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Bank of England Targets Buy-to-Let Market

Just a few weeks ago PropertyQuoteDirect reported on the Bank of England’s new criteria for personal mortgages. At the time, those that work in the private rental sector were unsure of whether the Bank would also bring in harsher regulations for buy-to-let mortgages, and recently they have admitted that they have been considering it. However, even though the Bank of England have stated that they are looking into changing lending criteria for buy to let mortgages, they have no official plans as of yet.

The Bank’s Financial Policy Committee (FPC) stated that if there was another housing bubble both homeowners and landlords would suffer, which could increase homelessness in the UK. This is why the FPC want to protect both markets in order to ensure that when interest rates rise neither will go back to the same states as they were during the recession. A spokesman for the FPC added: “The FPC considered the need to monitor mortgage lending activity beyond the scope of the recommendation to ensure that financial stability risks did not shift to other lending institutions or forms of lending. Continue reading

Mortgages to be capped at 4.5 times Household Income

As house prices have continued to rise the Bank of England have been put under pressure to increase their interest rates in order to avoid another housing bubble. However, the Bank claimed that they were wary of doing this as a large percentage of the UK population are still struggling with the cost of living which means that if interest rates were increased households could start defaulting on their mortgage repayments. This is why the Bank of England’s Financial Policy Committee (FPC) met up this week in order to come up with a way to stem the housing bubble without negatively affecting the UK economy.

As a result, the FPC decided that instead of increasing interest rates they would instead stem the amount of mortgage approvals by only allowing lenders to offer mortgages 4.5 times the amount of a household’s income. Previously, business secretary Vince Cable suggested that the cap should be 3.5 times a household’s income, however the Bank of England governor Mark Carney dismissed this suggestion as he believed it would leave too many people unable to purchase properties. He added that a limit of 3.5 times a household’s income “would have been more consistent with a period of higher interest rates.” Continue reading

Landlords Prepare for Market Changes

It’s currently a very risky time for UK landlords as in the next twelve months a number of changes are likely to affect the private rental sector. One of the most prominent changes will be the Bank of England increasing its baseline interest rate, ultimately leading to monthly buy to let mortgage repayments increasing. Therefore, it is not surprising to see that many landlords are already preparing themselves by investing in extensive landlord insurance policies and remortgaging their buy to let properties in order to take advantage of current low interest rates.

In fact, a recent report conducted by the buy to let mortgage specialist Mortgages for Business has shown that in the first quarter of the year sixty five per cent of buy to let mortgage activity was landlords remortgaging their properties. This is up fifty three per cent compared to the previous quarter, showing that a number of landlords are already trying to protect their businesses from the changes that will occur in the near future. Continue reading

Landlords bolstered by interest rate status quo

As the financial sector started to dissect the statement from the Bank of England’s Monetary Policy Committee (MPC) after its decision to hold the rate at 0.5% for yet another month, landlords with an interest in taking out yet more landlord insurance as they expand their portfolios must have found it hard to suppress a cheer.

The bleak statement accompanying the announcement of no change was based on the disappointing growth figures over the last six months with the MPC admitting the fragility of the nation’s economy could not stand a change in the record low interest rate.

The chances of any change in the rate over the summer now seems to be disappearing fast, which is good news for property investors looking to take advantage of the low interest rates and the stagnation in the housing market. The decision should mean residential landlords will have plenty of loan providers offering them ammunition to go out and negotiate good prices with homeowners desperate to sell their property.

The good prospects for those willing to take a chance in the market was summed up by Angela McGowan, a chief economist with the Northern Bank, who described the MPC’s decision thus: “This latest announcement is once again bad news for savers but good news for borrowers. And with the recent parade of gloomy economic data coming from the UK, it is now looking increasingly likely that the Bank of England will be forced to keep the base rate at this level for the entire year. This historically low interest rate level is vital for keeping the UK economy’s head above the water when there are harsh austerity cuts all around.”

It may not sound good news for the country but every cloud has a silver lining and for those in the letting sector the lining seems to be getting bigger and bigger.