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What is happening to the UK property market

What is happening to the uk property market

What is happening to the UK property market

Whether you’re applying for your first mortgage, or you’re already a homeowner, you’ll know there’s a lot of news coverage about interest rates, inflation and mortgage loans right now. 

So what’s happening, and why? How it might affect you will depend on what type of mortgage deal you’re looking for, or the type of deal you’re on – and how much longer is left on the term of your loan. 

Plus, forecasts on rising interest rates are changing quickly, along with wider economic conditions. No one knows for sure what’s ahead, but we’re still seeing tens of thousands of people requesting to view properties each day, which is the same level that we’ve seen all month.

So if you are thinking of moving, or if your mortgage term is coming to an end soon, here we’ve tried to help answer some of the questions you might have. 

Why are mortgage rates rising now?

Before this week, mortgage rates had already been increasing throughout the year. The Bank of England sets the ‘base rate’, which lenders use to set their own mortgage rates. In January of this year, the base rate was 0.25%. Since then, it has gone up incrementally and is currently 2.25%. 

The Government sets the Bank of England an inflation target of 2%, but the current rate is 9.9%. It’s the Bank of England’s responsibility to make sure inflation is low and stable, so they need to bring inflation back down. The way they do that is by increasing interest rates. 

The Bank of England forecasts inflation to rise to about 11% in October, and that it will stay above 10% for a few months before starting to fall. 

Rising interest rates have led to an increase in the average mortgage rates that are available. As an example, if you have a 10% deposit and choose to take out a two-year fixed rate mortgage, the typical rate that was available in January was 2%. That increased to an average of 3.9% at the end of August. These rises had been predicted and lenders were able to factor them in gradually. 

Mortgage rates have been rising further this week because when unexpected things happen in financial markets, they’re likely to have a direct impact. Last Friday (23rd September), the Chancellor’s mini-budget unveiled the biggest tax cuts for 50 years, including a stamp duty cut for home-movers in England and Northern Ireland.

This has resulted in a lot of speculation about how these cuts might impact the UK’s finances. The value of the pound has seen record falls, which is likely to drive inflation up further. As a result, it’s widely believed that the Bank of England may need to raise interest rates faster and higher than previously forecasted. 

At the minute, there’s a suggestion from the financial markets that the bank base rate could rise to 5.8% by next spring. This has impacted the underlying costs of fixed-rate mortgages. This is why some lenders have repriced deals and others have temporarily removed some or all of their products. Some of the lenders who have withdrawn products are expected to return with new deals in the coming days and weeks.

How might increasing interest rates affect my mortgage?

If you’re a first-time buyer, moving home, or remortgaging, it’s likely you’ll be impacted by the changes. If you have a fixed-rate deal, the good news is that it will be business as usual, and your monthly repayments won’t change, at least until your current deal ends. 

If you don’t do anything, at the end of your deal you’ll automatically move on to the lender’s Standard Variable Rate (SVR). These rates tend to be higher than other mortgage rates and are generally changed to reflect movements in the Bank of England’s base rate. 

Take a look at how your repayments would change if you have a 25-year mortgage term and are looking at a fixed-rate for £200,000, based on rates increasing from between 2% to 6%. 

Fixed mortgage rate (£200,000 over 25 years) Monthly payments Increase in monthly payments
1% £754
2% £848 +£94
3% £948 +£194
4% £1,056 +£302
5% £1,169 +£415
6% £1,289 +£535

 

If you’re among the estimated 15% of borrowers with a variable or a tracker mortgage, your monthly outgoings will almost certainly go up. The interest rate paid on tracker mortgages is usually anchored against the bank base rate plus a set percentage. For example, the current base rate of 2.25%, plus 1%, would mean you’d be paying 3.25% interest right now. 

Can I still get a fixed-rate mortgage deal now?

Some lenders have withdrawn their fixed-rate products, while others have increased their prices in response to the rapidly changing costs of their funding. But it’s definitely worth finding out what your options are. 

If you’re on a tracker or a variable mortgage, you could shop around to see if you can find a cheaper option with a fixed-rate mortgage. However, you might have to pay an early repayment charge first. You could speak to a qualified mortgage broker or adviser if you’re unsure which options would be best for your individual circumstances. 

I’m on a fixed rate, what are my options when my deal ends?

