House prices 30 per cent higher than 2007 peak
Zoopla’s latest price index shows a 25 per cent fall in the number of homes for sale in the first half of the year compared to H1 2020, underpinning the strong price inflation. The property portal says there is no sign of a demand and supply rebalance in the immediate future.
Sales agreed continue to run at pace with volumes 22 per cent ahead of average levels in 2020.
Buyer demand dipped by nine per cent in the first half of July after the most generous phase of the stamp duty holiday came to an end on 30 June.
However, demand still remains up 80 per cent compared to the average for this time of the year. Family homes are top of the list with demand up 114 per cent compared to the normal conditions.
Northern Ireland and Wales have registered the highest growth of 8.6 per cent and 8.4 per cent respectively, the highest growth in either country.
At a regional level, house price growth is at its highest in the North West up 7.3 per cent and Yorkshire & the Humber is up 6.8 per cent. Meanwhile London trails with annual house price growth of 2.3 per cent.
Nationwide price growth is expected to edge upwards to 6 per cent in the coming months before easing back towards the end of the year.
Grainne Gilmore, head of research, Zoopla, said: “Demand for houses is still outstripping demand for flats. To a certain extent this trend will have been augmented by the stamp duty holiday, with bigger savings on offer for larger properties, typically houses.
“But underneath this there is a continued drumbeat of demand for more space among buyers, both inside and outside, funnelling demand towards houses and resulting in stronger price growth for these properties.
“London has a two-speed market at present with domestic demand driving price growth in the outer boroughs, while the lack of international business and leisure travel is affecting demand in the more global real estate markets towards the centre of London. As Covid progresses at different rates across the world, unrestricted travel may not resume for some time yet, but when it does, demand will start to pick up once more.”
L&G launches equity release portal with access to fixed ERC and RIO deals
The Later Life Mortgages Portal is currently being rolled out to advisers who are being invited to sign up in phases.
L&G says the portal will increase the automation of the equity release application process. Advisers will be able to produce a Key Facts Illustration and track the progress of the mortgage application online.
Products such as the flexible lifetime mortgage and optional payment lifetime mortgage with a choice of either fixed or gilt-linked early repayment charges will be accessible alongside the RIO option.
L&G’s intention to offer a fixed penalty equity release loan was first reported by Mortgage Solutions in May.
Mortgage Solutions understands that the structure for the fixed early repayment charge is: years one to five/nine per cent, years six to eight/eight per cent, year 9/seven per cent, year ten/six per cent, year 11/five per cent, year 12/four per cent, year 13/three per cent, year 14/two per cent, year 15/one per cent and in year 16 there is no penalty.
Advisers welcomed the news that L&G was offering more choice, however, the penalty structure is less competitive than products offered by lenders such as Canada Life and More2Life which are shorter and cheaper.
Claire Singleton, chief executive of Legal & General Home Finance, said: “As the lifetime mortgage market continues its lockdown recovery, operational efficiencies created by technology will play an increasingly important role in helping advisers achieve the best outcome for customers.
“We have created a portal that will make a real difference to the advice process, saving advisers time, offering more choice and greater flexibility.”
Singleton said L&G had introduced fixed early repayment charges to give borrowers more choice and certainty over the penalty they will have to pay should they need to repay the loan early.
Brokers see rise in guarantor mortgage applications as house prices soar
Private Finance says its team has seen a 200 per cent rise in applications for family-assisted mortgages between quarter one and two this year.
As borrowers are forced to raise larger deposits and need help to pass lenders’ affordability assessments to secure bigger mortgages, family or friends are being called on to lend a hand. Brokers are also reporting that some first-time buyers are using the guarantor option to “leap frog the property ladder”.
According to Nationwide the average first home costs 5.6 times income, much higher than the long-run average of 3.7 time earnings.
A report published by the mutual, Future of Home, revealed that a 20 per cent deposit for a starter home was the equivalent of 104 per cent of a first-time buyer’s pre-tax income and would take between six and 16 years to save.
Thanks to low interest rates, those first-time buyers who can get on the property ladder will spend 28 per cent of their take-home pay on mortgage payments, which is just below the long-term average.
However, the affordability of a mortgage varies by occupation. Carers, labourers, salespeople, couriers and other low earners will find their mortgage payments swallowing over 40 per cent of take-home pay.
Chris Sykes, associate director and mortgage consultant, Private Finance, said: “While a low interest rate environment is good for borrowers, it has contributed significantly in driving up property prices – nearly 10 per cent higher than year ago, especially in combination with the stamp duty holiday and changing tastes and needs off the back of the pandemic.
“This has led to us notice a rise in guarantor and joint borrower sole proprietor (JBSP) mortgages in recent weeks as borrowers need to take advantage of friends or family members’ higher income to get the house they want.”
First-time buyers are also opting to skip the first rung of the housing ladder by relying on a guarantor.
“Over the past few years we have noticed many first-time buyers looking to leap frog the property ladder, rather than buying a flat first and then building up equity to buy a new house every few years. Deterred by the cost of stamp duty, people have often turned to parents to try and maximise their affordability and buy a longer-term home straight off the bat.
“But these products don’t come without complication, the older the parents generally the shorter the term so the higher the monthly payments. However we can often use things like interest only to make the loan achievable.”
Big name banks offering JBSP mortgages include, Barclays, Skipton, Clydesdale, Bank of Ireland and Metro Bank. But specialist lenders such as Family Building Society, the Market Harborough, Newbury and Furness Building Societies also play an important part in the guarantor mortgage market, said Sykes.
He added that borrowers who have taken out a JBSP with a specialist lender may have paid a higher interest rate. However, if their circumstances have improved since taking out the mortgage it is worth looking at remortgage options to remove parents from the mortgage and switch to a high street bank.
Fraudulent unauthorised adviser gets four years for stealing client money
His sentencing, by Judge Tomlinson in Southwark Crown Court today followed charges laid by the Financial Conduct Authority (FCA) in May.
Between 1 January 2008 and 31 July 2019 Hudson advised on regulated mortgages, pensions and other investments and appeared to be investing significant deposits on behalf of his clients.
Hudson told his clients their money would be invested in financial vehicles or put to other uses but instead, in some cases, he used the deposits to fund his own lifestyle, repay existing clients or make payments to other individuals.
In total, approximately £2m was deposited by Hudson’s clients.
He was sentenced to four years in prison for one count of fraudulent trading.
He also received two additional terms of 14 months to run concurrently, each reflecting a breach of section 19 of the Financial Services and Markets Act. Section 19 states that a person or company must not carry on a regulated activity in the UK, or appear to do so, unless they are an authorised or exempt person.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Mr Hudson’s defrauding was calculated and persistent over a number of years, preying on victims who believed he was a financial adviser and trusted friend when he was neither of these things. We remind investors to check the FCA’s register of authorised person to ensure any financial adviser is authorised to provide financial advice by the FCA.”
Confiscation proceedings are being pursued by the FCA and any sums recovered will be used to compensate the victims.
Nationwide leads cross industry initiative to tackle housing crisis
The mutual says the pandemic has exacerbated the longstanding issues of affordability, accessibility and the sustainability of housing.
Four action groups will be set up to look for ways to solve the issues causing the UK’s “housing crisis.”
A report, Future of Home, published by Nationwide to coincide with the launch of the action groups, revealed almost 70 per cent of renters surveyed so they thought they would never be able to afford to buy their own home.
Renters who are paying more in rent than a potential monthly mortgage bill are being locked out of homeownership because of tough affordability assessments. In the report, Robin Fieth, chief executive of the Building Societies Association, said: “The question is whether affordability and stress tests are a social good or a blocker on renters achieving their dreams of sustainable home ownership. Is there a better way to assess affordability as part of responsible lending?”
First-time buyers living in Scotland and the north of England have access to the most affordable housing, with house prices three times income which means they can save a 20 per cent deposit in five and half years. Mortgage payments would be around a fifth of their take home pay.
For those in London, the least affordable region for more than 30 years, a starter home costs nine times income and raising a deposit takes nearly 16 years. Mortgage payments would absorb more than 40 per cent of their take home pay.
