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Rossmore news: February 2017

A week in the news

  • One in seven businesses is failing to auto-enrol its employees in a workplace pension before the new deadline, new figures from Aviva reveal.
  • An index fund that tracks companies in the FTSE 250 but excludes investment trusts has been launched by Legal & General Investment Management.
  • Coventry for intermediaries has launched new offset mortgages and reduced the rates on some of its buy-to-let products.
  • Scots Widows has scrapped exit fees on all personal pension products.

Thousands of over 55’s lose out from pension freedoms

Hundreds of thousands of vulnerable over-55’s could be left worse off this year if they take advantage of pension freedoms to access cash lump sums, Just has warned. Just Retirement and Partnership said that 2017 would see the highest ever number of people reaching 55, the age at which pension freedoms kick in.


Interest-only ‘prison’ to spur equity release

A flood of interest-only mortgage maturities in 2017 is set to ‘turbo-charge’ the equity release market, with one provider predicting demand will more than double over the year. The FCA has highlighted 2017 to 2018 as the first year in which a large number of interest-only mortgages sold would reach maturity and it estimates that almost half those with such a mortgage will be unable to pay the loan.


Scammers Pose as FSCS

The FSCS has warned consumers to “be on their guard” against an email scam promising a high-value payment. The compensation body said scammers were posing as the FSCS and attempting to entice consumers to provide personal information with the promise of a $5.7m (£4.5m) payment.


Scottish Widows unveils £30m workplace pension investment

Scottish Widows will invest £30m in its workplace pensions business to expand the range of products and services available to its workplace customers.


Cost of cyber crime to rise 40%

Financial services firms will be forced to spend millions more to guard against digital crime this year, as some industry professionals warn more needs to be done to educate businesses of the dangers.

For Financial planners the big risk is that you, or your staff, make an error that leads to a client falling victim to fraud.


What is your State Pension age

Key points from an Age UK document entitled “Later Life in the UK” published in 2016 serve to illustrate just how things have changed and are still changing. With a UK population of 65.3 million:-

  • 6 million people are aged 65 or over
  • Over 1.5 million are aged 85 or over
  • The number of centenarians living in the UK has risen by 72% over the last decade to 14,450 in 2014
  • UK life expectancies at age 65 are 85.9 years for women and 83.4 years for men
  • By 2040, nearly 1 in 4 people will be aged 65 or over
  • The proportion of the population aged over 75 is projected to double in the next 30 years
  • Nearly 1 in 5 people will live to 100, including 29% of people born in 2011.

Pension Contributions by age per £10,000 per annum of retirement income

Current Age State Pension Age Approximate monthly contribution required per £10,000 of income*
20 68 £110
30 68 £165
40 67 £275
50 67 £510

* Contribution assumptions – Level before 20% basic tax relief
* Growth assumptions – Capital growth of 6% net of charges
* Income assumptions – At-retirement gross income before tax: adjusted for 2% inflation; 6% annuity rate; no tax free lump sum taken.

Increasing life expectancy means the State Pension Age goalposts could move even further away in the future, with people working into their 70’s and 80’s to make ends meet.


Conditions re Pension Advice Allowance

Can be used a total of three times, only once in a tax year, allowing people to access retirement advice at different stages of their lives, for example when first choosing a pension or just prior to retirement.

  • Will be available at any age, allowing people of all ages to engage with retirement planning.
  • Can be redeemed against the cost of regulated financial advice, including robo-advice as well as the traditional face-to-face advice.
  • Will be available to holders of defined contribution pensions and hybrid pensions with a defined contribution element, but not defined benefit or final salary type schemes.

Auto enrolment – Review by Department for Work and Pensions

The DWP is conducting a review of auto-enrolment considering three themes, coverage, engagement and contributions.

Coverage – Consideration is being given to changes in the current earnings trigger of £10,000, age criteria and self-employed.

Engagement – Informing individuals that state pensions will not be sufficient in their retirement, employers matching contributions, people have a responsibility to fund their retirement.

Contributions – Rates need to rise above the 8% minimum planned for 2019, learn from the US experience of timing contribution increases with wage rises.

Average mortgage deposit from Bank of Mum and Dad is now £18,505

A new study suggests more parents are taking on debts in order to help their children step on to the property ladder

Woman and child look at properties advertised for sale in an Estate Agents window, London, UK. Photo:Jeff Gilbert

One in seven parents have found themselves in debt after dipping into their savings to help their children on to the property ladder, according to a new study.