If your fixed-rate deal is due to end within the next six months, you could see what your options are for locking in a deal now. 

Many lenders will allow existing customers to apply for new deals up to six months before their current rate ends without having to pay an early repayment charge. This is often called ‘product transfer’ or ‘switching’. This is a relatively easy process as you’re staying with your existing lender, so you won’t need a solicitor or a property valuation, and there’s no need to prove your income. 

If you’re looking to move lenders – whether you’re remortgaging or moving home – you may want to start well before your fixed-rate deal ends, as the application process can take several months or more. 

There is so much fluctuation in the mortgage market right now, you might want to look at what your lender has to offer or speak to a mortgage broker to find out which deals are available to you. 

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London’s prime bubble sees record sales in homes over £5 million

London’s prime bubble sees record sales in homes over £5 million

London’s prime bubble sees record sales in homes over £5 million

Almost £3 billion was spent on £5 million-plus properties in the first half of 2022 as prime central London retains reputation as a ‘safe haven’ for foreign buyers

Mega-mansions are flying off the shelves in the top end of London’s property market with a record 294 homes in the £5 million plus bracket changing hands in the past six months.

Almost £3 billion has been spent on luxury property costing £5 million or more so far in 2022 according to research by agent Savills, the highest ever recorded.

Over half the sales in traditional super prime hotspots like Knightsbridge, Chelsea and Belgravia.

At 294, the number of homes sold in the first half of this year is almost as high as the total seen across 2019 as a whole (308 homes), the last period unaffected by the pandemic. It is even higher than in the bounce-back years following the 2008 financial crisis. There was also an increase in homes selling for more than £10 million, with 89 £10 million-plus sales completed in the first half of 2022, a 41 per cent increase on the first half of last year and 94 per cent increase on 2020.

A separate report from LonRes recorded super luxury sales including a 12-bedroom mansion on Belgrave Square near Harrods which sold for £90 million, and a property on The Boltons in Chelsea which sold for £42 million.

However, prices in prime London areas are still 17.6 per cent below their 2014 peak. Since then, the top end of the market has faced setbacks ranging from Brexit to tax changes and most recently the pandemic which has kept foreign buyers away. Many Asian buyers, particularly those from China and Hong Kong, were reluctant to visit London because of onerous Covid restrictions when they returned home while Russian buyers have also completely dried up since the start of the war in Ukraine.

This means wealthy Britain-based buyers continue to dominate the market’s top-end. With less reliance on the need to borrow money, this group remains relatively unaffected by the issues in the mass market such as rising interest rates and the cost of living crisis. A combination of these factors, plus the looming threat of a recession, means some experts have predicted house prices in the mainstream market will cool towards the end of the year.

Alex Christian, London director at Savills Private Office, said some foreign investors were starting to re-emerge in the prime London market, especially Asian buyers.

“London still looks like good value in a historical context, with prices well below the 2014 peak, and the pound remains weak against the American, Singapore, and Hong Kong dollar, as well as the Chinese Yuan, meaning that London property is looking like an increasingly good investment opportunity to buyers in these markets.”

He added: “Above all, prime central London’s reputation as a safe haven for international investment remains, and it is also seen as a secure bet to hedge against inflation.”

Alex Woodleigh Smith, managing director of Knightsbridge buying agency AWS Prime said the sector was seeing a correction in the value of prime central London property following the sharp decline experienced between 2015 and 2022, coupled with an ongoing shortage of stock.

“Add to this, a reinvigorated pool of domestic buyers and the re-emergence of international buyers fighting over limited supply and it is easy to see why scarcely available properties in the best addresses in London have become so irresistible. As a result, our summer has been anything but quiet”.

There has been a distinct increase in confidence in the prime London property market, which is resulting in more interest and an broad cross-section of investors from around the world investing in London.

Antony Antoniou, director of Trellows Luxury Homes said:

“As a major brand in the luxury market, we have noticed a significant increase in interest in the prime London market, with many of our most sought-after properties selling off-market, or before they even hit the market.”

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London market benefiting from frozen Russian property sales

London market benefiting from frozen Russian property sales

London market benefiting from frozen Russian property sales

Sanctions against Russians slow down supply of high-end property in London

The war in Ukraine is making it hard for even unsanctioned Russians to sell exclusive residential property in Britain, adding to a shortage of supply that has helped drive up house prices in prime locations, real estate sources say.

