UK Property Still Defying the Prophets of Doom - 2007 To Be Any Different?
"Time called on housing boom" - "House prices will crash" - "Eventually" (clever that one!) were just two of the Sunday Times money section headlines in November and December. "House prices have peaked" said Rightmove in August. Closer to reality, was the Sunday Times headline of 2nd April "House prices rise - but not for everybody".
International Mortgage Plans have stressed for three years now the imbalance in price growth in various areas of the UK. The indices of Nationwide and Halifax are a nonsense - even with the benefit of hindsight upgrading, they still witter on about "average property prices" - meaningless, as no one buys the average property in an average area. "MoneyWorks" asked us, in October 2004, to comment on the market and forecast its future. At that time, we felt the market had stalled mid-summer, that any pause was likely to be temporary and demand and continued low interest rates, would ensure a return to confidence. When asked to recommend areas for investment, we were emphatic in forecasting prime London and the Home Counties to have the call. Our forecasts for a halt to exuberant growth in previously unfashionable areas, was premature but we would certainly remain negative on them. Allowing for some self congratulation, it has to be said that the speed and extreme price increases seen recently have taken everyone by surprise. Knight Frank have estimated that prices in prime London locations rose 20/25% in 2006. In Kensington and Chelsea, Rightmove reports asking prices having risen recently by over 50%! On a more reasonable spread of area, "London" the Financial Times reports that house prices have risen by close to 13% in 2006, more than double the most optimistic guesstimates made earlier in the year. We now feel that prime London has gone too far, too fast and there may be a cooling-off, particularly if further bank rate increases are used to brake a worrying feature of our overall economy. London is the beneficiary, or victim, of a false market - city bonuses and foreign investors have driven prices and that money is now seeping through to the Home Counties, where there is an acute shortage of family homes. This is partly due to builder's recent concentration on producing apartments for investment purposes.
We can see no diminution in demand. Added to an under supply of family property, we have the continued strength of the Buy To Let market. Buy To Let is now quoted as an industry by the National Statistics Office and, as such, experienced higher growth than any other industry between 1992 and 2004. The pace can hardly have slackened in the last two boom years!
Apparently, over 60% of investors are now choosing property over pensions, to fund their retirement. Much thanks due to our brilliant Chancellor and the rapacity of under-performing, overcharging financial services providers.
Lenders are meeting the increased demand in their services by a marked new "creativity " in producing loans for multiple applicants and specific plans for parents wanting to help children through University, or just to secure a place on the property ladder - impossible on their own financial status. Two bank rate increases have obviously had little effect in dampening the home buyers' enthusiasm - will the third quarter percent increase? Unlikely, with the huge demand for property at all levels.
Where mortgages are concerned, going into February 2007, IMP are still majoring on transparency, low rates and low charges, whether for fixed, discounted or tracker loans. Despite bank base being at 5.25% and most bank lenders seeking a margin of 1.25% to 1.5% above this, IMP are still able, via special and often exclusive schemes, to obtain rates as low as bank base, whether letting or for family occupation. Our exclusive expatriate scheme, funded by the Stroud & Swindon Building Society, allows for up to three properties at the same rate; loans are interest only, flexible and carry no early redemption charges at any time! Our mortgage table carries a wide range of lenders comparable terms.
Our general advice, at IMP, is to stop over-paying your existing lender, as refinancing costs can be quickly swallowed up in interest payment savings. By continuing to pay standard variable rate, or unattractive rates, with your lender, you are subsidising the new borrowers they court so avidly
Expatriate Mortgage Terms - March 2007
Lender |
Interest Rate % |
Max % Advance |
Arrangement Fee |
Special Features |
Bank of Scotland | Libor + 1-1.5% | 80/85% | 0.25% | Special schemes GBP 70,000 min |
Dresdner Kleinwort Benson | Libor 1-1.5% | 80% | 0.5% | Currency switching minimum loan GBP 100,000. Life assurance required. Minimum earned income GBP 75,000 |
Fortis Bank |
Libor +1.0 Sterling
Libor 1.25% foreign currency CHF 2.10% EURO 3.73% HKD 4.00% JPY 0.56% USD 5.36% GBP 5.33% |
75% | GBP 500 | Min loan GBP 150,000 Loans to offshore companies and trusts. Multi currency mortgage available |
Halifax PLC | Under review | 75% | GBP 999 | Requirement to return to UK within 3 years. Very restrictive no self employed applicants |
Heritable Bank | 5.82% 2 year discount | 85% to GBP 250,000 | 0.5% | IMP clients receive a special discount |
Portman building society
Family occupation only |
2 year fix 4.85%
5 Year fix 5.48% |
75% |
1.5%
GBP 599 |
|
Royal bank of Scotland | Base 1-1.5% | 80% | 0.5% | Terms can vary via different Royal bank operations areas |
Stroud & Swindon | 5.49% 3 year discount | 75% | GBP 595 | Exclusive to IMP. No redemption penalties at any time. Free legal fee package for remortgages |
Notes some lenders have onerous redemption penalties for fixed and discounted terms. A usual penalty is six months interest in the first five years. Arrangement fees - all fees quoted are payable to the lender and usually added to the loan, although some require payment with the application. IMP charge an arrangement fee of 0.25% of the loan subject to a minimum of BP 250 and a maximum of BP 500. The arrangement fee is only payable when you are in receipt of an acceptable mortgage offer.
Most lenders have settled on a standard variable rate of 7.25%. Bank base rate 5.25%, three month libor 5.33%
Information by International Mortgage Plans
For further details www.international-mortgage-plans.com
Table updated 19th February 2007
About the Author
Independent advisors specialising in residential mortgages for British expatriates purchasing or refinancing UK property.
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