Month: September 2021

The number of buy-to-let (BTL) products on the market is higher today than the number available in March 2020, Moneyfacts says. There are now 2,968 BTL products available, compared to 2,897 pre-pandemic. This is the greatest number recorded since October 2007, when there were 3,305 options for landlords to choose from, Moneyfacts adds.

 

The data also shows, however, that lenders are less eager to extend funds to landlords with smaller equity: in March 2020 there were 32 products at 85% loan to value, while there are just 19 today. And at 85% loan to value, the average two-year fixed rate has increased from 4.70% to 5.61% over the same time frame and the average five-year fixed rate has gone up from 5.34% to 5.83%.

 

At all loan to value’s, price increases are less severe – here, the average two-year fixed rate has risen from 2.77% to 2.94% from Mach 2020 to today, and the average five-year fixed rate across all loan to value’s has moved from 3.24% to 3.25%.

 

Moneyfacts finance expert Eleanor Williams adds: “As it stands, compared to a pre-pandemic September 2019, both the average two- and five-year fixed buy to let rates are lower by 0.03% and 0.19% respectively, indicating rate pricing competition for those looking for new finance for an investment property.”

 

By Gary Adams (Moneyfacts)

27^th September 2021

Income protection insurance refers to a group of insurance products that help you out financially, if you lose your income due to injury or illness. 

Income protection insurance refers to a group of insurance products that help you out financially, if you lose your income due to injury or illness. 

The COVID-19 pandemic has greatly increased awareness of the importance of having a safety net to fall back on in times of financial hardship. Despite this, one of the best ways of strengthening your financial resilience – income protection insurance – remains poorly understood. Research¹ suggests that nearly half of the UK’s working population (46%) have heard of income protection insurance, but don’t know what it covers or how it works.

How does it work?

In a nutshell, income protection is a type of insurance policy that ensures you receive a regular income if you’re unable to work due to illness or injury. It will usually pay out a percentage of your normal monthly income to help you pay your bills, rent/mortgage or essential living costs, taking the pressure off until you can return to work. Some types of income protection are designed to cover specific types of payments, for example your mortgage or credit card payments.

There are two main types of income protection: long-term and short-term. The former will supply you with a regular income until you return to work, retire or die, whichever occurs sooner. The latter will pay out for a specified time period, usually six months to a year.

Most income protection policies will have what is called a ‘deferral’ period, lasting some weeks or months before payments begin. The longer the deferral period, the lower your premiums are likely to be.

What does it cover?

 In contrast to a critical illness policy, which only covers a strict list of specified illnesses, an income protection insurance policy will cover most illnesses or injuries that leave you unable to work (this will depend on the policy, however).

Another advantage is that it can be claimed as many times as you need it for the duration of the policy term. Some policies will also cover redundancy or unemployment on a short-term basis, although it is currently more difficult to find suitable cover due to the coronavirus pandemic.

Do I need it?

In order to work out whether income protection may be suitable for your circumstances, it can be useful to ask yourself the following questions:

– Could I survive for more than a couple of months without my income?
– Could I get by on my employer’s sick pay/Statutory Sick Pay?
– Could I rely on support from my partner or family?

If the answer to any of these questions is ‘no’, then taking out income protection cover is likely to be a wise choice.

But which type do I need?

Still confused? Not to worry, we are on hand to help you select the income protection policy that works for you.

As with all insurance policies, conditions and exclusions will apply. ¹The Exeter, 2021

 

 

The UK rental market is roaring ahead, with properties letting almost a week faster than in 2020, Zoopla research shows.

 Key takeaways

• UK rents, excluding London, are increasing at their highest rate for over a decade.
• Monthly rents outside London are averaging £790, up from £752 a year ago. It means renters are paying an average of £456 more a year.
• Competition for rental homes is fierce at a national level, with properties letting almost a week faster than last year.

Rents outside London are rising at their fastest rate since 2008 as people return to city centres. The typical price of renting a home in the UK, excluding the capital, now stands at £790 a month, costing tenants an additional £456 a year, according to Zoopla’s latest Rental Market Report.

The steep increase has been driven by renters returning to cities. But the surge in tenant demand has not been met by an increase in the number of homes to rent, forcing rents higher.

Gráinne Gilmore, head of research at Zoopla, said: “There has been a sharp rise in demand for rental properties in recent months, especially in central city markets, signalling the return of city life as offices and other leisure and cultural venues continue to open up more fully.”

 What’s happening to rents?

Rents across the UK, excluding London, have risen by 5% in the last year, the highest level since our index began in 2008 and more than double the 2.2% rise recorded in January.

The south-west saw the biggest hike, with the cost of being a tenant jumping by 7.6% year-on-year. It was followed closely by the East Midlands at 6.8% and the north-east at 6.5%.

Despite the rise, these places remain some of the most affordable in which to be a tenant. A single earner has to spend an average of 21% of their income on rent, compared with a UK average of 32%.

At the other end of the scale, rents in London have dropped by 3.8% year-on-year.

Even so, the rate at which rents in the capital are falling is showing signs of bottoming out, as tenants return to the city.

Across the whole of the UK, including the capital, the average rent stands at £943 a month, 2.1% more than a year earlier. But with average earnings rising faster than rents, rental affordability is holding steady for tenants who are employed.

What’s demand for rental homes like?

