Cash Buyers Are Paying Less Than Mortgage Holders in South London

 A new study has found that cash buyers are paying an average of £27,600 less than mortgage holders for properties in South London.

The study, by specialist property lending platform Octane Capital, compared transactions and prices in the mortgage and cash buyer markets between December 2021 and April 2023.

It found that the gap between cash and mortgage prices has widened in recent months, as the cost of living crisis has made it more difficult for people to get a mortgage.

In the South West, cash buyers accounted for 38% of transactions during the study period, compared to 22% in London.

This suggests that there is more competition from cash buyers in the South West, which is driving down prices.

Octane chief executive Jonathan Samuels said: "It's always been easier to buy with cash than spend time arranging a mortgage, but in the current environment it seems that advantage is bigger than ever, with cash buyers saving £27,600 compared to their mortgage counterparts.

"Mortgaged buyers are subject to more processes and delays, making it hard to compete with those who can swoop in with an immediate lump sum of cash.

"It's also far tougher to qualify for a loan than in late 2021, as surging interest rates make it harder from an affordability perspective, so buying with a mortgage is not an easy task.

"If you are able to qualify for a mortgage, our data suggests you should get your finance arranged as quickly as possible to ensure you can seal the deal, even if you have competition from a cash buyer.

"In some regions, like the South West, that competition is particularly fierce, so you have to be ready to hand over the money."

The study also found that the gap between cash and mortgage prices is widening in every region of Great Britain, with the exception of London.

This suggests that the trend of cash buyers paying less than mortgage holders is likely to continue in the coming months.

If you are a homebuyer in South London, it is important to be aware of the competitive landscape and to make sure you are prepared to act quickly if you find a property you want to buy.

Here are some tips for homebuyers in South London:

• Get your finances in order as early as possible. This will make it easier to get a mortgage and to compete with cash buyers.
• Be prepared to act quickly. If you find a property you want to buy, be prepared to put in an offer as soon as possible.
• Be realistic about your budget. The competition from cash buyers is likely to drive up prices, so you need to be realistic about what you can afford.
• Don't be afraid to negotiate. If you find a property you love but it is out of your price range, don't be afraid to negotiate with the seller.

If you are interested in knowing more or you are curious as to what your rental property is worth today drop me a line and pick my brains or use my free online valuation tool to get a ballpark figure!

South London Buy-to-Let Investors: Secure a New Mortgage Rate Now

 The Bank of England is expected to raise the base rate again in September, which could mean higher mortgage payments for buy to let investors in South London.

Gavin Richardson, the managing director of Mortgages for Business, is urging investors to secure a new mortgage rate as early as possible, even six months in advance.

"I think inflation will fall as low as five per cent in the final quarter of this year," he says. "But the Bank of England is still going to increase the Base Rate in September — probably by a further 0.25 per cent.

"So if you're approaching remortgage, while I expect inflation to ease, I recommend securing a new rate as early as possible.

"For some lenders, this can be up to six months before the end of your Early Repayment Charge period. If mortgage interest rates decrease, many lenders allow you to switch to a more competitive product should one become available before you complete.

"If you are on a tracker or variable mortgage that follows the Base Rate, you have time to secure a fixed-rate deal before the next [Bank of England] meeting.

"If you wait, you will see your mortgage repayments increase once again following the Base Rate rise. It's worth exploring your fixed-rate options with a broker to see how much you could save on your monthly payments."

The government announced the Consumer Price Index inflation rate was 6.8 per cent in July, down from 7.9 per cent in June. Inflation peaked last October, around the time of the failed Truss-Kwarteng mini-budget, at 11.1 per cent.

The Bank of England next meets on September 21 to discuss base rate. Richardson concludes: "As long as inflation continues the same downward trajectory though, we forecast the next rise will be the final increase this year."

If you are a buy to let investor in South London, it is important to act now to secure a new mortgage rate. The sooner you act, the more likely you are to get a good deal. A mortgage broker can help you compare rates and find the best deal for your needs.

Here are some tips for securing a new mortgage rate:

• Start the process early. The sooner you start, the more time you will have to shop around and compare rates.
• Get quotes from multiple lenders. Don't just rely on one lender's offer. Get quotes from at least three different lenders to see who can offer you the best deal.
• Be prepared to switch lenders. If you are not happy with your current lender's offer, be prepared to switch to a new lender.
• Consider a fixed-rate mortgage. A fixed-rate mortgage will protect you from interest rate increases for a set period of time.

If you are interested in knowing more or you are curious as to what your rental property is worth today drop me a line and pick my brains or use my free online valuation tool to get a ballpark figure!

South London Mortgage War Sparked by Economic News

There is a possibility of a mortgage war in the UK, triggered by improving economic news. A mortgage war is when lenders compete for borrowers by offering lower interest rates and other incentives. Sounds like a war I'd love to be in!

Here are the factors currently at play that is causing increased competition between lenders (and let's jubilate as they drop their rates):

• The Bank of England's recent decision to raise interest rates, which is expected to put upward pressure on mortgage rates.
• The government's plan to extend the mortgage guarantee scheme, which could make it easier for borrowers to get a mortgage.
• The improving economic outlook, which could lead to more people feeling confident about taking on debt.

