In a Nutshell - April 2016

In a Nutshell - April 2016

LV wants no Stamp Duty for Pensioners

Financial services provider LV has urged the government to remove stamp duty charges for pensioners.
LV say that stamp duty will scare the older generation from downsizing in later life while they try to fund their retirement, but moving now comes with a typical stamp duty bill of around £4,600.

The thinking behind the claim is that pensioners want to free up some cash by investing in property, which means that their larger, vacated properties would come onto the market for younger buyers and families - freeing up stamp duty revenue on those properties that would otherwise have not been made available.

An LV survey found that 34pc of those reaching retirement age are planning on using their home to provide them with extra cash during retirement, while only 22pc of current retirees are currently doing the same. LV found that 64pc of pensioners were residing in a house with at least three bedrooms, while 77pc live on their own or in a couple, which means that a lot of spare accommodation space is going to waste.

LV argues that cutting stamp duty for those who want to downsize will help younger people onto the housing ladder. 

UK Inflation Up

UK inflation rose to 0.5pc in March, according to the Office for National Statistics. It is the highest rate since December 2014, but still well below the Bank of England's target of 2pc. The Bank of England expects inflation to stay below 1pc for the rest of 2016. Under the Retail Prices Index, inflation was 1.6pc in March up from 1.3pc in February. Ben Brettell, senior economist at Hargreaves Lansdown, said that this will not affect interest rates. "Inflation rose more than expected but the overall trend remains weak, and places little pressure on the MPC."

Buy-to-Let Mortgage Rates Down

Buy-to-let mortgage rates are at a record low.

Moneyfacts says that rates have fallen dramatically since 2011. The average two-year fixed rate buy-to-let mortgage fell from 5.21pc in April 2011 to 3.32pc this month, and a five-year fixed rate fell from 6.24pc to 4pc today.

The drop to record lows have been due to April 2015's pension reforms and been pushed down in the last two weeks as a result of the Stamp Duty levy. Ian Wilson, CEO at Martin & Co, said: "People are looking for income but they can't find it. Buy-to-let property remains a two-pronged source of income, with rental income and capital gains."

Charlotte Nelson works at Moneyfacts. She said, "Savings rates are currently so poor that many are looking elsewhere to fund their retirement, so lenders have tried to capitalise on this new pool of cash by offering some of the best rates the buy-to-let sector has ever seen."

New Study - Higher Supply won't mean Lower Prices

A new study has suggested that it isn't house prices that will be most impacted by an increasing supply, but mortgage payments.

Dr Alla Koblyakova of the real estate economics and investment research group at Nottingham Trent University said that mortgage repayments will worsen "the ratio between an individual's mortgage payments and their income" by 9pc for every 1pc increase in housing supply.

This is because mortgage lenders will relax their lending criteria once supply increases - and they will give away mortgages too large for the income levels of the average borrower. Dr Koblyakova studied 1,700 mortgage holders from 2010-2014 and found that homes in the UK were "seriously unaffordable" last year. The house price to income ratio was 4.6 nationally, where 3 is the maximum ratio for 'affordable'.

The ratio in Greater London was 8.5. Dr Koblyakova said that increasing the length of mortgages, to reduce monthly repayment amounts, would make owning a property much more affordable for lower earners. He said: "Even if government policy helps to deliver the 250,000 or so homes needed in England (and 300,000 in the UK as a whole) over the next decade, 90 per cent or more of the housing stock that will exist in 2025 has already been built, and is being lived in by somebody. Government measures that nudge towards better use of the current stock could contribute materially to the supply-demand picture." Source: 
This is Money