Review of the Private Rented Sector acknowledges small landlords’ contribution

An evidence-based review of the Private Rented Sector, published recently, acknowledges vital contributions by the small UK landlords in providing a housing mix which is helping both tenants and landlords in combating the economic crunch.

The authors of the Review of the Private Rented Sector (PRS), Dr. Julie Rugg and David Rhodes, recognised a need towards evidence-based recommendations rather than myth-driven policy decisions by the Government.

The publication has been welcomed by the UK’s leading organisation National Landlords’ Association (NLA).

According to the chairman of NLA, David Salusbury, the Rugg Review offered various policy options to the Government based on independent and reliable evidences devoid of rhetoric and myths.

David Salusbury felt that the review was encouraging commitment for the growth of letting business for smaller landlords and also encouraged larger investments where appropriate, implying tax incentives to attract investment in quality housing.

The review cleared doubts about build-to-let, stating that residential and commercial lettings were two very different sectors in real sense. It also recognised that smaller landlordism did not necessarily mean financial instability.

The review explained how local authorities could play critical role in the management of sector with existing tools. It called for doing away with the assumption that PRS tenancies terminate against tenant’s expectations, while recognising that specific reasons have been the major cause for tenancy failures.

The review finally suggested need to evolve a working model and avoidance of any quick-fix solution.

Lenders slash rates to provide relief to homeowners

Beleaguered homeowners got some relief as two of Britain’s biggest lenders announced cuts in interest rates on some of the most popular mortgage deals.

Abbey, second biggest mortgage lender in the UK slashed interest rates on a 3-year fixed mortgage by 0.15 percent, bringing the rate down to 5.39% for borrowers depositing 30% of mortgage value.

Royal Bank of Scotland also reduced interest rates on fixed-rate home loans up to 0.6 percentage points, amounting to saving up to £75 from monthly payments on a mortgage value of £150,000.

2-year re-mortgage deals worth 90% of the property value will now be attracting 6.14% interest down from 6.74%.

Though cuts in fixed-rate deals were expected by the experts, many lenders have remained cautious towards fresh lending. Abbey has reduced maximum lending amount to 50% with 15% deposit. It also introduced a £250,000 cap on loans worth up to 85% of value. The previous cap was £550,000. According to the Council of Mortgage Lenders, a large percentage of mortgages in the last 2 years were above £250,000.

Abbey claimed the move was aimed at protecting the quality of its loan book. A spokesperson added that high loan-to-value deals had not been Abbey’s core market and the cap on loan provided strong risk profile with minimal effect on customers.

Shoot up in demand for rented homes

Demand for rented property is shooting up, reported Your Move, the UK’s second largest letting agent. The number of leases in September rose by 4.34% compared to those in August.

Your Move informed that the number of people who moved into rented homes shot up by 45% compared with same period of 9 months in 2007.

The letting market is flourishing across the UK since people are unable to get mortgages on affordable terms. Lenders’ indifferent attitude towards borrowers due to the credit crunch and financial upheavals is making it impossible for potential buyers to get on the ownership ladder and making them stay in rented houses for longer periods.

The demand for rented homes is strongest and had never been seen so high before by the letting agent. Supply of rented properties is also increasing since owners who are unable to sell are offering them on rent to ensure flow of steady income.

Knight Frank, another estate agency, is predicting only 2% growth in rents which is much slower than 7.5% growth of 2007, largely due to the increase in supply of rented property.

According to housing intelligence company, Hometrack, approximately 1.6 million people in the 20 to 39 years age group are renting since they cannot afford buying. A fall of 20% in house prices would open up market to 600,000 potential buyers.

Northern Rock refutes allegations of aggressive repossessions

Nationalised bank Northern Rock has denied allegations that it is more aggressive in the repossession of properties than other banks and societies. The housing charity Shelter claimed that Northern Rock had repossessed 50% more properties than others.

Contrary to Northern Rock’s denial, the data reveals that in 3 months ending September, it had repossessed 4,201 properties, which is much higher than most other banks and mortgage companies. It is almost 20% more than Northern Rocks’ previous quarter’s repossessions.

Northern Rock has issued a statement denying that it was adopting overly aggressive approach to repossession and claimed it had been taking mortgage customers to court only as the last alternative to recover money.

It added that in certain cases if a reasonable agreement could not be hammered out with the borrower and if arrears were getting accumulated, the bank considered this as damaging to interests of both the parties and resorted to the last option of repossession.

Shelter feels that borrowers should be rendered all the assistance and free independent advice so that they do not lose their homes. The option of repossession should only be exercised if absolutely necessary and unavoidable.

The Government offered a £300 million package last month to help owners facing repossessions. It also acknowledged that homeowners were finding it difficult to make payments and it was finding ways to help them through benefits system.

Undeterred by the B&B crash, more people taking out buy-to-let mortgages

The latest mortgage survey by the Spicehaart Financial Services, indicates rise in the buy-to-let mortgages by the people in September.

The rise is more surprising in the backdrop of nationalisation of the UK’s biggest lender Bradford & Bingley (B&B) in September.

B&B’s nationalisation was the result of fear that many landlords would flee the letting market due to difficulties in re-mortgaging portfolios. Contrary to the warning, Spicehaart reported the biggest 58% increase over a year in buy-to-let mortgage applications.

Spicehaart said that investors’ confidence in the UK property market was not affected much and the landlords considered downturn as good opportunity to buy properties at low prices. Its operation director Steve Cox believed there were good opportunities and the current money market conditions were leading to belief that investment in property was safer option than share market or savings deposits. However he suggested treating property investment as long-term option.

