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Archive for the ‘Conveyancing’ Category

Innovative thinking required to improve Home Ownership Levels

Wednesday, August 3rd, 2016

The news yesterday that home ownership has fallen to its lowest level for 30 years came as no surprise to me, having worked in the industry for nigh on 40 years and with two children, one just on the property ladder and one still saving hard.

Calling for more homes to be built is not the entire answer to the problem.  There is no point in building more and more new-homes when our children can’t afford the massive up-front deposit nor the monthly mortgage repayments.  It’s a bit like telling Rolls Royce to knock out more cars, whilst I’d quite like a Rolls or a Bentley – if I can’t afford one then it doesn’t matter how many there are on the market.

Successive governments have allowed property in the UK to be used as a lucrative investment for overseas buyers and buy to let Landlords. This has forced up prices and kept them rising at a much faster rate than salaries. The recent increase in Stamp Duty and the removal of tax relief on mortgages for buy to let landlords may slow this trend but with interest rates low and house prices and rents booming it is unlikely to make much of a difference.

The problem is that lenders have allowed mortgage products to stagnate. They haven’t kept abreast of the times, preferring to play it safe and compete with each other on interest rates alone. Currently first time buyers have to find a 10% deposit and with the average UK house price at £211,230.00 that means saving a huge deposit of £21,000 which with legal fees and stamp duty, mortgage arrangement and removal costs realistically means that a first time buyer needs to save around £25,000 to get on the property ladder.

Even if that hurdle can be overcome by diligent saving and help from the bank of Mum and Dad, first time buyers still need to be able to qualify for a mortgage and afford the monthly mortgage repayments on a £190,000 loan.

Typically, lenders will lend 3 x joint salary over a 25 – 30 year period. This means that a first time buyer needs to be earning in excess of £63,000 individually or jointly to qualify. That is far in excess of the average UK salary of £26,000, which means having to find an even bigger deposit to make up the shortfall.

Mortgage lending products are woefully out of date and the government needs to work with lenders and insurance companies to provide new products so that first time buyers can afford to buy in the first place and keep up their mortgage repayments in the second place.

We are all now expected to work until we are in our late 60’s so why can’t mortgage loans be extended over a longer period of say 40 or even 50 years? Doing this would halve the current monthly mortgage repayments.

Lenders should be encouraged to offer 100% mortgages again, these could be backed by insurance guarantee premiums and mortgage protection products that are designed to help buyers if they lose their income due to illness or redundancy. The insurance products would have to be vetted to ensure they do actually pay out when needed and were sold responsibly.

With no up-front deposit to find and with much more affordable monthly payments our children and their children would have a chance of home-ownership and a stake in their future and the future of the UK.


What will happen to the property market post BREXIT?

Friday, July 1st, 2016

It’s the most popular question of the week! Ever since that vote everyone wants to know, will prices go up? Will they do down? Same thing with interest rates will they go up, stay the same or go down?

The honest answer is that I don’t know. Without the aid of a Dr. Who style Tardis, or a crystal ball, frankly no one can predict exactly what is going to happen with property prices and interest rates in the next couple of years as we ease away from Europe.

I can make an educated guess, along with the thousands of other advisers, economists, bankers and media writers. My guess is that in the long term property prices will rise, they always have and I guess they always will.  There are more people in the UK than houses and people need somewhere to live. British people are aspirational and want to own their own home.

As to interest rates they may rise at some point but I believe that bankers and politicians have learned the lessons of the past and my prediction that any such rise would be gradual and not drastic.

What I can talk about is conveyancing and how to find a really good conveyancing solicitor at a really, really good price. With 40 years in the property industry under my belt, 25 of those spent working as a Property lawyer, I can claim expert knowledge in this subject.  To hear more watch us on Property.tv, SKY channel 238. An interview with Sharon Buthlay, director of CMS Ltd airs at 7.30 a.m., 11 a.m., 6 p.m. and 9 p.m.

Sharon Buthlay is the Director of Conveyancing Marketing Services Limited


Stamp Duty Land Tax Update

Wednesday, June 1st, 2016

Stamp Duty Land Tax – the new SDLT legislation is confusing buyers

Stamp Duty is a tax on property purchase, it has been around since the 1600s but the system as we know it has been around since the 1950s.  Stamp duty was replaced by Stamp Duty Land Tax in December 2003.

What was a fairly simple piece of legislation i.e. the tax was charged on purchases above a certain price level, currently £125,000 at the % rate prescribed by law. So no complex calculations and one rate for all. Easy for solicitors to calculate and for property buyers to understand.

From 1st April 2016 the new Stamp Duty Land Tax legislation created a different SDLT rate for buyers of buy to let properties or second homes. The new higher rate is 3% above the standard rates of SDLT on residential property and to make it even more complex the additional 3% applies to the portion of the purchase price that falls within that rate band. To confuse matters further the second property SDLT rate starts at £40,000 purchase price, whereas the residential SDLT rate starts at £125,000. Confused? You are not alone.