Some were forced to remortgage or even downsize their own home the research found.

Spiralling housing costs meant the average sum being loaned or given to help adult children to buy their first home had risen to £18,505.

A third of parents questioned said their financial security had been affected. More than three quarters had dipped in to their savings while one in six had cut back on expenditure. More than one in 10 said they had cashed in their investments.

One in 40 has even gone as far as to downsize and sell their own home to raise the capital and nearly one in 20 has re–mortgaged their home.

The research also showed that, despite 16 per cent of parents calling the money a loan, less than half of this number expected to have the full sum returned.

Stephen Lintott, the head of property at Slater & Gordon, which commissioned the research, said: “There are a huge number of buyers who simply can’t afford to get on to the property ladder without the help of family members.”

But he added: “We have found that many relatives say that their act of generosity wasn’t well advised and resulted in financial hardship or anxiety.”

The research, for which more than 500 parents who had helped their children buy a home were polled, indicated that nearly half felt obliged or pressured to do so, with two thirds saying that their children could not have done it without them. Many reported feeling stressed or anxious about their financial situation but, despite this, just 6 per cent of parents regretted helping their children.

One in 20 stepped in after grandchildren were born because they believed a young family needed more space, while 43 per cent said they had concluded their children would not be able to raise a cash deposit, so loaned them sum to get them started.

However, just a fifth had sought legal advice before handing over the money and 14 per cent had any kind legal documentation or contract in place to protect the cash should their offspring’s relationship break down or if theirfinancial situation should change. Mr Lintott warned: “It’s so important that relatives don’t rush into any complex financial arrangements, if they want to help they should seek the right advice.”

Planning ahead and how to reduce risks

1. Consider your options You may be able to help in a number of different ways, gifts, loans, guarantees.

2. Don’t rush into a decision Try to think about this as if it was a commercial decision and not an emotional one.

3. Be realistic Don’t over stretch yourself financially.

4. Take legal advice Before entering into a significant deal.

5. Think long–term Will I be able to afford this if interest rates change, my child splits from his partner, I need to move or tap into my own home’s equity?

Source: The Telegraph 

How can the children ever buy a home of their own?

Is the Bank of Mum and Dad now the only way to get a foot on the property ladder?

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Property ownership is the bête noir of our times. Over Christmas, families have gathered, feasted and given, but beneath the surface lay tensions that this country has never before seen. The older generation has truffled through decades of prosperity, piling up the value of their property. Their grown-up children now face a housing market as inhospitable as the north face of the Eiger.

The over-65s own a trillion pounds of equity. They have lived through repeated property booms, each of which has spun gold. House prices in the Thatcher years went up by 187.9 per cent, then by 6.5 per cent in the Major years and by 211.3 per cent under Blair. They dropped by 7.2 per cent in the Brown years and have so far risen by 11.9 per cent under Cameron. As they toast the year ahead, will they be delighting in their good fortune or feeling sorry for their offspring? Is there anything they can do to help? The answer is yes.

“This divide between the generations is being offset by downsizing,” says Lucian Cook, head of Savills Research. “Existing housing wealth will be recycled through the generations. The Bank of Mum & Dad is going to become much more important over the next decade.” Like salmon beating upstream to spawn, first-time buyers have to make monumental leaps to achieve their aim. Lenders are insisting on deposits as high as 130 per cent of their incomes. In London a deposit of £70,000 is common.

“The plight of the under-35s is now affecting the higher age groups,” says Cook. “People take stock of their lives over Christmas and New Year and we usually see the biggest spike in online property searches as a result.” The Prudential Downsizing Index says that 41 per cent of home owners over 55 are planning to sell soon, and as 65 per cent of first-time buyers now have help from their parents, it is easy to see where some of the money will go.

“The big thing is the affordability squeeze,” says Cook. “Clearly there has been a real structural change in the market.” What will happen when current renters reach 40 and they are still shut out from buying? “Interest rates are only going to go up, so it will become more attractive for them to stay in rented property.” Savills Research estimates the number of renters in the country is expected to rise by 1.2 million in the next five years, when they will constitute nearly a quarter of all households. By the 2020 general election they may be a significant electoral force.

James Nash, 29, works in the finance department of a large London retail store and rents a one-bedroom flat in Battersea with his girlfriend. “We both earn above-average salaries so we are not underprivileged,” he says. “I would have hoped by now to be buying, but it isn’t even on the horizon.”

