Interest Rate To Remain Steady

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Despite the fact that some banks have been busy raising the rates on their set mortgages, the Bank Of England seems quite sure that there will be no official rise in this area for some time to come.

The Bank Of England has released a statement putting banks and those seeking mortgages on notice that they have no intention of raising the base rate from its historic 0.5 low any time in the foreseeable future.

This has not surprised many financial experts and many have greeted it as welcome news.

Many experts feel that England is in for a fairly drawn out recovery period from this recession, and see no reason to raise the interest rates at this stage; in fact, a lot of people have expressed the opinion that this could be counterproductive.

This will come as very welcome news for some buy to let landlords who have only recently started to benefit from those low interest rates.

Granted, buy to let loans are very difficult to get at the moment with the hoops that have to be jumped through to qualify, but if you are in a position to buy, the buy to let the interest rates are now very favorable and there is certainly money to be made.

Let’s hope some landlords now start to profit from the interest rate’s record low; it has been a long time coming for this sector.

More Rules for Sale and Rent Back

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It has been an interesting month for sale and rent-back companies with moves to regulate and control this sector going into over drive. In the last blog I talked about the couple who beat an eviction after the sale and rent-back company failed to keep up payments when they took over the mortgage. This seemed a fair and equitable result and now we are hearing that sale and rent-back landlords have less than a month to seek FSA approval to continue trading.

This, in essence, will mean that they must open up their practices to checking by the FSA. They will be required to have an independent valuation of each property done and the customer made aware of it. All this seems like a giant step in the right direction to me. In theory, a sale and rent-back scheme could benefit everyone; it just seems that things were not being done very fairly in this sector up until now. I agree with John Socha, vice chairman of the National Landlords Association, when he says:

“Although sale and rent-back will not stop repossessions, ethical sale and rent-back could be a way for homeowners to remain in their properties but become tenants. Only when sale and rent-back operators are within a more regulated environment can we be confident that consumers will be treated fairly.”.

Regulation is the first step to getting this sorted out and seems to be heading in entirely the right direction.

Family Beats Sale-and-Rent-Back Eviction!

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It seems to be the week for landmark court cases. It was great to see justice prevail in the case of Paul and Amanda Jackson who have beaten a company called Repossessions Stopped in court this week.

The couple entered into an agreement with the sale-and-rent-back company after falling behind in their mortgage in 2005. The agreement was that they would sell the company their home, which they had occupied for twenty years,  and in return the company would allow them to live there indefinitely. The problem is in 2007, less than two years after the arrangement was set up the family were served an eviction notice. The story is that the company had defaulted on the mortgage payments after taking them over from the couple.

The judge showed good sense in my opinion when he ruled that the family were entitled to stay in their home for life, either taking out a new mortgage themselves or renting the property from the mortgage lender who had reposed it.

A spokes person for Shelter ,the charity that bought the action on behalf of the family, had this to say 

“This is a huge and important victory for not only the Jackson family but everyone who is tempted by sale-and-rent-back schemes.
 
I would urge anyone having mortgage difficulties to seek independent advice from Shelter, a Citizens Advice Bureau or other debt counselling organisations before contacting these kind of companies.”

Very sound advice and well worth following

Taxman to Catch Landlord Tax Evaders!

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We have known this was coming and most landlords, who are playing by the rules, welcome its arrival. The taxman is seeking powers that will catch out thousands of buy to let landlords and potentially triple the income they receive from Britain’s 70 000 landlords.

Essentially, the law change they are after will allow them to compel letting agents to hand over the names of all landlords on their books, both past and present. Those of us who are doing things properly and have declared our properties as buy to let and paid the appropriate taxes have nothing to fear from this move, but the thousands of landlords who seek to avoid paying tax by not declaring their properties buy to let could be in for some real trouble. This is especially true as the new power also extends to accountants.

HMRC have already raised an additional 100 million pounds in taxes after a campaign to find out landlords who remained undeclared was a major success for them. They estimate the new laws will provide them with a further 200 hundred million.

As much as we may all moan about taxation, most of us realise it is a necessary evil and pay our taxes just as we should so I don’t think there will be too many legitimate landlords shedding tears over this new law.  If everyone paid the correct taxes then the burden should be reduced for the rest of us, theoretically.

Landlords Claim Back Millions!

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There was a very interesting ruling in the high court last week that could see buy to let landlords claiming back millions of pounds from estate agents.

In a landmark case against a London firm, Foxtons,  the judge presiding over the case ruled that the leasing agreements  made by the firm unfairly overcharged commissions to landlords. Mr Justice Mann even went so far as to describe the charging system as placing “traps and timebombs” for landlords. And the conditions of the agreements that were revealed in court certainly did sound unfair.

Foxtons, which lets out some of the most expensive property in Central London, charged customers 11 per cent commission when a tenant continued to occupy the property for longer than the initial term of the lease, and an additional 2.5 per cent commission payment if a tenant agreed to buy the property from the owner.  The scary thing is, they are far from the only company doing this sort of thing and we can well expect the floodgates to open with aggrieved landlords bringing cases against other estate agencies who have not been playing fair.

Konnie Huq, a former Blue Peter presenter and the public face of the campaign against the unfair charges, described the ruling as a great day for landlords and with up to 26 million pounds likely to be claimed back by landlords it does seem fair comment.

