Wealth Guru Property Newsletter by The SaleMaker

Interest

Issue 19

rates

What next for borrowers looking to either remortgage or buy a home?

Investing in property What you need to know to attract tenants

Stuck on the property ladder A shortage of choice limits those trading up

Mortgage matters Understanding your options

10 essential mortgage questions What are the key questions you need to ask? P3 Wealth Management Ltd 59 Provost Milne Grove, South Queensferry, Edinburgh, EH30 9PJ T: 0131 331 4191 F: 0844 4141 782 E: info@p3wealth.co.uk P3 Wealth Management Ltd is authorised and regulated by the Financial Services Authority.

www.p3wealth.co.uk

Planning your remortgage. Isn’t it time you talked to us about saving money? We’re passionate about making sure you’ll obtain the best mortgage deal available. Contact us to discuss your current situation, and we’ll help you find the best deal that's right for you.

IN THIS ISSUE

In this issue

a foot on the 12 06 Getting property ladder The financial reality of buying a first home

New home registrations increase December weather didn’t dampen housebuilders’ spirits

Lending constraints

Guidance to house builders and Local Authorities

The underlying drivers to be considered before looking towards solutions

How the new planning system is intended to work

09 10 Undermining the market

A shortage of choice limits those trading up

Investing in property

Buy-to-let mortgage lending

14 14

10 11 11

Property facts

What next for borrowers looking to either remortgage or buy a home?

16 18

Time taken to secure a tenant has fallen

Fixed-rate deals A dramatic effect on homeowners’ rate expectations

Energy efficiency improvements

NHBC certificate Covering you against specified risks

House building permissions down Drop coincides with the coalition government having set out a radical agenda for planning change

Underpinning the UK property market

Start of the New Year attracts a growing number of investors

Strong demand for good-quality family houses

Residential property buyers gambling Are you taking a major financial risk by not having a survey?

Pre-empting a future interest rate rise An increasing number of homeowners are rushing to remortgage

Mortgage lending Home loans on offer have more than doubled

makes good 24 Developer progress Even with economic uncertainties, tax rises and government cutbacks

essential mortgage 24 10questions What are the key questions you need to ask?

look 20 Confidence in property 24 Landlords to increase prices Strong returns for investors over the longer term

Home building

Rental properties

Buy-to-let

What you need to know to attract tenants

Providing landlords with upfront financing to make rental properties more efficient

Understanding your options

Interest rates

Expectation of strong rental demand to remain

Mortgage matters

Proposals to change mortgage regulations

Stuck on the property ladder

Reconstructing our regions The clear economic benefits of meeting housing needs

The lack of finance means more potential buyers are opting to rent instead

26 Understanding the jargon The A to Z of property and mortgage terms

WELCOME

Welcome Welcome to the latest edition of our property news and mortgage magazine. We are ‘passionate about property’ and can advise you on any areas that may interest you. In a hugely competitive market, lenders are continually updating and extending their range of mortgages. Two of the most important points to consider when choosing a mortgage are how you pay back the capital that you borrow and how you pay the interest on it. On page 09, we consider the importance of how to fund what will probably be the largest purchase you’ll ever have to make. On page 12, read how optimistic sellers have pushed up property asking prices but those wanting to move home are stuck thanks to a shortage of homes on offer. According to Rightmove’s January report, asking prices rose by 0.3 per cent in the four weeks to mid-January – the first rise in three months. The National House-Building Council (NHBC) provides the Buildmark warranty and insurance cover for newly built and newly converted homes and other warranties for social housing and self-build homes. On page 16, we look at why it is important that you check your warranty documentation, which you should have received from your solicitor on completion. A full contents listing appears on page 3. At the time of publishing this edition, the property and mortgage market and economic events are changing very rapidly and some further changes are likely to have occurred by the time you read it.

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. The Financial Services Authority (FSA) does not regulate most Buy-to-let or Commercial Mortgages. YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

21 18 08 10 13

Assessing your mortgage options. Are you looking for the best mortgage solution? If you’re unsure about how to navigate the mortgage market during these challenging economic times, let us help you – don’t leave it to chance. Contact us to discuss your requirements, and we’ll help you make a well informed decision.

NEWS

Getting a foot on the property ladder The financial reality of buying a first home Over 1 million women and 1.7 million men aged between 20 and 34 are still living at home. The average age of a first-time buyer purchasing a home without financial assistance is now 37, meaning that more and more young people are leaving it later to get married and start families. And with the average first-time buyer deposit now at ÂŁ37,000, the financial reality of buying a first home is concerning many of those expecting to get a foot on the property ladder. This means that without taking into account living or renting costs, first-time buyers aged between 22 and 29 have to save 45 per cent of their take-home pay every month for five years to afford a deposit. House-building is currently at its lowest since 1923, with mortgage lending set to be at its lowest level for 30 years. Stewart Baseley, Executive Chairman of the Home Builders Federation (HBF), said: â&#x20AC;&#x2DC;More than 2.7 million young adults are still living at home. The government needs to help first-time buyers, and ensure that policies enable us to build the homes the country needs and mortgage providers are actively increasing their lending to firsttime buyers.â&#x20AC;&#x2122; n

This means that without taking into account living or renting costs, first-time buyers aged between 22 and 29 have to save 45 per cent of their take-home pay every month for five years to afford a deposit.

NEWS

New home registrations increase December weather didn’t dampen housebuilders’ spirits The severe December weather didn’t dampen housebuilders’ spirits, as the last quarter of the year saw an increase in new home registrations, according to the National House-Building Council (NHBC). Figures from the NHBC for new home registrations in December 2010 show an increase on 2009 figures, with just over 7,385 registrations during the month (compared to 7,149 in 2009). These, added to the previous 11 months, mean year end numbers look set to end approximately 30 per cent higher than overall registrations reported in 2009 (115,458 in 2010 compared with 88,083 in 2009). Month on month, December 2010 figures were down on November 2010 – a traditional trend for the industry,

reflecting a shorter month over the festive season. Imtiaz Farookhi, Chief Executive of NHBC, said: ‘No one is popping champagne corks but there is a growing belief that the worst is now behind us and we’re on the road to recovery. ‘The pace and extent of that recovery really depends on factors out of the hands of the industry, such as mortgage availability and monetary pressures on consumers. These are the biggest obstacles that the house building sector

now faces for the coming year.’ NHBC statistics for the rolling quarter October - December 2010 show that: Private sector registrations were up 1 per cent (to 18,551) when compared with the same period last year (18,393) Public sector registrations were 8,711 – 13 per cent higher than the same period a year ago (7,685) Registrations in the combined private and public sectors were 5 per cent up on the same period in 2009 (27,262, up from 26,078) n

