BoE hints could relax affordability rules
Posted by The Oracle Group on 4th July 2019 -
INDUSTRY
BoE hints could relax affordability rules
A new working paper from the Bank of England hints that strict affordability tests could be relaxed, but only if house prices start to rise. The “Modelling the distribution of mortgage debt” paper addresses a number of factors, including the Financial Policy Committee’s measures to limit the availability of high loan-to-income mortgages. These measures included two factors: an LTI flow limit that limited the proportion of mortgages with LTI ratios of 4.5 or higher to 15% of new mortgages, and an affordability test for borrowers. This effectively required lenders to ensure the mortgage remained affordable with a 3% rise in interest rates. Projecting a scenario where house prices start to rise, the BoE report says: “In this scenario we also assume that banks loosen their underwriting standards, permitting an increase in mortgages with LTI ratios up to 6, and performing affordability tests using a stressed rate of 5.5% instead of the 6.75%.”
Landlords urge councils to crack down on rogue agents
The National Landlords Association is calling on local authorities to give landlords greater protection from rogue letting agents, saying an FOI request had revealed that more than half of the 20 largest local authorities failed to prosecute a single letting agent between 2014/15 and 2017/18, undermining landlords’ efforts to improve the reputation of the private rented sector. The NLA said it knew of instances where agents had let properties to multiple tenants without the landlords’ knowledge, potentially leaving them liable to criminal charges or a fine of up to £30,000. The NLA said Liverpool City Council was the only local authority to have made a significant number of prosecutions, with 13 over the four-year period.
London landlords tell real estate industry to up its green game
London’s commercial real estate owners and tenants must up their game on clean energy and transport solutions, a group of leading London landlords has warned. The call comes after data from The Climate Group, Big Clean Switch and Edie revealed that 40% of London’s greenhouse emissions come from business premises. A statement signed by a list of landlords and occupiers, including Canary Wharf Group and Derwent London pledged to “work together to achieve a cleaner, healthier London”. “As the landlords and tenants of these properties, we have the potential to help London become a global beacon of climate action and clean growth,” the statement continues.
FIRMS
CBRE swoops for Telford Homes
Telford Homes has recommended that shareholders back US real estate giant CBRE's £267m bid to buy the business. CBRE plans to cash in on the UK’s growing build-to-rent market (BTR) and, under Jon Di-Stefano's direction, Telford has been placing greater focus on the BTR market to help offset waning London house sales. The UK housebuilder's pre-tax profits fell 13% to £40.1m for the year to the end of March, with steeper discounting and the wider Brexit-related slowdown driving the decline.
Purplebricks' losses double
Purplebricks’ new boss Vic Darvey has scrapped his predecessor’s global expansion strategy, pulling out of the US and Australia to focus on UK growth, after the online estate agent almost doubled its losses to £54.9m for the year to April. “Clearly, we have made mistakes,” he said, acknowledging: “Our product and tech teams have been stretched to the limit working on overseas expansion.” Its US exit alone could cost up to £6m.
Unite Group acquires Liberty Living for £1.4bn
Unite Group has acquired student housing platform Liberty Living from Canada Pension Plan Investment Board (CPPIB) for £1.4bn. CPPIB will retain a 20% stake in the combined entity. “Through this transaction, we are able to continue our investment in the student housing sector within the UK across a broader, more diverse and stable portfolio and with additional development exposure,” commented Thomas Jackson, managing director, real estate investments at CPPIB.
Former banker Irene Dorner to chair UK housebuilder Taylor Wimpey
Taylor Wimpey has appointed Irene Dorner as its next chair, with the former HSBC executive to replace Kevin Beeston and become the only woman in charge of a large listed housebuilder.
MORTGAGES
Buy-to-let mortgage costs have started to fall, according to Mortgage Brain’s latest quarterly product data analysis, despite the market remaining largely stable. For example, the cost of a 60% LTV two year tracker buy-to-let mortgage is now 3% lower than it was three months ago. The same product with a 70% LTV now costs 2% less than it did in March, while the 80% LTV is now 0.5% lower. “While the mortgage cost movement over the past three months has been minimal, the majority of the movement has been favourable and with specialist advice and support from brokers, buy-to-let investors and potential landlords can continue to make the most of the low rates and costs in the buy-to-let market,” said Mark Lofthouse, CEO of Mortgage Brain.
RENTAL
Half of buy-to-let landlords (52%) are using rental properties to supplement their employed income, according to a new survey by Precise Mortgages. According to the research, even landlords with bigger portfolios are still working full-time – 32% of those with 11 to 19 properties supplement earnings from a full-time job with letting income and nearly one in five - 18% - of those with 20-plus properties have other income in addition to rental earnings. Around 16% of landlords plan to add more properties to their portfolio in the coming year, with 71% funding purchases with a buy-to-let mortgage.
CONSTRUCTION
Flexible work could encourage more women into construction
Flexible working options are key in making construction a more attractive and progressive career choice for female talent, according to a Royal Institution of Chartered Surveyors poll which revealed the top recommendations industry professionals believe will help employers encourage more female talent into the property sector. Some 48% of professionals believe flexible working options will help encourage and retain more female talent.
LEGAL
Research shows that 39% of landlords want the government to introduce a fast-track housing tribunal if the Section 21 “no-fault” eviction process is scrapped. Paragon’s PRS Trends Report also revealed that almost a quarter of respondents (24%) called for a shorter court process for evictions, and some 15% would like a guaranteed way to cover their costs, while 7% wanted to be able to submit evidence online.
INFRASTRUCTURE
Homeowners in two Canary Wharf tower blocks face repair costs of £2m after engineers said the buildings may collapse in an explosion. Residents were billed up to £77,000 each to improve the "structural integrity" of Brewster House and Malting House. After safety checks prompted by the Grenfell Tower fire, engineers Wilde Carter Clack said floors could buckle in a severe incident.
RETAIL
Creditors at Monsoon Accessorize have approved the retailer’s company voluntary arrangement, which asked for rent reductions of up to 65% across more than half of its stores. The retailer did not disclose by what margin its CVA passed but said it was “with a majority significantly above the required threshold”. It will now see rent reductions between 25% and 65% at 135 of its 258 stores, after offering creditors participation in a £10m annual profit-sharing scheme, if its profits can recover.
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