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UK House Price Surge and Relaxed Mortgage Criteria Boosts £Multi-Billion Buy-to-Let

August 12, 2013Article by Ray Withers

UK house prices are on the rise, signalling the end of the property slump. According to just-released figures from Halifax, property values in the three months to July 2013 were 4.6% higher than a year ago, tipping the charts at the fastest annual pace for three years. They gathered speed of 0.3% in July alone, up to 0.9% from 0.6% in June; and are tipped to continue their projection throughout the year. According to Halifax, the average price of a UK home is £169,624.

LSL Property Services report house prices in England and Wales at their highest ever level of £232,969 (average). Based on Land Registry figures, this is higher than the 2007 peak and shows an increase of plus £500 per month over the past year. Savills, which specialises in prime London property, also reports an 18% price rise, with the average value of prime London stock now standing at £3.2million.

Confidence underpins increase in housing demand

Martin Ellis, chief economist for Halifax, tells us: “Signs of improvement in the economy, underlined by the recent evidence of a rise in gross domestic product and increases in employment, appear to have boosted consumer confidence. Greater confidence is likely to have underpinned the increase in housing demand. House prices are expected to continue to rise gradually through this year, with only modest economic growth and still-falling real earnings constraining housing demand and activity.”

Although there is still a lack of stock to meet demand, the Council of Mortgage Lenders reports lending numbers as the strongest they have been since 2008. Official Government schemes such as Funding for Lending and Help to Buy are expected to further assist the market recovery. In 2012 the Government gave banks access to a reported £80billion of cheap capital to lend to homeowners and small businesses within these schemes. This has been thus far credited with lowering mortgage rates and stimulating re-mortgage activity.

Housing Minister Mark Prisk told us last week: “We’re determined to build a bigger and better private rented sector that gives tenants more choice of good-quality homes.”

£5billion in three months adds fuel to the boom

Britain’s buy-to-let (BTL) market is also stepping up, with circa 40,000 BTL mortgages advanced in the three months to June 2013, up 7,000 from 33,000 in Q1. Lending to landlords topped £5billion in the past three months, a period which preceded the Bank of England’s pledge last week to keep interest rates low for the next three years.

This surge is also hitting levels not seen since 2008, as investors cash in on cheap mortgage rates for higher returns than they can get from the banks. More than one in 10 mortgages are now being given to new landlords, while first-time buyers still struggle to get onto the housing ladder.

Many lenders had restricted BTL funding following the credit crunch, but lending criteria is now being relaxed again, with the lower rates set to encourage existing BTL landlords to remortgage and borrow more.

Low mortgage rates and red hot rentals

The Council of Mortgage Lenders (CML) tells us BTL loans are now accounting for more than 13% of outstanding mortgages, up from just 4.3% 10 years ago. No surprise when landlords are now being offered mortgage rates as low as 2.5%. The CML data shows a total of 1.5million BTL mortgages outstanding with a combined value of £168billion.

David Whittaker, managing director of Mortgages for Business, comments: “Demand for rental property remains red-hot. Landlords are refinancing in their droves to raise enough capital to make further additions to their portfolios.”

Richard Lambert, CEO of the National Landlords Association, confirms his members are already showing a keen interest. 22% of BTL landlords, tempted by returns of 6% and 6.5%, said they are planning to add to their UK portfolios in the next 12 months.

A proven model with consistent profits

Ray Withers, Property Frontiers CEO, explains: “The UK property market continues to attract domestic and international interest and is still a secure place to invest. The latest industry figures are, of course, excellent news for investors. However, the market is still in recovery and, while new options and opportunities are emerging all the time, you still need to choose your investments wisely.”

He continues: “That’s why we have developed our buy-renovate-sell strategy for the UK market. Our exclusive partners have access to an in-house supply of discounted UK properties, which are renovated and then re-sold via local estate agents. This proven model has consistently generated good profits for investors and is hands-off, with a defined exit strategy,”

Achieve up to 61% returns over 5 years

The UK property market continues to prove itself as a solid underlying asset class for investors, but it requires an active investment strategy to generate above market returns. Get in touch to find out more about this proven, hands-off model, which delivers fixed returns up to 61% over 5 years (average 12.2% per year).

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Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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