two-bed-london-flat-to-be-sold-for-just-£1

Two-bed London Flat To Be Sold For Just £1

While a property is usually a considerable investment, this luxury 2-bed apartment in London could be purchased for as little as £1. With the market back on track since its pause over lockdown, you can now enter to win a property as a raffle prize. Demand for property has spurred, and in order to draw attention to their listings, agents create a lottery in which the property is the grand prize - to be won for a tiny fraction of its value.

 

The property is available to win in a raffle from Win My Dream Home (Image: Win My Dream Home)

Why Is It Being Sold So Cheap?

Properties that are sold as part of a raffle offer the chance for one lucky individual to grab a bargain price. The method has become popular recently as a way of drawing attention to the property and creating interest. It is also well-liked among sellers because the process can be more straightforward, with everything taking place online. This reduces a lot of time spent contacting potential buyers, giving house viewing, and other various admin and back and forth. The raffle creates a large sum over time through the sale of entry tickets. So long as it gains enough attention, it is unlikely to cause a loss for the seller.

 

How Does It Work?

Win My Dream Home is one such company allowing buyers to try their luck. They have listed a stunning luxury apartment, located in Kentish Town in North West London. The property is 525 square foot flat, on the ground floor and has two bedrooms, a 17-foot reception, and a private terrace. It has been valued at £500,000, but one lucky entrant of the prize draw will win it for as little as £1.

The apartment is based in Kentish Town, North London (Image: Win My Dream Home)

 

Tickets are sold for £5 from the Win My Dream Home website until 31st December 2020. Potential buyers who purchase a ticket are not guaranteed the apartment but can enter as many times as they wish. Bulk buying is also possible, making the entry price cheaper - 100 entries cost £100, just £1 per ticket.

 

Raffle tickets are sold for as little as £1 (Image: Win My Dream Home)

 

There will also be two runners up in the raffle. The first runner-up will receive ten thousand pounds, and the second will get five thousand pounds. Win My Dream Home will donate ten percent of all the money raised through ticket sales to the Great Ormond Street Hospital.

 

 


reduction-in-planning-permission

Home Truth: Lockdown Caused 21% Reduction in Planning Permission Applications

Lockdown Caused 21% Reduction in Planning Permission Applications

 

  • Same time period in 2019 saw only a 5% decrease from the year before
  • North East and Yorkshire & Humber saw the largest drop in planning permission applications during lockdown (27%)
  • 87% of planning permission applications were approved in 2020

 

New research from bridging loans broker Octagon Capital reveals that lockdown had a significant impact on the number of Brits applying for planning permission, with numbers from April, May and June 2020 down 21% on the same time period the year previously.

The research, which analysed gov.uk data, found that the decrease in planning permission applications during lockdown is far more significant than in 2019, where there was only a 5% decrease in applications during the second quarter of the year. In 2018, there was only a 3% decrease.

The good news for those who have applied for planning permission during lockdown is that the likelihood of having an application approved doesn’t seem to have been affected. 87% of planning permission applications in 2020 have been approved, marginally lower than the two years beforehand (88%).

Regionally, the North East and Yorkshire & Humber both saw a 27% drop in the percentage of planning permission applications between the second quarter of 2020 and the same period of 2019, the largest in the country. On the other hand, the South West has seen a 17% decrease, which is the lowest.

 

See also:

Rise in mortgage approvals 'highest in 13 years'

Dan Kettle: 'Bridging volumes halve in Q2'

Sunak approves stamp duty change

 

Percentage difference in the number of planning permission applications between Q2 2019 and Q2 2020

 

Region

Percentage Difference in Planning Permission Applications, Q2 2019 – Q2 2020

North East

-27%

Yorkshire & Humber

-27%

North West

-23%

East of England

-22%

South East

-22%

West Midlands

-20%

East Midlands

-19%

London

-19%

South West

-17%

 

Planning permission applications in the North East were the most likely to be approved during lockdown, with a 94% approval rating. Meanwhile, only 79% of applications from London were approved, the lowest rate nationwide.

