first time buyer
Latest Which? Survey Reveals Mortgage Concern
In recent weeks there have been many reports of lenders increasing their mortgage rates and there has been plenty of additional discussion about the impact that this may have. Results of a survey from Which? have just been released that highlight consumers concerns over the hike in their monthly charges.
Amidst reports that over a million customers would be facing a collective rise of £300m in mortgage payments, the organisation found that of those surveyed, 70% of mortgage holders are concerned about monthly increases while 14% declared that they were already struggling to meet higher payments.
Which? claim that those worst affected can be put into the bracket known as ‘mortgage prisoners’ – those who are not able to move to another lender for whatever reason.
Of those people surveyed, 41% said that if their mortgage were increased by £50 a month then they would have to cut back on regular household essentials such as food with 11% stating that they simply wouldn’t have enough for the vital areas of the family budget.
The percentages continue to increase in line with potential higher payments and for anyone facing a £100 a month rise, 11% said that they would simply be unable to pay their mortgage.
Which? went on to find some worrying statistics with regards to those already facing up to mortgage debt. The organisation found that an encouraging amount of people in this situation had already contacted their lender but very few were being met with any real help.
“Our advice to anyone struggling with their mortgage repayments is speak to your lender straight away. It is encouraging that a third of people we spoke to had approached their lender, but, worryingly, in one in five cases, they said their lenders offered no help at all,” said Peter Vicary-Smith, Chief Executive of Which?
“This is just not good enough and we want to see banks do more to help their customers who are struggling. These SVR rises are the consequence of the lack of competition in the market and the failure of the Government to take action to promote competition.
“This is why the new financial regulator, the FCA, needs to be a watchdog not a lapdog. It must stand up for consumers and stand up to the banks.”
This ‘Watchdog not Lapdog’ campaign that Mr Vicary-Smith referred to wants lenders and the FCA to protect their customers against unjustified rate rises and ensure that they are offered options of fixing payments at a reasonable level. Which? also wants lenders not to take advantage of those who are unable to switch mortgages.
Interest in New Homes Soars
New homes have been firmly in the news of late with government schemes announced that attempt to encourage construction companies and local authorities to build the houses that will meet demand. Now, as we enter the second quarter of 2012, leading house builder Barratt Homes have announced that they have experienced their busiest start to a year for five years.
The increase in activity began with a vastly increased number of searches on the company’s website back in January and this has subsequently been supported by a rise in visits to new sites and reservations on new properties.
As a result, Barratt claim that some sites are selling homes at twice the national average. The company’s figures have also been backed up by Right Move, who confirm a 27% rise in property searches since the start of the year.
Barratt believe that potential buyers are making their move as they become aware that home ownership is more cost effective than renting.
“We believe that one of the key factors is that savvy customers have worked out it’s now cheaper to buy than rent,” said Lisa Preston of Barratt West Midlands.
“We simply can’t believe how busy we are especially at a time when all you hear in the news is doom and gloom. It just feels like the people of Burton have decided to get on with their lives.”
Lisa Preston also added that she believes people are becoming aware that there may never be a more affordable time to buy their own property.
“In recent years many people have had to put their lives on hold but it seems that they are not prepared to wait any longer,” she added.
“Home buyers have also woken up to the fact that with interest rates low and house prices still some way below their peak, buying is more affordable now than many believe.”
Staying in the Midlands, home builder David Wilson have announced the development of six new sites across Leicestershire as they also start to meet an increase in demand.
“The Prime Minister has said again and again that one of the best ways to boost economic growth and get people working is through building more homes,” said Philip Lacey, David Wilson’s sales director for the area.
Mr Lacey also went on to confirm that over 1,500 jobs would be created for local people as a result.
“In addition to the local construction jobs created in building the new homes, the local people who move into the new housing will also spend their wages locally. This translates into a significant boost for local retailers at a time when concerns remain about the national financial picture. It’s exactly what this area needs,” he concluded.
