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Tue 27th May, 2008
Posted in Borrowing, Buy to let, Consumer Credit, Debt management, Financial news, Financial products, Homeowner Loans, Homeowners, House buying, Housing news, Personal loans, Property, Rental property, Secured loans, UK Finance, mortgages at 1:04 pm by Steve Smith
It has been revealed by Paragon, the UK’s third largest buy-to-let lenders, that it is suffering from the impact of the global credit crunch and may follow in Northern Rocks footsteps by becoming its latest victim.
The company has said that it can no longer borrow the amount of money it needs in order to sustain its business. The company has decided to cut the number of buy-to-let loans it offers by roughly half in the coming year. Other banks are expected to follow a similar lead.
Other buy to let lenders have also had to take urgent measures to raise ready cash including Bradford & Bingley which is the UK’s biggest buy-to-let lender.
If there is a shortage of available home loans in the buy-to-let category buyers will be sucked out of the market. This will further decrease demand for housing amongst buy-to-let investors and send prices dropping further. Ironically, this raises the price of rental property, as fewer properties are available to rent.
The statements by both buy-to-let lenders provides yet further evidence that the global credit crunch will take down more victims in a similar manner to Northern Rock. At the moment many banks simply cannot raise any liquidity because inter-bank lending rates are so high.
As a result of a short supply of liquidity many home loan deals are being withdrawn by banks from the market as well as turning away an increasing number of borrows. Borrowers looking for credit cards, personal loans and mortgages will find it increasingly difficult in the coming months to get their hands on credit.
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Fri 2nd May, 2008
Posted in Bad Credit, Borrowing, Buy to let, Consumer Credit, Consumer debt, Credit Card, Credit record, Debt management, Financial news, First time buyers, Homeowner Loans, Missed payments, Personal debt, Personal loans, Property, Secured loans, UK Finance, Unsecured loans at 4:44 pm by Steve Smith
With the number of rejections for applications for credit cards on the rise it is becoming increasing difficult to secure credit.
As banks continue to tighten their belts when it comes to lending borrowers are being warned to prepare for rejection when they apply for a credit card. The people that are going to find themselves most likely to be refused are those with imperfect credit histories.
In the recent past it was assumed by most people that only those who had very bad credit histories, recent first time buyers and some buy-to-let investors were the ones who would find it difficult to secure credit. However times have changed in the wake of the credit crunch and more and more people are finding that they too are being rejected for credit.
Customers applying for cards and personal loans are finding that credit scoring has become tighter, with lenders giving more stringent reasons for turning down an applicant. Last year an applicant might have got away with making the odd late payment on a card or loan and it not affecting their credit score, but this year it’s a different story.
It has been revealed that the number of applications for credit cards that are being rejected has gone up by as much as 17% in the past six months. This means that roughly 3.27 million people across the UK have been refused credit in that period. This is a half a million more people than were rejects in the six months leading up to March 2007. Those of us who are most likely to see or application for credit rejected are people in the 25-34 year old age bracket.
Banks are also becoming increasing choosy over who they are willing to lend money to because the pool of money they have to disburse is so much smaller. With so many people looking for bad credit loans or low-deposit home loans, there are going to be a lot of disappointed borrowers.
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Fri 2nd Nov, 2007
Posted in Buy to let, Consumer Credit, Financial news, First time buyers, Homeowners, Housing news, Property, Tenant loans, UK Finance, mortgages at 2:11 pm by Steve Smith
The strong demand in the rental industry is shown in the latest figures on void periods (the number of weeks that a rented property remains empty each year). Voids have been falling steadily over the past nine months, according to research by Paragon Mortgages. The annual average void period is now between 2.6 and three weeks. Tenant demand will remain high as property prices increase.
Keith Astill, managing director of UCB Home Loans, a subsidiary of Nationwide building society, said:
“People are renting for longer because it’s more difficult to afford to buy, which is in turn providing a boost to the buy-to-let sector.”
Halifax claims that UK property inflation is 10.7%. The figure is higher in Scotland, where house prices are have been increasing 15.9% a year.
Higher prices boost the value of the property, but also squeeze yields, decreasing the percentage of house price covered by the rental income. Yields dipped to 5.5% over the past 16 months, from 5.7% in June 2006, according to Birmingham Midshires.
This despite the fact that rents are on a steady increase, with the average increase of 4.5% in the last year to an average of £651 a month.
Tim Crawford, group economist at Birmingham Midshires, said:
“The fundamentals underpinning the buy-to-let sector remain sound. While house price growth is expected to be more subdued near term, reflecting the impact of higher interest rates, the potential for further increases in rents should encourage long-term investors.
“There also remains the potential for healthy long-term capital appreciation in the buy-to-let sector, particularly given the backdrop of more households being formed each year than there are new properties being built.”
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