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Tue 27th May, 2008
Posted in Consumer Credit, Personal loans, Homeowner Loans, UK Finance, mortgages, Homeowners, House buying, Buy to let, Financial products, Property, Financial news, Housing news, Borrowing, Secured loans, Rental property, Debt management at 1:04 pm by admin
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As a result of a short supply of liquidity many home loan deals are being withdrawn by banks from the market as well as turning away an increasing number of borrows.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, Consumer Credit, Personal loans, Homeowner Loans, UK Finance, Credit Card, Consumer debt, Buy to let, First time buyers, Credit record, Property, Unsecured loans, Financial news, Borrowing, Personal debt, Secured loans, Debt management, Missed payments at 4:44 pm by admin
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 Consumer Credit, UK Finance, mortgages, Homeowners, Buy to let, First time buyers, Property, Financial news, Housing news, Tenant loans at 2:11 pm by admin
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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Fri 27th Jul, 2007
Posted in Bad Credit, Consumer Credit, Banking, UK Finance, mortgages, Consumer debt, Homeowners, House buying, Buy to let, Property, Financial news, Housing news, Borrowing, Personal debt, Secured loans, Rental property, Fraud at 12:05 pm by admin
The devastation caused by mortgage fraud is becoming a major problem in the UK. It costs lending companies and homeowners millions of pounds each year. However, most of it cannot be prosecuted, because many of the fraudsters are from foreign countries that do not collaborate with UK enforcement authorities.
Mortgage fraud takes many forms, including stealing property using various methods of deception, obtaining a money transfer by deception, signing mortgages, and selling third party homes.
Victims are left with no hope of proving that they were not involved in the scam and are accused of hide the proceeds of the scam. Most victims hope that they are protected by banks and loan lenders, but sadly this is not always the case. Many people have been left with 40 year mortgages in their name and what appears to be a history of bad debts and defaults on secured loans.
The Department of Productivity, Energy and Industry (DPEI) closed a buy-to-let scam, in 1995, which promised to help investors make money in the property market. Three companies linked to the scam ended up at the High Court, following confidential investigations by the DPEI.
These companies took “substantial sums of money” and promised that they would help clients to build a portfolio worth £1 million a year.
In 2005, DPEI Minister Gerry Sutcliffe said: “These companies knew that their clients, who had all invested substantial amounts of money, couldn’t make anything like the returns that were promised. The schemes were completely misleading and set up with the sole aim of parting people from their money.”
Consumers are warned to avoid any investment scheme that promises too much, or very little risk. They are also warned to avoid anything that asks for personal information before explaining the company’s intent.
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Mon 4th Jun, 2007
Posted in Bad Credit, Consumer Credit, Homeowner Loans, UK Finance, Remortgaging, Consumer debt, House buying, Buy to let, Property, Financial news, Housing news, Borrowing, Secured loans, Rental property, Bankruptcy at 11:32 am by admin
With buy-to-let the current ‘gold mine’ for young investors, many are finding that their dreams of wealth are quickly turning into a lifetime of pain, and even bankruptcy.
A new study reveals that almost one third of landlords have less than one year experience. This is no bad thing, but novice investors may be less adept at budgeting for interest payments, taxes, and repairs, on their newly acquired properties.
Adrian Turner, chief executive of the Association of Residential Letting Agents (Arla), said: “Buy-to-let investors are starting the new year in an optimistic frame of mind. Private individuals have taken over as the main drivers of the sector and it is clear that they are here to stay.”
However, rental yields hit a five-year low of 5.74pc in 2006. Landlord Mortgages, a specialist buy-to-let broker, said that recent buyers face an income crunch as short-term discounted mortgage deals revert to higher variable rates. This could hit them sooner than expected.
Many have also forgot to take into account that rents will drop, as supply increases, about the same time that their mortgages become more expensive. The bad news increases further for those who remortgaged to finance repairs or took out a secured loan against the property to pay for improvements.
Lenders are tempting new landlords with buy-to-let mortgages with rates of 3.99pc. But after the expiry of incentive periods, the cost typically rises to well above the average rental income yield. Leaving the landlord paying out more money than is taken in.
