landlords Coronavirus New builds
Marketing No Comments

Coronavirus: what it means for your mortgage or your rent

We’re officially in lockdown and many of us are seeing the coronavirus crisis take its toll on our income. So, what happens about paying your mortgage? Here we answer all the big questions.

Can I stop paying my mortgage?

The government has announced that homeowners should be offered three-month payment holidays if they are struggling to make their mortgage repayments as a result of the coronavirus. But this doesn’t mean you can simply cancel your direct debit.

“Homeowners are unknowingly putting themselves into arrears by cancelling their mortgage payments without speaking to lenders first,” says Will Kirkman on ThisisMoney.co.uk. This can have an impact on your credit score.

If you need to take a mortgage holiday, contact your lender before you stop repayments, but don’t rush to the phone. “Amid claims that borrowers are waiting up to ten hours on the phone to speak to someone, many lenders are now asking borrowers to submit applications online to free up their helplines, or to only call if they are vulnerable or facing immediate difficulty,” says Kirkman.

What happens to my debt if I take a mortgage holiday?

Any repayments you don’t make now will need to be made at a later date. “It is likely the lender will spread outstanding payments out over the remaining term of your mortgage, so borrowers will see an increase in their monthly mortgage payments,” says Patrick Collinson in The Guardian.

That means, for example, that someone with a £200,000 25-year mortgage at 2.6% interest who takes a three-month payment holiday would see their repayments increase from £907 a month to £920 for the rest of the term.

Alternatively, your lender may let you extend the remaining term of your mortgage, so your monthly repayments stay the same. You may also be able to make an overpayment later on to clear what you haven’t paid now.

What are the alternatives to a payment holiday?

Simply stopping your mortgage repayments isn’t the only option if you are struggling during the coronavirus outbreak. You could ask your lender about options to reduce your bills for a few months. This could be switching to interest-only payments, deferring your interest payments or extending your mortgage term.

Can my home be repossessed?

If you do fall behind with your repayments, you cannot lose your home. The Financial Conduct Authority (FCA), the City regulator, has instructed banks and building societies not to repossess homes during the crisis. Nor can they charge fees for payment holidays granted owing to the crisis, says Collinson.

Can I stop paying my rent?

Yes. The government has acted to protect tenants as well as homeowners. “Emergency legislation will stop social and private tenants being forced out of their homes for at least three months,” says Martina Lees in The Times. But the situation “does not mean you can live for free”, says Lees. “Arrears will mount up – you’ll have to repay [the money] eventually.”

The housing minister has said the government expects landlords and tenants to work together to come up with an affordable repayment plan once the crisis is over.

I’m a landlord. Can I stop my mortgage repayments?

The government advice on payment holidays includes buy-to-let landlords whose tenants can’t pay their rent due to coronavirus. If you need to stop making repayments on your buy-to-let mortgage you should speak to your lender.

If you have insurance, it should cover rent arrears. Alan Boswell, one of the biggest landlord insurers, told The Times that existing rent guarantee policies will cover missed rental payments caused by the economic dislocation we are experiencing.

Has my lender cut my interest rate?

Late last week the Bank of England cut the base rate to an unprecedented 0.1%. Unfortunately, many banks are failing to pass this cut on to customers. Research by ThisisMoney.co.uk found that just 13 banks and building societies out of 87 had trimmed the rates they charge borrowers.

Under normal circumstances, “a drop in the base rate will see a corresponding drop in a lender’s ‘standard variable rate’”, says Kirkman. But the majority of lenders have kept their standard variable rates at the same level as before the central bank’s original cut on 11 March.

If you have a tracker mortgage the rate drop should mean your repayments fall slightly. But anyone thinking about switching to a tracker could struggle. Nationwide no longer offers any tracker mortgages at all.

By Ruth Jackson-Kirby

Source: Money Week

Marketing No Comments

Average deposit cost has only increased 5% since 2014

The latest research by Ome has revealed how much tenants are paying to secure a rental property and how this has changed in the last five years, as well as how this price increase compares to other items throughout our daily lives.

Ome’s data shows that the current tenant is now paying £1,139, a 5% increase compared to the £1,088 paid in 2014. Renting is thought to be one of life’s largest financial hurdles, with the traditional upfront deposit charged at the start of a tenancy, in particular, posing an obstacle to the nation’s tenants.

