Borrowers affected by a leading lender’s decision to increase the mortgage rates on their buy-to-let deals have signed up to protest as part of a group action. More than 400 mortgages have joined the legal fight, with almost £500,000 raised to help fight the case.
West Bromwich Building Society announced its decision last year to increase tracker mortgages by two percentage points.
Landlords say the lender has no legal grounds to make the move and have launched a group action to protect. Those interested in taking part have until the end of tomorrow to sign up.
The group had initially sought 250 mortgage cases to be part of the action but this target has already been passed with 295 mortgage cases signed up.
Ray Boulger, of mortgage brokers John Charcol, said: “By only targeting BTL borrowers with more than two mortgages West Brom appears to be adopting the cynical approach that the courts will take the view the mortgages affected are commercial and hence borrowers can not rely on the Unfair Consumer Terms legislation. This implies it accepts what it is doing is unfair, which rather seems to go against one of the things which most mutuals claim sets them apart from the banks.”
Borrowers affected will be charged a fee of £1,509 per mortgage represented and must sign up using the Property 118 website by 5pm on Friday, March 28.
House prices are set to jump by nearly a third during the coming five years as the supply of homes fails to keep pace with demand, the Treasury’s chief watchdog predicted.
The average cost of a home is expected to increase by 30 per cent between now and 2018, according the Office for Budget Responsibility.
Robert Chote, head of the OBR, said house prices were being pushed up by a combination of a lack of supply and rising demand, driven by increased confidence, higher mortgage lending and government schemes, such as Help to Buy.
A 30 per cent increase would add £77,000 to the cost of the typical home in England, which currently stands at 258,837, according to Zoopla.
But despite investors causing sharp house price increases in some areas of the country, Mr Chote does not think a property market bubble is building up.
Instead he expects house price growth to slow naturally, with gains easing from 8.5 per cent this year to 3.7 per cent in 2017 and 2018.
“With very rapid house price increases in some parts of the country you might see bubbly activity where people are willing to buy stuff off plan or not intend to live in it,” Mr Chote told the Treasury Select Committee.
But he added: “You can explain the increase in house prices by fundamentals without having to resort to saying there is a bubble going on.”
Steve Nickell, an economist for the OBR agreed. He told MPs: “A bubble arises when demand is being driven by people wanting to get in because of expectations of price growth rather than for somewhere to live.
“The house price to income ratio has been growing for the last 40 years but that cannot go on forever because everything you consume would become housing and there would be nothing else left.”
The comments come as the Home Builders Federation warned that the housing shortage in England had hit one million homes – the equivalent to the number of properties in Birmingham and the surrounding area.
Ten years ago, the Barker Review of Housing Supply warned that at least 210,000 private homes needed to be built each year in England to avert a housing crisis.
But the HBF said an average of just 115,000 homes had been built annually during the past decade, leaving a shortfall of one million properties.
Stewart Baseley, executive chairman of HBF, said: “The Barker Review was a seminal report for housing and starkly illustrated the scale of the emerging crisis. Since then successive Governments have failed to pay heed and develop policies to deliver the homes the country needs.
“As we approach a general election, we now need to see all parties committing to policies that lead to a sustained increase in house-building.”
The HBF said 260,000 new homes needed to be built each year if the Barker Review’s objective of gradually pricing households back into the market was to be achieved.
But 320,000 private sector homes would need to be built annually if the more ambitious aim of improving the housing market was to be met.
The group warned that this was three times the number of properties completed in 2013 and a level that had been achieved in just four years since World War II.
It added that even achieving the least ambitious of Barker’s three objectives – to slow down the rate at which households are priced out of the market – would require more than 200,000 private starts per year, a figure last achieved in 1973.
Tough new rules on mortgage lending are not expected to dampen the housing market recovery, industry experts insisted today.
The tighter regulations, which come into force on April 26, require banks and building societies to carry out a detailed assessment of borrowers’ ability to keep up with their loan before advancing them money.
Lenders will be able to ask applicants for evidence on how much they spend on everything from food to childcare to debt repayments if they are concerned about affordability.
They will also carry out an interest rate ‘stress test’, to ensure borrowers can continue to meet their mortgage repayments even if the cost of borrowing rises.
The Council of Mortgage Lenders (CML) said the changes, known as the Mortgage Market Review, are the biggest shake-up to lending in a decade.
But despite the introduction of the tougher lending criteria, the group does not expect the new rules to lead to a fall in mortgage advances, which could in turn impact the housing market.
The CML expects total mortgage lending to reach £195 billion during 2014, the highest level since 2008, with lending levels rising to £206 billion in 2015.
It said many lenders had been following the spirit of the new rules for some time already, and it did not expect the “brakes to slam on” from April 26.