The average rental on a one-bedroom flat in Battersea is £1,550 per month, while according to Hamptons International the cost of buying a two-bedroom flat is £889,000. “This is a different world from what my parents had when they were young,” says Nash. “I know they would help if they could. It is very frustrating paying a large amount to pay the mortgage of a landlord who is also benefiting from capital gains.”

People are prepared to put a toe on the ladder, if not a whole foot. Paul Beverley was 39 last year and felt if he didn’t buy now he never would. He had been renting in Ash Vale, Hampshire. “I’d never been able to afford to get on the property ladder,” he says. “Approaching 40 made me really stop and think. I realised I’d paid £100,000 in rent over 10 years and had no equity to show for it.”

But, like many, he couldn’t afford the prices. So he compromised and bought a two-bedroom house from Thames Valley Housing (020 8607 0550; tvhsales.co.uk) in Church Crookham, where he grew up. He bought a 50 per cent share at £102,500 with a £10,250 deposit and a mortgage of £92,250. His mortgage repayments are £568 per month and rent and service charges are £356. “In total I’m paying £924 each month, only £149 more than I was paying in rent. It’s my own home and I’m building equity.” He feels that the purchase has changed his life.

Meanwhile, in order to make ends meet, a lot of families have several generations living together. Letting agents Finders Keepers in Oxford says that owners are extending their houses in order to accommodate the Boomerang Generation and that a lot of first-time tenants have spent all or part of their 20s living in the parental home. Frank Webster, vice-chairman of Finders Keepers, has two daughters, Emily, 24, and Hannah, 22, who are both in work but still “nesting” at home.

“Oxford is such a strong market that I help a lot of people to buy for investment and quite a lot are buying for their young,” he says. “I have just helped a man buy a flat for his seven-year-old son. He knows he has been lucky and life has been good, but it may be a nightmare for his son in the future so he is doing what he can.

“My children won’t buy until they are 40. People working for me are clubbing together to buy or moving quite far out of the city to find lower prices and travelling in. I meet a lot of parents who are equity-rich and feel a bit guilty, and who want to help their children because they know prices will just keep going up.”

Perhaps we should remember that in most of the rest of Europe renting is what people do. Meanwhile, what does the year ahead promise? Savills reckons that prices will rise by two per cent in the regions and flatline in London, then start rising slowly. It predicts that by 2019 prices will have risen by 19.3 per cent in the country and by 10.4 per cent in London. The haves and have-nots are here to stay.

Source: Telegraph

Considering buy-to-let

Welcome to our seasonal newsletter. As it’s getting towards the end of summer, it may be time to look at your buy-to-let options. Rossmore can help with both new entrants into the market, or existing landlords.

Call us for a chat and see if there is anything we can do to help.

Considering buy-to-let? Download our e-update here. 

UK house prices see 10.2% annual rise

House prices

Prices have risen sharply in some areas of the country in the past year

UK house prices in July were up 10.2% from a year earlier – the biggest annual change since September 2007, according to the Halifax.

The lender said that property prices grew by 3.6% in the three months to the end of July compared with the previous quarter.

The monthly increase was 1.4% compared with June, making the average home worth £186,332.

The figures are at odds with other surveys which suggest a slowdown.

‘Upward trend’

This is the first time since September 2007 that the annual change has gone above 10%, according to the Halifax. It accelerated from an 8.8% rise in June.

“While supply remains low, housing demand continues to be supported by a continuing economic recovery, growth in employment, improving consumer confidence and low mortgage rates,” said Stephen Noakes, mortgages director at the Halifax.

The numbers, based on its own mortgage lending, counter the view put forward by rival lender Nationwide, which said prices had started to moderate.

The Nationwide’s estimate of the annual house price rise slowed from 11.8% in June to 10.6% in July.

The year-on-year comparison is calculated slightly differently by the two lenders. The Halifax compares the previous three months with the same three months a year earlier to give a smoother comparison, rather than a direct comparison of the equivalent months as calculated by the Nationwide.

The Land Registry has also suggested that seven out of 10 regions of England and Wales showed a monthly fall in prices, although these short-term price changes are often volatile.

Howard Archer, chief UK and European economist for IHS Global Insight, said: “On balance, we take the view that house prices will keep on clearly rising over the coming months but there will be some moderation from the recent peak levels.”

UK house prices

Year on year % change

Help to Buy

Halifax is part of Lloyds Banking Group, which recently announced that it was moving to reduce its share of mortgages under the government’s Help to Buy scheme.

