The ‘Panama Papers’ scandal is another potential blow to the already fragile top end of the UK’s property market
For some reason, one of my favourite old Van Halen songs, Panama, was running through my head last week, especially when our beloved prime minister was trying to explain that his family’s offshore company had not been set up for advantageous tax reasons alone.
As expected, the links to London’s property market of many of the people implicated in the ‘Panama Papers’ scandal have been seized upon, and they act as another potential blow to an already fragile top end that seems to be in the midst of a price correction kicked off by the stamp duty changes.
Of course, there will not be many shedding a tear about this. But a hope that it may trickle down and reduce prices for us mere mortals is just not the case.
House prices in general continue to show robust growth if the latest indices are anything to go by and the problem of reducing transaction levels continues.
Now that the stamp duty rush is over, all eyes are focused on whether the uncertainty around the EU referendum will slow these levels even further as buyers adopt their favourite ‘Wait and see’ approach. I am not so sure about this and figures seem to suggest that demand from first-time buyers has been increasing.
What rate rise?
Meanwhile, weaker-than-anticipated UK growth and projections that inflation will stay lower for longer have yet again pushed back prospects of a rate rise, with many ruling out any change this year and some even saying there may be no move until the end of 2017 or beyond.
In the markets this week, three-month Libor is still at 0.59 per cent while swap rates have continued their slide down, with five-year money back under 1 per cent.
2-year money is down 0.04% at 0.76%
3-year money is down 0.06% at 0.80%
5-year money is down 0.06% at 0.95%
10-year money is down 0.05% at 1.38%
In the mortgage world, Virgin Money has finally come out with its affordability tweaks, which could help single applicants, higher loan-to-value loans and higher-income applicants. It has also reduced the rate of interest applied to Help to Buy equity loan schemes from 4 per cent to 3 per cent. This is all great news but it is a shame to see that Virgin also joined the ranks of those with a four-times income cap for loans over £500,000.
There is more good news on the interest-only front as Leeds Building Society will now lend up to 50 per cent LTV using sale of property as a repayment vehicle.
It will also do part-and-part up to 75 per cent (50 per cent interest-only and 25 per cent repayment), as long as the customer has £150,000 of equity at the end of the mortgage term.
Leeds also has an interesting multiple buy-to-let product, which is at 3.29 per cent to 60 per cent LTV or 3.69 per cent to 70 per cent LTV on a five-year fixed basis. It comes with a free valuation, a £199 arrangement fee and £250 cashback.
Newcastle BS has tweaked its buy-to-let income policy and will now accept joint minimum income of £40,000 rather than one applicant at £25,000. It will also now accept self-employed borrowers with only one year’s accounts on products available from 3.24 per cent fixed for two years at 60 per cent LTV or from 3.44 per cent at 75 per cent LTV.
Meanwhile, I was dismayed to see that, under the latest FCA fee consultation, mortgage brokers and lenders will see their fees rise to help pay for the integration of the second charge regime. According to the Association of Mortgage Intermediaries, the total bill for lenders and brokers now stands at £36.8m, without much explanation from the regulator on where this all goes. We all need to support Ami in fighting these unfair increases.
Finally, members of the Council of Mortgage Lenders voted in favour of the big trade body merger last week, with 75 per cent voting to join the British Bankers’ Association, Payments UK, the UK Cards Association and the Asset-Based Finance Association.
I have always enjoyed any dealing I have had with the CML and hope the good relationship continues with the new body. It will be interesting to see if size really does matter.
Andrew Montlake is director at Coreco