Buy to let increase provides profits for Paragon

In the next couple of months Paragon Mortgages has predicted a doubling of buy to let mortgage business.

The prediction came along with the announcement of a 10% rise in half year pre-tax profits for the company’s parent The Paragon Group of Companies PLC. This was on the back of a 15% rise in buy to let lending that looks set to continue.

‘The pipeline of new business is very healthy at £241.2m’, said director John Heron. This represents more than a doubling of expected future business in the three months to the end of March, he  confirmed.

‘We are continuing to see growth in the buy to market as demand from landlords increased, tenant demand remains strong and levels of optimism stay high.’

‘Since the beginning of January we have successfully launched 42 limited edition products through our Mortgage Trust brand which has generated significant business due to market-leading rates.’

‘We are expecting to see a significant increase in loan completions in the second half of the financial year following such a successful period, as the benefit of this increase in lending activity comes through.’

The company announced pre-tax profits of £49.1 million, an increase from £44.8 million at the same time last year.

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Rents up for sixth month in a row, according to Countrywide

Average monthly rents across Britain increased for the sixth month in a row to £842.

The statistic is from Countrywide, the UK’s largest chain of agents, which said that the best yields for landlords are being reached in Wales at 6.7%, followed by the North and Midlands, both at 6.5%.

The best yields are mainly on one bedroom properties and smaller properties.

Average monthly rents for April fell in some regions, London, the South East and Wales. Countrywide places the fall in central London down to high stock levels in comparison with last year, when the Olympics were coming up. They say that this April, tenants viewed multiple properties and put in offers lower than the asking price, with some landlords accepting these offers.

Countrywide, who use their own data of 50,000 properties that they manage across England, Wales, and Scotland, say that rent arrears are declining in all regions apart from Scotland.

The company also says that buy to let property investments remain a strong performer when compared with savings and other vehicles of investment, and they predict that this will continue.

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250,000 people over 50 say they can only pay off mortgage by selling their home

According to The Saga Equity Release Advice Service, underachieving funds have left numerous people over the age of 50 with interest only mortgages facing an average deficit of £49,000.

Half of the 8,000 over-50s who were interviewed by Saga said they have not moved home for more than 20 years yet a quarter add that they will have to sell their home in order to make up the deficit from their endowment policy.

One in thirteen of those facing a deficit have bought themselves some extra time by extending their mortgage, while a third plan to dip into their savings to pay off their mortgage. About one in ten don’t know what they will do to pay their outstanding balance on their home.

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Expanding into the student property market set to bring annual return of 9.2%

In the UK the student accommodation property investment market is forecast to see annual returns of 9.2% over the next 12 months due to continuing demand.

This indicates a rise of 0.4% on London returns to 9.1%, due to increasing rents in a highly constitutionally undersupplied sector, says the latest report from property firm Knight Frank.

Standard rents a predicted to increase by 3% in London and 2.75% in the regions from September 2013, in keeping with their latest predictions for the student accommodation sector.

James Pullan, head of Knight Frank Student Accommodation said, ‘Student property is one of the most successful real estate asset classes, thanks to stability of demand for student bedrooms from all over the UK. The market is still structurally undersupplied in all core University cities.’

‘Student accommodation is a mid to long term investment play with current access to stock relatively limited, and the sector dominated by specialist providers and funders. There are barriers to entry for new operators, although a significant volume of new equity is entering the sector, looking for opportunities in the current refinancing climate,’ he explained.

‘Knight Frank forecasts a combined London and regions investment return of 9.2%, higher than most other asset classes. ‘This positive outlook is down to several factors including continued steady rental growth in all key English university towns, continuing undersupply, and the established perception of the UK as a top global knowledge centre,’ explained Pullan.

‘Other things we cannot ignore in the year ahead include significant volume of product entering the market. We are already seeing substantial equity, most of it international, chasing these assets and the first student property REIT recently launched and already finding keen interest in the UK and overseas,’ he added.

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Rate of mortgage and insurance cases increase

The amount of fraud on mortgages and insurance policies has more than doubled since the start of the recession, and the ongoing pressure on household finances is expected to lead to more cases, a credit agency has said.

The statistics from Experian indicate that although the total rate of fraud on financial products has declined since 2007, in particular areas there have been large rises in the number of false applications.

The stats show that the speed of mortgage fraud rose to 38 cases every 10,000 applications in 2012, up from 35 the prior year, and more than double the 18 cases per 10,000 in 2007.

Nine out of ten cases entailed individuals painting a intentionally false picture of their personal circumstances on an application, with the most common action being an attempt to hide a poor credit history. False statements about the applicant’s employment status or financial circumstances also made an appearance.

Experian said mortgage fraud cases were highest among the social group made up of middle-aged, middle-class, and skilled working-class individuals.

Over the same period of time the number of fraud cases including insurance policies have also risen more than double, from 5.44 in every 10,000 cases in 2007 to 12 in every 10,000 in 2012. In this area, 86% of frauds involved the person applying for the policy or making a claim.

Across the board, Experian said the group responsible for the majority of fraudulent applications for financial products in 2012 was a group they categorise as “Terraced melting pot”. This group, which portrays people in routine urban occupations, was responsible for 21% of first-party fraud cases over the year.

The “Liberal opinion” group, consists of young professionals and well-educated people, followed accounting for 14% of first party cases. Amounting to about 70% of financial services applications fraud was carried out by first parties falsifying their circumstances.

Experian said they predicted fraudulent applications to carry on increasing throughout 2013, pushed by the continuing pressure on household income and benefits, and stricter credit and lending rules.

Nick Mothershaw, UK director of identity and fraud at Experian said, "As a result of poor or patchy credit, more and more 'non-professional' fraudsters are clearly attempting to ease their position, misrepresent applications or make exaggerated claims over their income and personal finances."

"Mortgages, current accounts, insurance and cards will continue to come under pressure from fraudsters keen to get their hands on cash facilities."

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Costs for landlords to increase due to changes in council tax

Welcome to The Letting Vision Blog! We will be providing you with the most recent letting agent, landlord, and tenant news and views. This week we are going to talk about the changes in council tax and how that affects landlords.

From this week landlords are reminded that, local councils now have the option of charging full Council Tax on empty properties.

The changes will have an effect on properties that until now have been given assured exemptions and discounts, including properties for rent that are furnished or unfurnished.

Owners who have a property that is empty due to building work will lose the assured right to be let off Council Tax for up to a year. From day one many councils have decided to charge the full amount.

Here are the specific alterations:

• Exemption class C (properties that are empty and unfurnished for up to six months) has been abolished and each council can decide whether to award a local discount in its place.
• Councils can decide to charge an additional premium of up to 50% on homes that have been empty and unfurnished for two years or more.
• Exemption class A (properties requiring or undergoing major repairs for up to 12 months) has been abolished and each council can decide whether to award a local discount in its place.
• The minimum discount that councils can give for furnished homes that are no one’s ‘sole or main residence’ – i.e. second homes and unoccupied furnished lets – has been reduced from 10% to 0%.

Local councils vary with their approach to the changes. For instance, some councils are charging full Council Tax from day one, whereas, others are allowing a short period of about a month and then either charging full Council Tax or an amount of it for the next five months.

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