However, when looking at the cost of a deposit compared to the inflation of other everyday costs, the figures show that deposits have increased at a lower rate than many other costs of living, suggesting the issues of cash flow surrounding renting stretch further than the deposit itself.

The cost of a basic pay TV package, such as Sky or Virgin, has increased from an average of £22 to £28 in the last five years, the largest increase at 26%.

While the cost of renting has increased, it’s the cost of buying a home that has seen the second largest increase in the last five years, up 24% to the current average house price of £231,265.

The sum we spend on our mobile phones has seen the third largest increase, up 22%, while the price of a Big Mac has also increased more than the average rental deposit (+19%).

Other items that have increased at a greater rate than tenancy deposits in the last five years are car insurance (15.3%), the price of gold (10%), the cost of a pint (10%) and the cost of a cinema ticket (6%).

In fact, the only things to make the list that have increased at a lower rate than a rental deposit are home insurance costs (4%) and petrol (-2%). During this time, the average UK salary has only increased by 12.4%, meaning many day to day items have grown at a larger rate, although again, rental deposit are not one of these.

Co-founder of Ome, Matthew Hooker, said:

“The rental sector has received a fair share of negative press in its time and much of this has been focused around the traditional deposit and the sums charged by agents at the start of a tenancy in order for a tenant to secure a property.

However, with the recent Tenant Fee Act shining a light on the fees charged by traditional letting agents, it’s interesting to see that in relative terms, the increase in the value of tenant deposits is actually smaller than the increase seen in our TV packages, mobile contracts, Big Macs, and even the growth in the average UK salary.

So it would seem that it is the cost of living within a property itself that is putting the greatest financial squeeze on the nation’s tenants, with the actual deposit only proving a problem for those unable to accumulate the large initial sum, or finding themselves short for other areas of life once they have.

Of course, many of these other costs are either small or provide the option to pay in instalments with the deposit being the last major cost that can’t be widely tackled in bite sized chunks. That’s why we’ve seen a number of deposit alternatives enter the market in order to provide this choice and allow tenants to stay on top of the climbing costs elsewhere in life, by opting to pay their rental deposit on a more manageable monthly basis.”

Source: Property118

Landlord confidence Universal Credit UK property market Buy To Let Property Renting
Marketing No Comments

Over half of landlords letting to Universal Credit tenants experiencing arrears

Universal Credit is causing tenants to fall behind with their rent, according to new research for the Residential Landlords Association.

It reports that 54% of private landlords who have let to tenants on Universal Credit in the past 12 months have seen them fall into rent arrears.

Of these, 82% said that the arrears only began after a new claim for Universal Credit or after a tenant had been moved from housing benefit.

Almost seven in ten (68%) landlords said that there was a shortfall between the cost of rent and the amount paid in Universal Credit.

Private landlords renting to Universal Credit claimants can apply to have the housing element paid directly to themselves when a tenant has reached two months of rent arrears.

This is known as an Alternative Payment Arrangement (APA).

The RLA’s research shows that it took landlords an average of almost 8.5 weeks for an APA to be arranged – meaning that landlords can be left with almost four months of rent arrears before they begin to receive the rent they are owed.

The research further found that 36% of landlords said that they had buy-to-let mortgage conditions which prevent them from renting to benefit claimants.

The RLA is calling on the Government to do more to prevent rent arrears occurring in the first place, including:

Giving all tenants from the start of a claim for Universal Credit the ability to choose to have the housing element paid directly to their landlord.
Ending the five week waiting period to receive the first Universal Credit payment.
Ending the Local Housing Allowance freeze to ensure it reflects the realities of private sector rents.
David Smith, policy director for the RLA, said: “Today’s research shows the stark challenges the Government still has in ensuring Universal Credit works for tenants and landlords.

“The system only provides extra support once tenants are in rent arrears. Instead, more should be done to prevent tenants falling behind with their rent in the first place.

“Only then will landlords have the confidence that they need that tenants being on Universal Credit does not pose a financial risk that they are unable to shoulder.

“Without such changes, benefit claimants will struggle to find the homes to rent they need.”

By ROSALIND RENSHAW

Source: Property Industry Eye