Russian oligarchs, Middle Eastern oil barons and billionaire Chinese entrepreneurs have been on a spending spree on London real estate over the past three decades, snapping up trophy homes and high-end commercial property.

But the four-month-old invasion of Ukraine, which Russia calls a special military operation, has prompted Britain to slap sanctions on more than 1,100 Russians it says have ties to the Kremlin, spreading unease and freezing house sales in so-called Londongrad, agents say.

“There have definitely been a number of transactions that have not gone through, two in excess of 40 million pounds ($49 million),” said Charlie Willis, CEO of property broker The London Broker, adding that in both cases, the buyers were advised not to proceed “just because the seller was originally Russian”. He declined to give further details.

THE BIG SQUEEZE

A widespread shortage of available properties has pushed up prime London prices by 4.7% since the invasion, according to agents Benham & Reeves, although prices in Belgravia and Knightsbridge – popular locations for Russians – have climbed slightly less, at 3.3%.

“The market’s being fuelled by a lack of supply,” said Geoff Garrett, director at mortgage broker Henry Dannell.

The number of prime central London residential sales was down 30% between March and May compared with last year, though still up on pre-pandemic levels, according to property data firm LonRes.

Estate agent Aston Chase estimates there are over 150,000 Russians living in London who between them own eight billion pounds of real estate assets, businesses, and other investments in Britain.

But Mark Pollack, Aston Chase’s co-founder, says wealthy Russians are increasingly cautious about being caught up in the web of sanctions.

“Russians aren’t buying (in the same way) and they are not selling, not necessarily because they don’t want to in some instances, but because they probably can’t or it might be sensible to hope the … dust settles,” he said.

Britain in February scrapped its so-called “golden visas” for wealthy investors and last month announced plans for a new economic crime bill, intended in part to identify the owners of property in Britain and combat illicit finance, although critics say loopholes remain.

Henry Sherwood, managing director of The Buying Agents, which focuses on properties starting at around five million pounds, said the crack down had helped dash hopes the war and sanctions might lead to a flurry of cut-price Russian sales.

At the beginning of the war, “we had people ringing up saying: ‘Have you got any Russians selling?’,” he said.

But he added: “The more discreet don’t want to have anything to do with them. Our buyers don’t want to be associated with firesales – they don’t want to get into a transaction that will never happen.”

One unsanctioned Russian failed to secure three lawyers before finding one willing to help him sell an expensive London property, a senior executive at a property development firm on the other side of the deal told Reuters.

Russian tenants including students are also finding it hard to transfer funds due to sanctions, forcing them to withdraw from the market in London, said Marc von Grundherr, director at Benham & Reeves.

Unprecedented Western sanctions on Moscow, the withdrawal from Russia of scores of Western companies and pressure on London’s advisory companies to cut links with Russian clients have driven some Russian buyers to friendlier property hotspots such as Dubai or Istanbul.

One Russian client, Pollack said, had pulled out of buying an 18 million pound London apartment when Russian tanks rolled into Ukraine in February because they were nervous about the political rhetoric in Britain. They still want a London home, but have halved their budget, he said.

But buyers from other regions are helping to keep the London market buoyant.

International buyers have accounted for at least a third of property purchases in prime central London locations in every quarter between 2011 and 2019, according to data from Statista.

Vic Chhabria, managing director at agent London Real Estate Office, which specialises in new constructions as well as high-rise condominiums and luxury homes, said his appointment diary was full, with most interest from buyers in Singapore, Hong Kong and Mumbai willing to spend between two and 20 million pounds.

A prolonged war, tighter regulation, rising interest rates, raging inflation and brutal stock market drops could yet take the heat out of some of that growth, agents added.

“The property market has been flying over the course of the last two to three years,” said Garrett. “All of these cycles have to slow.”

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Property 115% more likely to sell in April

Property 115% more likely to sell in April

The chance of a vendor selling a property is at its highest level for a decade, research claims.

The continuing imbalance between supply and demand meant that properties sold faster and more easily in April.

Propertymark’s latest member data showed that while the average percentage of stock sold in April over the past 10 years is 20%, it hit 43% this year – a 115% rise.

The trade body’s Housing Market Report found there were nine sales agreed on average per member branch in April compared to the December low of only five.

This figure is lower than the peak of 14 sales per branch during the stamp duty holiday of 2020–21.

