Interest rate cut predicted - buy to let mortgages 04 February 2009
Analysts have predicted that the Bank of England is due to make another interest rate cut when its monetary policy committee (MPC) meets this week.
In a poll 11 out of 12 economists forecast that the MPC will trim the base rate on Thursday - something that could lower the cost of mortgages
the majority of those questioned said they expected a cut of between 50 and 100 basis points to be made.
"Whilst the Bank still has room to cut it should do so," commented Mark Swift of business organisation EEF.
And Charles Davis from the centre for economics and business research said: "Everything seems to be supporting the downturn at the moment. That might well push them into even stronger action than a 50 basis point cut."
But Simon Rubinsohn of the Royal Institution of Chartered Surveyors predicted that the MPC would hold the rate, claiming that the committee will cut in March instead.
Following a reduction of 0.5 per cent in January, the base rate currently stands at 1.5 per cent.
The Bank of England is likely to employ a number of measures to stimulate increased lending, it has been suggested.
Jonathan Loynes, chief European economist at Capital Economics, stated that interest rates are likely to reach zero, or very close to zero, in the coming months meaning the Bank will turn to other methods to improve the economic situation.
"They are going to want to try virtually anything as far as a policy stimulus is concerned," he remarked.
Mr Loynes suggested that the Bank of England will begin to buy corporate bonds as well as bonds from the government to lower interest rates in the long term.
An increase in lending and lower interest rates could benefit holders of mortgages
The Bank of England will reveal the outcome of its two-day February interest rate meeting next Thursday, with the possibility that the interest rate might be further lowered from its current level of 1.5 per cent.
Landlords who are willing to be flexible are most likely to emerge from the economic downturn in a strong position, it has been stated.
According to the Residential Landlords Association, the fact that tenants are struggling in the credit crunch does not necessarily mean that those with mortgages will suffer the consequences.
Director at the body Chris Town noted that opportunities still exist, with knowledge of the local area being key to ensuring that these are maximised.
"There's no doubt in my mind that some will find it really tough, however there is generally a strong demand for rental property in most markets," he said.
Rates Current Rates- 02.02.2009 Bank of England Base Rate: - 1.50% UK 3 Month LIBOR: - 2.16%(-0.01%) (The above LIBOR figure is provided by BBA, rounded to 2 decimal places)
There is always things we can learn in Property from the experienced to inexperienced of us. I just came across an article by James Caan in the Telegraph, his 7 golden rules and wanted to share this with my property friends.
After a series of five interest rate rises in eleven months buy to let lenders are still insisting that buy to let even today is still a sound bet. Should consumers be viewing this as merely feelgood propaganda in a time of uncertainty and should the realisation of the bandwagon having passed by that it may well be too late, or does the great British love affair with property underpin the whole ideal.
The buy to let positives can be typically drawn from lenders commentaries and confirm that the average total return for a buy to let investor was 13.0 per cent over the past year to June 2007, exclusive of fees and mortgage interest costs. The price of the typical buy to let property in the UK increased by 7.3 per cent over the year to June 2007 and house price growth rose slightly over the past year from 6.0 per cent in June 2006.
UK Buy To Let rental yields have fallen marginally over the past year to 5.5 per cent in June 2007 from 5.7 per cent in June 2006. Nationally, the average rent increased to £651 per month in June 2007, compared with £623 per month in June 2006.
By region, total returns for buy to let investors were highest in Northern Ireland over the year to June 2007, followed by Scotland and the South East. The lowest returns seen in the East Midlands. rental voids (the time a property is empty) have fallen for the last nine months and is at 2.8% confirming strong tenant demand. Voids have remained somewhat stable between 2.6 and 3.0 weeks for the majority of the last four years but have declined over the first half of 2006.
Most Investors though simply want to cover costs as their property investments are seen as long-term. Intimating that an investment into bricks and mortar is the preferred route than into a pension. Accepting that there will always be peaks and troughs and to weather the storm. Landlords who bought ten years ago will no doubt be more comfortable with this scenario than novice landlords. Landlords entering the market today will also be greeted with lender arrangement fees of up to 2.5% of the advance compared with a standard arrangement fee over a year ago of between £300 to £500.
More lenders have also entered the market with relaxed criteria increasing loans to 90% of the property value and reducing rental income cover in some cases to between 100% and 115%. One lender no longer looks at rental income at all and/or earned income, justifying the decision by saying rental income was not a robust test, as many lenders accepted the word of a letting agent on rental achieved.
Tenant deposit protection schemes were launched on Friday 6 April. Under new regulations, all landlords will be required to protect their tenants' deposit using one of three government-authorised schemes alongside two insurance-based schemes which allow landlords to retain the full deposit amount themselves. These schemes require a fee to join, and a premium is payable for each protected deposit. Only any disputed amount is passed to the scheme at the end of the tenancy period. Landlords of properties that house five or more tenants and are at least three storeys high (House of multiple occupancy) from April 6 2006 have to apply for a mandatory license from their local authority and meet a raft of criteria. Including upgrading fire and safety regulations to installing wash basins in every bedroom, this latter criteria was branded as 'daft' by the Council of Mortgage Lenders (CML). The license fee is set by individual councils and will not be uniform. Around 10 per cent of the 2.6m private rented UK households are defined as houses of multiple occupancy.