Borrowers are now able to raise a maximum of £150,000 through Help to Buy, down from £500,000.

Under the scheme, buyers are required to provide a deposit of of 5% of the home’s value, with another 20% backed by the government if the buyer fails to keep up with repayments.

The Bank of England has also taken action to try to ensure mortgage lending does not reach unsustainable levels.

Source: BBC News 

 

Young adults face housing squeeze

Nearly two-thirds of households in England own their own home.

A growing proportion of young people have been squeezed out of the housing market in England and are renting privately instead, a report suggests.

The financial crisis saw a fall in the proportion of the under 35s owning their own home, the English Housing Survey shows.

Some 21% of people in this age bracket were mortgage holders in 2008-09.

However, this fell to 18% in 2012-13, with more renting privately, and so paying more of their income on housing.

Private renters aged 25 to 34 increased from 31% in 2008-09 to 45% in 2012-13, the report said.

On average, owner occupiers buying with a home loan spent 20% of their income on their mortgage in 2012-13. Meanwhile, private tenants spent 40% of their income on their rent.

The statistics offer evidence that, especially during the financial crisis, young people found it difficult to get on the housing ladder, owing to stricter lending criteria from banks and a requirement to save for a large deposit.

The survey also revealed that 61% of private renters anticipated owning their own home eventually.

‘Build more homes’

Campaigners say that the squeeze on ownership among the young could be eased by building more homes.

Campbell Robb, chief executive of housing charity Shelter, said that young people were stuck in an expensive rent trap, unable to save up a deposit for a home.

“The government needs to give ‘generation rent’ the chance of a stable home by building the affordable homes we desperately need,” he said.

UK housing market

Owning vs renting

7.7m

Households
renting

14.3m

Homeowner
households

  • Homeowners spend 20% of income on their mortgage
  • Private renters spend 40% of income on their rent
Source: English Housing Survey

Alex Hilton, director of the National Private Tenants Organisation campaign group, said: “Renters spend two days every week working to pay off their landlord’s mortgage.

“This is a financial thumbscrew applied to people who simply have no other choice of tenure and it is hard to see how this can be characterised as anything other than exploitation.

“This underlines the urgency of the need for affordable housebuilding and tenancy law reform.”

Housing the homeless

Overall in England, 14.3 million homes (65%) were owner occupied in 2012-13, the survey showed. Another four million (18%) were privately rented and 3.7 million (17%) were rented from local authorities and housing associations at a reduced rate, known as social housing.

Just over a fifth of social tenants said they had been homeless prior to being housed. Two-thirds of all social renters had waited less than a year before being housed, and 8% had waited longer than five years.

The size of the private rental sector overtook the social rental sector for the first time in 2012-13, having been growing for many years.

Clearly, private tenants are more mobile than owners with a third moving in the previous 12 months compared with 4% of owner occupiers. The majority (81%) of private tenants who moved out in the previous three years did so because they wanted to move. Some 7% did so because they were asked to leave by their landlord or letting agent.

The annual report, published by the Department for Communities and Local Government (DCLG), offers a picture of the state of the nation’s housing.

Source: BBC News

Homehunters still don’t know about Help to Buy

Nearly a quarter of people have no idea what the Help to Buy scheme is, suggest a new report.

Around 22 per cent of the homehunters and homeowners questioned by removals specialists Bishop’s Move said they had never heard of Help to Buy (or had heard the name but didn’t know what it was).

A quarter of those questioned in the North East are still completely in the dark about the scheme compared to seven per cent in Yorkshire – where another 26 per cent were very unclear about how it worked – and six per cent in the West Midlands.

helptobuy

Overall, only three per cent of people said they were fully aware of Help to Buy’s benefits and have used or knew someone that has used the scheme.

Latest government statistics show that the various Help to Buy schemes have enabled 35,000 people to buy their own home since they were launched 14 months ago. The highest numbers of Help to Buy sales have been in Leeds (580), Wiltshire (506), Central Bedfordshire (458), Milton Keynes (417), and Peterborough (379)

“Help to Buy has certainly been making the headlines for some time there are yet pockets of home owners and property buyers across the UK that remain completely unaware of the scheme,” said Chris Marshall, Sales & Marketing Director at Bishop’s Move.

“In order to improve local economies through the housing market, more needs to be done from a regional perspective to ensure people are fully aware of the many benefits Help to Buy can bring.”