However, Propertymark said it is in line with the long-term average for April of eight sales per member branch.

The average number of properties for sale per member branch remained low in April at 20, while demand remained high at 100 house hunters per branch.

This contributed to 39% of respondents stating that most sales agreed in April were above asking price, according to the report.

Nathan Emerson, chief executive of Propertymark, said: “With fewer properties available to buy, it wouldn’t be illogical to assume that estate agents would be witnessing less sales being agreed.

“However, the number of sales agreed remains steady when compared with long term trends and agents report that sellers were 115% more likely to sell their home in April.

“This is due to the desire to buy a home remaining strong, and although the heights of prices being achieved may well start to cool, this trend is unlikely to change by a great deal.”

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House prices still rising but that could change soon

House prices still rising but that could change soon

The current climate could be short lived

House price growth hit a five-month high in February, according to Land Registry data but there are warnings that this will be short-lived. The Land Registry’s latest House Price Index shows UK property values rose 10.9% annually in February 2022.

That is the highest growth figure since September 2021, which coincided with the end of the stamp duty holiday on purchases up to £250,000.

This puts the average UK property price at £276,755. Annual house price growth was strongest in Wales where prices increased by 14.2% in the year to February 2022.

The lowest annual growth was in London, where prices increased by 8.1% in the year to February 2022.

Overall, UK prices were up just 0.5% on a monthly basis though, which may reflect recent warns that growth is set to slow. Other data revealed in the index for December 2021 also showed a sharp drop in transactions.  UK volume transactions decreased by 47.1% in the year to December 2021, according to Land Registry figures.

Sales in England decreased by 52.5% annually in England, by 18.1% in Scotland, 47.3% in Wales and by 16.9% in Northern Ireland.

“Soaring inflation, the rising cost of living, high energy bills and a lack of support from the government at last month’s Spring Statement mean many people are feeling the squeeze financially. The recent introduction of the new energy price cap and the national insurance increase has further heightened the pressure.

“With wages failing to keep up, the increased costs of moving home will likely put off prospective buyers and taking a first step onto the property ladder will be pushed out of reach for many. As a result, we could see house prices dip over the coming months.

“While house prices have remained robust for the time being, how the housing market truly reacts to the current circumstances is yet to be seen. However, it is unlikely that house prices will be able to continue rising at the same rate seen in recent times – particularly against the backdrop of an economy already trying to recover from the impact of the pandemic.

“If a slowdown does begin to materialise, a gradual fall in house prices is expected as opposed to a sudden drop. At present, there remains too much demand and too little stock, so house prices will likely remain high for some time yet.”

“The level of housing supply is 32% lower than before the pandemic and demand is up 134%.

“These latest figures suggest that the market continues to remain extremely competitive but the cost of living crisis may be a key contributor preventing home buyers and sellers coming onto the market due to financial uncertainty.

“However, slight growth in the number of properties coming to the market is being seen which is a positive shift in the right direction as a closing in the gap of supply and demand will enable house prices to start to stabilise.”

“These numbers show house prices continuing on their apparently inexorable upward path but that’s not quite what’s happening on the ground now.

“Demand is still well ahead of supply but concerns about the rising cost of living, squeezed pay packets and potentially further interest rate rises, are reducing price growth and transaction numbers.

“Looking forward, we expect activity to return to more ‘normal’ pre-pandemic conditions as supply picks up as part of the usual spring bounce.”

Whilst it is inevitable that the current growth cannot be sustained, the effect of debt erosion by inflation, combined with unprecedented demand, should prevent a drastic fall, but growth will certainly slow down towards the end of the year. It is vital that measures are taken to ensure that is is gradual slow-down and not a hard bump, otherwise we could experience a loss of confidence in the market not experienced since the early ninteies.

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Tips to make your home sell faster

Tips to make your home sell faster

Tips to make your home sell faster

Preparing your home for viewers is important. It will not only ensure your property sells faster but for a higher sale price; potentially adding thousands of pounds to its value.

Declutter – but keep it looking like a home

Get rid of items that have accumulated. Put it in storage, sell it, give it away or bin it. Consider removing any bulky furniture that makes the room feel small and replacing it with smaller furniture. People need to be able to envisage what the property would look like if they were living there. People often find this difficult, so make it easy for them to see all the fantastic living space you’re offering them. But, don’t make it look like a generic hotel; leave some personality. Apart from anything else, it gives unimaginative buyers suggestions as to what they might do. People are often buying into a lifestyle as much as a property.