But Sue Anderson, head of member and external relations at the CML, added: “What we don’t know is if we will see short-term impacts around the time of implementation, if lenders aren’t as ready as they think they are.”
Matthew Pointon, property economist at Capital Economics, agreed that the new rules should not have a negative impact on the housing market.
He said: “The weight of evidence suggests that most mortgage lenders are already implementing the Mortgage Market Review regulations, so we doubt mortgage lending will see a sharp drop come April 26.
“But the interest rate stress test should at least prevent mortgage lending from running out of control.”
Peter Williams, executive director of the Intermediary Mortgage Lenders Association, expects there to be a short-term drop in mortgage lending as the new rules bed in.
He said: “There now seems to be a growing consensus that the new regulations will have at least an initial dampening effect.
“In the short term, we are facing a likely drop in mortgage approvals as new practices are set in stone and while any remaining gremlins in new IT systems and processes are ironed out.”
The changes are being introduced to increase consumer protection, and are being overseen by industry regulator, the Financial Conduct Authority.
Under the new regime, a clear distinction will be made between when borrowers are being offered advice on a mortgage, and when they are taking out a home loan on an execution-only basis.
Firms that do offer advice to potential borrowers will need to ask more questions to make sure a product is suitable, meaning mortgage interviews are likely to take longer and may even be split across two sessions.
Borrowers will still be able to opt for an interest-only mortgage, but they will have to show how they plan to repay the loan at the end of the term.
Finding the perfect house is hard enough – but imperfect neighbours can spoil all your efforts.
According to a new study, the best place to head if you are looking for charming neighbours who never throw raucous parties or have family slanging matches, whose dogs never bark, and who keep their gardens suitably pristine is the undoubtedly lovely, but slightly impractical Isles of Scilly, where the local council received not a single nuisance complaint over the last year.
However, relocating to a group of islands 28 miles off the coast of Cornwall (where the main local career opportunity is growing scented narcissi and – according to the Land Registry – only 60 homes have changed hands in the last five years) might be a little drastic.
Other options include investigating the delights of Gwynedd with an average price of £169,058, Worcestershire with an average price of £220,693, Nottinghamshire with an average price of £146,579, or Glasgow with an average price of £147,135, which received the next lowest levels of complaints in the country, according to the research by Churchill Home Insurance.
It might also mean avoiding the most complained-about areas of Fife, Newcastle, Westminster, Stockton-on-Tees, Belfast and Tower Hamlets.
There are, however, other ways to safeguard yourself against the undeniable horror of acquiring a set of nightmare neighbours along with your dream home.
James Wyatt, of estate agents Barton Wyatt, said buyers do have some legal protection: “With consumer protection regulations in force, estate agents should have asked the seller about any neighbour issues,” he explained. “If there is a serious problem with noise or mess then it should be made clear to the potential buyer before they embark on trying to buy the property.”
However, Matthew Dabell, of aspire estate agents, said that while vendors should disclose information about neighbourly problems there is a grey area about how much they are legally required to fess up.
“While the guidelines are not black and white as to what you need to make any buyer aware of legally, there have been situations where the new owners have decided to sue previous owners for not informing them about particularly dreadful neighbours,” he said. “From a buyer perspective you have a right to know about any major issues with the neighbours and certainly if there are any ongoing disputes the outgoing vendor will need to inform you of these.”
And, of course, you can always simply ask the vendors directly about what the neighbours are like and listen to what they don’t say as well as what they do. They are unlikely to wax lyrical about how marvellous the neighbours are, what fantastic friends they are, if they have a long-running vendetta.
The other thing you can do is to use your eyes.
If neighbouring properties and gardens look basically well cared for then it is a good sign, and it is also not a bad idea to knock on doors and introduce yourself – you can pretend to have a question about local schools or whatever but in reality this will give you a chance to suss out whether the home is occupied by a dear old lady or a Hells Angel. You can also fish for gossip about other residents of the street.
Mandy Stevenette, of estate agents Stevenette & Co, suggests that buyers get to know the area before making a decision. “Visiting the property at differing times of the day, having a drive around, again at different times of the day, should help,” she said.
And if you smell a rat you should seek help from your conveyancer.
“If there’s something specific that concerns you – such as shared parking, or swimming pool related noise – ask your solicitor to insert a specific question among the standard questions that the vendor is required to answer,” said Greenwood. “For instance, you can ask: “Has the shared parking ever led to disagreement?”
Ultimately, of course. you cannot protect yourself 100 per cent. And it is worth remembering that, like family members, not only can you not choose them, but you need to learn to live with them.
Properties for sale in some of the most neighbourly corners of Britain:
Four bedroom apartment in a great Glaswegian location:
Five bedroom detached Georgian house in Nottinghamshire:
Historic three bedroom stone cottage with the proverbial roses around the door in the heart of Gwynedd: