The cost of fixed rate mortgage deals is continuing to tumble as lenders compete for business, figures showed today.
A number of banks and building societies are offering five-year fixed rate loans for less than 3 per cent following a slew of price cuts.
The average cost of a five-year deal now stands at just 4.08 per cent, down from 4.16 per cent at the beginning of September, according to financial information group Moneyfacts.
The fall comes despite the fact that five-year swap rates, upon which the loans are based, have actually increased by seven basis points during the period, in anticipation that the Bank of England will start to hike the official cost of borrowing soon.
Instead, the drop in rates is being driven by lenders competing for business, as they look to fill their annual mortgage quotas before the end of the year.
Chelsea Building Society, Tesco Bank and Yorkshire Building Society all currently have five-year fixed rate mortgages with sub-3 per cent rates.
Chelsea Building Society leads the field with a 2.85 per cent deal for people borrowing up to 65 per cent of their home’s value who pay a £1,545 fee.
For those looking to borrow 75 per cent of their home’s value, Tesco Bank is offering a rate of 2.99 per cent with a £1,495 fee.
Charlotte Nelson, of Moneyfacts, said: “Due to base rate speculation there has been volatility within the fixed mortgage market.
“However with many now predicting a later than first thought base rate rise, some providers have reduced their mortgage rates.
“As we are coming close to the end of the year, many banks and building societies are looking closely at their lending targets and the quickest way to get business is to reduce rates.”
The cost of two-year fixed rate mortgages has also fallen, with average rates dropping to 3.51 per cent, down from 3.78 per cent.
Chelsea Building Society also has the best deal for a two-year loan of 1.55 per cent, with a £1,545 fee for loan to value ratios of up to 65 per cent.
It is closely followed by Tesco Bank, which has a rate of 1.69 per cent for an LTV of 60 per cent and a £1,495 fee.
Virgin Money recently became the only lender to offer a six-year fixed rate mortgage, offering a rate of 2.99 per cent. But the deal was withdrawn following very strong demand.
The Bank of England is widely expected to start raising interest rates in the first quarter of next year, although two members of its Monetary Policy Committee have already voted for a hike.
Last week Governor Mark Carney warned that the point at which interest rates would start to rise from their current record low of 0.5 per cent was “getting closer”.
Nearly half of all flat sharers currently looking for a room in Britain are foreign, according to new figures released today.
The survey, carried out by flat sharing website Easyroommate, revealed just under 50 per cent of the respondents categorise themselves as ‘not British’, with the majority indicating they are European (33 per cent), closely followed by Afro-Caribbeans, who accounted for 3 per cent.
Indians and Pakistanis made up for 2 per cent of flat sharers, while Americans and Canadians made up for 2 per cent of flat sharers. The remaining 55 per cent of respondents selected British as their nationality.
Easyroommate suggests the large numbers of foreign individuals currently based in Britain is due to the economic instability in other countries.
It explained the lack of jobs and career prospects in these areas drives people to look for opportunities elsewhere.
It added that moving to a new country can be extremely costly – and that this explains why foreign nationals who are looking for cost effective alternatives, such as flatsharing for cheaper accommodation.
Of the individuals surveyed, a large number prefer to flat share with Britains.
Maya Harruna, of Easyroommrate, said: “It’s not surprising to see that Brits are the most desired housemates. British flat sharers prefer being able to communicate fluently with the people that they live with, while people who have recently moved to the UK prefer to live with someone who speaks fluent English, as it gives them the opportunity to improve their language.”
Markets do not like uncertainty and that was most palpably demonstrated in the Scottish commercial property market in the run up to the recent referendum. But just what impact did the uncertainty have and how far were its effects felt?
In the months leading up to September 18, activity in the Scottish commercial property market all but came to a stop, according to Sandy Gilmour, investment specialist at Graham & Sibbald’s Edinburgh head office.
“Occupier activity slowed down in the run up to the referendum – the lack of certainty on basic economic matters was the main reason potential and sitting tenants deferred decision making,” says Gilmour.
“Similarly the investment market started to grind to a halt around about July with sales being pulled or deferred until the result was known. The commercial property sector has lost a quarter of trading compared to last year.”
This is a view that has been echoed by other agents, including Colliers International, JLL and Knight Frank, although just how high any post referendum bounce will be remains to be seen.
There are a number of areas where the market is likely to perform strongly in the coming months, including the office market in Edinburgh and the industrial markets in Edinburgh and Aberdeen, where tightening supply is beginning to take effect.
South of the border, it seems there was little discernible impact from the wrangling over independence, although that is not to say political matters have not taken their toll. Cuts in public sector budgets continue to hit hard and will do so for years to come as the struggle to reduce the national deficit goes on.
“Where we have seen the biggest effect,” says Bill Lynn, national head of agency and investment at ES Group, “is that there is little or no public sector demand and principally for offices.
“If you have a public sector tenant in an office block and they have a lease break or a lease renewal, then they are exercising it…lack of demand and the exercise of breaks on public sector leases has been a big issue.”
Lynn also has an eye on next year’s General Election and he hopes that any uncertainty it generates will not destabilise the improved demand he has seen for both investment and industrial property in the North East during 2014.
Similarly he hopes that any move to devolve powers to the regions in England, as a direct result of the Scottish referendum, will not upset the commercial property apple cart, although we are a long way off knowing how such devolved powers might look and how they would be put into effect.
