Best Mortgages Set to Disappear, Borrowers Warned

According to this recent article by Dan Hyde of The Telegraph on September 9th, 2013 the record low rates on new fixed mortgages are in danger due to rising costs faced by banks.

Home owners have just a short window of opportunity to lock into the lowest-ever fixed mortgage deals before rates rise, experts have warned.

Lenders are preparing to push up the rates on new fixed deals because the cost of funding these loans has risen considerably.

Mortgage rates have been slashed to record lows in the wake of government schemes to stimulate the property market.

Two-year fixed rates are now available at less than 1.5pc. In July, The Telegraph reported that analysis of the home loan market showed it was the best time to remortgage in six years, with half of borrowers able to save money by taking out a new deals.

Since then, the money market rates underpinning these attractive offers have started to climb, reflecting the improving strength of the UK economy.

Banks typically price their fixed mortgages according to the rates on the money markets “swaps”. Over the past week, the rate on five-year swaps has risen from 1.77pc to 2.01pc.

Already, some lenders are removing their best buy mortgages or pushing up rates. Yorkshire Building Society today increased the rate on its five-year fixed rate for the second consecutive week. The rate was 2.44pc two weeks ago. Today it is 2.59pc.

Tomorrow, First Direct will increase the rate on its five-year deals for customers with a 10pc deposit. Its 4.19pc deal will then cost 4.39pc. Norwich & Peterborough and Nationwide have also made moves to increase rates.

Andrew Hagger, an independent personal finance researcher at Moneycomms, said: “Money market swap rates increased significantly last week, with a massive spike on Thursday. We must now wait to see whether these higher rates hold, but already lenders are starting to increase mortgage rates.”

David Hollingworth, a broker at London & Country, said: “Mortgage rates are not as directly linked to swap rates as they once were.

“But lenders cannot ignore the cost of funding going up, so if you are thinking of taking a fixed rate, there is very little to suggest rates are going to get better.

Mr Hollingworth added that lenders are still competing fiercely for business, as Britain’s property market rejuvenation continues. This should keep rates from rising rapidly. Further downward pressure could arrive when the second stage of the Government’s Funding for Lending Scheme is launched in January. This will provide a government-backed mortgage guarantee to customers who put down a 5pc deposit when moving home.

Article Source: http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10295935/Best-mortgages-set-to-disappear-borrowers-warned.html

UK is Urged to Invest £50bn in a Greener Economic Recovery

For the sake of UK greener economic recovery, Green New Deal campaign group says £50bn should be spent on technology, cheap housing and insulating homes as revealed on this article by Heather Stewart of TheGurdian on September 8th, 2013.

Campaigners have warned that Britain is hurtling towards a new economic crisis, and call for a £50bn "Green New Deal" to create more sustainable growth and better-paid jobs and equip the country for a low-carbon future.

After two quarters of better-than-expected GDP growth and a batch of positive economic indicators – including rising house prices and upbeat business surveys – the coalition is hoping the summer economic bounce will turn into a longer-term recovery. But five years on from their first demands for a radical reworking of Britain's business model, the Green New Deal group, which includes Green party MP Caroline Lucas, economist Ann Pettifor and tax expert Richard Murphy, says the need for an alternative approach is greater than ever. In a report published on Monday, and seen by the Observer, it argues that recent growth has been based on unsustainable rises in consumer spending and house prices and could end in "the mother of all credit busts".

"Recovery is an interesting word to apply to an economy that is marked by rapidly rising personal debt, highly insecure and often low-paid work, and rising underlying carbon emissions. What we're calling a recovery is poor, divided, indebted and polluting," said Andrew Simms, chief analyst at thinktank Global Witness and an author of the report.

Central banks have poured cheap money into financial markets to drive down interest rates and prevent deflation and depression. But Green New Deal says this is a dangerous gamble: "Given the choice, they prefer to have the problem of asset prices going through the roof than the problem of deflation. If they are wrong and the bubble bursts before the recovery arrives, it will be the mother of all credit busts," it says.