Give it a lick of paint

Giving your walls a fresh lick of neutral paint will make your home seem lighter and bigger, create a blank canvass, but not a clinic! It will enable the viewers to more easily imagine how they would adapt the rooms to their needs. It will be easier for the buyers to move in and use the rooms immediately than if the walls were still bright purple or lime green.

Maximise kerb appeal

Kerb appeal creates a lasting first impression – most buyers make up their minds in the first few minutes of arriving at a property.

A survey of more than 2,000 UK adults conducted by YouGov, revealed the most important features for kerb appeal were well-maintained windows and a roof that appeared in good condition. A well-maintained front garden, pathways and fences and a well-painted frontage were also important. See how much it costs to do some simple updates to the exterior of your home to enhance its kerb appeal and value. Don’t forget to clean any stains from the drive and have any block paving professionally cleaned and water sealed, to give it a beautiful sheen.

Fix & Clean

Make any minor repairs – holes in walls, broken door knobs, cracked tiles, torn or threadbare carpets. Many buyers want to move in without making changes, so allow for this. Clean everything until it sparkles. Get rid of limescale, clean and repair tile grout, wax wooden floors, get rid of odours, hang up fresh towels. This will make the place more appealing and allow viewers to imagine living there. Tidy the garden: cut bushes back, clean the patio and furniture of lichen and dirt, and cut the grass. While this doesn’t add much value to your home, it makes it more likely to sell as people visualise themselves using the garden.

Update the kitchen

The kitchen is the most valuable room in a house. It is worth the most per square foot and can make the difference when buyers are unsure. Consider refacing your kitchen cabinetry. This is much cheaper than installing new cabinetry and often as effective. Upgrading kitchen counter tops is expensive, but can add serious value. Declutter the surfaces and just leave a bowl of fruit out. Take out any bulky appliances that you aren’t using. Consider upgrading the plumbing fixtures and white goods, but keep in mind that while that could make your property sell faster, you will be unlikely to recoup their full value. Consider giving it a detail clean, don’t miss anything including the grout between the tiles!

Use Mirrors to make space

Wall mirrors make a room look much bigger and lighter. Consider putting some up, especially in smaller rooms or hallways. Clean windows inside and out, and replace any broken light bulbs. Making the place feel light and airy makes rooms feel bigger and the property more attractive. Ensure that you have lamps on in any dark corners. Take your time and plan this carefully, if it is done properly, your home should feel bigger, but the mirrors will not be obvious.

Light a fire

If it’s a cold evening, or even chilly day, light your fire. This will make your home feel warm and inviting. If you don’t have a fire then ensure the fireplace is clean.

Dress your home

Make sure the windows are properly dressed with blinds or curtains as naked windows make a place feel impersonal and run down. Buy some cheap ones if necessary. Plants and flowers bring colour, life and light to a room and also smell wonderful. So does that fruit bowl on your kitchen counter.

Smells Sells

Win their hearts with beautiful smells. Bad smells are the single biggest turn off for prospective buyers. Don’t just cover them up, fix the source of the smell. Clear drains, wash bins, open windows, air the kitchen from old cooking smells, get rid of furniture that is embedded with cigarette smoke, and wash any grimy bed sheets. If you are a smoker, place bowls of vinegar around the house and leave out for three days. Though the vinegar will smell when you open the windows it will disappear quickly taking most of the stale cigarette smell out with it.

Conversely, good smells can make a property feel like an alluring home. While it might be impractical to bake fresh bread, cakes or brownies for every viewer that visits your home, you could perhaps brew some fresh coffee.

Display & presentation

Good presentation is everything. Your home must be a meticulously prepared show house, for every viewing, this is hard, especially after five or ten viewings, but one emotional bid from a buyer who falls in love with your home could mean thousands more in your final selling price.

Summary

More often than not, people looking for property, are working to a set criteria, price, location, garden, schools, ect. More often than not, they know what type of property they will be viewing, before they see it, so aim to exceed their expectations. Most buyers make a decision to buy in the first twenty minutes, so make every one of those minutes count.