Dan Kettle, Commercial Director at Octagon Capital, commented: “COVID-19 has impacted every aspect of our lives, but the 21% drop in the number of planning permission applications during lockdown is particularly telling when it comes to looking at how Brits are prioritising their finances during a difficult time.

“There are positives from this research for those who still want to expand, for example to build a home office to help them work from home. The approval rate for planning permission applications has remained high and at the similar level to 2019. The best way to ensure your application is approved is to do your research beforehand and bringing in an architect to ensure your plans are up to scratch.”

To find out more about Octagon Capital and how planning permission has been impacted by lockdown, visit: https://octagoncapital.co.uk/guides/lockdown-caused-21-reduction-in-planning-permission-applications/


interest rates

Are Negative Interest Rates Imminent?

What does a negative interest rate mean?

Negative interest is an interest rate that falls below zero per cent. A negative interest rate is a reversal of how a bank typically works. Currently, most high street banks pay interest at a rate of 0.01 per cent. When negative interest rates occur, borrowers gain interest as opposed to paying interest to lenders.

 

Is the Bank of England setting negative rates?

Bailey set out to put minds at ease on a British Chambers of Commerce webinar. In an attempt to play down speculation, he disclosed that policymakers were only discussing negative interest rates to make sure that the option was there if necessary, not because they will be put in place imminently. He explained: 'It would be a cardinal sin in my view if we said we had a tool in the box which we didn't think could be operationally used...Yes, it's in the tool bag, but that doesn't mean we're going to use negative rates.'

As part of the research into its use, Bailey launched a study on whether the UK should set negative interest rates. The study reviews other countries who have implemented this, such as Japan and parts of the EU. The governor discussed other countries' experiences of negative rates, describing them as a 'mixed bag'. The effectiveness depended largely on the framework of each individual banking system as well as the time at which it was implemented.

On Tuesday, Bailey gave an online speech in which he hoped to clarify further that the bank had not decided whether rates will be set at below zero for the first time or settled any date for when this could happen. Whether the Bank of England is planning to push rates into the red remains unknown, but for now, it seems certain that Bailey wants to leave negative rates on the table.

How could this affect me?

If the Bank of England puts negative rates in place, commercial banks will be charged to hold cash deposits with them. As a result, banks will pass on these costs to the savers. With negative rates in place, your bank will most likely charge you to save with them, rather than paying you interest. It may also mean that borrowing, including mortgages, will become cheaper. Your credit card interest rates will probably depreciate as well. However, there is no guarantee that banks will pass on the benefit to the individual.

 

Why are negative interest rates being considered?

In theory, implementing negative rates would boost the economy. The aim is to encourage consumers and banks to use, borrow and lend money more freely and take more risks. If negative interest rates crush yields on savings accounts, people are far less likely to keep money tucked away in the bank and far more likely to spend or invest. As the second wave of COVID takes a thorough hit to the economy, the Bank of England is considering this option in hopes of reigniting the economy.


HOUSE-PRICES-GOOD-OR-BAD-TIME-TO-SELL

UK House Prices Jump By Five Per Cent 

 

They report the average asking cost for houses to be at £319,996 with monthly growth at 0.2 per cent in September. Scotland saw the most substantial increase in asking prices raised by 8.8 per cent to £168,272. Yorkshire and the Humber, as well as the North West of England, also saw significant growth with prices rising by 7.2 per cent (£210,128)  and  7.1 per cent (£212,977) respectively.

 

house prices
Average UK house price statistics published by Nationwide.

 

Both the East of England and the South East have already surpassed the number of sale agreements made in the same period last year. This is due to the fact that these areas have higher average prices. With more expensive properties, the stamp duty holiday introduced by the chancellor in July has more of an impact on buyers with possible savings of up to tens of thousands of pounds. This acts as an incentive for sellers to raise their asking price, knowing that the buyer is saving on stamp duty. 