Reports also suggest that Revenue & Customs are stalking 80,000 landlords over incorrect payment of tax. The buy-to-let market is coming under fire for rendering the housing market even more unattainable for first time buyers. In its annual plan for 2005-06 the OFT identified and prioritised attention to landlords who ignore legislation. The OFT guidance outlines why some standard contract terms used in tenancy agreements are considered to be potentially unfair. While landlords also have a potential green tax to look forward to in 2008.
Many entrepreneurial landlords are now looking further afield to enjoy the previous returns while also securing their own piece of paradise. Current developments in Thailand and The Dominican Republic offer guaranteed rental yields of 8% and ten years of tax incentives and no purchase tax. while the term 'off plan' within the UK property market may well have lost some resonance and compounded by the wettest summer since records began, the incentives along with sharing paradise with 10 people per acre is realising significant demand.
Mortgage-Loan-UK is a premier resource for personal finance information along with an extensive collection of mortgage related calculators.
Lease option sales were popular financing instruments in the late 1970s and early 1980s in America and Australia and are now becoming very popular in the UK.
They were primarily used as a way to circumvent alienation clauses in mortgages. Proponents claimed the sale was not really a sale because it was a lease; however, courts argued otherwise.
Today, options to purchase, lease options and lease purchase agreements are three different financing documents. The variances are state specific and not all states have identical laws. Before entering into an agreement with a seller, buyers should obtain the advice of a property lawyer.
"I can't pay my rent as my BMW is in the shop, and I cannot affordto pay for both."
"I can't pay my rent because the checks come out of Japan and theplane crashed."
"If I move, my friends won't know where to find me." "Well, you see, I cannot pay the rent because my daughter ate my husband's paycheck."
"I deposited my paycheck in the bank teller machine and it gotcaught in the rollers.It took six days to tear apart the machine."
"I had my choice of paying the rent or buying a car.I bought a car.I knew you would understand."
"I am sure I paid you -- YOU must have lost it."
"You towed my car away that was illegally parked and I refuse to pay my rent until you get my car out of impound."
"It's your fault.You deposited my check too late.My automaticwithdrawals went through the bank before the rent check."
"There is nowhere else to go.The place I applied to will not take me because you are evicting me."
Finally, courtesy of Randy Chapman, office manager for the ApartmentAssociation of Seattle & King County, this reason for not paying therent: "The house is haunted."
There are considerable risks posed by third party liabilities that landlord’s should be concerned with. In the litigious society in which we live, anyone operating a business, and a landlord is certainly doing that, can easily find themselves on the wrong side of a lawsuit which can seriously damage your wealth - and probably your health as well!
You only need to watch day-time TV for a brief spell to see how many law firms are touting for the business of anyone who has the slightest inkling of an accident claim.
Make sure your policy includes Property Owners Liability up to something like £5 million of cover. It is vital that you are covered in this way against death, injury or damage to individuals on or near your property, for example: tenants, visitors and guests, meter readers, postmen etc. Local authorities and Universities will normally specify a minimum amount of cover needed when you house housing benefit tenants or students.
Ironically, it's this third party liability, the greatest risk to the landlord, which is often overlooked!
It is extremely important to have a good credit score when you are looking to purchase property Credit scoring is closely regulated by the Financial Services Authority.
It is very difficult for a consumer to know in advance if they have a high enough credit score to be accepted for credit with a particular lender. This is due to the complexity and structure of credit scoring, which differs from one lender to another.
Also, lenders do not have to reveal their credit scoring methods, nor do they have to reveal the minimum credit score required for the applicant to be accepted. Simply due to this lack of information to the consumer, it is impossible for him or her to know in advance if they will pass a lender's credit scoring requirements.
If the applicant is declined for credit, the lender is also not obliged to reveal the exact reason why.
Personally I feel it is always best to be informed and stay ahead in business so I try to attend as many property events as I can. The following is a list of just a few
With these property events if nothing else you get to network with like minded people, exchange ideas and maybe even joint venture . If you know of anymore events then please let us know by commenting and we can add them here.
A 'section 8 notice to quit', also known as a 'section 8 possession notice', is so called because it operates under section 8 of the Housing Act 1988. A section 8 notice is different from the more common section 21 notice to quit in that is served on the tenant by a landlord wishing to regain possession of a property during the fixed term of an Assured Shorthold Tenancy (AST). A section 21 notice can only be used for regaining possession at the end of a tenancy agreement.
A section 8 notice can only be issued to a tenant who has breached the terms laid out in the tenancy agreement and if certain conditions have been met, the most common being one involving rent arrears. The Housing Act 1988 provides 17 grounds on which a landlord may seek possession before the fixed term of tenancy has finished.