Under an alternative plan in the Green New Deal report, the government would invest £50bn into expanding green technologies over five years, building low-cost housing, and employing a "carbon army" to insulate hundreds of thousands of homes and reduce energy use.

The authors say these measures would create more, and better-paid, jobs than the current debt-fuelled bounce, which Pettifor described as an "Alice in Wongaland" recovery. Lucas, who is the MP for Brighton Pavilion, said a grassroots workforce could be trained to lag Britain's chilly lofts "within weeks". "Ministers want to cut a nice big ribbon on a new nuclear power station – but this would be far more effective in getting our emissions down quickly," she said.

Real incomes have continued to fall over the past year, as above-target inflation has outpaced pay growth, in what the TUC has described as the greatest wage squeeze since the 1870s. Green New Deal argues that if more workers were paid a living wage it would help to create more sustainable consumer demand. Frances O'Grady, the general secretary of the TUC, which begins its annual congress in Bournemouth on Sunday, supported the Green New Deal initiative, saying: "The green economy already employs nearly a million people, in areas from electric-car manufacturing to wind-turbine installation. Implementing some of the ideas in this report could help these industries create more of the skilled and well-paid jobs we need if we are to build a sustainable recovery."

The authors suggest their pro-growth policies could be paid for by scrapping the controversial HS2 rail project; cracking down on tax evasion; and launching a fresh round of quantitative easing.

Instead of using electronically created money to buy government bonds from City investors, as the Bank of England has done with almost all of the £375bn-worth of QE it has undertaken since 2009, the proceeds this time would be used to invest in green projects, and pay off private finance initiative debts, freeing up public money to be spent elsewhere.

The report argues that investing in affordable housing, in particular, would benefit those on lower incomes more than the better off. "It can mean that people have more disposable income after housing costs, which in turn boosts spending in the local and national economy," the report says.

The authors argue that a rapid boost in the supply of housing would also help to "dampen the housing bubble beginning to appear in response to government measures such as Help to Buy, which facilitates prospective homebuyers to find a deposit". The controversial Help to Buy scheme was the centrepiece of George Osborne's March budget, and has been questioned by a number of critics, from the former governor of the Bank of England, Lord King, to the International Monetary Fund, amid fears that it could create a new property boom.

Mark Carney, the Bank's new governor, has said he is "very alert personally" to the risk that a housing boom is emerging – and said he was ready to burst any bubble, by targeting mortgage lending.

Reforming the bailed-out banking system is another central proposal of the report, suggesting that Royal Bank of Scotland, which is majority-owned by the taxpayer, could be broken up into a series of regional lenders that would build relationships with local industries. "All the mechanisms which have been brought into play to encourage lending to the productive part of the economy don't seem to be working," says Simms.

Labour has promised to introduce a British Investment Bank, to boost lending to businesses; but it has eschewed much of the Green New Deal agenda over the past five years, focusing on an emergency VAT cut as the centrepiece of its policies to create a recovery.

Other members of Green New Deal include Charles Secrett, former director of Friends of the Earth; Jeremy Leggett, chairman of green energy firm Solarcentury; and Larry Elliott, economics editor of the Guardian.

Article Source: http://www.theguardian.com/environment/2013/sep/08/invest-greener-recovery

Got a UK Property for Rent? How to Be an Overseas Landlord

This interesting article by Ruth Margolis of BBC America on September 5th, 2013 gives out simple and helpful advice on how to rent out your house if you have to up and leave the UK.

You’ve just had the call to say the dream job is yours. Congratulations. One thing, though: your new office is in America, so you’ll need to move there. OK! But hang on: you’ve just bought that nice new flat, and there’s no way you can afford the hefty mortgage and finance your new life in the U.S. What’s a soon-to-be-expat to do?

With the U.K. property market still flat, you might decide that selling up isn’t an option. Possibly your best choice is to rent out your place, so you do the thing people always do in these situations: put a “Great flat for rent!” shout-out on Facebook. But you get nothing — not even a solitary “like.” What now?

