The Bank of England made a bold statement this week and have forecast the fastest UK economy growth rate in over 70 years which they say will be built on the back of higher consumer spending. The central bank now expects the UK economy to grow 7.25% this year which is a far cry from what we would have thought we would be expecting this time last year.
Now, let’s take a look at the headlines that caught our attention this week, I always try to summarise the links to save you having to click through.
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- TMW reduces limited company rates – This is good news for landlords and investors that are buying via a limited company. The Mortgage Works (TMW) will be reducing their rates on its limited company buy-to-let range by up to 0.35%. This will include the reduction of its two-year fixed product, up to 75% loan to value (LTV), now priced at 2.94%, down from 3.19%. This shows that the mortgage market is getting fully back into the swing of things and also that LTD company mortgages are becoming more popular. With the mortgage market becoming more competitive for lenders, I think we will see more of this in the future as more and more lenders try to entice borrowers with more appealing deals.
- 40% of tenants planning a move now that Covid has eased says Nationwide – The UK’s leading mortgage lender Nationwide has conducted research and their data reports that we are about to have a mini-boom in the private rental market. Letting agents should prepare for a busy period as Nationwide’s findings would indicate they will see a higher turnover of tenants as more people move home as the nation emerges from Covid. The research that was conducted in April shows that the pandemic has prompted 29% of people to move or consider moving. 40% of those surveyed that said they would move or are considering moving were tenants in the private sector.
- Is the private rental sector in retreat? – The Morgage Works (TMW) has analysed the private rental sector and said that the share of PRS households in England edged down for the third year in a row in 2020 from 19.3% to 18.7%. In 2017 the number of households in the PRS was 4.7m and last year it fell to 4.4m. Robert Gardner, chief economist at Nationwide, says: “The shift reflects a combination of factors. Increased regulation, political uncertainty and tax changes (including the introduction of higher stamp duty rates on the purchase of additional properties from 2016 and a phased reduction to the tax deductibility of landlord expenses from 2017) dampened investor demand in the PRS”. So is it in retreat? I think it is a transitional period where some of the old school investors are leaving the sector that will be soon replaced by the new ones that understand and can navigate all the new changes the sector has been through.
- Why homebuyers should be wary of the new crop of 95% mortgages – The government has rolled out these 95% mortgages for homebuyers, but are they as good as they seem? This article looks at the drawbacks that would indicate they may not be. The scheme is state-backed and launched in mid-April and aims to help prospective home buyers with 5% deposits. First-time buyers and existing homeowners who are moving are eligible. Data from comparison site Moneyfacts shows that there were 391 95% mortgages on the market in March 2020, but one year later the figure had plunged to just five due to COVID-19. So what are the negatives to this scheme, well it doesn’t improve affordability so buyers need to meet income criteria for the amount they borrow still. They increase the chances of falling into negative equity, the interest rates are now higher sitting around 4% (pre-pandemic they were less than 3%) and due to lenders perceiving them as more risky the criteria is much stricter with brokers reporting 19 out of 20 applications are failing to get to the agreement-in-principle stage. So maybe it isn’t the saving grace that the government made it out to be.
That is all we have for you this week. If you have any comments or questions on this week’s news summary then please feel free to send us an email at [email protected] – if not, see you next week.