Adrian Turner said: “This new breed of landlord understands that residential property investment can, and must, take account of the ups and downs of the sales and the rental cycles. They are not spooked by scare headlines about housing.”
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Thu 17th May, 2007
Posted in Consumer Credit, Homeowner Loans, UK Finance, interest rates, mortgages, Homeowners, House buying, Buy to let, Property, Financial news, Housing news, Borrowing, Secured loans, Rental property at 11:02 am by admin
UK consumers who have invested in the buy-to-let market, or are planning to increase their portfolios, are sighing in relief as economists predict that another interest rate hike this week will not slow their quest for wealth.
Despite recent interest rate increases, the buy-to-let market remains active, according to Paragon, a leading mortgage firm.
Paragon said that landlords are still planning to increase their property portfolios, and were to increase the value of their portfolios by 4.8 per cent in the next year.
The firm has seen a “sustained” growth in rent in the past quarter. Rents rose from £9,665 in November to £10,334 in February, an increase of 6.9 per cent. This will bolster the buy-to-let market, even for investors who are planning on securing loans on their current properties.
“Suggestions that buy-to-let activity is influenced by fluctuations in interest rates, with business going up when rates fall and going down when rates rise, is unfounded,” commented chief executive of Paragon Nigel Terrington.
Birmingham Midshires predicted that the buy-to-let market will account for one fifth of all new homes purchased by property investors in 2007.
Many consumers took the plunge into the buy-to-let market last year, hoping that the soaring house prices would improve the rental market. For most, the risk paid off handsomely. Even those who borrowed homeowner loans to finance their portfolio growth have seen a profit.
House price expectations are at their highest since April 2004. Market experts predict that the post-Easter boom will improve the market even further.
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Wed 21st Mar, 2007
Posted in Consumer Credit, Homeowner Loans, UK Finance, mortgages, Homeowners, House buying, Buy to let, Property, Financial news, Housing news, Borrowing, Secured loans, Rental property at 11:19 am by admin
New buy-to-let investors are putting their money into property with optimistic expectations of seeing good returns over the long term, according to research from Mortgage Trust.
The research revealed that 75 per cent of all new landlords expect to keep their buy-to-let property for five years or longer. However, only 26 per cent think they will keep their first property investment for more than 15 years.
Many of today’s buy-to-let landowners are speculating on good returns on the housing market, as opposed to becoming long-term landowners. Survey respondents expect their portfolios to increase by a factor of three in the next decade.
However, there is little information to reveal, accurately, whether the respondents are small time investors with one or two properties, or the conglomerates with millions tied up in their portfolios.
The high tenant demand has forced rents up by 6.9 per cent in the last three months alone. Landlords expect to increase their portfolio and are confident that they will generate enticing income levels that they can reinvest.
Managing director of Mortgage Trust John Heron said: “There is continuing confidence in prospective house price growth and the rewards that can be achieved from capital gain on a property, as well as the rents achievable in the shorter term. All in all, the total returns achievable on a buy-to-let portfolio are an attractive prospect for investors.”
Research from the Homebuyer Show suggests that 47 per cent of landlords are looking to expand their portfolio this year. This is good news for private homeowners, showing that the housing market is still buoyant and encouraging for those looking to take out homeowner loans for home improvements.
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Tue 13th Mar, 2007
Posted in Consumer Credit, Homeowner Loans, UK Finance, mortgages, Homeowners, House buying, Buy to let, First time buyers, Spending, Property, Financial news, Housing news, Rental property at 11:25 am by admin
The buy-to-let mortgage market is expected to grow by 40% by 2016, according to a report from Alliance & Leicester and the Centre for Future Studies.
The report predicts that the rental sector will soar in the next decade, and ‘play pivotal role’ in the future of the UK housing market. However, it is currently feeding the increase in housing prices.
The number of landlord mortgages has grown rapidly in the last five years. There are 767,600 outstanding loans, accounting for 8 per cent if all total homeowner loans. This number is expected to grow to 12 per cent by 2016.
