturally rules out a swathe of other lenders.

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Clearly, HNWIs need to find specialist lenders and brokers who are well-versed in this type of client.

More specifically, they need lenders and brokers that have the skill, experience and resources to review each borrower and application on a case-by-case basis; to take in the full picture of the person’s financial profile, to understand the type of property they want to buy and why, and to assess their ability to repay a loan.

In essence, a more bespoke approach is required when working with HNWIs.

Lenders and brokers reliant on processing huge volumes of applications will, generally speaking, not have the structures and processes in place to operate in such a flexible manner.

Returning to the matter of rising interest rates – this economic shift over the past 20 months has only heightened the challenges that exist for HNWIs, thereby placing a greater onus on lenders and brokers to assist wealthier borrowers as they seek to navigate the mortgage market.

How higher rates affect HNWIs

For more than 13 years – between March 2009 and May 2022 – the BoE’s base rate resided below 1 per cent. It was never going to remain at such historic lows, which were largely indicative of economic turbulence stemming from the global financial crash, Brexit and the pandemic.

That rates would rise at some point was a given. As many who are longer in the tooth would also note, a base rate of 5 per cent or higher is also normal in the grand scheme of things – this was the general benchmark for much of the 1990s and 2000s, while the 1980s saw a base rate predominantly in double figures.

However, while a higher base rate is by no means atypical, the speed at which it has risen has undoubtedly created challenges for borrowers.

Jumping from an all-time low of 0.1 per cent in December 2021 to 5.25 per cent by August this year is a sharp rise, and coming after a prolonged level of such low rates, has placed a strain on many people who will have purchased properties with little consideration as to how such a shift could impact them.

HNWIs are no exception here. Again, while not featuring in the general discourse around higher rates and the impact on mortgage customers, HNWIs warrant attention and support.

Broadly speaking, HNWIs direct their investments towards high-value properties, such as those in prime central London. They may, for example, require a £5mn mortgage for the purchase of a £7.5mn townhouse in a prime central London postcode.

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Coupled with the size of the mortgages HNWIs take on is the length of their terms. HNWIs investing in a second home or BTL property may take on mortgages that have five or 10-year terms, unlike the 25 or 30-year terms that most UK homebuyers will be able to access.

If not on a fixed-term loan, the hikes to the base rate since the end of 2021 will have taken a notable toll on even very wealthy borrowers. With less time to spread out increased costs on an already large mortgage, some HNWIs will be struggling to make repayments.

Again, the complicated nature of their finances and investments comes into play. HNWIs might be asset-rich (owning all manner of assets) but have limited access to liquid cash.

Seeing their mortgage repayment skyrocket will require them to release equity from other investments or access cash from other sources.

As with the application process, it is important that preconceptions do not cloud the due attention that HWNIs require. Those lenders and brokers who are used to operating in this space will likely be acutely aware of this point.

Improving support for HNWIs

Butterfield Mortgages recently conducted a survey of mortgage customers in the UK. It revealed that just 44 per cent of borrowers feel they have received satisfactory guidance and communication from their mortgage providers since the initiation of the interest rate hiking cycle in December 2021.

This underscores the importance of lenders working with borrowers to recognise potential issues as they arise and, whenever possible, bringing forward solutions.

The necessity for this aid extends to HNWIs regardless of their affluence, and lenders must be unwavering in their dedication to aiding borrowers who need to continue to invest in property with a sense of assurance.

Alpa Bhakta is the chief executive of Butterfield Mortgages

By Alpa Bhakta

Source: FT Adviser