If, sadly, not when, a mortgage war does occur, it could have a number of implications for South London homeowners.

• Homeowners could benefit from lower interest rates, which could make their monthly payments more affordable.
• Homeowners could also have more options when it comes to choosing a mortgage, as lenders compete for their business. Hopefully it will reduce red tape that a borrower needs to go through to secure a home loan.
• However, a mortgage war could also lead to increased competition for properties, which could push up house prices. Cheaper borrowing means increased affordability...

Overall, the impact of a mortgage war on South London homeowners is uncertain. However, it is something that homeowners should be aware of, as it could have a significant impact on their finances.

Here are some additional things to consider:

If you are a South London homeowner, it is important to stay up-to-date on the latest mortgage news. You can do this by reading industry publications, following mortgage experts on social media, and talking to your mortgage lender. However I'm sure you have better things to do, so keep an eye out when your mortgage deal is coming to an end. Any time before that the information will be largely irrelevant and things are set to change anyway.

If you are considering remortgaging, it is important to shop around and compare interest rates from different lenders. You can use a mortgage comparison website to do this or consult a broker to do the leg work for you.

It is also important to make sure that you can afford the monthly payments on your new mortgage. You should use a mortgage affordability calculator to do this.

If you need my thoughts on your buy to let property or even the value of your own home be sure to drop me an email to see if I can help.

 

Mortgage company offering BRIBES for energy efficient borrowers!

Bribes all Round!

Well not exactly a bribe, more like a financial incentive. Well that is a bribe. When a mortgage company does it they just call it cashback! Fleet Mortgages is offering landlord borrowers £1,000 cashback if they improve the Energy Performance Certificate (EPC) of their property to a C or above during the initial fixed-rate period. The cashback is available on Fleet's five- and seven-year fixed-rate products, excluding Green options, which complete from July 1.
To secure the cashback, advisers or the landlord borrower must inform Fleet if the EPC level of the property has been improved, and this must be documented on the property's EPC on the EPC register. Fleet Mortgages is the first specialist buy-to-let lender to offer such a cashback incentive. The lender believes that it will help to motivate landlords to make the necessary improvements to their properties, so they can contribute to a greener future and also get money back against the costs of completing those works. More importantly from a selfish point of view they of course want to safeguard their collateral - if the government pushes for better energy ratings and their security properties fall below that

Eco/green

Fleet Mortgages' chief commercial officer, Steve Cox, said: "We're absolutely committed to supporting the UK's transition to a more sustainable future, and to improving the energy efficiency of the country's private rental sector properties. This cashback feature is designed to help landlords make the necessary improvements to their properties, so they can contribute to a greener future for everyone, and also importantly get money back against the costs of completing those works."

Because they say so

The government is expected to mandate that all private rental properties must have an EPC rating of C or above by 2028. Fleet Mortgages' new product is a way for landlords to get ahead of the curve and improve the energy efficiency of their properties sooner rather than later. Draconian measure? Perhaps. But hey, green is good, right?

How eco-friendly is your property right now? Need more tips on future proofing? Check out my stock of tips on the DownToSouthLondon Youtube Channel!

If you are looking for a valuation on your property, then head on over here for a 60 second valuation of your property. Want a visit with more insight? Book a valuation by sending me an email!

South London Homeowners Struggling with Mortgage Payments

I only wrote about the disastrous consequences of the 100% mortgage a short while ago, and my predictions are already materialising!

Various news outlets are reporting that broker searches are including second charges a lot more and that people are looking to borrow their way out of financial trouble. Other searches that dominated the charts included "1 year self-employed and there was a rise in searches for lenders who will accept people that are currently on a debt management plan. This as well as the number one search - ‘maximum LTV’ indicates that borrowers are actively reaching out to brokers to help them get their money worries on track by (perhaps counterintuitive to some) borrowing more. My gander is however that refinancing at a lower rate at the same time would lower monthly payments as well as free up some capital to afford themselves some breathing space.

What does this tell us?

The hangover from the sniffle that was the pandemic is now seriously kicking in. Those that took out a nice (sub 2%) fixed term loan in 2018 or 2019 will see payments sky rocketing to 6% or thereabouts! A worrying sign for sure because together with inflation having run wild for the past few years of tomfoolery on the political/economic front I can't see a lot of borrowers will have been swimming in newly found wealth - perhaps just a Porsche they purchased from the bounceback loans).

Here are the top five searches performed by brokers on Knowledge Bank during May 2023:

Impact

A recent report by Pepper Advantage, a global credit intelligence company, highlights a concerning trend in the UK residential mortgage market. Pepper Advantage (With over $60 billion in assets under management)  has identified an 11 percent increase in borrower arrears in the year leading up to April 2023. This surge in arrears, which predates the recent base rate rises, is the highest growth rate since the global financial crisis over a decade ago. What impact does that have on the South London Property Market?