Contact local estate agents. Explain your situation, then pick the least obnoxious and most sensible-sounding half-dozen to come to your house and give a valuation. Put together a long list of annoying questions and remember to include the following ones about money: if you find me the ideal tenant (someone I like who has good references and a sublime credit score), what’s your fee? Will you charge me if the agreement falls through? What will I have to pay you to find me a replacement renter if my current one moves out? If I choose to have you manage the property, what will that cost? And what, exactly, do I get for the money?

Once you’ve given a cross section of agents a grilling, choose a couple to market your place. But be warned: even the good guys will give you the hard sell on the property management side of their business. Carefully consider whether it’s worth the money. If you take the time to fix any problems with the property before you leave and pick a great tenant, you may find you can come cope with arranging minor household repairs from afar.

However, don’t let your agents know you’re planning to DIY. They’ll work harder on your behalf if they think you might also pay them to manage your property.

Don’t make the mistake of thinking you can handle everything from abroad, especially if you’re not planning to make regular trips back to the U,K. You will need a trusted proxy to pop by a couple of times a year to make sure your tenants haven’t thrown the bath out of the window or painted the walls with sewage. For your part, make an effort to build a good e-relationship with your renter and be quick to sort out any issues they may have. Neglect to do this and you run the risk that they’ll stop paying rent or give notice.

If you do decide to manage the place yourself, find a trustworthy odd jobs person who can attend to any small problems in the property. Also, take out renters and utilities insurance to cover you if your tenant stops paying the rent or the boiler breaks down.

Talk to your mortgage provider about swapping to a buy-to-let agreement. In reality, plenty of people who let a property they once lived in don’t bother to do this because it’s fiddly and expensive. And, in all likelihood, you won’t be found out should you decide to stay on the same deal. But you are supposed to swap, legally speaking.

You’ll also need to pay U.S. and U.K. income tax on any profits accumulated from your rental. So find an account who can help you with your tax returns in both countries.

Finally, find the time to check the property yourself whenever you’re in the U.K., giving your renter at least 24 hours notice. Nothing inspires a tenant go to town with a Swiffer and scrape the sewage off the walls like a visit from the owner.

Article Source: http://www.bbcamerica.com/mind-the-gap/2013/09/05/got-a-uk-property-for-rent-how-to-be-an-overseas-landlord/

Student Flatshare Rents 'up 8.5%'

According to a study, rents are higher in a third of university towns than students are willing to pay as revealed in this recent article by Express & Star on September 5th, 2013.

Research reveals that the cost of a room in a student flatshare has soared by 8.5% in the past year, to an average of £357 per month.

The research based an analysis of rents in 25 university towns and cities, and a survey of students, found that unsurprisingly, London is the most expensive place, with average monthly rents of £567, followed by Cambridge (£450) and Oxford (£398).

At the other end of the scale, Cardiff and Swansea are the cheapest, with landlords in these places asking for £255 and £260 a month respectively.

The research, conducted by flatsharing website easyroommate.co.uk, found that in eight of the areas examined, rents were higher than the maximum amount students were willing to pay.

The biggest discrepancy was in Exeter, where the average monthly student flatshare rent was £385, but students said they were only willing to pay out a maximum of £300.

Other places where rent exceeded expectations were Bournemouth, Hull, Leeds, Leicester, London, Manchester and Plymouth.

More than half (54%) of the 1,100 students surveyed said they had seen their rent rise in the last 12 months, the research found.

It claimed that the rate of growth in the cost of rents had been fuelled by higher numbers of people going to university.

Increasing rents had also forced students to change their lifestyle and accommodation, the study found.

Over a fifth of those questioned said they now shared a property with more people than last year to reduce their costs, while more than a quarter (28%) said they had less money to spend on their social life.

Around one in eight (12%) said they were able to save less money for after they graduate, while 7% had had to cut back spending on books and study materials.