Sara Bennison, chief product and marketing officer at Nationwide Building Society, said: “I have been so heartened by the generosity of time and spirit shown by all the organisations who joined us for a series of roundtables on the subject. The challenge was how can we move from rehearsing the problems of the past to coming up with practical, workable solutions in the future.
“By thinking about the whole system together and not just the individual components where each organisation plays, we are genuinely excited by the ideas these action groups can table for the mutual good of all.”
Organisations involved in the housing task force include; the Buildings Societies Association, Barratt Developments, Connells Group, Moneysavingexpert.com, campaign group Priced Out, the Association of Residential Letting Agents (ARLA), the National Residential Landlords Association and the UK Green Building Council.
Stamp duty holiday pushes house sales up 220 per cent in record June
It’s the highest number of transactions ever recorded by HMRC in a single month and represents a 220 per cent increase on June 2020, following the three month closure of the housing market as the pandemic took hold.
Although the stimulus of the stamp duty holiday and dearth of house sales at the beginning of the pandemic has exaggerated the rise in sales activity, comparing activity to June 2019 still reveals a 100 per cent increase.
The effect of the stamp duty holiday which made the first £500,000 of a residential property purchase price free of land tax can also been seen in March, when the relief was first due to end.
House sales in the month soared to 183,830 from 145,110 in February.
During the March Budget, Chancellor Rishi Sunak announced an extension to the relief until the end of June before the stamp duty holiday would begin to taper off.
The return to normality
From 1 July to 30 September the nil-rate threshold reduces to £250,000 before resuming to its normal level of £125,000 from 1 October.
Sarah Coles, personal finance analyst, Hargreaves Lansdown, said: “The red-hot property market hit a blistering peak in June, as frenzied buyers raced to complete on their new home before the stamp duty holiday tapered at the end of the month. The question is whether the overheated market means buyers have been burned.
“Unfortunately for these buyers, sellers didn’t hit the market in the same kind of numbers. There’s been a huge imbalance between buyers and sellers during the spring and early summer, which has meant panic buying, bidding wars, and the return of gazumping.
“When the market cools, buyer remorse tends to kick up a gear. The RICS survey in June showed agents expected sales to slow through the summer and into the autumn. Price rises are already showing signs of slowing, and there’s even the potential for them to take a step back if the economy is struggling with new variants when furlough is withdrawn.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “As always, it is transactions rather than the more volatile prices which are a better measure of housing market health. These figures clearly illustrate the frenzied rush to the finishing line for buyers to take advantage before the stamp duty holiday drew to a close.
“However, activity has reduced since, particularly in London, where the savings were greatest. Early signs are that sales will be down significantly but we have noticed nearly all of our transactions are continuing with very few renegotiations. This leads us to believe prices will not be markedly different over the next few months.”
Foxtons looks for buyer for mortgage broker Alexander Hall
Several mortgage advice firms have been approached by third parties acting for Foxtons with marketing packs targeting the acquisition of the Alexander Hall in the last two months.
Mortgage Solutions understands that Clearwater, an adviser brokering the deal for Foxtons, has drawn up a prospectus to show to eligible mortgage advice businesses.
Clearwater is a corporate finance house that specialises in mergers and acquisitions, debt raising and refinancing.
One source, who has been approached with a prospectus but has declined the proposition because they are not planning to expand, said to be an attractive deal the transaction would have to come with a mandate relating to the ongoing relationship between the two businesses.
“Any acquirer of the business would be looking for reassurance that Alexander Hall’s relationship with Foxtons to serve its estate agency branches would continue,” said the source. “Perhaps in the region of a 10-year service agreement.”
One broker firm thought to be an interested party is Pivotal Growth, a new intermediary established as part of a £200m joint venture between LSL and investors Pollen Street Capital.
Simon Embley stepped down as chairman of LSL Property Services to join Pivotal as chief executive in April.
Through funding from LSL and Pollen Street Capital, Pivotal is armed with a war chest of close to £100m to support acquisitions.