Lending constraints The underlying drivers to be considered before looking towards solutions The Council of Mortgage Lenders (CML) has responded to a discussion initiated by Housing Minister, Grant Shapps, over the large deposits needed by first-time buyers, by pointing out that lending constraints currently apply to all those who don’t hold a large amount of equity in their homes. The CML explains that high loan-tovalue (LTV) lending is very capitalintensive for lenders who typically need to hold six to eight times more capital against a 90 per cent LTV loan than a 60 per cent LTV loan. In addition, demand for high LTV products is relatively low, partly because of the cost to borrowers but also because consumers are unsure of the future direction of house prices. The lenders’ body therefore urges

the government to ‘consider and understand’ these underlying drivers before looking towards solutions. For example, while mortgage insurance, shared ownership and product innovation can all play their part, none will provide a ‘magic bullet’ to normalise the mortgage market, the Council suggests. CML Director General, Michael Coogan, sums up: ‘There is no simple quick fix for a market that has changed

fundamentally since the credit crunch.’ He adds: ‘Creative approaches have a role to play in helping to turn market stability into market recovery, and lenders look forward to working constructively both with government and the house building industry as we look to help create the kind of conditions conducive to responsible innovation.’ The CML estimates gross lending for 2011 at around £135bn, compared to £360bn at its pre-crunch peak. n

LEGAL MATTERS

Guidance to

house builders and Local Authorities

How the new planning system is intended to work The publication of the Localism Bill after much delay provides guidance to house builders and Local Authorities alike as to how the new planning system is intended to work. But, as a recent YouGov poll demonstrates, the government’s aspiration that the new system will deliver more homes relies on changing local people’s attitudes to housing. A YouGov survey commissioned by the New Homes Marketing Board (NHMB) has revealed that more than eight in ten people (81 per cent) believe Britain needs more housing for sale and rent, especially affordable homes for first-time buyers. But it also shows that far fewer people, just 50 per cent, would welcome more homes of all types in their own immediate neighbourhoods. This is a decrease even from 2007, when in a similar poll 58 per cent of people said they would welcome more homes in their neighbourhoods. The government believes that by giving people more power, more homes will get built but this survey shows how much government and local authorities need to

do to help house builders convince local people of the benefits of development. With Local Authority budgets cut, the financial rewards of development, through the New Homes Bonus, will be vital for boroughs and towns across the country. Stewart Baseley, Executive Chairman of the Home Builders Federation (HBF), said; ‘The localism proposals provide a real chance for people to develop their communities for the better and house builders will work with them to build the homes communities and families want. More homes will mean more money for local facilities and services and will enable young people to live in the communities where they grew up. ‘The government and local councils need to join us in educating communities of the severity of the housing crisis and the benefits of new homes.’ n

A YouGov survey commissioned by the New Homes Marketing Board (NHMB) has revealed that more than eight in ten people (81 per cent) believe Britain needs more housing for sale and rent, especially affordable homes for first-time buyers.

MORTGAGES

Mortgage matters Understanding your options In a hugely competitive market, lenders are continually updating and extending their range of mortgages. The most important points are how you pay back the capital you borrow and how you pay the interest on it. be paying each month during that time. When the fixed period ends, you’ll usually move to the lender’s standard variable rate. There are usually penalties if you pull out early.

CAPPED OR CAP AND COLLAR With a capped rate you pay a variable interest rate, but there’s a ceiling so your payments won’t go above a certain amount for a set period. Some deals include a collar too – this is the lowest rate you’ll get. If interest rates fall below the collar, you’ll lose out. When you choose a mortgage, you’ll need to think about the repayment method, interest rate deals and special features of some mortgages. The best one for you will depend on your circumstances, so it’s important to understand your options and obtain professional advice.

REPAYMENT METHODS There are the two main ways you can pay off your mortgage. These are called ‘repayment’ or ‘interest only’.

REPAYMENT MORTGAGE With a repayment mortgage you make monthly repayments for an agreed period (the term) until you’ve paid back the loan and the interest.

method, you’ll need to look at the interest rate deals on offer. Suitability of different deals will depend on your personal circumstances and any tie-ins or penalties that may be attached.

STANDARD VARIABLE RATE With a variable rate mortgage your payments go up or down with the lender’s standard interest rate. This often changes following Bank of England base rate changes.

STANDARD VARIABLE RATE WITH CASHBACK With this type of deal you get a cash lump sum as well as the loan when you take out the mortgage. You’re usually tied into the variable rate for a set period.

DISCOUNTED RATE INTEREST ONLY MORTGAGE With an interest only mortgage you make monthly repayments for an agreed period but this will only cover the interest on your loan. You’ll normally also have to pay into another savings or investment plan that will hopefully pay off the loan at the end of the term.

WHICH TYPE OF INTEREST RATE IS SUITABLE FOR YOU? As well as deciding on your repayment

You pay a lower interest rate to begin with, then move to another rate (usually the lender’s standard variable rate) after a set period.

TRACKER Tracker rates are linked to the Bank of England rate or some other ‘base rate’. This means they’ll always go up or down in line with changes to the base rate.

FIXED RATE You pay a fixed rate of interest for a set period, so you know exactly what you’ll

FLEXIBLE, CURRENT ACCOUNT AND OFFSET MORTGAGES Flexible, current account and offset mortgages offer you the facility to control and vary your monthly payments. They can be used with repayment or interest only mortgages. For example, you can: n pay less one month and more the next n make lump sum repayments (and sometimes draw these back) n take a ‘payment holiday’ pay off your mortgage early

KEY FACTS DOCUMENTS Mortgage providers are now legally bound to present customers with a Key Facts document. The Financial Services Authority (FSA), which regulates mortgages, says the Key Facts document should deliver clear, simple and user-friendly information to consumers about the mortgage offer. The Key Facts document sets out the total cost of the loan – not just the headline interest rate – including any up-front fees. Each new mortgage customer has to confirm that they have received the Key Facts before putting pen to paper. n

NEWS

INTEREST RATES

UNDERMINING THE MARKET Proposals to change mortgage regulations Organisations from across the housing industry have warned of the consequences relating to the Financial Service Authority’s (FSA) proposals to change mortgages regulation. Independent research shows that if the FSA’s proposals had already been implemented, of the 11 million current mortgage holders: n n