Rishi Patel, manager of easyroommate.co.uk, said: "Student rents are once again on the march as student numbers begin to recover following the increase in tuition fees.

"Rents for student flatshares are now at their highest level in five years which is increasing the financial pressure being felt by many students across the country who also have to deal with higher fees and more expensive day-to-day living costs."

The survey questioned 1,122 students between August 16 and 27.

Article Source: http://www.expressandstar.com/business/uk-money/2013/09/04/student-flatshare-rents-up-8-5/

Lenders in the UK Confident That Stress Tests Will Not Bar Most Mortgage Applicants

According to the research by the Intermediary Mortgage Lenders Association intermediary mortgage lenders in the UK are ensured that new affordability checks resulting from the MMR will not significantly reduce the number of people who successfully apply for a mortgage as shown in this recent article by the Property Wire on September 3rd, 2013.

Research by the Intermediary Mortgage Lenders Association found just 7% of intermediary lenders expect significantly more people will be turned down for a mortgage because of new stress tests, which will examine whether borrowers could afford their repayments in the event of interest rates rising.

IMLA’s Intermediary Lending Outlook shows that almost three quarters of lenders are confident that affordability checks will not impact borrowers in large numbers while the remaining 20% are unsure.

Overall responsibility for affordability checks will officially pass from brokers to lenders when the MMR takes effect in April 2014.  While many of its provisions are already standard practice for lenders, mortgage brokers are less convinced that aspiring borrowers will be unaffected.

Although 34% of brokers do not expect stress tests will significantly reduce the number of successful mortgage applicants, some 44% predict that considerably more consumers will find they are turned down.

However, brokers are significantly more confident about the impact of the MMR than they were at the start of the year. Some 66% are not at all worried in August 2013, compared with 42% in January 2013, and the percentage with significant worries has dropped from 12% to 4%.

In contrast, 67% of lenders are currently worried about the impact of MMR but despite their extra responsibilities under the new rules, no lender has serious concerns.

‘The MMR rules on affordability are built on common sense and are not too far removed from how many lenders already approach the issue. Recent experience has shown how important it is to ensure that mortgage borrowers can reasonably manage their commitments, not just now but in the future,’ said Peter Williams, executive director of the IMLA.

‘We are in unfamiliar territory when it comes to current interest rates, so we have to be pragmatic and anticipate the likelihood of change. Falling numbers of arrears and repossessions in recent years show a responsible approach to mortgage approvals, and lenders are working hard to ensure their existing tests meet the full MMR requirements without unfairly disadvantaging consumers,’ he explained.

‘Although the regulatory buck will rest with lenders from April 2014 there is still a collective responsibility to put affordability at the heart of the industry. This involves brokers working closely with lenders to help finalise the rules of engagement, while also ensuring that customer expectations are managed and applications suitably vetted,’ he added. 

Article Source: http://www.propertywire.com/news/europe/lenders-uk-mortgage-review-201309038187.html

New Loan Scheme Aims to Bring Empty Homes Back Into Use

This engaging article by The Independent on September 2nd, 2013 reveals a new loan scheme that intends to assist the country's housing shortage by giving affordable loans to owners of empty properties.

A new scheme hopes to help solve the country’s housing shortage by handing cheap loans to owners of Britain’s 710,000 empty properties.

The cash – up to £15,000 per property – will be offered to help with renovations through a new Government-backed £3m National Homes Empty Loan Fund, which has been set up following last year’s Great British Property Scandal campaign by architect George Clarke.

It will be administered by green lender the Ecology building society in conjunction with the Empty Homes charity and 39 local authorities.

David Ireland, chief executive of Empty Homes, said: “Many homes are empty because it is difficult for owners to raise the money needed to bring them back up to a habitable standard. The scheme will kick-start efforts to tackle this.”

The loans will be charged at a fixed 5 per cent and are available to those who own a property that has been empty for six months or more.