In the midst of government announcements, the claims from these two home builders may just be tangible proof that the housing market, for new properties at least, may show a marked improvement in 2012.
Thousands Trapped By Generation Rent
In recent weeks and months, much of the focus in the property market has been on rental properties and the constant argument between buying and renting. Recent surveys have indicated that in pure financial terms, renting is actually a better option and other positives continue to be highlighted.
On the downside, we’ve seen a rise in complaints about landlords to the Ombudsman and while it seems that property rental is a growth area, it’s been suggested that it’s not exactly a preferred option and there are many who would rather own their home but are simply unable to do so.
A recent survey was conducted by YouGov on behalf of Countrywide, who include an estate agency, a lettings arm and a mortgage broker within their business and are therefore ideally placed to offer an unbiased view of all sides of the market.
The survey of 18-34 year olds found that 45 per cent claimed that the issue of deposit affordability was the biggest stumbling block to buying a home. More tellingly, of the private tenants surveyed, only 32 per cent declared that they were happy where they were and just 5 per cent of tenants claimed that they were delaying a property purchase because they believed that house prices would fall.
“We see first-hand that mortgage deposit and repayment affordability remain the biggest issues facing homebuyers in the UK,” said Grenville Turner, Chief Executive of Countrywide.
“These findings confirm that we are at a crossroad for homeownership, where we could see the next generation becoming a nation of renters without the right intervention from Government.
Mr Turner went on to claim that movement in the property market was so slow that it could go on to have serious implications for estate agents all over the UK.
“Based on current levels of activity, the average home owner moves house once every 25 years as opposed to once in every 12 years,” he added.
“These levels are unsustainable and we call for further support as a strong, vibrant housing market contributes to gross domestic product growth and will dramatically improve the economy.”
In amongst all of these statistics Countrywide maintain that the desire to own one’s own home remains high right across the UK. Throughout the first few weeks of the year we’ve seen figures released relating to property market activity but we seem set for a long period of stagnation if those potential buyers remain trapped in unwanted rental arrangements.
Modest Fall in March Property Prices
The Nationwide have claimed that house prices in March have fallen by just 1% from the figures declared in February and the drop is in keeping with predictions that suggest sideways or slight downwards movement for the remainder of 2012.
While a 1% fall may not seem particularly excessive, this is the first time for six months that figures have dropped on a year by year comparison and that may be seen as significant in some quarters. It also represents the largest fall recorded by the Nationwide for two years.
At present, the Society claims that the average price of a property in the UK is now £163,327 and that equates to a fall of 0.9% from March 2011.
Nationwide’s Chief Economist Robert Gardner went on to suggest that the outlook was likely to remain the same for the next year at least.
“In our view the challenging economic backdrop is likely to continue to act as a drag, with house prices moving sideways or modestly lower over the next twelve months,” Mr Gardner said.
The Stamp Duty holiday which drew to a close on the 24th of March 2012 is largely being blamed for the slowdown in March and with buyers now having to pay the 1% tax for properties priced between £125,000 and £250,000, this is expected to have a significant impact on figures due for release at the end of April.
However, Robert Gardner went on to suggest that if the Government’s NewBuy scheme were to have an effect and if there were any signs of improvement in the economy, this pattern could yet change.
“This dampening effect on housing market activity and prices may fade over the course of the summer, especially if the wider economic outlook begins to improve and other policy measures, such as the government’s NewBuy scheme, are successful in supporting buyer demand,” he added.
Nationwide conceded that it was somewhat difficult to read the market as it is impossible to tell how many property sales would have taken place if the Stamp Duty window had not been open at the start of the year. Therefore, a clearer picture can only occur over the course of the next few months.
In addition, we have seen Nationwide producing conflicting sets of figures to the Halifax in recent months and the latter’s statistics for March 2012 are still to come.
Overall therefore, it’s a mixed and sometimes confusing picture but with the Stamp Duty holiday finally at an end, figures should finally begin to settle down and give us a more accurate indication.