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Russian sanctions won’t hurt prime London claims high-end agent

High end estate agency Savills says the imposition of sanctions on Russians, amid new measures obliging overseas buyers to be more transparent about their wealth, will have little effect on the prime London housing market.

Mark Ridley, chief executive of Savills, says the company;’s own figures suggest 1.4 per cent of the housing wealth in prime central London is Russian owned,, while under 0.1 per cent of the agency’s own business came from Russia.

Earlier this week Savills said in relation to its own activities within Russia: “Savills is appalled by the scenes of humanitarian tragedy which are unfolding across Ukraine, has already made significant donations to humanitarian relief agencies working in the Ukraine and neighbouring countries to help alleviate this suffering and is supporting those of its people who are personally affected.”

Ridley’s comments come alongside Savills’ latest trading statement, which show record sales and profits for 2021.

The company – which operates in the commercial and consultancy fields around the world as well as selling high-end homes in some of the globe’s wealthiest countries – saw revenue rise 23 per cent last year to £2.1 billion.

Profits more than doubled to £183m and dividends included a special payment to shareholders to compensate for a cancelled payout at the start of the pandemic.

Ridley says it is “a thank you to shareholders who supported us”.

He adds: “Savills delivered a record performance in 2021 reflecting the significant recovery in both residential and commercial transactional markets supported by growth in our less transactional investment management, property management and consultancy businesses.

“The group has started 2022 in line with our expectations and the strength of our balance sheet supports our growth strategy to pursue further complementary acquisitions and significant recruitment across our global business.”

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Rise in buyer interest for renovation projects

Buying agency Stacks Property Search is reporting g rising buyer demand for wrecks requiring significant levels of renovation.

The agency says that in the current market, where demand for property outstrips supply, more buyers struggling to find what they want, are instead seeking big refurbishment projects or a knock-down and rebuild.

James Law of Stacks says: “Property prices have increased significantly over the course of the pandemic, in some areas by as much as 30 per cent and when buyers do find something they want they’re shocked by the price.

“For example, reluctant to spend £1.2m on something that’s ready to move into that would have cost under £1m two years ago, they start seeking something for £800,000 that needs substantial work.

“The harsh reality is that this strategy is not a certainty. The cost of builders and building supplies have increased by as much as property, and everything is difficult to come by.

“Quotes are coming in at eye-watering levels, and there’s no guarantee that the price will be fixed over the course of the project as prices continue to rise due to a range of factors – Brexit, the pandemic, and energy prices to name the headliners.

“Add to that the fact that builders’ lead times are double or three times what they were two years ago, and the best ones are booked out for months or sometimes years in advance.”

His Stacks colleague Ed Jephson adds: “Buyers are constantly looking for higher quality, and sometimes the only way to achieve this is to do it yourself. Future-proofing from an eco point of view is becoming more important, and buyers are increasingly aware of running costs.

“Buying an old property that is perfect aesthetically but requires retro-fitting makes little sense, so in this respect taking on a project is more sensible in the long term.”

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High loan-to-income mortgages: new home loans could give borrowers an extra £200k

Eligible homebuyers could get a mortgage worth seven times their salary for the first time in over a decade.

The new product from online mortgage lender Habito comes after the Bank of England separately announced plans to relax lending rules in December.

To qualify for Habito’s higher loan-to-income loan, applicants must have a basic salary of £75,000 or more per year.

Alternatively, one applicant in a joint application can borrow up to seven times their salary if they are qualified, practising and registered in one of 14 listed professions and earn a minimum of £25,000. Buyers must also have a 10 per cent depositand only one applicant in a joint application can borrow up to seven times their salary

The professions eligible for the mortgage are: police, firefighters, nursing, paramedics, doctors, accountants, barristers, teachers, engineers, lawyers, dentists, architects, surveyors and vets. Habito says this is because these professions offer a reasonable prediction of future earnings, job security and employability.

How much can I borrow for a mortgage?

Since the interest rate stress test was introduced in 2014 to make sure borrowers could afford to service their mortgage if interest rates rise, most lenders will only offer a maximum loan-to-income ratio of 4.5 times earnings. This has put buying a home even further out of reach for many buyers, especially in London where the average property costs 11.7 times the average salary.

Habito’s new lending rules could increase the amount a solo buyer earning £75,000 could afford to pay for a home by more than £200,000.