North of the border, however, where devolved powers are coming on stream more quickly, commercial property agents are keen to see them put to good use.
Gilmour comments: “The ability for the Scottish Government to raise money is interesting, but it needs to be used sensibly and channelled into projects that can make a substantial impact over the long term.”
The uncertainty created by the referendum has largely dissolved for just now, but political upheaval in the shape of the forthcoming General Election and the devolution of further powers to the regions looks set to play its part in the commercial property market for many months and indeed years to come.
Rents are expected to rise at below the rate of inflation during the coming year despite tenant demand remaining strong, research showed today.
Landlords estimate rents will edge up by an average of 1.8 per cent in the next 12 months, below both the Bank of England’s inflation target of 2 per cent and the current annual rate at which rents are rising of 2.4 per cent.
The majority of landlords said they did not plan to hike their rents at all during the coming year, with only 43 per cent saying they would increase them, according to letting agency network Your Move and Reed Rains.
Among those who do plan an increase, 57 per cent said they were hiking them to cover the cost of inflation, while 31 per cent said it was to pay for maintenance work.
Four out of 10 landlords said they had seen an increase in demand to rent a home during the past six months, and nearly two-thirds expect this trend to continue going forward.
The rise fed through to a 6.9 per cent jump in new tenancies agreed in August compared with a year earlier.
It also helped to reduce average void periods between tenants, and led to 18 per cent of landlords adding to their portfolio of rental properties.
A further 21 per cent of landlords think now is a good time to invest in a buy-to-let property, with 55 per cent attributing their confidence to strong tenant demand, while 54 per cent cited attractive property prices and 45 per cent said property provided better capital returns than other investments.
David Newnes, director of Your Move and Reeds Rains, said:“Demand for rented accommodation is climbing, and there’s little sign of this stopping.
“While Help to Buy and higher loan-to-value lending are enabling first-time buyer activity, strong house price growth this year has lifted home ownership a few steps out of reach for many, and the private rented sector remains the safety net supporting those still saving for a deposit.
“This demand is also powering more supply. Secure house prices and spirited tenant demand are encouraging budding buy-to-let investors and existing landlords to add to the number of available homes to let.”
But landlords were less upbeat about the mortgage market, with 42 per cent who had tried to take out a mortgage during the past 12 months saying they had found it more difficult than a year ago.
The figure was up from 35 per cent in January, highlighting the impact of the tighter lending environment.
A further 39 per cent of landlords said buy-to-let mortgage repayments had become more expensive in the past 12 months.
Even so, one in 10 landlords cited cheap mortgage finance as a key reason why it was a good time to invest in a buy-to-let property, although the figure was down from 17 per cent in January.
Today’s figures come after letting agency chain Sequence said there were nearly seven would-be tenants chasing every available property as demand to rent soared by 17 per cent in the year to the end of August.
House prices dipped by 0.2 per cent in September as the booming property market continued to show signs of cooling, figures revealed today.
The slide, which followed 16 consecutive months of price rises, left the average British home costing £188,374, 2 per cent higher than the pre-correction peak.
The annual pace of house price growth also moderated, easing to 9.4 per cent, down from 11 per cent in August, according to Nationwide Building Society.
The figures are in line with other data which suggests the property market is beginning to slow as buyers become more cautious in the face of future interest rate rises and the high prices being demanded by sellers.
The Bank of England yesterday said the number of mortgages approved for house purchase fell for the second month in a row during August.
Robert Gardner, Nationwide’s chief economist, said: “Price growth may soften further in the final quarter of the year, given the high base for comparison from Q4 2013.
“However, the outlook remains uncertain. There have been tentative signs from surveyors and estate agents that buyer demand may be starting to moderate, but the low level of interest rates and strong labour market suggest that underlying demand is likely to remain robust.”
House prices rose in all 13 regions of Britain during the year to the end of September.
London continued to see the strongest annual growth, with property prices in the capital soaring by 21 per cent to stand at an average of £401,072, 31 per cent higher than their 2007 peak.
Annual gains were also strong in the Outer Metropolitan at 14.4 per cent, and the Outer South East and East Anglia at 13.2 per cent and 11 per cent respectively.
But there continues to be a considerable north/south divide, with prices in the North rising by just 4.3 per cent during the past year, while in Wales they edged up by 5 per cent and in Scotland they were 5.2 per cent higher.
Average house prices in the south of England, which encompasses London, the South East, South West and East Anglia, were up 15.3 per cent year-on-year.
But in northern regions of England, property values rose by an average of just 6.7 per cent.
Nationwide said house price growth in the south has exceeded gains in the north for the past 22 quarters.
However, there was a significant slowdown in the pace of gains in London during the three months to the end of September, with prices rising by just 0.9 per cent during the period.
East Anglia led the way in the third quarter with a gain of 3 per cent, followed by Northern Ireland at 2.9 per cent and the West Midlands at 2 per cent.
At the other end of the scale, prices fell by 2.1 per cent in the North in the three months to the end of September, while they dipped by 0.8 per cent in Wales.
Matthew Pointon , property economist at Capital Economics, said despite the recent fall in demand from potential buyers, he still expected housing market activity to pick up in the next few months.
He said: “More homes should come onto the market as potential sellers’ expectations about future increases in the value of their current property moderate and, alongside the return of real earnings growth, that should tempt buyers back.
“We therefore expect the number of buyers and sellers to be more-or-less matched, which implies house prices are set for a prolonged period of much more moderate growth than that seen over the past 18 months.”