Following the publication of Mortgage Solutions’ story, Foxtons confirmed in a statement to the stock exchange that it was reviewing strategic options for Alexander Hall which could include the sale of the business.
Clearwater declined to comment.
LSL said it would not comment on market speculation.
High street key to unlocking 500,000 new homes – Centre for Policy Studies
The retail sector was already struggling before the pandemic, where up to 40 per cent of all retail space was estimated to be no longer needed, but the global health crisis has only exacerbated the decline.
According to a report by think tank the Centre for Policy Studies, Reshaping Spaces, these empty shops could translate into half a million average sized homes. And the potential is likely to be even greater as the estimate was made before the pandemic decimated many major high street retail brands.
By using mixed use regeneration planning, high street and unused commercial spaces can be repurposed to provide facilities such as GP surgeries, education and community centres to increase the opportunities for residential development in areas currently lacking this neighbourhood infrastructure. According to the think tank, mixed-use regeneration such as this could unleash tens of billions of pounds in private finance.
Local councils hold key
Transforming Britain’s high streets, says the CPS, lies in the hands of local councils.
Among the CPS proposals is the requirement on each council to make the first part of its new local plan a commercial assessment of the area’s needs which should be completed by the end of 2022.
Councils would work with developers and landlords to come together with an assessment of what is needed and where. This will release land, bring through mixed-use regeneration and allow land to repurposed for the required number of homes.
Business rates review
The CPS is also calling for an overhaul of business rates. According to the report, business rates are “erratic, too high, deter sensible recycling of commercial space, and are not spread evenly or fairly”.
Business rates mean taxes are seven times higher on commercial property than residential. In the retail sector business rates represent 42 per cent of all taxes paid, which the think tank says is unworkable in the aftermath of the pandemic.
Changes to the business rate retention scheme which incentivise councils to keep hold of vacant commercial premises instead of recycling them are also being called for.
Luke Hall, Minister of State for Regional Growth and Local Government said: “The role of the high street has always evolved and this year it’s even more important that we work together to support change and make sure that they are the beating heart of their local community. This can be achieved with high quality housing and leisure in addition to shops and restaurants, all of which is set out in the High Streets Strategy which was published this week.
‘This report shows how councils can repurpose retail space to help their town centres become more attractive places to live, work and visit.’
Report author and CPS head of policy Alex Morton said: “There is a real opportunity to boost the levels of homes and encourage mixed use regeneration as part of the current planning reforms. Councils need to take a lead and work with partners to see how their local commercial centres will look and create plans that can help Britain build back better.”
Pepper Money launches cashback mortgage range
The cashback feature is available for remortgages on the Pepper 12 to 24 ranges and has been designed for borrowers looking to consolidate debt.
The Pepper 24 line of deals, which are open to borrowers who have had adverse credit registered over the last 24 months, is now available up to 85 per cent loan to value.
Interest rates start from 4.45 per cent and are completion fee-free. Cashback of £500 is available on completion.
Paul Adams (pictured), sales director at Pepper Money, said: “We’re really excited about the launch of Pepper Money’s first ever cashback mortgage. Many customers experienced financial difficulty during the pandemic, leading to missed payments and increased debt.
“With our cashback mortgage, the customers now have a great option to consolidate those debts with the cashback available to assist with the payment of disbursements that are often required during debt consolidation.”
Harpenden BS revamps self-build deal as demand rises
Rates now start from 3.69 per cent for loans between £75,000 and £999,000. For loans between £1m and £2m, a rate of 4.19 per cent applies.
Flexible construction types are accepted and self-build retention releases are not linked to build stages during the project.
Harpenden said its improved range is in response to an increase in enquiries for self-build mortgages following the pandemic.
Craig Middleton (pictured), Harpenden’s mortgage sales manager, said: “Customers are looking to secure a dream property more than ever following significant time spent working and socialising at home during Covid.
“We’re finding customers increasingly want to bring a highly personalised look to their new or enhanced properties, making a self-build project particularly appealing.
“With savings of between 20 and 40 per cent possible compared to buying a similar property on the open market, a self-build project is even more attractive.”