If their borrowing was capped at 4.5 times their income they could borrow £337,500. With a 10 per cent deposit this would get them a home worth £371,250. Borrowing seven times their income would offer £525,000. Adding the 10 per cent deposit would buy a home worth £577,500.

For joint applicants where one works in the specified professional fields and earns £25,000 and the other applicant also earns £25,000, their borrowing would be capped at 4.5 times combined salary, or £225,000. With the Habito One mortgage they could potentially get seven times one salary and five times the other, meaning they could borrow £300,000.

Is a higher LTI mortgage risky?

The online mortgage broker announced the enhanced lending criteria on its full-term fixed rate Habito One mortgage, which allows buyers to borrow at rates starting from 2.99 per cent for the entire term of their mortgage.

Borrowers on a fixed-rate mortgage usually need to remortgage after a certain period of time, often two, five or ten years, or else find themselves slipping onto their lenders standard variable rate, which can be expensive.

Habito says it is able to offer the higher loan-to-income mortgages because the interest rate on the loan is guaranteed for the entire length of the loan, reducing the risk of the borrower not being able to afford payments in future.

Daniel Hegarty, founder and CEO of Habito, said: “Longer, fixed-rate mortgages mean that customers are completely protected against any threat of fluctuating interest rates, in a way that shorter fixes of two or five years mortgage deals don’t allow for.

“As a lender that considers every applicant’s case individually, we’re confident that with suitable criteria in place, in the right circumstances, eligible customers can safely and securely boost their borrowing to buy the home that truly suits their needs and their life plans.”

Full-term fixed rate mortgages are not common in the UK but are already popular in other countries including France, Denmark and the US.

This is partly because British buyers worry about hefty early repayment charges to get out of a mortgage during the fixed period, for example if they need to sell their home.

Will I be able to get a mortgage at seven times my salary?

Some mortgage brokers expressed doubts about how many buyers would actually be offered mortgages at seven times income.

Mark Harris, chief executive of mortgage broker SPF Private Clients said: “With current regulations restricting each lender to 15 per cent of applications at over 4.5 times loan-to-income, one wonders whether lenders can get the volume of borrowing to truly make a difference.

‘While seven times income sounds high, will borrowers be able to get to that level once existing affordability rules are enacted? Even at lower loan-to-values, borrowers do not always hit the theoretical LTI caps.

“For those with one of the professional vocations listed, existing lenders already offer enhanced LTIs, so it is worth shopping around to find the best deal.”

Habito said that due to longterm fixes not being subject to the same regulations as short term fixes, the lender has no percentage cap on the volume of lending it can do at seven times.

Colin Payne of Chapelgate Private Finance pointed out that key workers pay significant pension contributions each month, making larger mortgage repayments out of their take-home pay potentially unaffordable.

He said: “The irony is it adds fuel to the fire in terms of house prices making that ‘forever home’ more unaffordable for many. It feels like a headline to increase enquiries and then offer alternative lending options, a ‘sprat to catch a mackerel’, and that cannot be the best outcome for buyers.”

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Plans to force buy-to-let owners to pay up to £10,000 to boost energy efficiency

  • Campaigners are calling for plans to charge landlords up to £10k to be scrapped 
  • Plans are for all new rental homes to have an energy rating of C or above 

Campaigners are urging the Government to scrap proposals to make landlords pay up to £10,000 to improve the energy efficiency of their rental homes.

The National Residential Landlords Association suggested that landlords could not reasonably be expected to pick up the tab in the way that the Government is suggesting for stringent new rules affecting buy-to-let properties.

In an official statement, NRLA said that the plans were based on the ‘misguided assumption that all landlords are property tycoons with deep pockets’.

In a consultation that closed in January, the Government proposed that from 2025 where a new tenancy agreement is signed, the property will need to have an Energy Performance Certificate rating of C or above.

From 2028, all rental properties will need to meet the new standard, even where it is not a new tenancy agreement.

The Government has suggested that, in meeting these targets, landlords should be expected to pay up to £10,000 to make the necessary improvements.

However, the NRLA said that this imposed cap fails to accept the realities of different property and rental values across the country.

It follows research from NRLA that showed private landlords making an average net income from property of less than £4,500 a year. (Scroll down for more information about how this figure was calculated.)

The National Residential Landlords Association is calling on the amount that landlords should be expected to contribute to be linked to average market rents in any given area – known as broad rental market areas – as calculated by the Valuation Office Agency.