The growing number of students and single parents are feeding the growth in the traditional rental market. However, people seeking flexibility may grow as renting becomes more socially accepted.
The sector will also be encouraged by the rise of professional landlords - those with rental incomes at least on a par with the national average wage.
The average landlord in the UK owns four buy-to-let properties worth almost half a million pounds. London and the South East remain the hub of buy-to-let properties, with 40 per cent of buy-to-let properties in this region.
Stephen Leonard, director of mortgages at Alliance & Leicester, said: “Demand for rented property has been growing steadily in recent years and returns on buy-to-let have increased.
“This growth is expected to continue - as the number of renters rises further and buy-to-let becomes even more attractive to both existing and potential landlords.”
Jon Land, 24dash.com Editor, said: “Property investors are taking advantage of the fact that many young professionals can’t get a foot on the housing ladder and are being forced into the private rental sector where rents have been rising steadily in recent years.”
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Thu 8th Mar, 2007
Posted in Consumer Credit, UK Finance, interest rates, mortgages, House buying, Buy to let, Financial products, Property, Financial news, Housing news, Borrowing, Secured loans, Rental property at 9:30 am by admin
One of the most promising ‘wealth building’ ventures in the UK is currently the buy-to-let market. The lenders have become more lenient, offering money for buy-to-let, which has opened the market to a whole new class of investor.
However, buy-to-let loans often have high fees attached to ‘affordable’ and low-rate loans. Lenders have introduced low-rate, high-fee buy-to-let mortgages to attract new customers.
Landlords are feeling the strain as house prices outstrip rental growth and interest rates increase, many are willing borrow higher loan charges in exchange for cheaper monthly payments.
Mortgage experts are warning borrowers to weigh up the costs carefully, who say the benefits of the cheap rate are outweighed by high fees.
Alan Harper, senior analyst at independent personal finance information provider Moneyfacts.co.uk, said: ‘The idea of lenders offering the choice between products that offer comparatively high interest rates with low fees, and low interest rates with high fees, has been around for a year or two now.
‘Individual circumstances will determine which is the better option in any specific case, but it’s worth bearing in mind the effect a large fee can have over the term of the deal on the overall cost of the mortgage.
‘While getting a low-rate deal may appear an attractive option, it does come at a price – and it’s a price that’s increasing all the time. Whatever the scenario, consumers should seek guidance from a qualified independent adviser before taking on a commitment of this kind.’
A example of high-fee, low-rate loan was launched by Abbey, which offers two and three-year fixed rates at 5.19% and 5.29% respectively, with a booking fee of £3,999 – the largest flat fee charged in the buy-to-let sector.
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Wed 7th Mar, 2007
Posted in Consumer Credit, Homeowner Loans, Banking, UK Finance, interest rates, mortgages, Remortgaging, Homeowners, House buying, Buy to let, Spending, Property, Financial news, Housing news, Borrowing, Equity release at 10:54 am by admin
The economic community was worried about making predictions on the housing market after watching the Bank of England increase interest rates three times in the last few months. The predicted three interest rate hikes in 2007, the first that we’ve already seen, has made economists even more wary.
A report by the U.K. Land Registry, published today by a government agency which records property transactions in England and Wales, showed that house prices increased 0.9 percent in January to an average of £174,827.
Even though the Bank of England increased interest rates, consumer confidence has not dropped. Consumer spending increased 1 percent in the fourth quarter as house prices surged, fueling economic expansion at 3 percent annual pace. The central bank expects growth to increase through 2007.
The U.K.’s property shortage will persist for at least this rest of this generation, Kate Barker, a Bank of England policy maker who advised the U.K. Treasury on the issue, said in a Feb. 23 interview.
“The fundamental problem of housing supply will indeed take a long time to solve, and it’s unlikely we will see it solved in the southeast,” Barker said.
This will create a unique situation where consumers can borrow secured loans against their homes to build wealth. While speculation has never been strong in the UK, many consumers are speculating on housing prices and buy-to-let, even borrowing loans to invest, in the same way that consumers do in the USA.
Loan borrowing is a quick way to build wealth.
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