Stamp Duty Holiday Closure Shouldn’t Deter First Time Buyers
The stamp duty holiday finally came to an end on the 24th March 2012 and buyers will now have to pay tax at 1% on properties priced between £125,000 and £250,000. The window, which had had been credited with much of the positive aspects in recent property figures is believed to have saved purchasers some £300m and economists are awaiting the impact of its closure with some trepidation.
While some property experts believed that purchases had slowed down prior to the closing of the window, figures revealed today by the Council of Mortgage Lenders (CML) prove that this was far from being the case.
The CML revealed that the number of first time buyers had increased by a significant 23% in January compared with the same month in 2011 and that resulted in £1.6 billion being approved for 13,200 new loans.
In addition, the UK’s biggest HomeBuy agents revealed that a record number of purchases went through on Friday the 23rd of March, the final day of the stamp duty window, with 129 transactions being recorded.
All of these figures will undoubtedly lead to a spike in property statistics for the first quarter of the year but does it mean that we are heading for a period of gloom as some economists are predicting?
Chris Smith, group direct mortgage manager of the Yorkshire Building Society revealed that his organisation increased its lending to first time buyers in 2011 and he believes that there are still plenty of market options open to them.
“FTBs are important to us – the proportion of our loans to FTBs is seven per cent higher than the market average,” Mr Smith said.
As for the Government, the First Buy Guarantee scheme has been introduced in the hope that it will be more of an incentive for first time buyers than the stamp duty holiday. The scheme is open to FTB’s with a household income of less than £60,000 who can raise a 5% deposit but many industry experts are critical. The initiative was been described in some quarters as ‘window dressing’ amidst allegations that it has an ulterior motive of helping the ailing construction industry.
“This is a very appealing prospect, but Osborne’s scheme won’t go beyond scratching the surface of the problem faced by the vast majority of first-time buyers, as it is exclusively for new-build properties and only around 11,000 buyers will benefit – a fraction of the overall number of potential first-timers,” said Nicholas Leeming of Zoopla.co.uk.
“While the availability of credit is slowly easing, it’s not easing fast enough to help those borrowers who don’t qualify. A step in the right direction these measures may be, but they’re merely window dressing the wider problem.”
One window has closed but has another opened? The remaining nine months of the year will only begin to tell what impact the stamp duty reintroduction and the First Buy Guarantee will have.
First Time Buyers Held Back By Lack of Choice
Figures revealed earlier this month show that there has been a significant increase in mortgage products available to first time buyers in recent months. Those with a small deposit of 10% or even 5% can now take advantage of around twice as many products compared with twelve months ago, according to the financial information website Moneyfacts.
Those statistics would suggest that first time buyers may help to contribute to a tentative upturn in the property market but a further survey suggests a stark lack of choice when it comes to suitable properties.
Miles Shipside of property website rightmove.co.uk also suggests that the problems regarding affordability and the issues of obtaining a mortgage still remain but the most discouraging fact is the paucity of suitable homes.
The survey began by showing an increase of buyers intending to purchase their first home of 1.4% from the last quarter of 2011 in comparison to the previous three months. This also represents a rise of 1.5% from the same period in 2010.
However, the findings also revealed a significant drop in available properties in the same period with traditional first time buyer homes such as flats and terraced houses being in particularly short supply.
“First-time buyer levels remain well below the historic norm of 40%, but a slight increase of 1.4% on the last quarter of those intending to buy for the first-time offers some encouragement for the year ahead,” Mr Shipside said.
“Our research also provides evidence of an emerging new home-ownership challenge in the form of a lack of available properties that would typically be brought to market by first-time sellers.”
Rightmove pointed to a number of factors that contributed to their figures and many reasons as to why more suitable properties aren’t coming onto the market.
“Owners of these property types, typically first-time sellers, are being deterred from bringing their property to market for a number of reasons. A continued policy of forbearance by lenders and low interest rates means that the market is short of forced sellers,” Mr Shipside added.
