October, 2009
Liars’ loans may be banned and buy to let regulation
Liar’s loans, or more accurately “self-certificated mortgages” were enormously popular before the credit crunch. The idea was that self employed people could not easily provide evidence of their income and their ability to meet the mortgage payments so the lenders relaxed their normal requirements and allowed them to self -certify.
The idea mushroomed and in 2007 as many as one thirds of all new loans were taken out on this basis. Inevitably some people were unduly optimistic about their earning potential and others simply lied. Defaults on this type of lending have been higher than average and they are now very difficult to come by. The FSA is talking about requiring lenders to obtain proper evidence of applicants’ income and this would be the final nail in the coffin.
The FSA is also considering regulating buy to let landlords. This could mean more paperwork for landlords and is hardly going to encourage new investors to enter the buy to let property sector.
What do you think – are these mortgage products suitable or were the banks just too keen to lend?
Are you a buy to let investor looking for buy to let insurance? Contact Click4quote on 08450 89 90 91
Bundled insurance often bad value
Buying insurance as part of another sale often means that you pay more, or even buy a policy that will not cover your needs. A classic example of this is Payment Protection Insurance sold alongside loans and credit cards. The idea is that if you lose your job or fall ill the insurance will cover the repayments but there are often important exclusions meaning that claims do not get paid. The Financial Services Authority is so worried that thousands of these policies may have been miss-sold that it is telling lenders to re-open 185,000 complaint files to make sure the original decisions were fair.
Another area where people are sold insurance as part of another sale is travel insurance sold by airlines and holiday companies. It may be easy to tick the box and buy the standard policy you are offered but this could be very expensive and may not cover your particular circumstances. It pays to check premiums elsewhere and it is always essential to read the documents to make sure you and your possessions will be covered for the trip you are planning. Some people are given travel insurance as a benefit when they sign up to credit cards or bank accounts. Always find out whether this will cover your partner and family as well – if so will they be covered if they travel without you? Are there age limits, for example only covering children under a certain age? Has anyone had any experience of this?
Have you been purchased insurance added on to another sale? Let us know what you think.
If you need insurance for your holiday contact click4quote.com. We sell competitive ski travel insurance for your upcoming ski trips this winter.
Landlord News Update
House price outlook positive amongst landlords.
There is a trend showing in the Young Group’s Young Index, that landlords are starting to have a positive outlook on property prices over the next 12 months, however there is a significant difference between the outlook for London prices and those outside the capital.
Over 75% of landlords believe prices will remain constant or even rise over the next year in London, increasing from just 35% in the last quarter in 2008, however the predicted rise is less than 1%. The view on prices outside of London is divided, with only 51% of landlords believing the same to be true, however this has increased from a gloomy 12% around this time last year, but in contrast the increasing possessiveness the prediction on prices is in fact a small fall of less than 2%
Reluctant landlords – stick or twist?
At the beginning of the ‘credit crunch’ when house prices fell dramatically the number of people who could not sell, or not afford to sell, was forcing those vendors to rent the property whilst the market improved, which caused an over supply of rental property.
This summer the market seems to have improved, mainly due to a lack of supply of property for sale, which has tempted some reluctant landlords to offload their property meaning a reduction of rental property available.
For remaining ‘reluctant landlords’ the question is to ‘stick or twist’.
Interest rates are generally forecast to remain low for the next 4 years and with improving rents the prospect of the property paying for itself or even making a profit is real. With this prospect the focus switches to the general housing market during and at the end of the 4 year period.
If landlords selling a property are doing so at a potential loss, the idea of holding on the property and making money is attractive. However, in the long term that profit will have to offset any further loss in value of the property if the market falls once again.
The general view at the moment is that house prices have reached the bottom, but predictions for increases in value are minimal so is a reluctant landlord just delaying the inevitable and leaving themselves open to a further loss if the market falls?
A short term view for reluctant landlords is difficult. Sell now and regret the decision if prices rise. Sell now and regret the decision if prices fall. Not sell and have a rental property you may have to partially fund or start to fund if interest rates do rise. Remember it is not just the mortgage you need to worry about, protecting your property with landlords insurance is a must.
Each option has its own problems attached and the best one will be related to individual circumstances. A longer term view may be best as values in 10 years will probably creep up again due to a continuing shortage of property for sale if Government statistics are to be believed.
The real fact for reluctant landlords is a financial loss on a property is very hard to accept, either through a sale at a lower value or by subsidising the mortgage as the rent does not cover the payments.
Are you a reluctant landlord – what are your views?
Will house prices rise or fall over the next 4 years?
Do you need landlords insurance? If so check out click4quote.com for a great deal on cheap landlord insurance.
Call for regulation of buy to let mortgages
A body representing property investors has called for the buy-to-let mortgage market and property investments ‘clubs’ to be regulated. The British Property Federation believes regulation would stop the “reckless lending” that occurred during the ‘boom’.
Mortgages for buy to let investments generally do not fall under Financial Services Authority (FSA) regulation as they are treated as business loans which allowed many new, inexperienced landlords to enter the buy to let market with ease throughout the ‘boom’.
The British Property Federation is arguing that if buy to let loans were regulated in the same way as normal residential home loans, this would protect all landlords and also the wider housing market. In support of this arguement the Federation is evidencing equity release which is regulated by the FSA, and is questioning why this falls under regulation and not buy to let.
Ian Fletcher, BPF director of policy, said: “Many lenders simply threw money at buy-to-let borrowers during the boom without sufficient checks on who they were lending to or what they were lending for.”
“Consumers have suffered as their buy-to-let dream turned sour and many buy-to-let lenders were at the root of our economic problems as organisations such as Bradford and Bingley found themselves over exposed to bad loans.”
Are you are buy to let investor, what are your views? Remember you should protect your investment with buy to let insurance.
Click4quote offers online buy to let insurance quotes so get a quote now.
Sports injuries cover with personal accident and travel insurance
Sporting activities accounted for 693,000 admissions to accident and emergency departments in 2008. Some sports are more dangerous than others – did you know that 67,000 people were injured playing rugby? Personal Accident Insurance can help to cover some of the costs if you are injured but surprisingly few people have it. If you are injured while involved in a sporting activity abroad you should be covered by your travel insurance but make sure the sport is not excluded. Most insurance policies only cover you for “hazardous activities” if you have agreed this with the insurers before you travel or before the inception of your policy in the case of Personal Accident Insurance.
Accidental injuries whether on the sports field or not can lead to legal claims. If you injure someone you might be sued, even if it was part of a sporting activity where a certain amount of rough and tumble can be expected. Check that your homeowner insurance and travel policy cover your personal liability in the UK and abroad. Liability for injuries caused while in charge of boats and vehicles, and while engaged in a business activity need to be covered.
If you are injured abroad and think it was someone else’s fault your travel insurance policy may have legal expenses cover to help you. Has anyone tried this?