There are exemptions from the new second home SDLT rate which is adding to the general confusion of just who is actually affected by this rate.

SDLT Second Property Exemptions:-

  • Leasehold property where the original lease was for 7 years or less. Properties where long leases were granted but have less than 7 years left to run are not exempt
  • Amenity or garden land where there is no relevant dwelling on it (i.e. house/flat). Buying a building plot with a contract for property to be built (i.e. off plan purchases) would not be exempt
  • Non-residential property or mixed use property. So a property that is used as a commercial business or a mixed use property that is part commercial/part residential (think shop with flat above) are exempt
  • Property purchases under £40,005.00
  • Caravans, houseboats and mobile homes that are not fixed to the land
  • Transactions that would usually attract the higher 15% rate for purchases of higher threshold interests in dwellings by companies.
  • Charities will still be able to claim relief from SDLT on property bought for charitable purposes provided the property meets the conditions for relief.

SDLT Second Property non-exempt

  • Buyers of second or subsequent property that costs more than £40,005.00. If you are replacing your main residence and own another property you must pay the higher tax. There is an interim period where if you sell the second property (so that you only retain one property) you can claim back the overpaid tax from HMRC. The period is 36 months.
  • If you own a holiday property in the UK or abroad and buy another property in the UK you would be liable for the higher rate.
  • There are no reliefs or exemptions for property developers who buy, re-furbish and then sell the property. If you own a property and buy another the higher rate will apply.
  • There are no reliefs or exemptions for companies that buy residential properties.
  • Married couples or civil or co-habiting partners are treated as one person for the legislation. Therefore if one of the couple owns a property and the other wants to buy a property in their own name they would have to pay the higher rate tax.

There are other and more complex issues that arise as a result of divorce/separation, trusts and companies which are too lengthy to go into here.  Your solicitor will be able to interpret the new legislation and advise you.

How to pay the new SDLT

The process is the same as before i.e. there will be an SDLT form which your solicitor will send you to complete, sign and return. The only difference is that you will need to choose a new code on the SDLT return – code 4 in box 1. Your solicitor will guide you in completing the form and paying the accurate amount of SDLT

How to claim a refund of overpaid SDLT

If you sell your previous main residence within the 36 month period and wish to claim an overpayment of tax there is a form to complete.  You will find this on gov.uk. The form must be completed within 3 months of selling the property. This can be completed by you or your solicitor.

The HMRC claim to aim to process refunds within 15 working days provided they have the correct information.








Stamp Duty Land Tax – 2016 Upate

Wednesday, January 27th, 2016

In November 2015 the Government announced that as from 1st April 2016 higher rates of SDLT will be charged on purchases of additional residential properties that cost £40,000 or more.

It was announced that a consultation would take place to decide the nitty gritty of the policy detail including whether there would be an exemption for corporates and funds owning more than 15 residential properties.

With only 9 weeks left for anxious buyers to complete their purchases before the new Stamp Duty regulations come into force we still await the finer policy detail.

At CMS we speak to hundreds of property buyers every month and wonder whether the Government is aware of how many ordinary people this onerous 3% hike in stamp duty will hit.  Here are some of the recent scenarios we have come across that would mean ordinary people would be hit with an additional 3% property tax charge whilst large, wealthy corporations and business would be exempt:

  • Adult children purchasing a property for their parents to live in. Mum and dad are in rented social housing and need to move to be near family. No council exchange is possible so the children, who already own their own homes, take out a mortgage to buy a property for their parents to live nearby.
  • Mum and Dad buy a flat in a University town for a child about to start University. Child is not old enough, nor earning enough to warrant a mortgage.
  • Family move across country because of a job change.  They need to move quickly so decide to rent their existing home out and buy another near the new job.
  • A property owner is made redundant and decides to use their redundancy pay out to buy a couple of buy to let properties to run as part of a small business.
  • A couple, with their own home, cash in their pensions and want to use the proceeds to buy and let out a property to supplement their income.
  • A small builder has spent his life buying property, renovating it and selling it on for a profit. He already owns his own house.
  • A couple who work and live in a city centre decide to buy a small flat near the coast as a bolt hole from city life

These are all true examples of recent transactions we have been involved in. None of the people involved are greedy landlords buying up property from under the noses of hapless first time buyers.  They are ordinary families trying to do the best for their family, people who are trying to preserve their savings and income into later life, small builders who stop property from crumbling into disrepair and provide homes for the next generation.

At CMS we hope that the Government takes these examples into consideration and that appropriate exemptions are made for ordinary people as well as the big corporates.

Meanwhile, if you are buying a second property and need it to be pushed through for a fast completion at a competitive conveyancing fee please give us a call on 01638 576478

What Happened To The Housing Ladder?

Monday, May 11th, 2015

It is with relief that we welcome the stability of a majority government, especially one that believes in the concept of home ownership.