 

Increased demand for three and four bedroom houses has also helped to drive UK housing prices. Director of property data at Rightmove Tim Bannister states: “Increased competition for second-stepper homes has pushed prices to a record this month for those looking to take the next step up the ladder". While most often the reason for moving house is needing more space, the increase in people working from home has created a higher demand for the same types of properties. As a result, different types of buyers are now finding themselves in competition for the same type of property. 

 

Another affect the pandemic is a surge of people looking to move out of major cities. More and more people are choosing to leave the capital altogether, but the outer areas of London are still active. Zone 1 has become less desirable as, with more people working remotely, the importance of living close to inner-city offices dwindles. York is one of the many areas seeing buyers coming from London, as it’s far cheaper in comparison. Many are choosing to sell up and move despite working in the capital because they will only be commuting once or twice a week. As a result, commuter belts are widening around London and all major cities. 

 

Before the pandemic, many would've assumed it impossible to leave the major cities in which they find their employment. Moving to the countryside to a larger or more desirable home is likely something many would never have considered an option. However, with the majority of people spending more time at home in recent months, more buyers are happy to compromise on city life and opt instead for extra indoor space or a garden. The option to work from home has created a wave of people looking to move to more affordable areas and own larger homes than they ever thought they could. Accordingly, demand for smaller houses with three and four bedrooms has grown, demonstrating that houses have become preferable over flats. 

 


property sales

Will Property Sales Continue To Recover?

When the market closed entirely during the lockdown in April, experts predicted the worst. However, pent-up demand has helped the market reopen on a strong foot. The stamp duty holiday introduced for nine months has also helped to spur interest. Buyers and sellers alike are keen to take advantage of the financial incentives which come with the higher tax threshold. It is evident now that buyers have started to make up for the lost time. 

 

In August, prices accelerated the most in one month for more than 16 years, according to Nationwide. They describe the sudden recovery as 'unexpectedly rapid'. Experts predict fewer than 1.1 million sales will complete this year, compared to each year from 2014 to 2019, where the number was around 1.2 million. Given the bleak outlook most held back during the lockdown, when house prices fell for four months consecutively, the figures are promising.

 

 

Nevertheless, the recent trend of high activity levels has begun to appear superficial and impermanent. Fears have begun to muster that the upwards trend will soon plummet. This is partially due to the tax break encouraging those who were intending to buy next year to advance their plans. This could create a vast drop in demand when the tax break ends in March 2021. Moreover, critics fear that the continually increasing likelihood of an imminent second lockdown may have an impending effect. Ongoing financial uncertainty and instability as a result of the pandemic have near but crushed consumer confidence. The reintroduction of national lockdown measures would be sure to topple the already fragile economy.

 

The question also remains whether first-time buyers are able or willing to enter such an uncertain atmosphere. These potential buyers have been some of the hardest hit financially by the coronavirus. As a result, this demographic is, for the most part, shut out of the market. The sudden kick-back into action also means that buyers experience delayed processes. High-demand causes mortgage processes to extend and become prolonged as banks and brokers deal with an excess of both back-dated and current requests. The property website Rightmove recently published estimates indicating that there are currently 40 percent more sales in progress than is typical for this time of year, resulting in delays. These setbacks, as well as the endless uncertainty, could cause consumers to lose confidence in the market and activity to plummet rapidly.

 


mortgage-agreement

Will Buyer Caution Halt Mortgage Approvals?

Last month's statistics show a strong recovery for the housing market following the lockdown market freeze. Mortgage approvals were recorded at their highest level since 2007. According to the latest figures from the Bank of England, 84,715 home loans were signed off in August - up from 66,288 in July. This brought approval levels back to pre-pandemic statistics and the highest approval rate in nearly thirteen years. However, analysts are beginning to question whether the growing caution of buyers will halt this rising trend.

