What do the two main parties plan for the housing market over the next 5 years?

This week both Labour and the Conservatives released their election manifesto for 2015. We wanted to see what the two main parties plan for the housing sector in the next 5 years. We have compiled all of the information directly from each party’s manifesto where they analyse what they will look to achieve over the following 5 years.

The Conservatives

We will double the number of first-time buyers, and help more people own their own home

·         We will extend Help to Buy to cover another 120,000 homes

·         We will continue the Help to Buy mortgage guarantee until the start of 2017, and the Help to Buy equity loan until at least 2020

·         From this autumn, we will introduce a new Help to Buy ISA to support people who are working hard to save up for a deposit for their first home. A ten per cent deposit on the average first home costs £15,000, so if you put in up to £12,000, government will put in up to £3,000 more. A 25 per cent top-up is equivalent to saving a deposit from your pre-tax income – making it effectively a tax cut for first-time buyers.

We will build 200,000 Starter Homes and more affordable housing

·         We will build 200,000 quality Starter Homes over the course of the next Parliament, reserved for first-time buyers under 40 and sold at 20 per cent below the market price

·         We will now go further, delivering 275,000 additional affordable homes by 2020. And we will offer 10,000 new homes to rent at below market rates to help people save for a deposit

We will extend the Right to Buy to tenants in Housing Associations

·         We will fund the replacement of properties sold under the extended Right to Buy by requiring local authorities to manage their housing assets more efficiently, with the most expensive properties sold off and replaced as they fall vacant.

·         We will also create a Brownfield Fund to unlock homes on brownfield land for additional housing.

We will give you the Right to Build

·         We aim at least to double the number of custom-built and self-built homes by 2020, and we will take forward a new Right to Build, requiring councils to allocate land to local people to build or commission their own home, as you can do in most of Europe.

We will protect the Green Belt

·         We have safeguarded national Green Belt protection and increased protection of important green spaces

We will support locally-led garden cities and towns and prioritise brownfield development, making sure new homes are always matched by the necessary infrastructure to support them

·         When new homes are granted planning permission, we will make sure local communities know up-front that necessary infrastructure such as schools and roads will be provided.

·         We will ensure that brownfield land is used as much as possible for new development.

·         We will require local authorities to have a register of what is available, and ensure that 90 per cent of suitable brownfield sites have planning permission for housing by 2020.

·         We will fund Housing Zones to transform brownfield sites into new housing, which will create 95,000 new homes

We will help keep your council taxes low

·         We will encourage voluntary integration of services and administration between and within councils – for example, with the Troubled Families Programme and the Better Care Fund – to promote savings and improve local services.

·         We want local councils to help manage public land and buildings, and will give them at least a 10 per cent stake in public sector land sales in their area.

Labour

We will make sure that at least 200,000 homes a year get built by 2020

To help young people and families get on the housing ladder, we will give local authorities the power to give first call to first time buyers on new homes in areas of housing growth. And we will unlock a Future Homes Fund by requiring that the billions of pounds saved in Help to Buy ISAs be invested in increasing housing supply.

We will increase competition in the housebuilding industry by backing small builders, including through our Help to Build scheme, and by getting the public sector building again.

We will build more affordable homes by prioritising capital investment for housing and by reforming the council house financing system.

We will give local authorities powers to reduce the number of empty homes, including higher council tax on long term empty properties. And to boost the housing we need, we will start to build a new generation of garden cities.

For the 11 million people who rent privately, we will legislate to make three-year tenancies the norm, with a ceiling on excessive rent rises. A ban on unfair letting agent fees will save renters over £600. We will drive standards up by creating a national register of private landlords.

https://www.conservatives.com/manifesto

http://www.labour.org.uk/manifesto

Tesco Bank have announced that in the first half of next year they are going to open up their mortgages to the intermediary market. This is encouraging news for the industry, there have been a number of additions to the intermediary market including TSB earlier this year. The addition of lenders to the market provides more competition which often leads to better rates and also more variety in mortgage products for borrowers.

There has been a lot of talk over the last few months about a price war between mortgage lenders and it seems that this is set to continue. It provides people with an excellent opportunity to either purchase their first house or remortgage onto a more competitive rate. With competitive 5 year and even 10 year fixed rates available, it is a great time to find a fixed mortgage to give people a sense of security over what could be an unpredictable few years.

Your home may be repossessed if you do not keep up repayments on your mortgage.

A fee will be payable of £995 for mortgages up to £500,000, £1,500 for mortgages between £500,001 and £1,000,000 and £2000 is payable for mortgages over £1,000,000

This week the government published details of the implementation of the European Mortgage Credit Directive into the UK market. Although the government has made significant changes to the mortgage market already, there are some other changes to come. They are to be implemented by March 2016 however they are been put into place now in order to give the market as long as possible to prepare for them.

