The FSA has announced that they want to cap rent increases in sell and rent back schemes to 15% per annum, which sounds quite a lot in my opinion. But they will not be regulating this guideline themselves and will be relying on operators within the industry to conduct affordability test. Instead they will leave it up to the Financial Ombudsman to resolve complaints made by tenants.
My problem with this new guideline is the fact that it is only a guideline, which makes it very difficult for the ombudsman to ascertain what is actually unfair. Although, if strict fixed rent increases were brought in this could strangle the industry. However, I think they should perhaps reduce the per annum rental increase from 15% to a lower level or make in line with local rental increases, so they are roughly the same as local properties.
Back in July of 2009 all operators within the sell and rent back industry had to apply for authorisation from the FSA. The FSA predicted that over 1,000 companies would apply, but in actual fact only 80 took the plunge. What does this say; well it says the industry has managed to get rid of a lot of cowboys, but also it is not as big or robust as they thought, which suggests any new regulations must be considered carefully.
Also the new regulation imposed advertising constraints, which prevents sell and rent back companies from using exploitative language and high pressure sales tactics. These include terms life “fast sale” and “mortgage rescue”. Other sell and rent back regulations include a 14 day cooling off period allowing the homeowner to take time to make a carefully considered decision.
Mortgage providers are warning of a £300bn shortfall in the amount they will be able to lend which will not be filled by savers’ deposits.
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The new sell and rent back regulations have certainly given homeowners more protection. Since the Financial Services Authority started to regulate the SARB market trust in the industry has improved.
A recent sell and rent back regulation brought in provides tenants with an opportunity to rent back their home for 5 years. This will no doubt prevent less morally obliged companies from offering ridiculously short tenancies, which offer former homeowners little benefit, especially when they are facing repossession.
The SARB (sell and rent back) market is generally used by people who are trying to prevent repossession, cannot obtain credit and are facing mounting debts. In principle selling their homes and renting them back is usually the only and best option available to them at the time.
However, some companies have been criticised for taking advantage of these people when they are at their most vulnerable, often offering very short tenancies and extraordinary low purchase prices. The FSA intervened in 2009 to help protect the public from questionable practices.
Most sell and rent back company’s main objective is to acquire the property as cheap as possible and get rid of the tenant as quickly as possible so they can sell the property on. Not only are these people financially desperate, but also sometimes have strong ties to the house and the area they live in. Perhaps, they need to stay in the area because their children or the house they live in has been in the family for a long time and they have lots of family locally.
Although the new 5 year tenancy will help some individuals this still leaves landlords with the opportunity to systematically increase the rent to an unaffordable level, which would leave the tenant with no choice but to move on. Even though the new regulations do state the landlord must be able to fairly condone the rent increase, this still leaves room for ambiguity. If the new regulation is going to work a new regulation needs to be brought in to control rent levels in the sell and rent back market
Selling houses fast is undoubtedly a specialised market and many quick house sales come in the face of repossession threats. The Financial Services Authority (FSA) have made a proposal that mortgage holders who are in arrears with their payments will receive protection in a bid to see repossession numbers drop so that fewer people will have to suffer the depressing pressure that repossession brings. Unfair charges that are brought upon anyone in arrears will also be lowered or dropped as for many, once in arrears it is impossible to climb back out due to the extra charges that are often levied.
A fast house sale is hugely beneficial to many but to others it is a situation they are forced into as late payment charge mount up at ridiculous speeds. The new rules look set to abolish this trend and will be welcomed by many. Lesley Titcomb, spokesperson for the FSA, speaks of how lenders should re-evaluate their priorities and the way they do business and stop preying on customers who fall behind with payments by inundating them with charges that are simply a way to create further profits.
Selling houses fast is a great way out of debt for many but with few people actually using the service; the amount of home owners in arrears with little chance of getting out of their situation are increasing. According to figures released in September there were 194,600 people in arrears with their mortgage payments by 2.5 per cent upwards. The aggressive treatment of some companies is ensuring that many people are unable to pay back their arrears and the FSA has cited this is a major problem that needs to be changed. The new proposed rules could see massive changes in the amount of people suffering from repossession and if implemented, they will make a difference to many.
If you are thinking about using The Homeowners Mortgage Support (HMS) scheme, which is backed by the government you may also be eligible to use Property Cashpoint’s sell house fast plan too.
Our sell house fast scheme is aimed at helping homeowners obtain a quick cash house sale. Unlike The Homeowners Mortgage Support scheme, which helps people temporarily pay their mortgage. In some cases paying your mortgage may not be your only worry. If you have recently lost your job and have credit card and loan repayment debts spiralling out of control. In cases like these a helping hand with your mortgage re-payments may not be enough. In this situation your most suitable option maybe to secure a quick house sale with immediate cash offer.
The Homeowners Mortgage Support scheme helps people who rely on two incomes and have recently lost one. They may no longer be able to work overtime and as a result can make their mortgage repayments. Other circumstances which are considered include number of working hours reduced and a loss of a second part-time job.
The HMS scheme can mean that the interest on your mortgage is deferred for up to two years. However, not all lenders are part of the scheme and there are a few constraints in terms of eligibility.
If you own more than one home or have mortgage protection insurance you will not be considered. Or if your lender does not think you will be able to meet the mortgage re-payments even if you don’t have to pay interest. Also if you are already receiving support for mortgage interest (SMI) you will not be eligible.
Using a sell house fast scheme is a more complete solution for financial problems such as these. You can clear your debts and start fresh. However, if your problems are more temporary then a HMS scheme maybe more suitable to your needs. Here’s a link for more information on HMS.