Talk to Rossmore about your buying options using the Government sponsored help schemes.

Source: Independent

 

Mortgage demand ‘to keep rising’

=shutterstock_houses
Lenders expect demand for mortgages to continue to rise in the next three months but supply may be squeezed slightly, the Bank of England has said.

The Bank’s Credit Conditions Survey also found that demand for home loans “increased significantly” in the second quarter of the year.

The survey comes a few days before the Bank announces whether it will take any action to dampen the housing market.

Some have called for action to control rising house prices in London.

The Bank’s Financial Policy Committee met last week, and is widely expected to have discussed the impact of the latest official figures showing an annual property price increase of 18.7% in London.

Excluding London and the South East of England, the cost of a home was 6.3% higher in April than 12 months before, the Office for National Statistics (ONS) said last week.

‘Statistical fog’

Some commentators – such as the Royal Institution of Chartered Surveyors (Rics) – have suggested that momentum in the housing market has passed its peak.

Government schemes have kick-started the market from the lull that started during the financial crisis, but the introduction of new affordability rules – known as the Mortgage Market Review – is thought to have caused a bottleneck with home loan applications.

The Council of Mortgage Lenders suggested on Thursday that there was a “statistical fog” regarding mortgage data at the moment, owing in part to the disruption caused by these new rules.

The Bank of England’s survey of lenders, conducted at the end of May, found that demand for homes was expected to rise.

Approvals were expected to fall in the second quarter of the year, although in reality this did not happen. Yet lenders are predicting a significant fall in the number of mortgage applications that are approved in the coming three months.

“Some lenders noted that changes introduced as a result of the Mortgage Market Review might reduce approval rates somewhat,” the Bank said.

“In addition, some lenders suggested that a tightening in lending standards on large loans with high loan-to-income ratios may also push down their approval rate a little.”

To find out more about your mortgage options, why not contact Rossmore?

SOURCE: BBC NEWS 

‘Desperate need’ for homes on sale, says Rics

Estate agents say there is a shortage of homes on the market

First time buyers

House prices will continue to rise across the country until more homes are put on the market, an industry body has said.
The lack of homes for sale was a “major concern” and there was a “desperate need” for more, the Royal Institution for Chartered Surveyors (Rics) said.

Buyer inquiries rose in every area of the UK except Wales in March, its latest survey found.

Various surveys suggest house prices are still below their peak.

First-time buyers

The Rics report said that house prices “continue along their upward trajectory” as the economy recovers, with the survey recording an 11th month of house price rises.

Many more surveyors expect prices to rise in the next three months and the next year, compared with the number of surveyors predicting price falls.

The survey suggested that prices would rise by 6% a year, on average, over the next five years.

“It is a major concern that we are not seeing enough houses coming on to the market,” said Simon Rubinsohn, chief economist at Rics.

“For the market to operate effectively, we desperately need more homes in areas where people want to buy and want to live.

“Until this happens, we are likely to see prices continue to increase and it is going to be ever harder for many first-time buyers to conceive of ever owning their own home.”

Many potential first-time buyers have found it easier to secure a mortgage owing to greater competition in the home loans market, but price rises – especially in the south-east of England – have made ownership unaffordable for some.

Are you a first-time buyer? Talk to Rossmore about your mortgage options. We’re here to help.

Source: BBC News 

Help to buy scheme gathers pace

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The government’s help-to-buy “equity loan” scheme picked up towards the end of last year.

Figures from the Department for Communities and Local Government (DCLG) show that completed house sales in England under the scheme jumped from 2,133 in November to 3,410 in December.

That brought the total to 14,823 since the loans were first offered last April.

Most of the loans, 89%, have gone to first-time buyers.

Although help-to-buy has been cited as an important factor in the recent revival of UK house sales, so far it has helped finance only a small minority of the deals that have gone through.

Between April 2013 and January this year, there have been 957,000 properties sold in the UK, according to HM Revenue & Customs.

Under the scheme, the government lends a buyer up to 20% of the purchase price of a newly built home, so long as the buyer puts down at least 5% themselves. The rest is paid for via traditional mortgage.

The home must not be worth more than £600,000.

The money is interest free for the first five years and has to be repaid when the property is sold, in the same proportion of the selling price as the original loan, so if prices rise then the government may make a substantial profit on its original loan.

Why not talk to Rossmore to find out how the Help to Buy scheme could impact you?

Read more: HERE 

Source: BBC NEWS 

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