Government policies have helped to drive property sales during the pandemic. Current ultra-low borrowing rates have spurred interest amongst buyers. The stamp duty holiday, which will run until March 2021, makes buying a house now even more enticing. Extra sale listings have met the demand, sending mortgage approvals through the roof. High activity levels in the housing market are a sure sign of economic rebound following the lockdown.

The coronavirus has also spurred a scramble to purchase homes outside of large cities. The pandemic forced most of the nation to work from home, and there has been a resulting surge of people looking to move out of major cities. More and more people are choosing to leave London as they have realised the potential of working from home or commuting once or twice a week. The surge in mortgage approvals is partially due to many choosing to prioritise how much space they have in their homes over the densely populated inner-city locations. As a result, commuter belts are widening around London and all major cities. 

Despite the mortgage approval rate making a strong recovery, the Bank has stated that this only 'partially offsets' the lapse during the lockdown. Between March and June, approvals slumped to their lowest level since the early 1990s as the housing market halted. For comparison, 418,000 mortgages have been approved in 2020, while in 2019 524,000 were approved in the same previously recorded.

 In a usual year, without the impact of a pandemic, August is one of the quietest months for mortgage approvals in the UK. Typically, most of the nation is spending time abroad and on holiday. Due to the travel restrictions in place, most were unable to take their summer holidays and instead have been keen to take advantage of the financial incentives which come with choosing to move houses now. It is evident now that buyers have started to make up for the lost time.

However, as always, speculation is raised as to whether this rising trend will continue. Samuel Tombs, a chief UK economist, has described Google Trends data which indicated that the number of visitors to the three leading UK property websites fell by five per cent in September. Moreover, lenders have recently begun to restrict high-loan-to-value mortgage product sales. This move mainly concerns first-time buyers, whose interests are being pushed out of the property market. The change is sure to lower mortgage sales. 

Moreover, the set of buyers willing and able to make moves out of big cities or into larger homes is slowing. Concerns over the continuing financial impact of the virus rise with the onset of the second wave. Henry Pryor, a Property market consultant, expressed his view on the developing caution of buyers, saying: 'We may well run out of a pool of buyers prepared and able to move for lifestyle reasons as the flood of negative headlines about the true cost of the pandemic to individuals and the nation starts to become clearer.'


stamp duty

How Does The Stamp Duty Holiday Work?

 

What is stamp duty?

Stamp Duty Land Tax is a tax on the purchase of properties. Stamp duty is only paid in England and Northern Ireland. The devolved administrations of Scotland and Wales have alternative property taxes (Land and Buildings Transaction Tax and Land Transaction Tax, respectively). How much tax you owe the government depends on the property value, and where you are in the UK. The temporary changes to stamp duty currently in place only apply in England and Northern Ireland.

 

What has changed?

The threshold for stamp duty has been increased temporarily to £500,000 for properties in England and Northern Ireland. This applies to anyone purchasing their primary residence. If your property costs up to £500,000, you will not pay any stamp duty. Higher-value properties will only be taxed on their cost above that amount, potentially saving buyers tens of thousands of pounds.

 

stamp duty

Before the new policy was introduced in July, buyers paid stamp duty in England and Northern Ireland on land or property with a value of £125,000 or more. The first-time buyer discount allowed those entering the property market to pay no stamp duty up to £300,000 but is now replaced by the stamp duty holiday.

Landlords and second-home buyers will also see a tax cut but will still be eligible to pay the extra 3% stamp duty that has always been allocated to them. 

 

Who benefits? 

The stamp duty holiday was put in place to help buyers in a time when many are facing financial hardships as a result of the coronavirus. Chancellor Rishi Sunak has suggested that with the new policy, the average saved on a stamp duty bill is £4,500. Moreover, nearly nine out of ten home buyers this year will pay no stamp duty at all.