Tenant demand is soaring. It was nearly 80% higher in August than average levels between 2017 and 2019. It’s being driven by a resurgence in city centre life, with people being drawn back as offices, bars, restaurants and other leisure facilities reopen.

There are also seasonal factors at play, such as university students looking for accommodation ahead of the new academic year, graduates starting jobs and families moving before the school term starts.

Is there a good supply of homes available to rent?

While demand so far this year has increased by 19%, the level of rental homes available has fallen by 13%. This mismatch is not only forcing rents up, it is also leading to the rental market moving at its fastest pace since 2016.

The average time between marketing a property for rent and agreeing a tenancy is now just 15 days, compared with 20 in July last year.

What could this mean for you?

Landlords

If you are a landlord with a property to rent, the current surge in tenant demand is good news. It not only means you are likely to be able to find a tenant quickly, but you are also likely to be able to achieve the rent you want.

It is worth noting the swing back to city life, compared with the earlier stages of the pandemic when people were looking for homes in rural locations and ones with outdoor space.

Tenants

With demand rising and the level of homes to rent falling, you can expect to face significant competition from other tenants to secure a home. The imbalance is also pushing rents higher, so you may have to pay more than you did a year ago.

If you are finding it hard to find somewhere, consider looking outside of town and city centres.

 What’s the outlook?

The high number of people looking for a home to rent during August will ease off in line with seasonal trends. But demand is expected to remain high in the coming months as the return to city life continues.

Gilmore explained: “As ever, much will be dependent on the extent to which the current rules around Covid-19 continue as they are. But given no deviation from the current landscape, the demand for rental property, coupled with lower levels of supply, will continue to put upward pressure on rents.”

By Nicky Burridge for Zoopla

08 September 2021

The headline rate of inflation in the UK has recorded its biggest ever jump, leaping from 2% in July to a nine-year high of 3.2% in August. Earlier this summer the Bank of England said it expected annual price rises to hit 4% before the year was out, before dropping off slightly.

What is inflation?

It is the measure of how much prices are rising and falling and is tracked by several different indices. The main one used by economists is the consumer prices index (CPI), which records the cost of a basket of 700 items including food, transport and entertainment. The Bank is tasked with keeping inflation at 2% but it has been above that already this year and is now much higher.

Why is August’s figure so high?

The rate is a year-on-year comparison, so a monthly jump in inflation does not mean prices have risen by that much since July. The Office for National Statistics, which publishes the figures, said higher prices in transport, restaurants, hotels and for food and drink had driven the rate up in August.

It pointed out that in August 2020 the eat out to help out scheme was running – as a result, restaurant prices were artificially low, so will be much higher now in comparison, even if not in historical terms. However, staff and supply problems in the hospitality industry have also pushed up prices, while the cost of petrol at the pumps is higher than at any time since 2013.

What does this mean for me?

Moderate inflation is not a bad thing – people will be more likely to spend their cash if they think it will buy less in future. But high inflation has consequences. Most obviously, if you are on fixed pay then your money will not go as far each month.

What if you are saving?

Rising inflation at a time when interest rates are at record lows is bad news – your money will not have the same buying power when you withdraw it as it did when you put it away. Put very simply, if you put away £100 last year, it would need to be worth £103.20 to have the same value in real terms. The best one-year account currently pays 1.5%, so your savings would be worth £101.50.

Moving into higher-risk investments is a way to try to beat inflation but there is always the chance you could lose money, too. “For people to have any chance of keeping their returns real, there are few options other than to move up the risk curve,” says Simon Lister, an independent financial adviser at the financial comparison website Investing Reviews. “For the risk-averse, it’s a rout at present.”

If high levels of inflation stay for longer than anticipated, the Bank may raise interest rates, which would be good news for those with cash on deposit.

What if you are borrowing?

The opposite is true for borrowing. If you have a loan on a variable rate of interest, then a rise in the Bank base rate would push up your repayments. Fortunately, many people have opted for fixed-rate mortgages, and costs will remain the same even if the Bank does act.

And inflation reduces the size of your debt in real terms. If it leads to a pay rise, then the sum you need to repay each month will be less of your income than when you first took on the loan.

What about student loans?

The rate of interest on student loans is linked to inflation, so a high rate sounds like bad news for many of those with university debts. The rate that matters is the RPI (retail prices index), which hit 4.8% in August, and students who have started university from 2012 are supposed to pay an interest rate of RPI plus 3.

The good news for them is that the rate is calculated based on March’s figure, not September’s when inflation is still expected to be rising. Also the rate is monitored against commercial personal loan rates, and altered accordingly. It has been capped below RPI plus 3, and the government may step in if RPI is still running high.

What about pay?

Most workplaces do not have to raise pay in line with inflation but it is often used in negotiations. Employers, who in some sectors are already battling with staff shortages, may have to increase wages to attract and retain workers who need to meet higher living costs.

And pensions and other benefits?

A number of benefits are linked to inflation, including the state pension. The government suspended the pensions “triple lock” last week, but committed to raising pension payments in line with CPI if September’s figure is above 2.5%.

September’s figure determines how much elements of universal credit and other benefits will go up next April, so they should keep up with rising costs. However, before then the temporary £20-a-week universal credit uplift will have ended.

Some private pensions offer payments linked to inflation, so payouts should increase.

Hilary Osborne of the Guardian

Wed 15 Sep 2021