Nearly half wouldn’t have been able to borrow what they did Up to a quarter may not have been able to borrow anything at all

Moving forward, it is estimated that each year the proposals would mean: n n

Up to 153,000 house purchases could not be possible 57,000 first-time buyers would be refused mortgages

The implications for the housing market of such a reduction in mortgage availability – already one of the main constraints on housing delivery – are clear, and additional pressure could be placed on the already overstretched private and social rental sectors, where 5 million people are waiting on Local Authority waiting lists. The organisations also warned that unless the FSA changed its view that lending on shared ownership properties is sub-prime, the banks would continue to turn away more than £240m of valid business. In 2009/10, this resulted in 4,600 low-cost homes being left vacant, even though 110,000 households had applied to move into them. Elizabeth Richards, Head of Legal & Policy at the National Federation of Property Professionals (NFOPP), comprising both the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA), commented: ‘These proposals may seriously undermine the mortgage market. The National Association of Estate Agents attributes the decline in both buyers and sellers during the past few months to restrictive lending criteria. These new regulations have the potential to exacerbate this problem. Loans to first-time buyers are considerably lower than at this time last year, and the NAEA believes that these new proposals will prevent even more people from buying a home.’

Interest rates What next for borrowers looking to either remortgage or buy a home? Inflation is the problem that just will not go away quietly for the Bank of England and that has led to the outlook for interest rates picking up. While the Bank of England has not given any indication that it will raise the base rate, commentators are suggesting it may have to raise rates sooner rather than later and accelerate the pace of rates returning to a more normal level. That view appears to be shared by the money markets and this has pushed up swap rates, the funding that heavily influences fixed rate mortgages. But while higher swap rates could feed through to higher mortgage rates, it is far from certain. Banks still have hefty margins that mean they can keep mortgage rates low even if swap rates or the base rate rise. The problem is that rates are being used not just to make money but also to ration mortgages. The CEBR / Chesterton Humberts property forecast for 2011 suggested that a new bout of quantitative easing will help. It said: ‘The expansion in the money supply will

increase competition between lenders forcing down spreads and fees, making mortgages cheaper.’ But waiting around to see if rates fall further is a gamble and jittery borrowers are increasingly tempted to choose a fixed rate. If you are in the position of needing to fix, remember that if you have a 25 per cent deposit or equity, despite the doom and gloom, now is not a bad time to be looking for a mortgage. To get the full choice of deals, raising a decent deposit is still vital. The benchmark figure is 25 per cent – if you have this, then you’ll be getting close to the best rates, although for an absolute cheapest deal you’re still likely to need 40 per cent. A selection of better deals for 15 per cent deposits are available and even the 10 per cent deposit market is looking more buoyant. n

NEWS MARKET DATA

Property facts Home building 1 BRITAIN IS EXPERIENCING A HOUSING CRISIS Current home building levels are nowhere near enough to meet demand. Last year 160,000 new homes were built in England, compared with projected household growth of 223,000 per year. Average house prices in England are more than seven times average salaries and are set to reach nine-and-a-half times this by 2026.

2 THE GOVERNMENT HAS RAISED HOME BUILDING TARGETS The government has set a housing target of 240,000 homes per year by 2016, and a total of 3 million homes by 2020.

4 BRITAIN’S HOME BUILDERS ARE WORKING HARD TO MEET HOUSING NEEDS New home completions have risen some 35 per cent since 2001.

RENTAL PROPERTIES Time taken to secure a tenant has fallen

5 HOME BUILDING DOES NOT POSE A THREAT TO THE COUNTRYSIDE Green Belt land comprises 13 per cent of total land in England. Only 8 per cent of land in the UK is classed as urban, half the figure in Holland and lower than Belgium, Denmark and Germany.

6 NEW HOMES ARE FAR MORE ENVIRONMENTALLY FRIENDLY AND SUSTAINABLE

3 BRITAIN’S PLANNING SYSTEM IS STILL NOT BRINGING LAND FORWARD QUICKLY ENOUGH TO MEET HOUSING NEEDS

Due to building standards introduced in 2006, new homes are now 40 per cent more energy efficient than new homes built at the beginning of the decade.

It takes on average 15 months for home builders to receive full planning permission on sites they wish to develop. This excludes time taken for pre-application discussions, which can extend the whole process to over two years in many cases.

Source: CLG Housing Statistics, Housing Green Paper, HBF research, CLG Housebuilding Statistics, CLG Land Use Statistics, CLG Local Planning Authority Green Belt Statistics, National Housing Planning Advice Unit.

UK private rental properties are being let within 15 days on average, according to property services group, Countrywide. The firm’s latest quarterly survey shows that the length of time taken to secure a tenant has fallen by five days in a year, as an average 4.4 tenants line up for each available home. The number of new tenants registering for rental accommodation increased by 14 per cent compared with a year earlier, and the increase took the total number of new tenants for the year to over 200,000, a record high. Countrywide are seeing a change in the demographic of tenants, with a growing number of professional tenants emerging across the country as affordability issues face homebuyers who are unable to sell or raise the capital to buy their next home. These wider economic issues are reflected in our rental stock, with a growing number of three- and four-bedroom family homes entering the market. The research suggests that the proportion of these homes entering the rental market grew by 3 per cent last year. However, the greatest demand is for twobedroom apartments and houses, which are still in short supply. Demand is at its greatest in the South West, although letting agents throughout the UK reported a lack of supply, while confirming that two-bedroom houses and apartments remain the most sought-after property types.

NEWS

Stuck on the

property ladder A shortage of choice limits those trading up Optimistic sellers have pushed up property asking prices but those wanting to move home are stuck thanks to a shortage of homes on offer, according to Rightmove’s January report. Asking prices rose by 0.3 per cent in the four weeks to mid-January, the property listing website’s index recorded – the first rise in three months. At £223,121, the average property asking price is up 0.4 per cent on a year ago. Homeowners wanting to move up the property ladder are being hardest hit by the stuttering market, as a shortage of choice limits those trading up. Those hunting for the traditional semi are being hampered the most, with the supply of semi-detached homes – the property that many families looking for more space aspire to – down 30 per cent on last year. The number of flats and terraced homes being offered is down 10 per cent, and the number of properties coming to the market each week stands at 9,150, almost half the 17,000 January average seen before the credit crunch hit. With house price inflation having risen rapidly over the past decade, many buyers of a family home face a stamp duty bill of at least £7,500 for properties costing more than £250,000. This has now been added to by lenders demanding minimum deposits of 25 per cent to secure the best mortgage rates, leaving a mover hoping to buy a £300,000

