Two major reforms make the UK property news headlines as changes to the law on leaseholds come into force and the Bank of England relaxes the rules on stress testing the affordability of mortgages.
This is against the background of continuing vitality in the UK property market and tips on buying homes near schools rated as “Outstanding” and how to attract higher-rent tenants.
Leasehold changes take effect
On the 30th of June, the long-awaited Leasehold Reform (Ground Rent) Act 2022 came into force. Announcing the changes, Propertymark reminded readers that from this date only a token, peppercorn ground rent can be legally charged by the freeholders of new leasehold residences in England and Wales.
The effect of the legislation is to reduce the ground rent on any new residential leases to zero financial value.
Mortgage affordability rules relaxed
Along with most of the media, the online listings website Zoopla on the 21st of June reported the Bank of England’s decision to significantly ease the lending rules on residential mortgages with effect from the 1st of August.
Currently, strict rules imposed by the Bank of England mean that mortgage borrowers have to pass a stress test under which they would continue to find their repayments affordable if the rate of borrowing increased by 3% of their lender’s standard variable rate.
That exacting standard has often caught out first-time buyers who are already at the limits of what they could find affordable – and a 3% increase would tip them over the edge. Relaxation of these rules, therefore, is likely to be especially welcome news to first-time buyers.
No sign of a slowdown for UK property market
If inflation and the steadily mounting cost of living are pressuring the spending of most individuals, those market forces have yet to have a serious impact on the UK property market.
In an article on the 23rd of June, the Buy Association reported that the latest official figures showed little sign of any slowing down of the UK property market. Indeed, the property sales figures for May were a further 1.6% higher than in April.
Analysts point to the historically low rates of interest that mortgage borrowers continue to enjoy – with a current base rate of 1.25%, the cost of borrowing is significantly cheaper than the average 7% which prevailed throughout the period from 1970 to 2022.
This continues to fuel the growth in house prices – albeit at a somewhat slower rate month by month and lower than the runaway surge in prices seen in the previous six months.
The cheapest places to buy a home close to an Outstanding school
In research published on the 21st of June, online listings website Zoopla revealed which parts of the country offered the most affordable housing if you want to live near a school rated as “Outstanding” by the education regulator Ofsted.
The research demonstrated how Ofsted’s ratings of nearby schools can affect the value of your home.
Watford, Wakefield, and Wolverhampton, for example, are places where you might find the cheapest homes close to a school rated as Outstanding; whereas you’d need to pay a premium to buy a home near any such school in Durham, Blackpool, or Sunderland.
How to attract higher rents
If you’ve ever wondered what it takes to attract higher rents to your buy to let accommodation, Property Wire offered some suggestions on the 21st of June.
Almost a half (42%) of discerning renters said that they were looking for accommodation that had been professionally decorated – and around a third of them insisted they would be prepared to pay more for such a rental. A similar proportion of prospective tenants also said they were looking for higher-quality furniture in any home they rented.
With the experience of recent Covid lockdowns still fresh in many minds, almost two in three would-be tenants are looking for space for working from home (WFH) – with, at the very least, a desk from which to do their work.