Estate agents all over the country are certain to be quickly dropping their charges to fall in line with this ruling and that can only be a good thing for us in the letting business.

House Prices to Fall a Further 40%?

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Despite the fact that there has been some great indicators that the house prices in the UK may have bottomed out, or at least be very close to doing so, some people are still far from convinced.

In a quite complicated argument this week about the fact that housing still had a way to fall, James Ferguson of the website MoneyWeek outlined why he believes that house prices could fall another 40%.

His very detailed argument is based, partially, on the fact that he believes affordability of houses in this country are still far too high. This figure is worked out by measuring initial home loan payments as a percentage of take home pay. According to James these figures show the housing downturn could be anywhere up to five years from bottoming out.

As a result he recommends that anyone wanting to make maximum profit from property in this country should wait a few years before deciding which one to purchase.

Mr Ferguson is clearly a very intelligent man, and he may well be right but personally I hope that not too many people listen to him because in the tricky way of economics, that is one definite way to make sure his predictions come true.

Mortgage Arrears Start to Come Good

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According to specialist lender CHL Mortgages, things are almost looking rosy in the area of mortgage arrears for both ordinary residents and buy to let packages.

Their figures show that arrears have dropped by 15% from its highest point in February. The most cheerful news is the fact that the indicator the mortgage lender uses to predict the likelihood of future arrears, unpaid direct debits etc., has also fallen substantially.

CHL Mortgages are not talking too much about changes in economic improvement in general, but for the improvement in their arrears situation, however. They are very firmly claiming that their policies have resulted in the  upturn in the situation.

Bob Young, Managing Director at CHL Mortgages, said “In a market short of positives, we believe that these falling arrears levels can be seen as a sign of our competency in the collections department and the strength of our underwriting in what have been particularly difficult market conditions.”

This is probably fair enough as they go to great lengths to explain all the changes they put in place to try to make things run more smoothly in terms of people meeting the conditions of their agreements but, as we all know, you cannot get blood from a stone not matter how great your policies. So, the rest of us can be hopeful that as well as reflecting best practice, this improvement also points to things looking up in terms of people’s personal finances.

Landlords Snapping Up Residential Properties!

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The speed at which landlords are purchasing residential properties seems to be increasing, according to figures released by the Association of Residential Letting Agents (ARLA).

Their figures indicate that the first quarter of this year saw 8 percent of agents report that they had landlords who were purchasing new properties, and the second quarter has seen the figure increase to 16 percent.

Experts looking at this figure are indicating that the increase has two causes. The first is the fact that bank interest rates have remained at their historical low. There is even evidence that the all time low base rates are beginning to have an effect on buy to let loans.

The second reason being quoted is the fact that many experts believe, and are being vocal about their belief, that house prices have bottomed out in the UK. This clearly means that anyone who has cash available will never have a better chance to grab a bargain.

It is great to see landlords getting back in the game and increasing their portfolios, if indeed they are. The buy to let sector has had it particularly hard over the last year and it would be fantastic to see some signs of recovery in this area. The evidence at the moment is hardly conclusive but it is enough to give us a little bit of hope.

Should You Think Twice to Letting Out to Minors?

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A very tricky case that went through the Court Of Appeals recently showed all too clearly the inherent dangers of renting to under 18’s.

A local authority made the mistake of entering into a standard tenant agreement with a minor, and when the minor fell behind in the rent and refused to vacate the authority took the matter to court.  The Court Of Appeals ruled that because an ordinary agreement had been entered into, the landlord was acting in the capacity of trustee for the child and it was therefore a breach of this trust to seek to evict them. In a further ironic twist the court ruled that notice to quit served on the tenant was ineffective because as trustee for the child the landlord should have served the notice on themselves.

Unfortunately, changes in the care arrangements for minors mean that many local authorities are encouraging minors to enter into private tenant agreements to secure accommodation for themselves. To me, this smacks of the government offloading its responsibilities onto the private sector but that is beside the point. 

Easy as it is to feel sorry for these kids, entering into a tenancy with them can spell a major headache for you.

So, unless you can get an adult to take responsibility for them and their tenancy agreement, the advice has to be don’t rent to minors.

Time to Switch to a Fixed Rate Mortgage?

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The writing really does seem to be on the wall for the tracker mortgage. Most of us have really enjoyed the period of plummeting interest rates and repayments. I even admit to being a little gleeful at times, but all good things must come to an end. And it seems most borrowers are recognizing that this particular joy is very close to having run its course.

Figures from Legal & General show 87% of residential borrowers went for certainty when picking their home loan, up from 71% in the first three months of this year. The reason for this is likely to be the fact that people now view an interest rate hike early next year as inevitable.

In terms of which fixed deal people are choosing, two year terms seem to be the most popular and that probably reflects people’s uncertainty about the economic times. Three year fixes are also showing a huge amount of appeal.

It has to be said that people thinking of fixing a mortgage need to get moving on it because the banks are moving like lightening to hike up their fix rate terms. Nationwide increased their rates again this week, making it the second time in under two weeks. You can rest assured the banks have not enjoyed this period of low interest rates and will be keen to get them back up where they believe they belong.

Now is the time to fix if it is something you are thinking about.