home needing to raise £84,000 – £9,000 in stamp duty and a £75,000 deposit or equity. Miles Shipside, Director of Rightmove, said: ‘With the number of new sellers at a two-year record low, prices are being underpinned by muted new supply just managing to fight off the downsides of lender reticence. ‘However, in less popular locations, the smokescreen of New Year price optimism is temporarily masking the collateral damage that the new era of tighter credit will continue to inflict.’ One of the reasons behind the shortage of semi-detached homes being put up for sale could be that their owners are facing the biggest frustration in attempting to move up the property ladder and find reasonably priced detached properties. Mr Shipside said: ‘These figures show that owners of semis aspiring to trade up are the most likely to feel trapped and frustrated of those stuck on the property ladder. They would previously have sold to owneroccupiers of terraces, who in turn would have sold to first-time buyers or buy-to-let investors. ‘With fewer buyers at the bottom of the chain, and short chains due to more vacant property, some are obviously unwilling or unable to come to market. ‘Also semi owners face the biggest

price jump to trade up to their target market of detached homes, and lenders are no longer as profligate in their ways to fund this traditional step onto the next rung of the ladder.’ Rightmove measured 1.3 million properties marketed in 2010, compared with just 530,000 mortgages. n

NEWS PROPERTY INVESTMENT

Investing in property What you need to know to attract tenants 1. Research, research, research – know the area you are buying into. Regeneration plans and new Tube stations are great indicators of up and coming areas and capital appreciation. Apply the ten-minute rule for access to transport links, bars and restaurants and local amenities. 2. Location - consider who your ideal tenants will be. To attract quality tenants you need quality locations. 3. Buy well - consider both price and content. Research prices in the area and look for comparables. Can white goods, flooring or furnishing be included in the purchase? 4. Make sure the numbers work - most wealth is created through capital appreciation, so buy a property that supports this type of growth. Ensure you include all costs in your financial projections (such as legal fees, stamp duty, service charges, ground rent and contingency to accommodate void periods between tenants). These costs are all too often ignored, leading to negative monthly cash flows. 5. Appoint the right advisers - a professional regulated adviser can secure the best deals free from fees and aligned to your investment strategy. Good letting agents will minimise void periods. Remember that not all solicitors are off-plan specialists. 6. Don’t expect to get rich quick - property investment should be approached with a long-term view. It is an asset class that in the

medium to long term has outperformed all other asset classes and we would encourage people to build a sustainable, appropriately geared portfolio over a number of years. 7. Never ignore the basics of supply and demand - find out what is needed in your chosen area. The markets for one-bedroom flats and four-bedroom houses do not follow the same pattern. 8. Don’t be influenced by your emotions – you’re not living in your investment so decorate and furnish at an appropriate level of quality. Make sure you understand what quality is required and don’t be tempted to furnish cheaply if you want to retain quality tenants. 9. Be wary of incentives - particularly schemes or developments where you are under pressure to sign up quickly to secure the deal, and never buy an off-plan or new property without the guarantee of either a National House-Building Council (NHBC) or Zurich ten-year warranty. 10. Don’t pay over the odds - avoid paying finder’s fees, commissions or subscriptions, particularly prior to completion. If the investment proposition is a sound one, there should be no reason to pay up-front fees.

BUY-TO-LET MORTGAGE LENDING Expectation of strong rental demand to remain Buy-to-let mortgage lending grew by 7 per cent in 2010, according to data from the Council of Mortgage Lenders (CML). By the year-end, there were an estimated 1.3 million buy-to-let loans outstanding, worth £152bn. The total value of lending during 2010 stood at £10.4bn (up 22 per cent on 2009), and the total number of loans advanced increased 10 per cent, to 102,000. In the final three months of the year, there were 28,600 new buy-to-let loans advanced, worth £3bn, a rise of 6 per cent by volume and 7 per cent by value from the third quarter. In terms of loan performance, the buy-to-let sector saw a further decline in the number of mortgages in arrears, with low interest rates a key driver in the improvement. For 2011, the CML expects strong rental demand to remain as deposit constraints continue to present obstacles to potential first-time-buyers.

Director General, Michael Coogan, commented: ‘Funding remains a key constraint on growth in buy-to-let lending, but demand seems to be resilient and loan performance has improved.’ He added: ‘Loan performance could potentially be adversely affected by rising rent arrears or interest rate rises, but at present there is no indication of these pressures materialising in practice.’

NEWS

ENERGY EFFICIENCY

Energy efficiency improvements Providing landlords with up-front financing to make rental properties more efficient

FIXED-RATE DEALS A dramatic effect on homeowners’ rate expectations Research from Unbiased.co.uk suggests that the average mortgage borrower is only prepared to enter a fixed-rate deal if the interest rate is around 3.3 per cent. With the Bank of England’s base rate still at 0.5 per cent, the professional advice portal suggests the emergence of a ‘rate-spoilt’ generation, as back in January 2009 a rate of 4 per cent would have appeared attractive, given that fixed-rate deals peaked at around 7.8 per cent at the end of 2007. Furthermore, the study indicates that only a quarter of respondents coming to the end of their deals would move on to a new fix rather than reverting to their lenders’ standard variable rates. According to Unbiased.co.uk, homeowners are likely to continue to refrain from remortgaging to a fixed-rate deal until the base rate starts to rise. The firm’s Chief Executive, Karen Barrett, comments: ‘With the base rate now remaining at a record low, our tracked research shows this has had a dramatic effect on homeowners’ rate expectations.’ She adds: ‘Their ideas of what is a reasonable fixed-rate mortgage have become distorted in the low interest rate environment and they need to ensure that their mortgage expectations are realistic.’ According to Ms Barrett, homeowners need to be alert to ensure they don’t miss out on getting the best deals before it’s too late.

Landlords should be considering measures to improve the energy efficiency of their properties now, the Association of Residential Letting Agents (ARLA) recommends. The government’s Green Deal (which should be up and running in Autumn 2012) will provide up-front financing to make rental properties more energy efficient where tenants request improvements. However, by 2015, landlords who don’t comply may be forced to make improvements because ministers are determined that all properties with an Energy Performance Certificate rating of F or G are upgraded.

For private landlords with older properties, this may present a significant challenge, so ARLA is suggesting that simple measures, such as loft insulation (the recommended thickness is between 250-300mm), the insulation of water fittings, and the draught-proofing of doors and windows, are tackled immediately. ARLA Operations Manager, Ian Potter, reminds landlords that they can already take advantage of a tax allowance of up to £1,500 for energy efficiency improvements, through the Landlord’s Energy Saving Allowance. n

Buy-to-let.

