Due to the effects of the recession, even the smallest of changes to the property and private rental markets can have a huge effect on landlords, and unfortunately it looks like things are set to change very soon. 2014 has already seen both markets starting to re-gain momentum, however not everyone is as pleased about this as others. Here, we look at some predictions for the property and private rental markets which could affect your business in the near future: Continue reading
Over the past few months there have been numerous news stories regarding the Bank of Ireland and how they have implemented massive interest rate increases for the majority of their tracker and variable mortgages. We have also heard that some landlords are starting to struggle when it comes to interest only mortgages, as many have failed to budget in order to pay back the loan once the interest only term is over. So here we look at the importance of mortgages for landlords and how to protect your business: Continue reading
Landlords considering purchasing property insurance on new properties as they take advantage of the demand for rented housing will not have been disappointed with the latest house price report released by the UK’s largest lender this morning.
Slight increase masks overall trend
The Halifax which is now part of Lloyds banking group announced that house prices showed an infinitesimal rise of 0.1% in May compared to April but more in depth figures suggest that purchasing new property is still getting cheaper. Analysis of the figures shows that the average price of a home in the UK today is £160,000, which is over 4% lower than this time last year, and in effect a landlord is saving well over £6,000 on the purchase of an average property. The year on year drop is actually the biggest fall since October 2009 which may well set alarm bells ringing in some quarters of the industry. The three monthly figures also showed a drop but only by 1.2%.
Steady year ahead
The forecasters at the Halifax don’t believe that house prices will move much at all in the present year, saying that the continued low interest rates will prove attractive to those who can find a deposit but inflation, higher taxes and uncertainty in the job market will act as a deterrent to many who are thinking of taking the plunge into house ownership.
Once more this is good news for the prospective landlord. Lenders appear to be turning away from the traditional target of first time buyers trying to get onto the property ladder and instead are focusing on property investors with a little more money to deposit and a professional outlook on their investment. The £6,000 drop of the average property price will enable landlords to pay for such essentials as business property insurance, health and safety checks, energy efficiency ratings and upgrading of the new purchase without compromising their borrowing. It will also help cover the initial void period between purchase and the placement of the new tenant. The overall picture suggests tenants will still be in plentiful supply while forecasts of modest increases in interest rates over the next 12 months should give a landlord time to settle his finances and plan for the future.
With the latest predictions of low interest rates being with us for years to come, landlords will be wondering what exactly the future holds for the residential letting sector.
Ernst and Young, a leading UK economist group and sole sponsors of the Independent Treasury Economic Model (ITEM) club, are predicting the current Bank Rate of 0.5% will be staying with us until 2014. The prediction is based on the present government holding firm on its commitment to spending cuts of around £40 billion and the loss of jobs that will go with it.
Although inflation is still way above the Government targets of 2% and the end of year increase in VAT threatening to push it higher still, the group feel the spending cuts will then kick in and push inflation closer to 2%. A relief then for the Governor of the Bank of England who will then be able to stop writing letters to the Chancellor of the Exchequer explaining exactly why inflation is above government plans. Not for long though, as interest rates will then have to stay low to stop the nation slipping into deflation.
With interest rates staying low and new borrowing rates remaining high, one can only anticipate home-owners without a big deposit will stay exactly where they are. Several mortgage brokers are reporting a good increase in loan enquiries but from personal experience, a lot of these enquiries will fall by the wayside when prospective home-buyers realise the interest rate on a new loan will be much higher, compared to the tracker mortgages they already have. This perhaps is confirmed by reports showing a fall in prospective buyers registering with agencies.
The result could well be house prices start to slide again; already one report is showing prices have fallen for the first time in over 12 months, Hometrack, the property data company, reported a 0.1% fall in June. If that is the case then the buoyant rental market could be here for some time yet, giving ambitious landlords, with an eye for a bargain, more reason to spend time looking for cheap landlord insurance to cover new properties they are willing to invest in.