The last few weeks have brought further reminders of the UK’s unstoppable appetite to invest in property. The Council of Mortgage Lenders has just calculated that 200,000 interest-only borrowers have no repayment vehicle. You try living in a desirable area with the associated costs of buying a new place. The FSA says it wants to establish the repayment intentions of consumers and identify the characteristics of those people. It can include me in its analysis of those “naughty” people but at least I know what the risks are.
Having advised hundreds of people on red mortgage endowment letters – when I did not advise them to set up their plans in the first place,
I may add – I know that holistic financial planning will repay the loan more effective in future years than religiously piling money into an underperforming with-profit fund or the like, particularly for those clients suffering from income strain when buying a home but with the prospect of future income rises or inheritances.
UK mortgage debt hit the 1tn figure for the first time this month. Meanwhile, the Halifax has changed its retention strategy, with up to 49bn being protected by the wider HBOS group. Get out the flags, I say for the UK’s biggest lender, which will for the first time make the same mortgages available to existing as well as new customers. How annoying has this been for clients historically when they could not secure the headlines rates shown in the glossy adverts?
The Government has also been active in proposing that minor household developments such as applications for home extensions will be assessed on impact rather than size. Many will welcome this simplifying of the process for homeowners wishing to upgrade their homes.
Friends of mine recently applied for permission to change the front door of their flat – a cheap MDF-style door with two bits of not very security-conscious glass. They were turned down due to the need to keep all front doors the same in their block of expensive flats. But if the “head of style” had popped round to have a look, they would have demanded its replacement for a more fit for purpose and attractive door.
Anyway, enough about everyday strains and stresses that could be avoided with a little common sense. I have had the lovely task of reading parts of the Finance Act. Why would I do this instead of reading Heat magazine? The Finance (No 2) Act 2006 received Royal Assent on July 20. Part 4 of this act introduces a UK real estate investment trust. Specific regulations and guidance governing the details of the UK Reit regime will be finalised and publish during the autumn, in time for the Reit legislation to come into force on January 1, 2007.
This, in my mind, is good news for advisers. IPD performance data shows that, as an asset class, commercial property has outperformed the other asset classes over 10 years. Let us see if the FSA thinks a Reit is a sensible investment alongside an interest-only mortgage. If they had existed, on average, over the last 10 years, they would have been the perfect mortgage repayment vehicle.
Kim North (firstname.lastname@example.org) is director of Technology and Technical