While it is aimed at buyers, homeowners are also benefiting and pocketing some extra money. With the policy in place, homeowners have more of an incentive to keep their asking price high, knowing that the buyer is saving on stamp duty. This is particularly significant with the sale of high-value properties which can run a stamp duty bill of tens of thousands of pounds. The stamp duty savings will likely end up being shared, with both buyers and sellers managing to save.

 

How have house prices been affected?

The Stamp Duty holiday intended to boost the property market after it took a hit during lockdown when house prices fell consecutively for four months. The stamp duty tax holiday has already taken effect by increasing house prices. In August, prices accelerated the most in one month for more than 16 years, according to Nationwide. They describe the sudden recovery as 'unexpectedly rapid'.

On the other hand, fears have begun to muster that the tax break will encourage those who were intending to buy next year to advance their plans. This could create a vast drop in demand when the tax break ends.

 

 

 When does the stamp duty holiday end?

The stamp duty holiday in England and Northern Ireland is nine-months long. It began in July 2020 and will end in March 2021. According to HMRC figures, the government usually raises around £12 billion annually from stamp duty land tax. Though, the tax holiday is set to cost the Treasury an estimated £3.8 billion.


Mortgage

Rise in Mortgage Approvals as People Escape Cities

Sharp rise in August, usually a quiet month, in property

In August, there was a drastic rise in mortgage approve, taking it to the highest monthly level for nearly 13 years. This is seen to be driven by government help during the current global pandemic, where people are rushing to buy homes outside of large urban centres in Britain.

Next March, low borrowing rates and the government’s stamp duty is due to expire, and this helped mortgage approvals rise from over 66,000 in July to over 84,500 in August since October 2007, according to Bank of England figures. Normally, August is a very quiet month in property, where most of the nation is on holiday, however not this year.

 

second-mortgage-contract

 

Since the outbreak of the coronavirus, the property market has been very unpredictable, explains specialist broker, One Buy To Let.

In May, the property market hit its lowest level since the early 1990s. Despite the surge in August, mortgage approvals have been down and some brokers are expecting a 6-9 month recovery.

Despite this drop, the pandemic has encouraged people to think about their living space and has led to some reconsidering living in urban areas. Since spending more time at home, indoors, working, making some consider buying larger homes.

Samuel Tombs, chief UK economist at Pantheon Macro economics, said “The outlook for a further drop in employment also will weigh on the housing market, though with home-ownership having narrowed to a wealthier segment of the population over the last decade, job losses won’t have as devastating an impact on the market as they did in 2008”.

Whilst many wealthy property buyers are keen to buy properties, many are still wary about where they are putting their money. This is seen to continue as people are expecting a drop in employment, and this will weigh on the housing market and it is thought that this will be seen dramatically when the furlough scheme ends.

More specifically, economists have warned that many low-income mortgage lenders could find themselves in financial difficultly once the holiday regime ends and more people are made redundant, and more are finding themselves looking for jobs that are not around.

For this reason, the government need to move quickly to protect home ownership, especially for families that have been unemployed or are on low incomes.


bridging-rates-fall-50%

Dan Kettle Comments on Bridging Volumes

According to the latest report by Bridging Trends, bridging volumes halved during Q2 as a result of the covid-19 lockdown. £79.4m worth of bridging deals were completed from May to July 2020, down from £184m in the same period of 2019 and from £123m in Q1 2020.

As a result, in the six months to the end of June 2020, bridging volumes declined by £168m to £202m, compared to £370m in the first half of 2019 - something that brokers and lenders considered as 'inevitable' given the circumstances.

How bridging fell by 50% in Q2

Bridging interest rates rose during the period, perhaps reflecting the increased risk and more limited product availability during the period.

The average weighted monthly interest rate in Q2 2020 increased to 0.85 per cent – up from 0.8 per cent in Q1 and 0.75 per cent in Q4 2019. This is the highest average monthly interest rate recorded in Bridging Trends data since Q3 2016. Investment purchase and re-bridging saw notable increases as the reason for borrowers accessing bridging finance.