“In addition, those wishing to trade up are suffering from a lack of equity, lack of confidence to stretch themselves financially and, in certain micro-markets, difficulty in identifying a suitable property that they would like to move to.”
In the current property climate, it seems that good news is always tempered by cautionary advice and while there may be more mortgage products available for first time buyers, they may well have to be patient in terms of finding that perfect property.
To Rent or To Buy? The Debate Rages On!
It’s a question that will probably never be met with a definitive answer as many would be homeowners face up to the question of whether buying or renting is their best option. Naturally, as individuals, those in this position will have a differing set of circumstances and the difficulties in securing a mortgage may well be enough to push many down the rental channel.
As for the costs involved, the Halifax has declared that home owning is considerably cheaper and on average, anyone renting their property could be paying in excess of £100 a month more for the privilege.
As part of the Halifax Buying Versus Renting Review, the organisation took into account many factors including the relative cost of monthly mortgage and rental payments, the cost of essential building repairs and maintenance and any money lost as a result of funding a deposit. Additional expenditure such as buildings insurance was also used as part of the overall survey.
Using their own records and those supplied by the National Office of Statistics, Halifax claim that the typical cost of purchasing a three bedroom house in December 2011 was £600, which is £116 less than the finances involved for renting an identical property.
Ultimately, that works out to be a 16% saving and a significant change to a previous survey carried out in 2008 which claimed that the costs involved for buying a home worked out to be 29% more expensive than renting.
“The affordability gains for buyers relative to renters in the last three years have been significant,” said Martin Ellis, housing economist at Halifax.
“The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates. At the same time, rents have risen due to strong demand for rented accommodation.”
The findings also arrive after a claim from the Association of Letting Agents that the rental market is showing clear signs of softening and that demand for the type of three bedroom property used in the survey is on the decline.
The figures are indeed significant but as the property market has already indicated, this promises to be a volatile and uncertain period in terms of mortgage rates and the ability to arrange a home loan. In addition, economic uncertainty and the difficulty in raising a substantial deposit are likely to see very few renters change their current position in the light of these statistics.
Moving to the City Putting Village Life At Risk
Recent property news has highlighted regional anomalies in the current housing market. Figures released last week indicate that while demand for new properties grew in London by around 0.4%, elsewhere in the country there were some notable slumps.
That contrast is highlighted again today with news that more and more buyers are moving away from the villages and back to the towns and cities as recession starts to take hold. As a result, property experts suggest that a depressed market in rural areas is the only logical conclusion.
The public transport network has historically allowed commuters to enjoy a more idyllic life in the outlying villages. Some of these commuters are occasionally featured on regional TV taking a long trip from the North of England into the capital.
However, that trend seems to be disappearing as Estate Agents Smiths Gore suggest,
“In Yorkshire, buyers are keen to avoid the lengthy commute into the cities and are moving from the outlying villages back into towns,” said Smiths Gore’s Andrew Turner.
That lengthy commute is an obvious reason for this shift. Higher train fares and increasing petrol prices make a longer journey into work far less attractive. There is however another issue here and it may surprise many to hear of its contribution to this pattern.
We were all led to believe that so-called teleworking was the future: With a telephone and an internet connection to hand, workers across the country were moving away from the daily commute and setting up a home office to liaise directly with their employers.
Occasional visits to the main office would have been necessary but on the whole, teleworking was the way forward for many firms. Once again however, Smiths Gore are suggesting that the trend is quickly being reversed.
“There has been a real push from employers to get people back into the office,” said Fin Hughes of Smiths Gore’s Andover branch. “They feel that offering the luxury of working from home is no longer financially viable. They need to feel that they’re getting real value from their employees.”
With the teleworking option taken away from those living in remote villages, the only sensible option from a financial point of view is to move to towns and cities with better transport links.
Overall, experts suggest that this is just beginning and the disparity between the rural and suburban housing markets is set to increase dramatically in the coming months and years.