Under the NRLA’s proposals, this would mean the amount a landlord would need to contribute would gradually taper from £5,000 to £10,000, taking into account different rental values – and by implication, property values – across the country.

VAT and council tax reductions

Alongside this, the NRLA is calling for a package of fiscal measures to support property investment.

It said these should include the development of a decarbonisation tax allowance, where VAT would no longer apply to energy efficiency and low carbon work.

And it said council tax should not be charged where energy improvements are being made to rental properties when they are empty.

Ben Beadle, of the National Residential Landlords Association, said: ‘We all want to see as many energy efficient rental properties in the sector as possible.

‘Besides being good for tenants, improvements made to rental properties ensure they become more attractive to prospective tenants when being marketed by landlords and agents.’

However, he added: ‘The Government’s proposals for the sector are not good enough.

‘They rely on a misguided assumption that landlords have unlimited sums of money and fail to accept the realities of different property and rental values across the country.

‘Ministers need a smarter approach with a proper financial package if they are to ensure their ambitious objectives are to be met.’

David Reed, of Richmond estate agents Antony Roberts, said: ‘We all want to see improvements to energy efficiency but If these proposals come to fruition, there’ll be a rush of landlords with property in vast swathes of suburbs – where older, less efficient properties make up a greater proportion of the stock – selling rather than incurring what could be considerable costs in retaining an investment in property.

‘With yields so low, returns barely meet costs as they are, especially as the latter have grown significantly in recent years either directly (Tenant Fees Act and electrical regulations) or indirectly (unable to offset mortgage interest).

‘Tenants love charming period conversion flats in good commuter territory and seldom is efficiency/an EPC rating at the forefront of the search criteria, whereas location and provision of attractive accommodation win hands down. There are simply not enough newer, in theory more efficient, properties being constructed to meet tenant demand.

‘The private rental sector vitally needs a healthy supply of good property and landlords who own one or maybe two rental properties make up a large sector of the market. Many are already disgruntled by recent changes and longer-term plans are under question. If they leave, the effect on tenants will be hard felt – a further restriction of supply giving more upward pressure on rental and lack of choice.

‘Hopefully consideration will be given to where there is no easy-fix or realistic programme of improvement to achieve grade C status or better.’

How much do landlords make?

Private landlords make an average net income from property of less than £4,500 a year, according to the The National Residential Landlords Association.

Here is how the NRLA reached that figure… 

The English Private Landlord survey said that the average – median – gross rental income for a landlord before tax and other deductions is £15,000.

 Average costs for landlords would be:

– Repair and replacement of furnishings – based on the previous tax exemption for 10% of annual rent (£1,500)

– Cost of a gas safety certificate (average £80 required annually – checkatrade average)

– Electrical safety check (average £265 performed every 5 years. £53 annually – checkatrade average)

– Deposit protection (£13 from TDS)

– Tenant referencing cost (for two tenants £49 NRLA tenant referencing)

– Interest-only mortgage for the average UK property (£250,000) with a 20% deposit (cheapest available £6,096 annual)

– Insurance (£531.15 for building and contents insurance from Hamilton Fraser using average floor space for PRS property https://www.statista.com/statistics/292206/average-floor-area-size-of-dwellings-in-england-by-tenure/)

– Agency fees (£1200 based on 8% agency fees)

The NRLA based its calculation on an average landlord of a house let to a couple with an interest-only mortgage, and assumed that tenants move annually.

Total gross rental income – £15,000

Repair and replacement costs – £1,500

Tenancy management costs – £726.15 (includes average cost of insurance, gas safety certificates, 1/5 of the EICR cost, deposit protection and tenant referencing)

Agency fees – £1,200

Total deductions before tax and mortgage costs – £11,573.85

Amount that can be taxed – £2,314.77 (£11,573.85 x 0.20)

Tax after mortgage interest relief accounted for – £1,095.57 (£2,314.77 – (£6,096.00 mortgage costs x 0.20)

Remaining balance after Tax – £10,478.28 (£11,573.85 – £1,095.57)

Mortgage costs – £6,096.00 (based on cheapest available 80% Loan to Value mortgage on the average property in the UK of £250,000)

Remaining balance after all average costs deducted – £4,382.28 (£10,478.28 – £6,096.00)