Retirement planning is set to change irrevocably in 2012 as, later in the year, “auto enrolment” is expected to see millions of workers start saving in a company pension scheme for the first time.
From October 1, all workers aged between 22 and the state pension age, and
employed by a company with 50,000 or more staff, will be automatically
en-rolled into their employer’s pension scheme – unless they ask to opt out. This new government policy will be rolled out to smaller employers from 2013.
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Take action to control your own Pension in 2012, invest in a SIPP
Tough new mortgage restrictions to stop borrowers falling in to arrears have been proposed by the UK's Financial Services Authority (FSA) after months of behind-closed-doors negotiation with lenders.
Out go self-certification and interest-only home loans for most mortgage borrowers.
In come strict affordability tests to combat payment difficulties and mortgage fraud for borrowers – with lenders having to prove borrowers could afford their repayments before taking any action to seek arrears or repossession.
The FSA claims the mortgage market review is aimed at preventing a return to risky boom time lending based on the assumption that house prices would continue to rise to repay loans.
The review applies to all residential mortgages and remortgages but excludes buy to let landlords, who will still have access to interest-only deals, providing lenders continue to offer them.
The FSA is seeking feedback on new mortgage rules for entrepreneurs who borrow against their homes as security for business spending.
The FSA proposes three core mortgage lending principles:
Lenders should only agree mortgages or loans with a reasonable expectation that the
customer can repay without relying on uncertain future house price rises. Banks and building societies must verify income for every mortgage applicant.
Lenders should assess the borrowers ability to repay a loan on the basis interest rates might rise
Interest-only mortgages can only be agreed if the borrower can prove a strategy for repaying the loan from other resources and that the plans do not rely on future house price rises.
FSA chairman Lord Turner said: “We believe that these are common sense proposals which serve the interests of both lenders and borrowers. While the excesses of the pre-crisis period have largely disappeared from the current market, it is important to ensure that better practice endures in future when memories of the crisis recede and the dangers of poor practice return.
“The three key proposals are, we believe, the most effective way to tackle the problem of risky lending.
“The proposals reflect the ideas and input of many stakeholders, including consumer groups and lenders. We believe these proposals will hardwire common sense standards into mortgage lending and guard against the risky lending practices of the past – leaving most borrowers unaffected, but better protected.”
Consultation on the proposals is open until March 30, 2012.
Mark Alexander, founder of Property118.com welcomes the initiative and says “the countries which have fared best since the beginning of the credit crunch are not those which could be described as a Nation of Homeowners, Germany is a good example. Landlords and mortgage companies need to be far more diligent in making sure that people can afford to stay in the homes they choose to live in.”
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Savers still face a struggle to earn a real return on their savings, despite the fall in inflation in November, experts warn.
Data released on Tuesday showed that the consumer prices index – used
by the government to measure inflation – recorded an annual rise of 4.8 per cent
in November, down 0.2 percentage points on the previous month. Similarly, the
retail prices index– seen by some as a more accurate gauge, as it includes
housing costs – fell from 5.4 per cent in October to 5.2 per cent.
However, that still means a basic-rate taxpayer needs to find a savings account paying 6 per cent a year to beat inflation, while those paying the higher 40 per cent tax rate need to find an account paying at least 8 per cent.
“Savers continue to lose out to inflation,” said Sylvia Waycot of Moneyfacts, a data provider website. “With returns so low and inflation unsteady, people don’t know which way to turn.”
With CPI inflation remaining well above the Bank of England target of 2 per cent, savers are seeing the value of their cash continue to diminish.
According to Moneyfacts, £10,000 invested five years ago would have the spending
power of just £9,210 today, assuming average interest rates and tax at 20 per cent.
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Take note of what Phil Clark, Head of property investment at Kames Capital, has to say.
‘My view is that 2012 will be every bit as challenging as 2011. However, there are still many good opportunities for property investors to make well-informed decisions. In particular, I believe investors should consider a greater exposure to alternative sectors such as student accommodation or healthcare property. One of the key attractions of these alternative sectors is they generally have a high income yield, an ability to track inflation and have low vacancy rates.’
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Demand for rental properties in Portugal is growing as more Portuguese nationals are forced to rent rather than buy, due to a lack of mortgage liquidity, presenting potential buy-to-let investment opportunities for shrewd property investors.
The latest Portuguese Housing Market Survey from the Royal Institution of Chartered Surveyors and Confidencial Imobiliário (CI) shows that the country’s rental sector is benefiting from ongoing weakness in the sales market.
Ricardo Guimaraes, CI Spokesman, said: ‘Tight credit conditions are pushing both
households and home owners to the rented sector. Households can’t access
mortgage finance to purchase a house and therefore home owners in most cases
can’t sell their house. This is resulting in sharp increases in both the demand for and supply of rented accommodation.”
A further bonus for anyone thinking of buying property in Portugal is the fact that residential property prices in the country are falling due to a lack of activity in the sales market, presenting investors with opportunities to negotiate significant property price reductions.
Josh Miller, RICS senior economist, said: “Although sales volumes in the housing
market continue to fall, volumes in the lettings market are booming at the
moment. This is because households who cannot access mortgage finance are opting for rented accommodation instead.”
He added: “Given the deteriorating macro-economic backdrop and tightening in credit conditions that is already underway, the lettings market is therefore likely to
continue experiencing high volumes of activity in the near term.”
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