We offer professional investor advice, essential when choosing the right mortgage deal. Providing investors with professional advice to make an informed choice is what we do best. Whether youâ&#x20AC;&#x2122;re a new or experienced investor, contact us to discuss your buy-to-let requirements.

BUILDMARK

NHBC certificate Covering you against specified risks The National House-Building Council (NHBC) provides the Buildmark warranty and insurance cover for newly built and newly converted homes, and other warranties for social housing and self-build homes. If you buy a newly built or converted home, it is therefore important that you check your warranty documentation, which you should have received from your solicitor on completion. The Buildmark warranty and insurance cover is divided into five main parts:

COVER BEFORE COMPLETION Cover during the first two years (from the date shown on the Ten Year Notice/ Insurance Certificate)

COVER DURING YEARS THREE TO TEN Additional cover in years three to ten (where NHBC’s subsidiary carried out the building control) The steps you should take vary depending on how long the cover has been in operation. It is important to check for the number of your insurance policy and the commencement date of the cover. This information is shown on your Insurance Certificate.

COVER BEFORE COMPLETION If, due to insolvency or fraud, the builder does not start building or converting your home, or fails to finish it, NHBC will reimburse money you have paid the builder for the home where the money cannot be recovered from them. If the property is not finished, NHBC can arrange for the property to be finished in accordance with their Standards. The maximum amount NHBC will pay is 10 per cent of the original purchase price or £100,000 (whichever is less).

COVER DURING THE FIRST TWO YEARS If you discover any defects or damage in the first two years from the date of your Insurance Certificate, you must report these to the builder. The builder must put right any defect or damage to your home, caused by not building to NHBC standards, within a reasonable time

scale. If the builder is notified of defects or damage within this period of cover, they remain responsible for putting the problem right, even after this period of cover has expired. If, after notifying the builder of the problem, you’ve received no response, you should contact NHBC and they will write to them on your behalf. Remember that the builder is not responsible for items such as normal shrinkage or normal condensation due to the property ‘drying out’, general wear and tear or damage arising from failure to maintain the property.

NHBC RESOLUTION SERVICE If the builder fails to put right the problems, NHBC will usually offer a Resolution Service, which aims to resolve disputes between you and the builder. Under the Resolution Service, they can also help arrange the work needed to put things right if the builder fails to do so. If the builder is insolvent, then they insure his obligations. NHBC can only help with disputes about defects or damage to your home. They will not be able to help you if you have a dispute about financial or contractual matters.

COVER DURING YEARS THREE TO TEN During years three to ten, NHBC provides direct insurance cover and you should contact them, rather than the builder, if you need to make a claim. Generally, the insurance cover NHBC provides will depend on the type of policy you have. It is therefore important that you read your own documents for specific information. Additional cover in years three to ten where NHBC’s subsidiary carried out the building control

This cover only applies if NHBC Building Control Services Ltd has carried out the building control for your home. If it has, you have additional cover in years three to ten against costs arising from the builder’s failure to comply with specified statutory Building Regulations, where there is a present or imminent danger to the health and safety of the occupants of the home. Your Insurance Certificate will show if this cover applies to your home. My property is less than two years old. What should I do if I discover a defect or damage? In the first two years after completion of the property, it is usually the builder’s liability to rectify defects or damage caused by failure to build to NHBC’s technical Standards. In the first instance, you should notify your builder of any defects or damage. There is no need to notify NHBC. However, you should keep a copy of all correspondence and any other relevant information, such as notes of telephone conversations, and contact them in the event of a dispute. If a dispute arises regarding work to be done, NHBC usually provides a Resolution Service (see above). This assists in resolving straightforward disputes between homeowners and builders.

WHAT IS THE BUILDER LIABLE FOR? The builder should put right, within a reasonable time and at their own expense, any defect or damage caused by a failure to build to their technical Standards which is notified to them within this period of the cover. If you have to move out of the home so that work can be done, the builder

BUILDMARK

should meet any reasonable costs you incur, by prior agreement with the builder, for removal, storage and appropriate alternative accommodation. If the builder has been notified of a defect or damage during this period of cover, then they remain liable to put it right even after this period has expired.

WHAT IS THE BUILDER NOT LIABLE FOR? n Wear and tear or deterioration caused by neglect or failure to carry out maintenance. n Dampness, condensation or shrinkage not caused by a defect. n Anything excluded by an endorsement on the Insurance Certificate. n Anything caused by alterations or extensions to your home. n Anything resulting from compliance with written instructions given by or on behalf of the first owner in respect of design, materials or workmanship. n Any cost or expense greater than that necessary to carry out a workmanlike repair of the defect or damage. n Any items falling outside the definition of home (as defined in your policy document). n If you are not the first owner, anything which you knew about when you acquired the home and which resulted in a reduction in the purchase price you paid or which was taken into account in any other arrangement.

MY PROPERTY IS MORE THAN TWO YEARS OLD. WHAT DOES MY POLICY COVER? During years three to ten after completion, NHBC handles insurance claims under the NHBC Buildmark (their warranty and insurance). In general, this part of the cover insures against damage that has resulted from construction defects in the structural and weatherproofing parts of the home. The cost of the work must exceed a minimum sum for the claim to be valid. Not all types of damage or parts of the property are covered in years three to ten. n

NEWS

House building

permissions down Drop coincides with the coalition government having set out a radical agenda for planning change Local Authority planning permissions for house building continued to head firmly downwards in the fourth quarter of 2010, the latest Home Builders Federation (HBF) Housing Pipeline report released reveals. It is the third successive quarterly fall and leaves permissions at less than half the rate being granted four years ago. Across Great Britain, just 33,000 homes were approved for construction in the last three months of 2010 – 9 per cent down on the previous quarter and 22 per cent down on a year ago. Social housing was hardest hit with only 5,500 approvals – a new low for the survey and particularly concerning with five million people already languishing on Local Authority housing waiting lists. HBF released the report just days after the government published its 2010 housing statistics that showed the number of new homes completed in England in 2010 slumped 13 per cent on the previous year, itself the lowest peacetime number on record since 1923. The implications of the collapse in permissions are stark and exacerbate an already acute housing crisis. Currently the country has a housing shortfall estimated to be a million homes, with

