Finance Matters

Posts Tagged ‘arrears’

December marked the fifth consecutive month of year-on-year growth in mortgage lending, with a 12 per increase, according to the Council for Mortgage Lenders (CML).

Gross mortgage lending in December was an estimated £11.7 billion, while for the whole year it totalled £140 billion, £2 billion higher than the CML’s expectations.

December’s figures represent a 12% drop from November 2011, but this was partly due to the smaller number of working days in December.

November’s figures were also boosted by a substantial increase in the number of house-buyers taking up fixed-rate deals

In a strong end to the year, mortgage lending for the final quarter of 2011 totalled £37.3 billion, a year-on-year increase of 11 per cent.

However in the face of continuing economic uncertainty, a weak 2012 first half is expected for the housing market, with demand from buyers slowing as lenders increase mortgage rates.

Bob Pannell, the CML’s chief economist, said: “The closing months of 2011 saw stronger mortgage lending activity and housing transactions, despite the fact that short-term economic prospects are challenging.

“There is a glimmer of light ahead for households in that real incomes could stabilise and perhaps even start rising by the end of the year.

“But, continuing eurozone problems mean that mortgage funding prospects are uncertain, so overall UK mortgage market conditions for the year ahead remain difficult to call.”

The CML is also reminding property owners that they should take out rent protection insurance, as the ongoing economic uncertainty is expected to lead to an increase in repossessions.

Rising unemployment and other pressures on incomes are likely to see more people falling in arrears with their rent and mortgage payments in 2012, the CML warned.

Rent protection insurance protects a landlord for a specified length of time if a tenant is unable to pay the rent.

The average cost of renting a home in England and Wales fell to £711 in December, 0.8 per cent lower than November’s average, according to LSL Property Services’ latest Buy-to-Let Index.

December was the second consecutive month in which rental costs have fallen, but over 2011 as a whole, they showed an increase of 4 per cent.

The impact of Christmas spending caused an increase in rent arrears, with 10.7% of all rent late or unpaid at the end of December 2011, compared with 9.3% in November 2011.

Yorkshire and the Humber, the West Midlands and the East Midlands were the only regions where the cost of rents didn’t fall in December, compared with the previous month.

Even rents in London fell by O.9 per cent during the month, representing their first fall for a year.

However, on an annual basis, rents rose in all regions expect the south-west of England, and the north-east of England, in 2011, with London suffering the fastest rise with a 5.6% increase.

David Brown, commercial director of LSL Property Services said: “The seasonal relief continued for tenants as rents dipped again in December, but the drop-off was much smaller than a year ago”.

With demand for rented property continuing to increase, Landlord Assist today suggested that 2012 will be an excellent year for buy-to-let investors

Landlords will benefit from historic low interest rates and an easing of lending criteria.

Graham Kinnear, managing director at Landlord Assist, said: ‘There are few tangible investments at present which can offer growth, income and a positive hedge against inflation quite like the buy-to-let market.

Yorkshire Building Society today announced an easing of its buy-to-let criteria, including a reduction in minimum property value from £150,000 to £100,000.

Buy-to-let mortgages will now be available to borrowers as young as 25, compared with 30 previously and they will need to have a minimum income of just £20,000, compared with £35,000 previously.

LSL Property Services, which includes Your Move and Reeds Rains, announced a 0.4 per cent drop in rent for a ‘typical’ property to £717 in November.

Rents have been rising throughout the year, driven by increased demand from people unable to afford to buy a propert and November’s decline marked the first fall in rent for 10 months.

However, although this represents a fall compared with the previous month, it is still 3.5 per cent higher than a year earlier and rents are expected to start rising again in the New Year.

LSL recorded significant regional variations in November, with rents falling in some regions, particularly the East Midlands where they were 2.2 per cent lower, but continuing to increase in Wales; Yorkshire and the Humber; the West Midlands; and London.

LSL director David Newnes said: “Landlords are looking to avoid having properties vacant over the Christmas period, and can be less aggressive with pricing as tenant activity slows in the run-up to the New Year.”

LSL also announced a reduction in the number of tenants in arrears with their rents.

This was attributed to ‘a changed tenant mix’ with an increasing number of tenants only renting because they are unable to afford a deposit on a house.

Yesterday zoopla.co.uk revealed that it is now cheaper to buy a home than to rent one in 47 out of 50 of the UK’s largest towns.

Zoopla also highlighted soaring demand for rental properties from people who are unable to raise the deposit needed to buy their first property.

Combined with low interest rates, this has made renting a home around 15 per cent more expensive than owning one.

In comparison, at the end of 2010 it was 10 per cent more expensive to rent a property than to buy one in 40 out of 50 of the largest towns.

Although stores have been forced to start their sales early this year to persuade shoppers to part with their money, nearly a third of people in the UK will go into debt over Christmas.

Fifty-eight percent of this group will put more spending than usual on credit cards and thirty-nine per cent will go overdrawn to fund Christmas according to a survey carried out by YouGov on behalf of banking software company Intelligent Environments.

Others will take out personal loans or borrow money from friends and family.

The survey of 2,015 adults found that 11 per cent of people in the UK will lose track of spending over the festive period and people between the ages of 25 and 34 were found to struggle the most with money.

Sixty-four per cent of this group expect to incur debts or arrears of some kind as a result of Christmas expenses.

Jerry Mulle, sales and marketing director at Intelligent Environments, said: “Christmas is typically a cash-strapped time of the year but as harsher economic conditions start to bite the number of people falling into debt or behind on their payments looks set to rise.

Another YouGov survey, this time commissioned by housing charity Shelter, also highlighted people’s willingness to go into debt in order to buy Christmas food and gifts, to the extent of putting their homes at risk.

Out of 1,029 adults surveyed, one in twelve said they would miss paying their rent in order to pay for the cost of Christmas, and one in fourteen said they would miss a mortgage payment.

Shelter warns that cuts to jobs and housing benefits and the high cost of housing is creating the conditions in which homelessness is likely to rise.

Graeme Brown, the director of Shelter Scotland, said: “We urge people to think very carefully before delaying rent or mortgage payments. It can seem like a quick fix, but can have long lasting implications.”

A survey by LSL Property Services has revealed rents in England and Wales continue to surge, with the average rent hitting a further record high last month.

September represented the eighth consecutive month that the average rental cost rose.

Lenders’ deposit requirements, together with unaffordable house prices, has meant the rental sector has been in high demand and this has driven up prices.

According to LSL, the average rent stands at £718 – an all-time high – with rents rising by 4.3% in the last year alone.

Rents increased fastest in the South East and the East Midlands, up by 1.8% and 1.1% respectively on a monthly basis.

However, rents are on an upward trend across the country and it is unlikely that tenants will gain respite any time soon, explains David Newnes of LSL.

Research shows many tenants in rented properties would like to get a foot on the property ladder but are unable to do so unless they have a deposit of around 20% in order to secure a mortgage.

Mr Newnes comments: “In many cases, buying a home is now cheaper on a monthly basis – provided renters can get past the stumbling block of the substantial deposit requirements.

“For the majority, saving a £25,000 deposit is a Herculean task as inflation and rents climb – and most would-be buyers are biting the bullet and prolonging their stay in increasingly costly rental accommodation.”

In the meantime, tenant arrears improved, dropping to their lowest level in almost 18 months, with 8.6% of all UK rent unpaid or late by the end of September, down from 10.7% in August.

Despite the improvement, tenants will face mounting pressure over the medium term, particularly as inflation remains high and public sector job losses take effect.

In related news, housing charity Shelter recently said private rents had become unaffordable in 55% of council areas in England.