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Tue 05 May 2015

May News

As the countdown clock ticks, we'll know this week who will hold the keys to Number 10 and we have to acknowledge that the election is being fought on the economy.  As a Company, we remain apolitical, but do want a Government that supports home ownership for all, whether that's privately owned or by offering long term security in the rented sector. Evidence suggests that property prices seem set to increase and whilst great news for homeowners, there is a growing concern that many people are becoming disenfranchised. Everyone would agree an appropriate balance has to be struck.  Property in the UK has become an asset class in its own right and investment in property has led to significant house inflation over the last 30 years. The fact is, it has also caused lenders to become highly competitive and rates being offered from the likes of HSBC, below 1%, are a positive sign, that the market, is finally, truly working for consumers. The challenge for any Government, through housing schemes and other assistance, is to enfranchise as many as possible to take advantage of these schemes and to ensure both economic stability and security remains, enabling growth, not just in the housing market, but across all sectors. 

 

Here's our round up on this month's news.... 

 

Homeowners believing "good time to sell" hits 4-year high

 

More people could be tempted into putting their homes up for sale in the coming months as expectations grow that values will continue to rise, data shows. The number of homeowners who believe the next 12 months will be a good time to sell has reached its strongest level for four years, according to a Halifax confidence tracker. House prices have continued to rise in 2015, albeit more slowly than last year, with experts pointing to a shortage of homes coming onto the market. The Royal Institution of Chartered Surveyors recently said it is seeing signs of a 'worrying' upward pressure on house prices as a result of the shortage. According to the Halifax tracker 59% think now is a good time to sell, while 26% believe it is not. The overall net balance of 33% is the highest recorded since the survey started in April 2011. But even if the supply of homes for sale and buyer demand is brought into better balance, people still expect property values to continue their upward march. More than two thirds expect house prices to increase in the next year while just three per cent expect them to fall. This is the highest net balance recorded since the start of last summer.

 

 

Living near Waitrose boosts your house value, claims research 

 

Having a Waitrose near where you live increases the value of your home, claims Lloyds Bank. Properties within "easy reach" of a Waitrose cost 12% more than other homes in the same area, says the bank. Homes close to a Sainsbury's carry a 10% price premium - and those near Tesco carry an 8% premium. However, having a Lidl or Aldi nearby can actually reduce the value of your house or flat, it is claimed. But having any sort of supermarket nearby can add an average of £15,000 to a property, concludes the research. "Having a grocery shop within easy reach appears to be high on the list for homebuyers looking for good access to local amenities," said Andy Hulme, Lloyds Bank mortgages director

 

 

 

Re-mortgaging now accounts for 66% of buy-to-let lending 

 

Re-mortgaging now accounts for two-thirds of the buy-to-let market due to record low mortgage rates, according to Mortgages for Business. According to its latest Buy to Let index, 66% of 'vanilla' buy-to-let loans were remortgages in the first quarter, rising from 62% in the fourth quarter of 2014. The proportion for houses in multiple occupation was even higher, at 73%, up from 70% in Q4 2014. For multi-unit freehold blocks, remortgaging accounted for 89% in Q1, compared to just 42% in Q4 2014. Mortgages for Business managing director David Whittaker says: 'Record low mortgage rates are driving wave upon wave of landlords to reassess their finances. A great deal agreed last year may be uncompetitive by today's standards. So this stampede is completely rational - it represents a charge by landlords to make the most of an unprecedented economic situation.' The buy-to-let sector contrasts with the residential sector, where remortgaging accounted for 32% of new advances in February, the Council of Mortgage Lenders' latest figures show. 

 

 

UK economic well-being is improving, says ONS 

 

The financial well-being of UK households improved last year - but overall it is not much better than it was five years ago - according to the Office for National Statistics (ONS)
 In a series of new measures, the ONS is seeking to quantify economic well-being, as well as economic growth. Real Household Disposable Income (RHDI) per head increased by 1.9% in the year to December 2014. However, the measure is only up by 0.2% from the second quarter of 2010. RHDI - which records household income after tax, and is adjusted for inflation - is the measure favoured by the chancellor, George Osborne. The ONS also reported a rise in households' optimism about their finances. In December 2014, the ONS survey showed a balance of -5.2, meaning that the number of people who thought their financial situation was getting worse outweighed the number seeing an improvement. However, that figure was an improvement on a year before, when the balance was -7.6. The series of data was first published by the ONS in December 2014.

 

 

High-value mortgage demand drops 

 

Demand for mortgages fell sharply in the first quarter of the year in the UK, according to research for the Bank of England. Lenders reported that this was the third successive quarter of falling demand, the bank's Credit Conditions Survey found. Mortgages for high-value property saw the biggest fall in demand since the third quarter of 2008. Demand was expected to bounce back in the second quarter. Some lenders attributed the fall in demand over recent quarters to a combination of changes in regulatory policy and concerns about housing affordability, as well as uncertainty about the outlook for the housing market. However, the predicted recovery might point to the effect of the general election campaign on the UK housing market. The survey suggested that lenders were showing a greater willingness to lend to borrowers who were only able to offer a deposit of less than 10% of

 

Cost of moving up 60% in a decade 

 

The cost of moving home has increased by 60% in a decade to nearly £12,000 once estate agency fees and conveyancing costs are taken into account. Moving costs have far outstripped the cost of living, which has increased by 29.4% over the same period according to the Post Office Money's Cost of Buying & Moving study. The average buyer already forks out a typical deposit of nearly £91,000. John Willcock, head of mortgages at Post Office Money, said: 'With prospective homebuyers' attention firmly fixed on saving for a deposit, the additional costs of moving can often come as an afterthought - particularly for first-time buyers who are taking their first steps on the property ladder. Although house prices may continue to rise there are steps buyers and movers can take to reduce the amount they pay on top of this.