people being forced to stay with their parents for longer and first-time buyer levels at an all-time low. Permissions granted for homes typically take up to three years to build. So the full implications of this drop will not be felt for some time. However, with household formation projections showing the need for England to build around 232,000 homes a year until 2033, and 2010’s total at just 103,000, there is obvious potential for the crisis to deepen. The new Housing Pipeline report shows that through 2010 there was a steady fall in permissions granted to developers for new homes in England, with a drop from over 40,000 in the first quarter to under 30,000 in fourth quarter. This drop coincides with the coalition government having set out a radical agenda for planning change. The downward trend in permissions shows the importance of the government implementing its proposals for a pro-growth planning system as soon as possible. Commenting, HBF Executive Chairman, Stewart Baseley, said: ‘These figures are extremely concerning. A reduction in permissions

granted now will see fewer homes built in future years, exacerbating the already acute housing shortage we are currently experiencing. ‘The figures demonstrate the necessity for the government to clarify exactly how the new Localism-based planning system will deliver the homes and supply the growth we desperately need. Only by ending the ongoing hiatus caused by the scrapping of the old system without a ready replacement can developers and Local Authorities plan ahead confidently and effectively for new housing. ‘It is also crucial that councils recognise the housing shortage and accept their new responsibility for housing supply. This will require understanding the new system, taking full account of the government’s incentives and allowing developers to build the homes local residents and the country desperately need.’ The report, compiled by Glenigan for HBF, is the second of what will be quarterly monitoring. It will provide a regular and accurate assessment of the situation being faced by developers as Local Authorities get used to the new planning system. n

NEWS

Local Authority planning permissions for house building continued to head firmly downwards in the fourth quarter of 2010, the latest Home Builders Federation (HBF) Housing Pipeline report released reveals. It is the third successive quarterly fall and leaves permissions at less than half the rate being granted four years ago.Â Â

NEWS

Confidence

in property Strong returns for investors over the longer term New research has shown that investors see the property market as the best place in which to inject their hardearned cash this year. According to the Worldwide Property Group’s latest confidence tracker survey, 72 per cent of capitalists believe that property makes a superior investment.

Kevin Wilkes, Managing Director, commented: ‘It’s no surprise that so many people feel that property offers them the best investment potential.

This places bricks and mortar ahead of both gold – ranked top by less than one-fifth of respondents – and shares, which came third in the list with just 11 per cent of the vote.

He went on to say that the US is currently a ‘very appealing’ location, with some ‘incredible bargains’ available to those able to make a cash purchase.

Interestingly, the group also found that 77 per cent of investors consider this to be a great time to buy property in the UK, while 64 per cent view overseas markets as a strong option.

‘My tip for 2011 would be to make this the year that you invest. Don’t leave it too late and miss out on some of the best opportunities we have seen in decades.’ n

‘It has consistently produced strong returns for investors over the longer term, and during a downturn there is even more potential to achieve great returns.’

New research has shown that investors see the property market as the best place in which to inject their hard-earned cash this year.

NEWS

Reconstructing

our regions The clear economic benefits of meeting housing needs Recently released research reveals that building the homes required to meet government’s projections of need would mean £1.2bn of investment annually across the country and the creation of over 215,000 jobs. The Home Builders Federation’s (HBF) report, ‘Reconstructing Our Regions’, for the first time unveils the clear economic benefits of meeting housing need and tackling the housing crisis. The report analyses the potential impact of the government’s New Homes Bonus incentive to local communities and the upturn in employment in housing construction that would be seen if local areas build the homes needed to meet the government household projections over the next two decades. Last year saw the lowest number of homes built since 1924 and almost five million people on the social housing waiting lists. It also saw a record low number of first-time

buyers, with more and more people in their 30s staying with their parents. HBF Executive Chairman, Stewart Baseley, said: ‘Building houses is a win-win for communities across the country. Not only will families get the homes they need but local employment and increased investment will be boosted. ‘Economic growth is fundamental to a successful recovery and housing has a huge role to play – I urge Local Authorities to reap the rewards of development and start building the homes the country needs.’ n

BUY-TO-LET Start of the New Year attracts a growing number of investors Rents in England and Wales fell slightly in January, as the buy-to-let market saw a growing number of investors. According to the latest Buy-to-let Index from LSL Property Services, average rent dropped by 0.3 per cent (£682) compared with December but remained 4 per cent higher than a year ago, with signs of renewed growth in several areas. The January movement marked the second consecutive monthly fall and took average yield down to 4.9 per cent, as rents declined at a faster pace than rental property values. LSL Commercial Director, David Brown, points out that the number of buy-to-let loans available increased by 7 per cent in the final quarter of 2010, according to figures from the Council of Mortgage Lenders (CML). He commented: ‘There are signs that this trend is continuing into 2011, allowing a growing number of professional landlords to get onto the market – or broaden their portfolios – and take advantage of near record rental income and strong tenant demand.’ According to Mr Brown, international investors will also be playing their part while yields look attractive and properties are affordable. Meanwhile, tenant arrears fell back slightly in January, but remained high with 11 per cent of all UK rent in arrears.

NEWS

UNDERPINNING THE UK PROPERTY MARKET Strong demand for good-quality family houses Strong demand for good-quality family houses underpinned the UK property market and helped support price growth towards the end of last year, according to estate agents Winkworth. According to the group’s latest report, the average asking prices of properties on its books rose from £494,000 to £532,000 between August and November 2010. Overall demand from buyers fell during the three months, however, as confidence waned and mortgage availability remained tight. The number of properties for sale across the UK remained stable and above levels seen during the same period a year earlier. But it was the growing demand for high-calibre family homes that underpinned the market, fuelling an upward trend in asking prices. Dominic Agace, Chief Executive of Winkworth, said: ‘It is the availability of finance which remains a key determinant of the level of activity in the housing market in 2011. ‘Until the banks feel comfortable to lend again, particularly at the bottom end of the market, volumes are likely to remain constrained.’ In the rental sector, demand continued to outstrip supply between August and November, with the number of properties to let sliding to a level more than 45 per cent lower than that of the same period in 2009.

