Category Archives: Mortgages

Homeownership falls



Government figures released today show for the first time since the mid-80s homeownership has fallen.

Whilst still over 14 million of us are home owners, it is still the lowest proportion at 65% since Margaret Thatchers “Right to buy” proved to be so popular, a scheme where the tenants of council owned properties were encouraged to buy the house they lived in at a discounted rate.

Home ownership peaked in 2003 when the rate had risen to over 70% but that number fell over the following 4 years as credit became harder to obtain and property prices increased which also priced potential buyers out of the market.

This has forced more and more people to enter the rental market which is shown in recent figures showing a higher demand for rental properties. Once in the rental market, renters tend to feel trapped as they are unable to raise the 20% deposit required rather than the typical rate of 10% to get on the property ladder.

There has however been a rise in the number of mortgages approved since the Governments “funding for lending scheme” was rolled out last year and a number of lenders reducing their rates.

Home extension plans Derby

The first stage of planning a home extension is to get your home extension designed so you will need to get your ideas or sketches draw up by an architect. These will either form the basic design for your planning application drawings or for your building regulations drawings. The first stage is that your architect will meet you at your property and carry out a survey of the property, to create drawings of your property, it is these drawings that are called the existing drawings. From these drawings the architect will be able to take measurements and work out how best to get your ideas into a fixed design and in the form of a drawing. Then you can check these drawings and make sure you are happy with the proposed design for your new home extension. Then these drawings can be submitted for either a planning application or a full submission building regulations application. Many home extensions can be built without the need for planning applications but it is important that you or your architect check to make sure and either get it in writing or apply for a lawfulness certificate. This will be important if you come to sell or remortgage your home as any conveyancing solicitor will check this is in place before they complete any sale or remortgaging transaction. If you do need to obtain planning permission to build your home extension you can either go through the planning process which take a couple of months and then apply for building regulation approval or carry out the two applications concurrently. The planning process is to determine that your home extension project is in line and in keeping with the current development of your local area. The building regulations process is to check that what you are proposing to build will meet the current building regulations. These are split into various sections titled with a letter for instance part “A” covers the structural integrity, part “P” covers the electrical installation and part “L” the thermal efficiency of the property.

Buying a new house in 2013?

The property market may have been in the doldrums for the last couple of years with the number of new build properties and transaction volumes languishing at historic lows but many potential buyers are still out there. Many have become feed up of waiting for signs of a housing market recovery and with no signs of prices falling are choosing 2013 as the year they step on the property ladder. So are there still bargain properties to be had? Well the answer is yes but as with most bargains there is usually a catch, and in the case of cheap properties it is usually either the area is less desirable not much can be done about this. Or the property requires some form of a renovation, repair or improvement project it is important that you get an idea of what sort of costs are involved in these works prior to you buying the property. The other issue is that especially in the current climate mortgage companies are becoming far pickier about the type of remedial repairs that will affect a property’s mortgagibility. So ideally get a good local building contractor around before you buy to give you some indication of the costs that will be incurred in bringing the property back up to standard. They also have the experience to know where to look and what problems are associated with that type of property. For instance a good local builder will know that certain streets suffer from poor foundations or issues with the concrete floor slabs. This costs nothing and could save you thousands of pounds so take the time to check your bargain property has not got expensive building works that you may have missed.

Raising a roof

Many home owner look at doing a loft conversion but some properties are less suited to a loft conversion than others. This can often be the case with some bungalows either the pitch is simply to shallow or the ridge of the roof is too low. Even if you can stand up in your loft and the head height is a little tight with the addition of loft insulation bringing the ceilings down and an increase in the thickness of the floor joists it can still be unachievable to convert the loft. However it can still be the best value project for that property so what is the answer? You need to raise the roof this can be done by simply taking the roof off and replacing it with a roof with a stepper pitch and an increased ridge height and therefore more standing room. Or staying with the same pitch and increasing the wall heights to move the whole structure up and give more height or a combination of the two. This usually gives rise to the need for structural steels in the ridge to give the roof more strength and allow for the removal of trusses or other supporting timbers or masonry columns. It will also be likely that you will require steels in to support the new floor structure. This has the advantage of reducing the spans that the floor joists have to make meaning that their depth can be reduced and this again helps with head height. It also makes it easier to get workable stairs and there are various building regulations relating to the depths of the stair risers and the length of stair treads. It is also important to maintain the stairwell ceiling height which is made easier to achieve when these works have been included in the conversion. This does mean more materials and extra work and labour charges but can be well worth while in certain properties particularly those that are set in areas that has high re-sale prices. If you can turn a standard small three bedroom bungalow into a two story house the value of the property can increases dramatically. With all the space down stairs now being able to be utilised as living space you get the added bonus of a large property down stairs. Although this type of building project is too ambitious for most home owners done by the right building contractor they create some amazing houses that command a premium price.