The raft of proposals that has been promised to help first time buyers onto the housing ladder is to be applauded.  The Help to Buy 2 Scheme, The Help to Buy ISA, discounts on new homes of up to 20%, more Social Housing being released under the Right to Buy Scheme, the building of 200,000 new homes on Brownfield sites.

However, solving the problems of first time buyers is not the total solution to solving the problem of the property market. Helping First Time Buyers provides a popular ‘sound-bite’ but no-one seems to be looking at the bigger picture as to why there continues to be a lack of new property coming onto the market.

Could it be that many couples who have saved hard and sacrificed much to get onto that first rung are simply stuck there? Typically, young couples move up the housing ladder as their families grow and their careers progress.  But with wages growing by just 1 or 2% per year – if at all – and property prices growing currently at 8.4%* house prices rises easily outstrip any increase in earnings.  Add to this the cost of moving, with estate agents fees at 1-3%, stamp duty, legal fees and removals the cost of moving that one step up the ladder is prohibitively expensive.

Is it feasible for the average first time home owner to pay the bills, start a family and manage to save towards the cost of a larger home? Probably not!

Strict lending criteria means that most lenders use a multiple of income criteria at 3 x salary and since the Mortgage Market Review (MMR) in 2012 lenders now take into account the borrowers monthly expenses to ensure the borrowing is affordable.

Example: Assuming the average couple own a property worth £185,000 and they have 25% equity in the property,  this gives them £46,250 to put down on their next house at say £215,000, leaving them with a deficit of £168,750 + moving expenses of just over £8,000 (agents fees, stamp duty, legal expenses, survey and moving expenses) they would need a mortgage of £176,750. Using the lender’s calculation of dividing by 3 this means our average couple would need a joint income of approximately £58,900 to move just one step up the ladder.

The simple truth is that income does not grow in proportion to property prices. Property prices will not, in the long term, come down and income cannot rise to the levels that lenders currently require to comfortably repay the amount of mortgage needed.

The answer must be a concerted effort by Government and the Council for Mortgage Lenders (CLC) to make mortgage borrowing more affordable for everyone on the property ladder and not just first time buyers.

There are three potential solutions that Government and the CLC could consider:-

  1. The re-introduction of Mortgage Interest Relief at Source (MIRAS). This tax incentive provides borrowers with tax relief on the interest payments of their mortgage. As the interest is deducted at source it means that the monthly mortgage payment is reduced – meaning that the lender can lend more.
  2. Longer term mortgages. Traditionally the term of a mortgage has been 25 years however, with people living and working longer there is no reason why this could not be extended to a term of 40 – 50 years – this would halve the monthly repayments and mean that the lender could lend much more.
  1. Longer fixed rates. As the lender is duty bound to ensure that the mortgage is affordable they currently have to calculate the loan on the basis of future interest rate rises. With a long term fixed interest rate this ceases to be a problem. We are currently seeing longer fixed term interest rates – but why not for the entire length of the mortgage?

Sharon Buthlay

Property Lawyer

Director of Conveyancing Marketing Services Ltd

* House price index January 2015

First time buyers in despair as house prices continue to spiral ever further out of reach

Thursday, May 7th, 2015

With house prices continuing to rise and salaries stuck it is no wonder that ‘generation rent’ are despairing at ever being able to save enough deposit to buy their own home.

The divide in house price affordability and pay has never been greater and as fast as they try to save, our younger generation can see their dream of home ownership slipping ever further away.

It takes the average first time buyer 5 years to save the 15-25% deposit lenders require for home ownership.  By which time property prices have increased again and again – meaning that hapless home owner wannabees are caught in a vicious circle.

None of the current Government backed schemes answers the problem of home ownership affordability in the long-term.  Prices won’t come down and salaries won’t rise to the level they need to.

The simple reality is that the amount of mortgage available to buyers needs to be higher but the monthly repayments still need to be affordable.  This could be achieved in a number of ways:

Increase the term of mortgages – traditionally 25 years – by increasing the term to 40 or even 50 years monthly repayments could be halved. Build in an option for early repayment as salaries rise and equity in the property is achieved.

  • Offer longer fixed rate mortgages.  The amount of lending is currently curbed because lenders have a duty to ensure that borrowers can afford to repay their loans even if rates rise.  If rates were fixed for the term of the mortgage this would provide more security for the lender and the borrower and lead to higher lending.
  • Bring back Mortgage Interest Relief at Source (MIRAS). One of the more popular tax breaks, originally introduced in 1969 by Roy Jenkins to encourage home ownership, MIRAS allowed borrowers tax relief on the interest on their mortgages. It was abolished in the year 2000 by Gordon Brown as a ‘middle-class’ perk. The tax relief is given at source (i.e. it is deducted from the monthly mortgage payment) making mortgage payments more affordable. This in turn means that lenders could be more generous in the amount they are prepared to lend, thus decreasing the amount of initial deposit our first time buyers would need to find.

The mortgage industry need to work with the Government to provide better, more affordable mortgage lending to produce a long term solution to this knotty problem.