Residential property buyers gambling Are you taking a major financial risk by not having a survey? Residential property buyers are taking major financial risks by not having surveys carried out on their future homes, according to new research. A study by chartered surveyors e.surv showed that buyers gambled an estimated £1.3bn last year by failing to have a survey done before making a house purchase. Researchers found that eight out of ten home movers choose not to have a survey, although the average private survey – costing as little as £200 – identifies works requiring around £1,800 to put right, giving buyers room to negotiate on the seller’s asking price. According to HM Revenue & Customs (HMRC) figures, there were approximately

880,000 residential property transactions in 2010, meaning that more than 700,000 buyers can expect to fork out more than they bargain for when purchasing a home they have not had surveyed. Richard Sexton, Sales Director for e.surv, commented: ‘Interestingly, people buying more expensive properties are more thorough when they buy, despite the fact they are the ones who can afford to fix dodgy roofs or unexpected damp patches. ‘But they’re not just being risk averse – they use surveys to barter down sellers very effectively. It’s the people who can least afford something to go wrong who are missing out,’ he added. n

MARKET DATA

NEWS

Pre-empting a future interest rate rise An increasing number of homeowners are rushing to remortgage The UK housing market remained sluggish at the start of 2011, but an increasing number of homeowners are rushing to remortgage their property to ensure they are not caught out by rising interest rates, research suggests. According to the British Bankers’ Association (BBA), the number of home loans approved for house purchases stayed almost completely flat in January, with only marginal improvement from December’s two-year low. At just over 28,900, the figure is considerably lower than the 70,000 to 80,000 monthly approvals associated with a stable housing market. However, the number of homeowners remortgaging increased by five per cent in January – up 28 per cent on the same month a year earlier – as families rushed to secure a fixedrate deal before interest rates rise as expected.

The number of UK remortgages exceeded 26,000 in January, just slightly less than November’s 16-month high, fuelled by speculation that the Bank of England would boost the base rate to curb overtarget inflation. David Dooks, Statistics Director at the BBA, commented: ‘The high street banks have seen more remortgaging activity of late as people look to fix costs.’ Interestingly, the news follows Nationwide research which indicated that 75 per cent of homeowners have made no plans about how they will cope if and when interest rates rise. Net mortgage lending was valued at £1.6bn last month – approximately half the average 2009 amount. n

MORTGAGE LENDING Home loans on offer have more than doubled The number of mortgages available from UK lenders has more than doubled in the last two years, but other factors continue to keep buyers out of the housing market. Research by Moneyfacts.co.uk shows choice falling to an all-time low two years ago, when only 1,097 residential mortgage products were available. Since then, the number of home loans on offer has more than doubled, to 2,447, with borrowers holding a 20 per cent deposit seeing the number of deals available soar from 97 to 390. Currently, the largest range of products is to be found in the 75 per cent loan-tovalue (LTV) tier, where 851 mortgages are available, up from 422 two years ago. At the same time, the number of loans at 60 per cent LTV has fallen from 261 to 187, the financial website reports. However, Moneyfacts claims that despite the overall rise in mortgage availability, access remains restricted for many. Spokesperson, Michelle Slade, explains: ‘Borrower affordability remains the key factor in lending decisions and lenders remain strict over which borrowers they will accept.’ Ms Slade also warns that rising rates and the implementation of the Financial Services Authority’s Mortgage Market Review are likely to restrict affordability calculations further.

NEWS

DEVELOPER MAKES GOOD PROGRESS Even with economic uncertainties, tax rises and government cutbacks Redrow says it continued to make good progress in the final six months of 2010, despite the housing market being ‘overshadowed by economic uncertainties, tax rises and government cutbacks.’ The developer attributes much of its success to its New Heritage Collection, which is proving to be ‘aspirational’ for customers who appreciate an emphasis on traditional values. Furthermore, the group reported that reservations were ‘comfortably ahead’ in the first six weeks of 2011 compared with a year earlier, although the figures may include an element of ‘catch up’ from the December freeze. Looking ahead, Redrow’s Chairman, Steve Morgan, is more optimistic than some on UK house prices, saying they have been stable for some considerable time now ‘and we do not share the pessimism of some commentators that there will be a major fall in house prices during the coming year.’

Landlords look to increase prices

The group’s New Heritage Collection is currently selling at an average £196,000, or 7 per cent higher than equivalent homes in Redrow’s previous Signature range.

The lack of finance means more potential buyers are opting to rent instead

10 ESSENTIAL MORTGAGE QUESTIONS What are the key questions you need to ask? Mortgages should be straightforward – you borrow money to buy a property and pay interest on the loan. But what are the key questions you need to ask? n How much can I afford to borrow? n How can I tell which mortgage rate is best? n What is the best type of mortgage for me? n How should I repay it? n Can I make lump sum payments? n Are there any redemption penalties? n Does this mortgage come with insurance? n What other charges will I have to pay? n What happens if I can’t pay? n What about the small print?

Rent climbed steadily last year and it seems likely that the trend is set to continue in 2011, as landlords look to increase prices. Research from buy-to-let specialist Paragon Group has revealed that 41 per cent of the landlords it polled are planning to increase rents during the next 12 months. A further 55 per cent plan to keep rents at 2010 levels and just 4 per cent are looking to reduce the amount of rent they are charging. Of those looking to increase rental prices, one in ten landlords are aiming to increase the rent they charge tenants by 4 per cent to 8 per cent. Nearly a third plan to increase rents by up to 4 per cent of the current value. Landlords are also in a buoyant mood when it comes to demand, with 45 per cent predicting growing levels of people looking to rent and a further 44 per cent forecasting already high demand to remain steady.

They have reason to be confident. Rents in the private rented sector grew steadily throughout 2010, according to the Royal Institution of Chartered Surveyors (RICS). More surveyors recorded rent increases than falls in each of the first three quarters of the year. Nigel Terrington, Chief Executive of Paragon, which polled 182 landlords, said: ‘Landlords are in a strong position. Tenant demand has risen faster than supply during 2010 and that is expected to continue well into 2011. ‘This is reflected in landlords’ expectations of future levels of tenant demand and also the rent they are planning to charge for their properties. ‘There continues to be a lack of finance available in the UK mortgage market, meaning that many potential buyers are opting to rent instead.’ n

GLOSSARY

Understanding

the jargon The A to Z of property and mortgage terms APR

COMPLETION

DISBURSEMENTS

Stands for Annual Percentage Rate, which helps you compare the cost of different mortgage deals. It takes into account the amount of interest you will pay, the length of the term of the mortgage and other charges, such as any arrangement fee.

The day on which a property becomes legally yours.

All the various costs itemised on your conveyancer’s invoice for carrying out your home buying legal work.

ARRANGEMENT FEE

CONTENTS INSURANCE

You have to pay this to some lenders for releasing their hold over a property once you have paid off your loan.

Lenders sometimes charge a fee to cover the work involved in setting up your mortgage or for certain mortgage rates.

A policy insuring household contents against theft and damage.

EARLY REPAYMENT CHARGE

CONCLUSION OF MISSIVES The Scottish equivalent of exchanging contracts.