Selling your home to first time buyers

It is estimated that a third of potential first time buyers are trapped in rented accommodation many of these home buyers have experienced difficulties in completing purchases due to the lack of suitable mortgage funding. Research from the Royal Institute of Chartered Surveyors has showed that nearly forty percent of first time buyers are simply unable to afford to buy a house. It is estimated that twenty percent of home buyers are stopped from buying a house by the lack of mortgage funding. The government backed Newbuy scheme only applies to new built homes many of which are often out of reach of first time buyers. Many in the property industry believe that if the scheme was extended to second hand properties it would provide the mortgage funding to allow first time buyers to get onto the property ladder and therefore kick start the housing market from the bottom up. Many home owners who are looking to sell should consider imaginative sales structures that allow first time buyers to obtain a suitable mortgage to allow them to buy their homes. Mortgage lenders are wary of gifted deposits and long stop completions but there are other methods that allow home owners to get their buyers in place. It is possible to offer the option of buyers renting your home before they buy and paying you the deposit in installments before they buy along with some rent. This can give first time buyers access to mortgages with a lower loan to value rate and the availability of mortgages at a 90percent loan to value is much higher than 95 percent loans.

What will happen to house prices?

House prices continue to stumble along with small movements up and down giving neither comfort to the optimists or pessimist. Indeed the same data is often used by both camps with negative data being picked up as continuing pent up demand and the pessimists suggesting that it is because of a lack of demand. If you look at mortgages which have a huge impact on the property and construction sectors you can see both positives and negatives. Mortgages are cheap with low interest rates and good fixed rates available however this is offset by tight lending material. Even though house prices are static it is still an achievement considering the wider economic backdrop. The bank of England has recently continued with its position of low rates and increase quanitive easing with more moves suggested soon to keep inflation on target. But the key is mortgage criteria and money supply when banks have access to cheap money and an increased supply they feel they are in a better position to lend. To increase lending they will relax lending criteria and the upward cycle begins. When lending criteria is relaxed more people can both practically borrow at the same time they have the confidence to borrow. The opposite is currently happening with property buyers and property developers less excited about buying assets that could fall in value while loans become harder to come by. It is interesting that new built homes and developments are seeing price rises against all odds. This is probably due to the recent low build rates in the UK making new homes much rarer than in the boom years of the mid 2000’s when every city’s skyline was peppered with tower cranes. Some economists are now predicting a fifteen percent increase in house prices over the next five years believing that the low supply rates will drive capital values higher.

Huge increase in new mortgages

The number of new mortgages taken out by home buyers has increased dramatically in the last month. With an incredible increase of twenty four percent and an increase of thirteen percent on the same period last year. Figures from the council of mortgage lending showed that an impressive £12.2 billion pounds was lent to home buyers and home owners by banks and building societies. Many in the mortgage industry have pointed at the end of the stamp duty holiday as the reason for a marked increase in mortgage activity earlier in the year. The continued activity has surprised many in the property industry and the braver amongst them are starting to call the beginning of the recovery. With an increase in mortgage products and demand remaining stable from potential property purchasers. It looks like good news for new borrowers and particularly first time buyers. With first time buyers being the life blood of the housing market it is another reason for optimism.

The Bank of England increases money supply good news for property and construction sectors?