A quarter of deals were completed for investment, up from 20 per cent in Q1, while 13 per cent were as re-bridges, up from 8% between January and March.

In contrast, chain breaks made up just one in 10 bridging deals, down from 20 per cent in Q1, while heavy refurbishment dropped from 13 per cent of transactions to 10 per cent.

Dan Kettle of Octagon Capital commented: “The drop in bridging volumes is unsurprising. During the covid-19 lockdown, very little action could really take place, since there was no property valuations, certainly no auctions and most lenders had temporarily turned off their lending.”

“But that does not mean that things won’t improve. There has been real enthusiasm to get deals done and get out there at the moment, especially whilst covid-19 threats are relatively low and if a second wave comes back to bite us.”

 

 


What is Regulated and Unregulated in Bridging Finance?

Bridging loans or bridge finance, will typically fall under regulated or unregulated activity - and this can have quite an impact on the application process, eligibility and terms that you receive. In this article, Octagon Capital aims to explain the difference between regulated and unregulated bridging - and how you can find the best product for you.

As a rule of thumb:

  • Any residential bridging is regulated (if it is their primary residence)
  • Any commercial bridging is unregulated (including offices, garages, warehouses)

 

Regulated Bridging Unregulated Bridging
70% Maximum LTV 75% Maximum LTV
First and Second Charge Mostly Second Charge
Subject to Status All Credit Statuses Considered

What is the regulation for bridging loans?

When it comes to regulated bridging loans, the FCA is the main regulator in the UK for any mortgages or deals. Essentially, they have strict regulation and guidelines in place to ensure that borrowers do not risk losing their primary residence when borrowing and there is adequate protection in place.

So typically, you can borrow against residential properties, such as buying a place for buy-to-let purposes. However, you cannot borrow a regulated bridging loan if it is secured against your own primary residence.

Part of this is the Mortgage Credit Directive (MCD) which is an EU framework for mortgage firms and is overseen by the FCA. There are a number of measures in place to offer transparency to customers, such as showing them any rates beforehand as an APRC and also giving applicants a reflective period in case they want to change their mind or request more information.

For the regulation surrounding SMCR, this is for senior managers of investment firms under the FCA - and does not apply in this case.

 

regulated-bridging

Borrowing against flats and places of primary residence will typically fall under regulated activity

 

Regulated bridging loans and mortgages are available by first charge or second charge

First charge loans

This refers to the 'first charge' that is taken from your bank account each month, so often refers to as your first mortgage, which could be against your main residence and property that you live at, or an investment.

Second charge loans

This refers to the 'second charge' from your bank account, taken out after your first charge. So you could have a mortgage against your home (this is your first charge) and then another mortgage or bridging loan against an investment product (this is your second charge). You can also get a second charge against your existing home, known commonly as a second mortgage.

Importantly, the amount you can borrow on your second charge is less than your first charge, since it is second in the queue when it comes to repayments each month.

You can use the same lender for both first and second charge, or use a different one for each.

 

What is unregulated bridging loans?

When bridging loans are unregulated, they are conforming to some essential guidelines, but there are a lot of flexibilities when it comes to the criteria and lending to people with adverse credit histories. Loans in this nature are commonly by means of second charge, and with faster processing and applications, they typically make up around 50% to 60% of all bridging deals (regulated rarely gets more business than unregulated in this sector).

Unregulated business is often for commercial properties including:

  • Offices
  • Petrol garages
  • Schools/ Hotels/ Farmhouses
  • Warehouses
  • Factories
  • Gyms
  • Other business purposes

 

unregulated-bridging-loans

Offices will typically fall under unregulated activity

 

What does non-status bridging loans mean?

Non-status bridging means that it does not take credit status into account. So where regulated mortgages and most financial products require a strong credit score, this is not the case with non-status lending. Therefore, lenders are willing to take a view on adverse credit histories or limited credit histories and may look at other factors such as the potential value of your property and the opportunity.