Ecology chief Paul Ellis said: “At a time when there is increasing demand for homes but an acute lack of supply, it makes sense to bring new life to existing but neglected properties.”

Article Source: http://www.independent.co.uk/property/house-and-home/property/new-loan-scheme-aims-to-bring-empty-homes-back-into-use-8794322.html

Is Shared Ownership a Real Housing Solution?

With the ongoing nation's housing crisis it has been carried out that shared ownership plan is the solution according to this article on August 31st, 2013 by Patrick Collinson of TheGuardian.

A Shelter report has concluded that a robust and organised shared ownership scheme is a key part of solving the nation's housing crisis.

The shared ownership flat in London's Docklands seemed like salvation for Mark and his partner, who had spent years trying to find a home in striking distance of where they work in the capital. It was pricey, at £437,000, so they could only afford a 25% share, but with the rent set at a reasonable level it was just about affordable.

Yet just a few months later it turned into a nightmare for the first-time buyers, with the service charge hiked up by 73% to an unmanageable £380 a month, or £4,560 a year.

The service charge, plus the mortgage payment and rent, make the property no longer viable for Mark who feels conned by the housing association that sold the flat. At the time of the purchase, the association provided him with an "estimate" of the service charge, even though, he claims, it later admitted it knew this was not an accurate reflection of the costs, and that it would be raised in a matter of weeks.

If the true charge had been disclosed Mark would not have proceeded with the purchase, and in any case would have failed the affordability test.

Mark's tale is just one among many about this hybrid form of property buying for the desperate. One former head of the National Association of Estate Agents likened shared ownership to "sending lambs to the slaughter".

The concept of "staircasing", where a young buyer takes on a 25% share then buys further portions on the way to full ownership, is largely illusory.

A Cambridge University report found that of the estimated 145,000 shared ownership properties already sold in England, only 27,908 have been staircased up to 100% ownership since 2001.

Many shared ownership apartments are overpriced new-builds flogged by housing associations using dubious techniques whereby the buyer is almost guaranteed instant negative equity. So-called "affordable" homes sell for as much as £640,000 (a two-bed in Tower Hamlets, east London) with combined monthly costs adding up to as much as £2,000. To qualify buyers need incomes of up to £80,000 a year.

Legal fees to staircase can be high, service charges are steep and selling up is difficult when you are restricted to just a small pool of potential buyers. Much of the public subsidy that goes into shared ownership ends up in the pockets of developers and landowners, which are able to charge an inflated price.

Yet housing charity Shelter, after a long investigation into the property market focusing on the 1.8 million low-to middle-income "forgotten families" trapped in renting this week concluded that the solution to the UK's housing problem is … shared ownership.

To be fair to Shelter, its inquiry makes no bones about the current shoddy state of the shared ownership market. It has developed in a piecemeal way, with multiple schemes launched by successive governments, none having a material impact on the market.

Shelter's vision is for a major, mainstream shared ownership market supported by the government to the tune of £12bn in order to provide 600,000 decent homes for priced-out families throughout their lives.

Shelter reckons the minimum share of ownership should be as low as 12%. That effectively turns the purchase into a controlled rent home from a social landlord with a bit chipped in by the "buyer". But maybe that is no bad thing. The main attraction of shared ownership is that unlike the private rented sector it gives full security to the occupiers, as they can't be evicted with just a couple of months' notice.

Shelter acknowledges that shared ownership is not the entire answer – we need to address the chronic undersupply of new homes in other ways as well. The government's Help to Buy scheme won't help, either. Shelter estimates that when the second part of the scheme goes live in 2014, three in four families will still be unable to raise enough money to buy an average three-bedroom home in their area.

It is good that Shelter has put shared ownership under the spotlight, as it is a sector that urgently needs reform. But it's sad that the best we can offer today's younger generations is a quarter share of what the baby boomers saw as their birthright.

Article Source: http://www.theguardian.com/money/blog/2013/aug/31/shared-ownership-housing-solution