The first change is in the buy-to-let sector. Currently this area of mortgage lending is mostly unregulated because landlords are typically viewed as business borrowers therefore requiring less supervision. However the new legislation means that so called ‘accidental landlords’ will be subject to the affordability assessments as seen in the residential market. An example of an accidental landlord is someone who may have purchased a property with a mainstream mortgage, but due to a change in circumstances, they move away but decide to keep the property as an investment.

The second area is for the Financial Conduct Authority (FCA) to bring the regulation of  second charge mortgage lending more in line with first charge mortgages. The FCA believes that there may be a risk to consumers in this area from poor sales practices and ineffective affordability assessments.

We welcome the implementation of stricter affordability rules in order to help protect the consumer from poor sales practices as well as ensure that they can afford to pay back the loan. It will be interesting to see how this impacts current lending levels as it will be difficult to identify and evidence a professional landlord from an ‘accidental’ one.

Sources:

http://www.fca.org.uk/news/fca-outlines-approach-for-implementation-of-mortgage-credit

https://www.gov.uk/government/news/new-mortgage-regulation-legislation-published

For a while now we have heard in the news how competitive mortgage products are and this week we saw a glimpse of this in the longer term products. We saw the first 10 year fixed rate fall below 3% and it is possible that we could see others follow suit.

Given the uncertainty that lies ahead regarding interest rates it may not be a bad idea to secure a longer term product while the rates are at such attractive levels. When the interest rate is increased, which many economists are predicting will be later this year, it is unlikely we will see rates of this level for quite some time.

It is encouraging to hear that a new lender has entered the market. This sends out a positive signal in regards to the strength of the industry and offers even more competition to the market. There are also other lenders who are looking to open up their products to intermediaries this year.

For any advice on long term mortgage products please contact us on 01977 674455 or send a message via our website http://www.ramortgages.co.uk/contact.html.

Your home may be repossessed if you do not keep up repayments on your mortgage

A fee will be payable of £995 for mortgages up to £500,000, £1,500 for mortgages between £500,001 and £1,000,000 and £1,500 for mortgages over £2,000.

What are the changes to Stamp Duty?

After hearing the Chancellors Autumn Statement it is clear that the biggest impact to our industry will be the changes in stamp duty. It has been widely publicised over the last couple of days but we want to briefly inform you of what has changed and what impact this may have on you.

Effective from Midnight on the 3^rd December the new rules are as follows: “Under the new rules, no tax will be paid on the first £125,000 of a property, followed by 2% on the portion up to £250,000, 5% on the portion between £250,000 and £925,000, 10% on the next bit up to £1.5 million and 12% on everything over that.” (Source: bbc.co.uk)

As you can see this system is very similar to the way income tax works. It avoids any significant jumps in the amount you owe and will be a huge benefit to the majority of people purchasing a house.

So what does this mean for you?

Well based on an average family home of £275,000 the total stamp duty payable on the old system would be £8,250. With the new rules the amount payable is only £3,750 giving a huge saving of £4,500.

For people looking to purchase a house using the help to buy scheme the average Help to Buy home is £185,000. With the old rules the stamp duty would be £1,850 but using the new rules it is only £1,200, a saving of £650. This will help reduce the upfront costs involved in purchasing a house which can be a massive burden on first time buyers. (Figures taken from bbc.co.uk)

A study by the Office for National Statistics has shown that more than 4.6 million people are now self-employed. Research suggests that around half of these people will struggle to get onto or up the housing ladder.

For employed applicants, proving your income is relatively straight forward. In most cases you just need 3 of your latest payslips along with bank statements to back them up. For self-employed applicants however, it isn’t quite as straight forward. In most cases you will be needing 3 years accounts or SA302’s (which take at least 2 weeks to obtain causing a significant delay on the whole process).

The other issue is that with employed applicants it is fairly straight forward for a lender to decide how much is affordable to you however for people that are self-employed it can be open to interpretation. This can mean that even if a decision in principle is agreed, there is a good chance the amount a lender is willing to loan you could change once they have assessed everything.

Our advice to those people who are self-employed is to make sure that before applying for a mortgage you make sure you have suitable documentation to prove your income. It is also important to have a big enough pot of money for the deposit but also a little extra if needed to reduce the loan to value to keep the lender happy. Different lenders take into account different figures such as net profit, dividend and salaried income. For this reason the way in which your income is derived can significantly influence which lenders you should approach making it important to consult a mortgage advisor on the best route to take. 

After a quiet third quarter in the property market there is an expectation that things are going to pick up in the final three months of the year.

According to a report by Reuters, the credit conditions survey showed that in the third quarter of 2014 there was the biggest fall in the amount of credit the lenders were able to supply since the last three months of 2008, when the Lehman Brothers collapsed. (http://reut.rs/10IHmRT)

We have already seen a number of lenders reducing their rates and others are expected to follow in a battle to gain market share and hit end of year targets which may have slipped away due to the quiet summer.

This could be an ideal time to either obtain a new mortgage or remortgage a current property to secure a cheap fixed rate product. There is an expectation of an interest rate increase at some point next year which means we may never see rates this cheap for some years.