The mortgage lenders have gradually withdrawn nearly 85% of buy-to-let deals in the past one year from, but Spicehaart is confident that investors with big deposits could still get better mortgage deals.

Demand for rentalS is continuously on rise and rents are likely to increase with further fall in house prices.

First time UK landlords beware of novice letting agents

The credit crunch and falling property prices have badly affected the housing market. UK homeowners who are unable to sell are choosing to become landlords.

First time landlords who are more interested in getting a steady income must be aware of novice letting agents who may not be in a position to provide the right advice due to lack of experience in the housing sector.

According to the ex-president of the Association of Residential Letting Agents, a number of desperate real estate agents have switched over their role to become letting agents or added lettings to their business.

According to Robert Jordan, chairman of Jordan, with 6 offices in the UK, more estate agents are becoming letting agents and being unqualified would be putting more tenants and landlords at risk. He said there were basic differences in being a letting agent and an estate agent.

According to Jordan, unqualified agents had no bonded client accounts hence there was greater risk of clients losing money. Landlords and tenants get protection for deposit and rent money by depositing an amount in a bonded account which is covered by the deposit compensation scheme.

Jordan’s advice is to use services of a reputable agent who should be a member of ARLA with bonded deposit scheme.

Overseas students urged to understand Tenant Deposit Protection Rules

Colleges and universities are being reminded by the online tenancy deposit firm, mydeposits.co.uk to make students understand Tenant Deposit Protection Rules to safeguard their deposit money.

The firm is concerned that most of the 48,000 overseas students in the UK may not be aware of their rights regarding tenancy deposit.

With effect from April 2007, landlords and letting agents are permitted to accept tenant deposit only if they follow Tenant Deposit Protection Rules laid down by the Government for the tenants in the UK.

The tenants have now got the resource in the form of new legislation to get back their deposit from the erring landlords who fail to refund deposit after the expiry of lease agreement.

The firm mydeposits.co.uk has suggested that students needed to be motivated to demand from landlord proof that their deposit money has been put in the Government-approved scheme. A student in the UK pays on an average £245 per month as rent. According to the firm’s chairman David Salusbury, educational institutions could play important role in making students understand laws governing their rented accommodation.

The firms dealing with tenant deposit protection usually render free impartial service in resolution of disputes over deduction of money by a landlord.

Tenant humiliation practices condemned by NLA, ARLA

The National Landlords’ Association (NLA) and the Association of Residential Letting Agents (ARLA) have jointly come forward in condemning tenant humiliation practices.

The two associations, representing more than 23,500 letting agents and landlords, have criticised those landlords who allowed putting up rent dodger signs on properties of tenants who failed to make their payments.

NLA chairman, while admitting that landlords get frustrated due to non receipt of payments from tenants, suggested use of legal channels to gain possession if absolutely essential.

The law favours landlords in such situations, but court judgements take longer, commonly six months or more. Landlords do not get easy channels for taking action against erring tenants while facing extremely tough economic conditions. These frustrations apart, NLA strongly disapproved tenant humiliation practice as a flawed idea.

ARLA’s head of operations, Ian Potter, concurred with this view. He termed humiliation practice as an illegal action violating planning and data protection laws. He wanted to know what the landlords and agents would gain and what would be the opinion of majority of people about them? He cautioned that taking law in their own hands was more dangerous.

ARLA feels that letting agents, who encouraged such actions against tenants, must be boycotted.

NLA extends its support to sale-and-rent-back regulation by FSA

The National Landlords’ Association, representative of 20,000 individual landlords of the UK is committed to raise standards in the sale-and-rent-back sector.

In response to the Market Study on industry by the Office of Fair Trading which recommended regulation of sale-and-rent-back by the Financial Services Authority (FSA), NLA pledged its support.

NLA had recently acknowledged that it was keen in evolving market-led solution to bad practices and declared that its own sale-and-rent-back practice code would be including legally enforceable financial penalties.

NLA chairman, David Salusbury reiterated that NLA’s commitment to improving standards in market would not be affected by OFT’s recommendation about FSA regulation. NLA pledged its support to Government and FSA.

Research by a financial website in the month of July had revealed that there was big lack of understanding about schemes among homeowners who were likely to opt for sale-and-rent-back deals.

The research pointed out that 26% of respondents thought sale-and-rent-back agreements would entitle them to stay in homes indefinitely and were unaware that they could be evicted if their landlords failed in making mortgage payments.

The sale-and-rent-back sector earned bad name since some companies paid less than 60% of the market value for properties.

Landlords seeing boom in tenant demands

There is boom in the tenants demand, reported buy-to-let lender Paragon in its recently conducted Mortgage Trends survey.

AS per the survey, 51% of respondent landlords acknowledged that tenant demands were either growing or booming during July to September period.

The survey indicated 33.9% increase in the second quarter and revealed that optimism on growth was highest since Paragon started questioning respondents on this subject in 2004.

41.7 of landlords reported demand as ‘stable’ while just 3.6% informed that there was fall in demand in third quarter.

The survey also revealed 57.8% respondents were expecting continuation of growth up from second quarter figure of 53.9%. 32.3% of landlords felt that tenant demands would stabilise in next 12 months while 5.2% were expecting fall from existing levels.

The void period improvement is noteworthy, as the survey data revealed that it is down to 2.6 weeks per year from 2.7 weeks compared with April to June period.

Paragon’s managing director; John Heron observed that reluctant buyers were causing increase in demand for rented accommodation. He wanted government to recognise the role of fast growing private rented sector and to ensure that over regulation did not deter landlords from investing in their portfolios.