Growing Mortgage Arrears

The data indicates a strong correlation between rising borrower arrears and repayment collection failures, known as Direct Debit Rejections (DDRs). DDRs occur when there are insufficient funds in a borrower's account to cover a direct debit instruction processed by a creditor. Historically, DDRs have been a reliable leading indicator of borrower stress.The year leading up to April 2023 witnessed a significant increase of 33 percent in the percentage of accounts with a DDR across its UK mortgage portfolio. This rise in DDRs suggests that more borrowers are experiencing financial difficulties, which may eventually lead to arrears.

Regional Variations and Impact on South London:

Pepper Advantage's data also reveals interesting regional variations in mortgage arrears rates. While the arrears rate in London was around five percent in April 2023, the North East and North West regions of the UK experienced significantly higher rates, approximately 10 percent each. This emerging north-south divide indicates that South London might be relatively insulated from the brunt of the arrears issue. However, it is crucial to monitor the situation closely, as economic challenges and financial stress can have ripple effects. Potential factors such as job market fluctuations, changes in interest rates, and local economic conditions could still influence the property market in South London.

Different mortgages, different strokes

Pepper Advantage's report highlights variations in arrears rates based on mortgage types. Fixed rate mortgages experienced a 35.7 percent increase in arrears, while variable rate mortgages saw a slightly lower but still significant rise of 25.1 percent. Although the growth in variable rate arrears was recorded off a higher base, it indicates potential vulnerability among borrowers with adjustable interest rates.

The South London property market could experience some impact from these variations. Landlords with properties tied to variable rate mortgages might face increased risks as a result of borrower arrears. On the other hand, those with fixed rate mortgages may have more stability, but the overall market sentiment could be affected if the arrears situation worsens.

I know from data that the rental market is shrinking by 66 properties every single day at the moment as landlords struggle to make sense of the myriad of complexities (regulations) and see no profit due to tax grabs. I do wonder which investment is taking their fancy at the moment if property isn't? Perhaps a good time to be a South London landlord as demand is increasing as well as supply shrinking! Rental prices are on the rise, that is for sure.

If you are keen for an online valuation for sales or rental check out my online valuation tool or send me an email and let's book an in-person visit.

The return of 100% mortgages - a sign for trouble ahead?

The past

Do humans ever learn from experience? If you remember back in 2008 we had a catastrophic collapse of the property market and guess who suffered - yes, exactly - those that were highly geared and were stuck in negative equity situations. They became mortgage prisoners, unable to move. This simply because prices dropped suddenly and if they were unlucky enough to become unemployed overnight they'd be unable to move somewhere cheaper and sell their property if it all became too much.

A frequent occurrence

It would seem that this isn't putting off Joe Public from wanting to get on the housing ladder. After all, there's no end of free money to make that happen, what with help to buy loans and free stamp duty and all the rest of it. This, in combination with landlords being persecuted by the taxman and regulations up to here (points to forehead level) a mass selloff in combination with some free money is the perfect recipe to get more renters on to the property ladder. That's what they want, right?

But then what?

I see this all the time. First time buyers stretch budgets, borrow from mum, dad, HTB, various other means and then move in to a pukka pad in an amazing location. Then life happens. They want to live with their significant other, or perhaps if they have already bought together they want a dog/balcony/spare room/change of area. OK let's sell it and buy another one" you would think. Well here comes the problem. Most of the time first time buyers are tempted by the shiny newness and incentives of new build apartments. These are much the same as brand new cars when you drive them off the forecourt. You guessed it... even if they were to sell it 2 years later for exactly the same money you now have to factor in estate agency fees to sell, stamp duty to buy a new place and NO incentives whatsoever. Property number 2 becomes a LOT harder to move to financially speaking, unless you have received a somewhat handsome pay rise and can afford to borrow more or you've had some other cash lump sum windfall. So they can't sell, "no problem, we'll rent it out" they say. Nope. You will be unlikely to cover the mortgage repayments with the rent, maybe just, but you'd only get a consent to let. Eventually you'd have to switch over to a full on buy-to-let mortgage if you're not living there. And they are normally 75-80% loan to value maximum, with another fly in the ointment, the rent must be 145% of the interest only mortgage payment. VERY unlikely to happen given the high gearing!

The end

So in summary they're stuck. It's a quick fix to get young people on the housing ladder, but I think they will find that when life changes - and it does when you're young - you need to be flexible. And once you add up all the costs (solicitors, agency, stamp duty, valuations, list goes on) you're not (much) worse off renting. Besides, there's a lot of small print with these mortgages. You can't just have rented a room and proved a good track record, you have to have rented the whole property and been responsible for all the bills. Careful consideration should be made to commit to a mortgage - especially in a day and age where people of first time buying age can't even commit to a date. That said it's a great time to sell your property as so many people are keen to buy. If you are looking to make a move and venture to pastures new I'd love to hear about it. If you are after a free market appraisal with a view to marketing your property for sale or let I'd only be too happy to come and have a look at it. Email me at jeroen@claphampropertyblog.com or pop your property details in my online valuation tool!