Stamp Duty Blow to First-Time Buyers
The Chancellor has been accused of failing to recognise the severity of the first-time buyer crisis, by not extending stamp duty relief beyond March 2012.
Whilst the Government is trying to breathe new life into the ailing housing market, George Osborne has been criticised for not doing enough by boosting house building in the UK and the first-time buyer market.
Peter Spencer, chief economist to the Ernst & Young ITEM Club, said: “One area where the chancellor fell short of expectations was making the housing market more accessible to first-time buyers. The stamp duty tax relief will end in March 2012 as planned and there were no further measures along the lines of guaranteeing bank loans to first-time buyers.”
“Osborne gives with one hand, and takes away with the other,” said Peter Rollings, chief executive of estate agent Marsh & Parsons. “The failure to extend the holiday for first-time buyers will undermine the government’s own attempts to kick start the first-time buyer market across the country. While the new mortgage indemnity scheme may improve the accessibility of mortgage finance to many credit-worthy borrowers, first-time buyers will need to save for longer to pay the stamp duty bill as they move.”
Such kick start schemes include the revival of the right to buy scheme first launched in the 1980s. Under the scheme, two million council houses could be available to buy by tenants. Osborne has hailed it as “one of the greatest social policies of all time” that had been “slowly and stealthily strangled” by the previous Government. Under the scheme, families will be offered discounts of up to 50% on the market value of the property. The profits made from the sale of council houses will be used to build a new affordable home for each council house purchased.
“It will take three to five years for the newly built properties to come onto the market,” said Robin King, director at property firm Move With Us. “If there is a sudden large uptake of buyers, how does the government plan to address the lack of available housing? Social housing is often built in ‘uneconomic sites’, in areas that will struggle to attract buyers. Will this help to regenerate deprived areas, or will we end up with an oversupply of properties that cannot be sold?”
John Longworth, director general of the British Chambers of Commerce, said: “In cities and towns across England, regeneration projects are stalled, with a serious impact on local business confidence. The £400m Get Britain Building fund will help unlock progress on some of these sites, which will have a positive impact on a wide range of local companies involved in construction and its supply chains. Ministers must speed the fund’s implementation so we see more spades in the ground quickly.”
Record Number Reducing Property Asking Price
Those with a property on the market right now might find they have to bite the bullet and reduce the asking price to make a sale. Before you start knocking thousands off of the price of your home, work out how much you can afford to reduce the price by first. Take into account your moving costs including conveyancing, estate agent fees and stamp duty. You also need to include removal company costs, temporary storage if required, the cost of temporary homing for pets and many other costs that people forget to include. If you are lucky you may still come out making a profit.
According to research conducted by Zoopla, the average price reduction of a property in the UK has reached a new high and currently stands at £19,500. More than 40% of properties currently for same have had their asking price discounted at least once and that figure is growing.
Of the properties that have had a reduction the average discount stands at 7.4% which represents a reduction of almost £3 billion off the initial asking price. Sellers are becoming more and more realistic and more desperate to move before the year comes to a close.
Prices have been reduced the most in Glasgow (9.1%), followed by Newcastle (8.9%) and Bolton (8.8%).
Even those more resilient markets in London have not escaped the great price crash. 32.6% of available properties in the capital have had their asking prices reduced. However the average reduction in London is smaller at 6.43%.
Nicholas Leeming, business development director of Zoopla.co.uk, said:
“With the current economic uncertainty and difficulty buyers face in finding funding, it is no wonder that sellers are having to reduce prices in order to encourage sales. And with the latest economic forecasts for 2012 looking decidedly gloomy, sellers may have to reduce their expectations further if they are serious about making a move.”
Of course, reducing the asking price is nothing new and nothing to necessarily be panicked by. Even when the economy is booming many have had to reduce their prices in order to make a sale. It all comes down to how desperate you are to move and how low you can afford and are prepared to go. Reducing the asking price and then finding you won’t have enough money to move after all can be avoided by doing your homework, finding a good mortgage deal and ensuring you have enough money to cover your moving costs.