A legal expert handling all documentation for the sale and or purchase of a property. This will be a solicitor or licensed conveyancer.

With some mortgages you have to pay an early repayment charge if certain things happen. For example, if you pay off some or your entire mortgage or you transfer to a different mortgage rate before the end of the special rate period.

CONVEYANCING

EQUITY

The legal process involved in buying and selling a property.

The difference between the amount you owe on your mortgage and the current value of your property.

CONVEYANCER BANK OF ENGLAND BASE RATE This is also known as the Bank of England’s repo rate. This rate can go up or down from time to time and is announced by the Bank of England’s Monetary Policy Committee.

BUILDING INSURANCE Insurance against the cost of rebuilding a property from scratch following structural damage, for example by flood, fire or storm.

CREDIT SCORING A technique used by the lender to assist in the assessment of your application.

BUILDING SURVEY This is a technical report following an inspection of the property. It will give you a comprehensive account of the condition of the property, describing any structural or other defects.

CAPPED RATE Your interest rate won’t go above a certain level – the ‘cap’ – during the capped rate period. This means that you can enjoy any rate reductions, yet have the comfort of knowing that your rate won’t go above the cap. 26

DISCHARGE FEE

DAILY INTEREST With this method of calculating mortgage interest, it is charged on the amount of mortgage outstanding daily. This means lenders take into account any changes in the amount you owe on a day-to-day basis.

DEPOSIT The money you pay on exchange of contracts as part of your initial contribution to the purchase of your home.

EXCHANGE OF CONTRACTS The swapping of contracts between a buyer’s conveyancer and a seller’s conveyancer. Once you have exchanged contracts, you are both legally bound to the transaction.

FEUDAL A form of legal title applicable only in Scotland.

FINANCIAL SERVICES AUTHORITY (FSA) An independent body that regulates the financial services industry in the UK. Its aim is to help consumers become better

GLOSSARY

informed about financial matters and to help protect consumers.

FIXED RATE A rate of interest guaranteed not to change over a fixed period of time.

FREEHOLD A form of legal title to land which means you are the absolute owner of the property and the land it’s on.

GUARANTOR Someone who guarantees to repay the mortgage if the borrower can’t or won’t for any reason. Guarantees are usually entered into where the borrower’s circumstances would not allow them to borrow enough to buy the home they want. For example, parents may act as guarantors for their children when they buy their first home.

HIGHER LENDING CHARGE Fee or premium sometimes charged by lenders if your mortgage represents a high percentage of the property value.

HOUSEHOLD INSURANCE A way of referring to both buildings and contents insurance.

INITIAL DISCLOSURE DOCUMENT Initial disclosure is the information you will receive from an advisor when you first contact them regarding a mortgage or related product. It informs you about the service you will receive, details whether you will receive advice and 27

GLOSSARY

explains what fees may be charged. It may help you to decide whether or not to use that advisor.

so the mortgage should be repaid if you die before the end of the term.

LOCAL AUTHORITY SEARCH INTEREST-ONLY MORTGAGE You pay only interest to your lender throughout the mortgage term and your mortgage balance doesn’t reduce.

INVESTMENT MORTGAGE As with an interest-only mortgage, you pay only interest to your lender throughout the mortgage term and your mortgage balance doesn’t reduce. At the same time, you put money into a separate investment, which should grow and pay off the mortgage as scheduled. You must make sure you keep premiums up to date on any mortgage investment products.

Part of the conveyancing process when you buy a property, carried out by your conveyancer. It gives details of any matters which, from the local council’s point of view, affect the property. It reveals any proposed changes to the local area, such as road improvements, and details any planning permission given for the property.

LTV This means ‘Loan to Value’ and is the proportion of the value or price of the property (whichever is the lower), that you borrow on a mortgage. For example, a £63,000 mortgage on a house valued at £70,000 would mean a LTV of 90 per cent.

REPAYMENT MORTGAGE Your monthly payments will gradually pay off your mortgage as well as the interest if your payments are strictly in accordance with the terms and conditions of the original loan.

REPO RATE This is also known as Bank of England base rate.

RETENTION Holding back part of a mortgage loan by the lender until repairs to the property are satisfactorily completed.

STAMP DUTY Government tax you have to pay based on the purchase price of a property worth £125,000 or more. First-time buyers are exempt from stamp duty on properties worth between £125,000 and £250,000 until 25 March 2012.

KEY FACTS ILLUSTRATION

MORTGAGE DEED

A Key Facts Illustration (KFI) sets out details of the mortgage product that a customer is interested in. All lenders are required to set out the details in a Key Facts Illustration in the same format, so it’s easier for you when you want to compare products. You must receive a KFI before making an application.

A legal document establishing a mortgage on a property. This is called a ‘standard security’ in Scotland.

LAND REGISTRY FEE

NEGATIVE EQUITY

Your conveyancer pays this on your behalf to register your details in the Land Registry records once you’ve bought a property or changed your mortgage lender.

This is when the amount you owe on your mortgage is greater than the value of your property. It particularly becomes a problem if you want to move house.

A property survey that can include a valuation and should reveal any major faults in the property. It must be noted that valuations do not strictly involve surveys. It is recommended that a buyer should have a survey taken out.

PREMIUM

TRACKER RATE

An amount you pay on a regular basis. This could be for an insurance policy, depending on the mortgage product you choose.

Tracker rates vary in line with changes to the Bank of England base rate. During the tracker rate period, any changes to the Bank of England base rate are passed on to you in full.

LEASEHOLD This means you own a property for a set number of years. When the lease expires, the property returns to the freeholder. Flats are commonly sold as leasehold.

LIFE ASSURANCE A form of insurance by which someone’s life is insured. Life assurance policies can run parallel with a repayment mortgage,

MORTGAGE TERM The length of time over which you agree to pay back your mortgage, up to a maximum of 40 years.

REMORTGAGING When you arrange a new mortgage on your home, with a different lender, and use the new mortgage to pay off the old one. This could be to withdraw equity to spend on home improvements.

STRUCTURAL ENGINEER’S REPORT A specialist report from a structural engineer on the condition of a property.

SURVEY AND VALUATION

VALUATION Arranged by your lender to find out if the property is suitable to lend a mortgage on.

GLOSSARY

Your property may be repossessed if you do not keep up repayments on your mortgage.

Published by Goldmine Media Limited, Prudence Place, Luton, Bedfordshire, LU2 9PE Articles are copyright protected by Goldmine Media Limited 2011. Unauthorised duplication or distribution is strictly forbidden.