Welcome to NestInsights, your guide to the evolving UK property market. In this blog series, we explore the latest property news and developments that shape the sector, offering you the insights needed to navigate and thrive. Our goal is to provide a comprehensive overview that empowers you to make well-informed decisions in this dynamic market.
Table of Contents
Lenders Withdraw High Loan-to-Value Mortgages from the Market
Estate Agents Anticipate Summer Rate Cuts to Stimulate Buyer Activity
Property Giant Secures £580 Million Deal with Private Equity Firms
Law Society Confronts No Confidence Vote Over 'Material Information' Form Changes
Labour Introduces 'Freedom to Buy' Housing Policy
Chancellor Commits to Freezing Stamp Duty, Capital Gains Tax, and Council Tax Bands
UK Property News Week 23
Lenders Withdraw High Loan-to-Value Mortgages from the Market
In recent developments, several lenders have pulled high loan-to-value (LTV) mortgage products from the market. This move, while not indicative of a mass exit, has raised concerns, particularly among first-time buyers who rely heavily on these types of loans to enter the property market.
According to the latest analysis by Moneyfactscompare.co.uk, a few lenders have recently withdrawn fixed deals at 90% and 95% LTV. For instance, Hanley Economic Building Society has pulled its two-year fixed deal at 95% LTV, Principality Building Society has removed selected two- and five-year fixed deals for first-time buyers at 95% LTV, and Saffron Building Society has stopped offering its five-year fixed deal at 90% LTV.
Additionally, Vernon Building Society has withdrawn a couple of five-year fixed deals at both 90% and 95% LTV.
This reduction in high LTV products is relatively minor in terms of numbers; fixed mortgage deals at 90% LTV have only decreased from 700 to 696, and at 95% LTV from 329 to 326 since May 23. However, the impact on the market, particularly on first-time buyers with limited deposits, could be significant.
Rachel Springall, a finance commentator at Moneyfactscompare.co.uk, noted that while the withdrawal of some higher LTV products might raise eyebrows, it does not yet represent a broader trend. She emphasized that more extensive withdrawals could pose challenges for those with limited deposits, but she remains optimistic that these deals might return when re-pricing activity picks up in the coming weeks.
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Estate Agents Anticipate Summer Rate Cuts to Stimulate Buyer Activity
As the summer months approach, many estate agents are anticipating potential interest rate cuts to invigorate buyer activity in the property market. The International Monetary Fund (IMF) has recommended that UK interest rates be reduced to 3.5% by the end of next year, which could involve the Bank of England cutting its key rate by up to seven times from its current level of 5.25%.
A recent survey involving over 600 estate agents reveals a mixed landscape in buyer inquiries, with 31% of agents observing an increase, 34% noting steady activity, and 35% witnessing a decline.
A significant 85% of these agents attribute the slowdown in buyer market activity to higher mortgage rates, which have persisted due to the Bank of England’s decision to maintain rates at 5.25%.
Despite the anticipation of a rate cut, April’s inflation figures came in higher than expected, dampening hopes for a June reduction. Nonetheless, the majority of agents believe that a rate cut is essential to boost buyer interest. Specifically, 83% of surveyed agents are confident that lower rates will entice more buyers back into the market. Additionally, 82% believe that a rate cut would encourage more buyers to make offers on properties.
Property Giant Secures £580 Million Deal with Private Equity Firms
Vistry Group, one of Britain's largest housebuilders, has entered into a substantial deal worth £580 million with private equity firms Blackstone Real Estate and Regis Group. This agreement involves the sale of a portfolio comprising 1,750 new-build homes, a strategic maneuver that highlights the evolving landscape of property development and investment.
The portfolio, concentrated in the southeast of England, spans 36 Vistry developments and will be managed by Leaf Living, a private rented housing firm supported by funds from Blackstone and Regis. The first completions of these homes are anticipated by the end of June, with the majority expected to be finished within the next two years. This deal is a clear indicator of Vistry’s shift in focus from traditional housebuilding to its partnerships business, which prioritizes building affordable housing for government and non-profit partners.
Greg Fitzgerald, the Chief Executive of Vistry Group, emphasized the benefits of this partnership, noting that pre-selling homes through such agreements provides certainty, accelerates build programs, secures work for the supply chain, and reduces costs.
This approach not only supports Vistry’s business model but also plays a crucial role in addressing the UK's acute housing shortage. Vistry is on track to deliver a more than 10% increase in new home completions this year, underscoring its commitment to boosting the housing supply amidst rising demand.
The strategic divestment aligns with Vistry's broader vision to streamline operations and focus on scalable and sustainable growth. By collaborating with private equity firms and leveraging their financial strength, Vistry can enhance its operational efficiency and expand its reach in the affordable housing sector. This move also reflects the growing trend of large property developers partnering with institutional investors to mitigate risks and ensure steady revenue streams.
Law Society Confronts No Confidence Vote Over 'Material Information' Form Changes
The Law Society of England and Wales faces a no confidence vote initiated by the Property Lawyers Action Group (PLAG). The contention arises from the Law Society's decision to release a revised TA6 Property Information Form in March, which aligns with the National Trading Standards (NTS) guidance on 'Material Information' for property listings.