The landlord cannot evict the tenant without first obtaining an order for possession from a court. Before applying to the court for such an order, the landlord must serve a Section 8 notice to quit on the tenant. The notice states that the landlord intends to seek possession of the property and states the ground or grounds on which possession is sought.
The notice must be laid out in a prescribed format and must specify which grounds the landlord intends to use to gain possession and the landlord's reasons for relying on those particular grounds. Any error made when issuing the section 8 notice is likely to delay the landlord gaining possession.
Grounds for issuing a Section 8 notice to quit
Under section 8 of the Housing Act 1988 there are 17 separate grounds on which a landlord can seek possession of a property.
For ground 2 the landlord must give two months' notice. For grounds 8, 10, 11, 12, 13, 14, 14A, 15 and 17 they can give just two weeks' notice.
Notice must be given in the prescribed manner in a section 8 notice. This is important because any errors the landlord makes when serving the section 8 notice is likely to lead to serious delays.
Grounds involving rent arrears
The most common reason for issuing a section 8 notice to quit is rent arrears and this is covered in grounds 8, 10 and 11.
Ground 8
Rent is unpaid when the notice seeking possession is served, and at the time of the hearing for a Possession Order:
Rent is paid weekly or fortnightly and at least eight weeks' rent is owed. Rent is paid monthly and at least two months' rent is owed. Rent is paid quarterly and at least one quarter's rent is more than three months overdue. Rent is paid yearly and at least three months' rent is more than three months overdue.
Ground 10
Rent which is lawfully due to the landlord has not been paid by the time the possession proceedings are started and was owed at the time the Notice seeking possession was served.
If a landlord has been offered money for rent by the tenant but has refused to take it, the tenant will have a defence in the possession proceedings.
Ground 11
The tenant has failed repeatedly to pay rent on time. There don't have to be rent arrears at the time possession proceedings started. If the landlord is issuing the section 8 notice on the grounds of rent arrears, if possible he should include ground 8 in the grounds he relies upon, as this is the only ground covering rent arrears that is mandatory. This means that if the landlord can prove that this ground applies, the court will grant a possession order
Nevertheless it is recommended that landlords make use of all the grounds that apply, as they will all help the court in making their decision on whether to grant a possession order.
Grounds for issuing a Section 8 notice other than rent arrears
If any of the following grounds apply a landlord can apply to a court for possession after issuing a section 8 notice to quit upon the tenant.
Ground 2
The property is subject to a mortgage which pre-dates the tenancy and the mortgagees are repossessing the property to enforce the charge. Written notice should be given before or at the time the tenancy begins that possession may be required under this ground.
Ground 12
The Tenant has breached any term of the tenancy agreement (other than the ones relating to the payment of rent).
Ground 13
The property has deteriorated due to neglect by the tenant or by someone living with the tenant and the tenant has failed to remove that person.
Ground 14
The tenant or someone living with or visiting the tenant is causing or is likely to cause a nuisance to neighbours or visitors to the area, or has been convicted of using the property for immoral or illegal purposes, or has been convicted of an offence in the local area.
Ground 14A
Note that this ground is only open to registered social landlords or charitable housing trusts and can not be used by private landlords.
The property is occupied by a couple, one of them being a tenant and one of them has left due to violence or threats of violence from the other partner or from a member of that partner's family who is also living in the property.
Ground 15
Furniture at the property has deteriorated because the tenant or someone living with has neglected the furniture and the tenant has failed to remove that person.
Ground 17
The tenant, one of the tenants, or a person acting on behalf of the tenant has given false information to the landlord which resulted in the landlord granting the tenant the tenancy. When issuing a section 8 notice to quit on a tenant it is advisable to make use of all grounds that apply. This is because not only are certain grounds considered only at the court's discretion, but also certain grounds are often hard to substantiate.
Does a Section 8 notice to quit guarantee a possession order?
Issuing a section 8 notice to quit on a tenant does not guarantee that the court will grant a possession order. It depends largely on which grounds are relied upon as well as the strength of the the landlord’s argument.
Grounds 2 and 8 of a section 8 notice are mandatory, meaning that if a landlord relies on one of these grounds and can prove to the court that one of them applies, then the court will have no choice but to issue the landlord with a possession order.
Grounds 8, 10, 11, 12, 13, 14, 14A, 15 and 17 are discretionary, meaning that the court will not necessarily rule in the landlord's favour even if he can prove that one of the grounds applies. In these cases it is at the court's discretion whether to grant a landlord a possession order. They will weigh up the facts and make a decision based on what they see as fair and reasonable.
If a court is satisfied that a landlord is entitled to possession on one of the grounds, then the court will grant a possession order to take effect within 14 days. It is possible that this will be extended to six weeks if it will cause the tenant to experience exceptional hardship.
If you need legal advice for a specific or complex question that is not answered on this website, you might like to contact our partners at JustAnswer.com, who will put you in touch with an experienced qualified lawyer at a fraction of the high street rates.
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