The Bank of England has pledged to increase the amounts banks can lend to businesses and for mortgage lending. This is desperately needed and has been called for by many economists for some time, there is still the cry of too little too late by many economists. Many experts from the world of finance and property have long suggested that these measures should have been exercised simultaneously with quantitative easing. So what difference will this make? That depends greatly on the banks, banks have suggested that there is little appetite for borrowing. Many businesses, borrowers and house buyers have been put off even applying for lending as it has a negative effect on their credit rating if they are turned down and also they feel there is little point as lending criteria is so tight. This has lead to a cycle of less demand and less supply. Hopefully borrowers will feel more confident if funds are more readily available and banks will react quickly to the pent up demand from borrowers and home buyers. This is needed to increase transaction levels for house purchases and increase the UK’s woefully inadequate new build rates. Like the stock market the property market reacts badly to uncertainty. With the residential housing market not only driven by the market fundamentals like average earnings to house price ratios. It is also lead by sentiment people are very unlikely to buy houses that they feel may drop in value, they simply wait. Also existing home owners need little motivation to stay put but if they feel that if they put off moving up the housing ladder they may be priced out of the market they move swiftly. The banks have profited greatly recently as they have been quietly increasing tracker rates at the same time as the libor (London interbank offer rate) the rate at which they borrow has been moving down. The mortgage and property market needs a sensible and sustainable level of competition to help stimulate the housing and construction market while constraining the boom and bust of the property cycle to the minimum. The property market will always have peaks and troughs but with sensible management of the mortgage markets and money supply it will help to regulate the cycle.

Landlords encouraged by the return of the 85% loan to value BTL mortgage

The 85% loan to value buy to let mortgage has returned to the mortgage market, the mortgage is available from Kent Reliance a subsidiary of the RBS. With this new product entering the market it will more than likely lead to other lenders following suit. The loan to value of a buy to let mortgage is critical to landlords as it allows there cash reserves to stretch to more properties. Many landlords believe we are at the bottom of the property cycle and are looking to expand their property portfolios. They can use higher loan to value mortgages to gear their existing funds and purchase properties that would otherwise be out of reach. It also prompts new landlords to buy whereas before their target properties may have been out of reach. It also shows that some lenders consider that the buy to let market is looking like a safer way to get a return. They obviously have more confidence that buy to let landlords are less likely to default on their mortgages. They must have renewed confidence that the capital values of the properties their loans are secured against is less likely to fall. The additional buyers that these loans will be available for will have a positive effect on the overall housing market. It is usually the case that rental properties require a programme of refurbishment so this will also mean more money dripping back into the wider economy.

Rents and property prices rise as landlords rejoice

There is nothing that warms a landlord’s heart more than increases in both rents, their income and capital values, their net worth. When the two happen concurrently this always increases interest in the buy to let sector. Their Royal Institute of Chartered Surveyors survey reports that 13 percent of their clients are reporting rent increases rather than falls. This demonstrates that UK rents have risen consistently since 2009, many point to the mortgage drought and tighter lending criteria as a factor as it keeps households in rented accommodation and stops them from moving on into their own homes. The lack of mortgage funding lies with the banks and their ability to obtain money supply. There are no signs of a recovery in a bank lending in the short term so it looks a safe bet that rents and rental yields will continue to rise. This will undoubtedly lead to landlords actively looking to expand their property portfolios. House prices in some areas are without a doubt being supported by the value of their rental income rather than their desirability to buyers. It is interesting that none of the sectors pundits are predicting rises when there are increasing similarities to this part in the property cycle in the start of the last boom. Many economists look at the prices to average wage earnings ratio, but if there is one proven fact in the property market it is that the market although constrained by the fundamentals is without a doubt driven by sentiment. The herd mentality is never displayed better than when the property market moves up or down. Once buyers feel motivated to buy more quickly fearing they may become priced out of the market that is when capital values increase rapidly. Once this happens banks themselves are more motivated to lend on an asset that is increasing in value and surveyors are more relaxed about committing to higher values. This gives surveyors the confidence that even if they may have mistakenly over valued a property their mistakes will soon be covered by a rising market. With the opposite being true in more recent times?