The updated TA6 form is designed to include comprehensive details such as property tenure, ownership, and charges, as well as information on building safety, restrictive covenants, flood risk, and coastal erosion. It aims to provide more transparency and assist estate agents in complying with the Consumer Protection from Unfair Trading Regulations 2008 by ensuring key property information is readily available to potential buyers.
PLAG has expressed significant dissatisfaction with the Law Society's approach, citing a lack of consultation with licensed conveyancers prior to implementing these changes. They argue that the modifications were made unilaterally, ignoring the practical implications for conveyancing professionals and the increased risk of legal liabilities.
The crux of the dispute lies in the PLAG's concerns over the legality and practicality of the new 'Material Information' requirements. They highlight several potential issues, including the risk of innocent misrepresentation claims against sellers and the fundamental shift in the conveyancing process from a detailed interrogation by a buyer's lawyer to reliance on a single, possibly flawed, data pack.
In response to these concerns, the PLAG has initiated the procedure for a Special General Meeting (SGM) to hold a vote of no confidence in the Law Society's CEO, Ian Jeffery, and President, Nick Emmerson. The group needs 100 signatures from solicitors to call for the SGM, which will then be followed by a vote to determine the motion.
The revised TA6 form, despite its good intentions to streamline the information flow and reduce the likelihood of sales falling through, has faced criticism for potentially increasing criminal liabilities for estate agents, solicitors, and sellers under current consumer protection laws. Critics argue that the form's extensive requirements could lead to more claims of misrepresentation and complicate the conveyancing process.
Labour Introduces 'Freedom to Buy' Housing Policy
The Labour Party has unveiled its 'Freedom to Buy' housing policy. This initiative aims to sustain and expand the existing mortgage guarantee scheme, which was initially introduced by the Conservative government and was set to expire in June 2025. Under Labour’s plan, the scheme will be rebranded and made permanent, potentially helping 80,000 more young people onto the property ladder over the next five years.
Labour leader Sir Keir Starmer and Deputy Leader Angela Rayner have positioned the party as the "party of homeownership." Starmer emphasized the personal and societal benefits of homeownership, drawing on his own family’s experience. "My parents’ home gave them security and was a foundation for our family.
As Prime Minister, I will turn the dream of owning a home into a reality," he stated. The 'Freedom to Buy' scheme will not only assist first-time buyers who lack a large deposit but also prioritize giving them first dibs on new developments.
The new policy is part of Labour's broader strategy to tackle the housing shortage and stimulate the construction sector. The party has pledged to implement significant planning reforms with the ambitious goal of building 1.5 million new homes over the next parliament.
Additionally, Labour plans to reform compulsory purchase rules and impose taxes on foreign buyers to fund more planning officers, ensuring that the infrastructure necessary for increased housing development is robust and well-supported.
Angela Rayner highlighted Labour's commitment to transforming the housing market, stating:
Labour’s plan would get Britain building again with a new scheme to help young people get a mortgage and with a housing recovery plan, creating a generation of new towns and unlocking economic growth across Britain.
The introduction of the 'Freedom to Buy' scheme comes at a time when many young adults are struggling to move out of their parents’ homes due to high property prices and insufficient affordable housing. By making the mortgage guarantee scheme permanent and introducing other supportive measures, Labour aims to make homeownership more accessible and to alleviate some of the pressures facing the housing market today.
Chancellor Commits to Freezing Stamp Duty, Capital Gains Tax, and Council Tax Bands
The Chancellor commits to freezing stamp duty, capital gains tax, and council bands for the next five years. This commitment is part of a broader strategy aimed at providing stability and predictability in the property market, particularly as the country prepares for the upcoming general election.
Stamp Duty Freeze
Currently, homebuyers in the UK are required to pay stamp duty on properties costing more than £250,000. This threshold is set to drop to £125,000 in March next year, effectively doubling the tax bill on an average-priced home in England from £2,386 to £4,886.
For first-time buyers, the stamp duty exemption threshold will decrease from £425,000 to £300,000.
This change has been a point of concern, as it could potentially dampen the market activity, especially among first-time buyers who are crucial to maintaining market momentum.
Capital Gains Tax Adjustments
In addition to freezing stamp duty rates, the Chancellor has also committed to maintaining the current rates of capital gains tax. In the Spring Budget, Hunt reduced the capital gains tax rate to 24% from 28% for higher or additional rate taxpayers selling residential property, effective from April 6th. This measure aims to ease the tax burden on property investors and encourage the turnover of investment properties, thereby stimulating the market.
Council Tax Bands Stability
Council tax bands in England, which are based on property values as of April 1, 1991, will not be revalued or adjusted during this period.
The current bands range from A (properties valued under £40,000) to H (properties valued over £320,000).
This decision is intended to provide certainty for homeowners and prevent sudden increases in council tax liabilities, which could otherwise affect household budgets and consumer spending.
Conclusion
We've covered key developments, from the withdrawal of high LTV mortgages affecting first-time buyers to anticipated summer rate cuts expected to stimulate buyer activity.
We've also highlighted major deals like Vistry Group's £580 million partnership, legal challenges surrounding the Law Society's 'Material Information' form, Labour's new 'Freedom to Buy' housing policy, and the Chancellor's commitment to freezing key property taxes.
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