 

Half of over-40s consider buy-to-let 

 

Nearly half (45%) of over-40s are considering investing in buy-to-let to boost their retirement income. A further 8% have already invested in buy-to-let, while more than one in five savers (21%) regret or are unsure about saving into a pensions fund. Steve Griffiths, head of sales and distribution at Kensington, said: 'The launch of pension freedoms has led to a lot of excited talk about the potential boost for buy-to-let with thousands of retired landlords rushing to set up in business. 'With so many people unhappy with pension saving there is a need for alternative approaches but buy-to-let will not be right for everyone and anyone planning to do so needs to get advice from a broker as well as advice on other issues including tax. 'The fact is buy-to-let is already a strong and growing market with more than 1.63m mortgages worth around £188bn representing around 14% of the total mortgage market and there is plenty of advice available as well as lenders willing to lend.' Over-40s still generally support saving into a pension, with four in five (78%) retirement savers happy they took out a pension. Pension freedoms allow over-55s to take their defined contribution fund as cash subject to tax rates. Around half of potential buy-to-let investors say they would use their pension fund to start as a landlord or to expand their portfolio.

 

 

Gross mortgage lending grows in March 

 

The Council of Mortgage Lenders estimates that gross mortgage lending reached £16.5 billion in March. This is 21% higher than February (£13.6 billion), and 7% higher than March last year (£15.4 billion). 

 

Gross mortgage lending for the first quarter of this year was therefore an estimated £44.9 billion. This represents a 12% decrease from the last three months of 2014, and a 3% decrease on the first quarter of 2014. Commenting on market conditions, CML chief economist Bob Pannell observes: "The underlying lending picture is stabilising. Sentiment and activity are showing early signs of improvement, and should be further supported by the effects of stamp duty reform. We expect to see lending strengthen over the next few months, albeit from a relatively sluggish start in 2015."

 

 

Only 1% will spend pension pot on luxuries 

 

Pensions Minister Steve Webb has urged people against making hasty decisions. Only one in 100 older people eligible for the new retirement freedoms is planning to spend the whole pot on luxuries, research suggests. But with around 320,000 people retiring each year with a defined contribution (DC) pension - the type of pension to which the new freedoms apply - PwC's findings in a survey of people aged between 50 and 75 could still equate to 3,200 people a year spending their whole pots on treats. The findings came as one financial firm said the calls it has taken so far from people looking to release cash were for the purposes of "everything from paying off debt to purchasing a speedboat". Some further potential pitfalls were also highlighted in PwC's research. More than one in three people surveyed are not currently considering tax efficiency as part of their plans and less that half (45%) said they will factor in likely investment risks during their retirement planning.

 

 

8 in 10 young adults believe banks don't want to lend to FTBs 

 

Nearly eight in 10 people aged 20 to 45 believe that banks do not want to lend to first-time buyers, according to a report by Halifax. The bank's fifth annual report - which surveyed 40,000 people between 20 and 45 and 4,000 people with children between these ages - found that 79% think banks do not want to lend to first-time buyers and that 21% believe it is "virtually impossible" for these buyers to get a mortgage. This is despite the increase in first-time buyers last year to levels not seen since 2007. 43% of respondents are currently saving for a deposit, says the report, but 57% are not. The three most cited barriers to homeownership among those who do not own a property are the size of the deposit (57%), high property prices (56%) and low income (53%). London has the lowest proportion of homeowners aged between 20 and 45, at 39%, and also the highest number of people in the age group who fear they will never own a home (82%). Those who do not own a home are prepared to save for a deposit for an average of 5.3 years and can afford to save an average of £33.35 each week.

 

Two thirds to benefit from stamp duty reform: Nationwide 

 

More than two thirds of homebuyers across the UK are likely to benefit from the new stamp duty regime, with almost a third seeing no change and just 2% likely to pay more, according to Nationwide Building Society. Based on 2013/14 transactions data from the Land Registry, HM Revenue and Customs and the Council of Mortgage Lenders, and assuming an average saving of circa £1,580 across a total of 647,000 transactions benefiting from the changes, homebuyers in the UK could save £1bn as a result of the stamp duty changes, Nationwide found. In last year's Autumn Statement, the chancellor announced changes to the stamp duty slab. Now, no tax is payable for houses worth less than £125,000, 2% on the portion of any value above this and up to £250,000, 5% on the next portion up to £925,000, 10% up to £1.5m and 12% thereafter. Under the new rules, for the same £185,000 property you'll pay nothing on the first £125,000 and 2% on the remaining £60,000. This works out as £1,200, a saving of £650. For homebuyers in England, Wales and Northern Ireland, the new stamp duty system came into force on 4th December 2014, while for Scottish buyers, the Land and Building Transaction Tax changes were implemented yesterday, 1st April 2015.

 

Pension withdrawal could mean tax shock, warns IFS 

 

Hundreds of thousands of people are being warned about a big tax bill, if they decide to cash in their pension pots from next week. Many people face paying tens of thousands of pounds in income tax, said the Institute for Fiscal Studies (IFS). From Easter Monday, anyone over the age of 55 will be free to cash in Defined Contribution (DC) pension savings. But apart from a tax-free lump sum of 25%, they will be liable for income tax on the remainder. If the sum being taken out - when added to annual income - exceeds £42,386, they will pay tax at the higher rate of 40%. "Do watch out." said Paul Johnson, director of the independent think-tank IFS. "If you can keep your income below the higher rate threshold, you're going to end up paying less tax than if you take it in a big lump." The Treasury, he said, is hoping to benefit to the tune of £0.5bn in 2015/16, partly because some people will be caught in the tax trap. By 2018/19 it expects to raise an extra £1bn, as a result of people cashing in their pensions.