Posts tagged ‘Help to Buy Scheme’

Homeowners urged to plan for interest rate rises

Homeowners were today urged to plan ahead for when interest rates start to rise.

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Just over half of people admitted they did not have a financial plan for when the cost of their mortgage increased, with 69 per cent saying their finances were already stretched.

The study by the Money Advice Service found that 84 per cent of mortgage holders thought an increase in interest rates would impact their finances.

But 56 per cent were confident they would be able to find the extra money they needed simply by cutting back on everyday spending.

Just over a third of homeowners said they would use money from their savings to ensure they could meet their mortgage repayments, while 15 per cent said they would get an extra job.

But more seriously, 13 per cent of homeowners admitted they were currently living beyond their means and 19 per cent said they would really struggle to cover any increase in their monthly repayments.

The Bank of England has held interest rates at a record low of 0.5 per cent since 2009.

But the official cost of borrowing is widely expected to start increasing next year, with Bank Governor Mark Carney recently warning that the point at which the Bank Rate would start to rise was “getting closer”.

A 0.25 per cent increase in the Bank Rate would add around £20 a month to repayments on a £150,000 mortgage taken out over 25 years.

The research found that 47 per cent of homeowners thought they would find it difficult to meet an increase of up to £150 a month in their repayments, and 19 per cent admitted they would struggle to meet any rise.

Younger homeowners appeared to be particularly vulnerable to future interest rate rises, with 77 per cent of those aged under 35 saying their finances were already stretched, while 16 per cent were not aware that an interest rate rise was on the cards.

A significant proportion of homeowners also appeared to have little understanding of how a change in interest rates would affect them.

Around 28 per cent of mortgage holders said they did not know what their current rate was, and more than half had not calculated what impact a 1 per cent rise would have on their repayments.

A further 3 per cent admitted they did not even know what their monthly repayments were.

Sue Anderson, head of external affairs at the Council of Mortgage Lenders, said: “Although we don’t know when rates will rise, the monetary authorities have previously flagged that rises will be finely calibrated, so large sudden shocks are unlikely.

“By planning ahead now, mortgage holders can get a clear picture of what a rate rise would mean for their own repayments.

“Taking steps in advance to work out what the effect on your payments might be, and planning ahead, will mean that most borrowers will be able to cope by careful budgeting.”

Homeowners who are worried about interest rate rises could consider taking out a fixed rate mortgage to offer them the security of knowing what their monthly repayments will be.

A number of lenders are currently offering five-year fixed rate loans for less than 3 per cent.

Chelsea Building Society currently has the most competitive deal of 2.85 per cent for people borrowing up to 65 per cent of their property’s value, while Virgin Money has a rate of 2.99 per cent for people with only a 25 per cent equity stake.

The Chelsea deal has a £1,545 arrangement fee, while the Tesco loan has a £1,495 one.

Meanwhile, the Bank’s Financial Policy Committee today said the Government’s controversial Help to Buy scheme had not stoked house price growth, as it accounted for only 5 per cent of mortgages and had been used most in regions where house prices had risen least.

The FPC also asked for new powers to cap the size of mortgages that lenders advanced relative to a borrower’s income and the value of their property.

 

October 2, 2014 at 11:29 AM Leave a comment

Good news for tenants as rents to rise at below rate of inflation

Rents are expected to rise at below the rate of inflation during the coming year despite tenant demand remaining strong, research showed today.

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Landlords estimate rents will edge up by an average of 1.8 per cent in the next 12 months, below both the Bank of England’s inflation target of 2 per cent and the current annual rate at which rents are rising of 2.4 per cent.

The majority of landlords said they did not plan to hike their rents at all during the coming year, with only 43 per cent saying they would increase them, according to letting agency network Your Move and Reed Rains.

Among those who do plan an increase, 57 per cent said they were hiking them to cover the cost of inflation, while 31 per cent said it was to pay for maintenance work.

Four out of 10 landlords said they had seen an increase in demand to rent a home during the past six months, and nearly two-thirds expect this trend to continue going forward.

The rise fed through to a 6.9 per cent jump in new tenancies agreed in August compared with a year earlier.

It also helped to reduce average void periods between tenants, and led to 18 per cent of landlords adding to their portfolio of rental properties.

A further 21 per cent of landlords think now is a good time to invest in a buy-to-let property, with 55 per cent attributing their confidence to strong tenant demand, while 54 per cent cited attractive property prices and 45 per cent said property provided better capital returns than other investments.

David NewnesDavid Newnes, director of Your Move and Reeds Rains, said:“Demand for rented accommodation is climbing, and there’s little sign of this stopping.

“While Help to Buy and higher loan-to-value lending are enabling first-time buyer activity, strong house price growth this year has lifted home ownership a few steps out of reach for many, and the private rented sector remains the safety net supporting those still saving for a deposit.

“This demand is also powering more supply. Secure house prices and spirited tenant demand are encouraging budding buy-to-let investors and existing landlords to add to the number of available homes to let.”

But landlords were less upbeat about the mortgage market, with 42 per cent who had tried to take out a mortgage during the past 12 months saying they had found it more difficult than a year ago.

The figure was up from 35 per cent in January, highlighting the impact of the tighter lending environment.

A further 39 per cent of landlords said buy-to-let mortgage repayments had become more expensive in the past 12 months.

Even so, one in 10 landlords cited cheap mortgage finance as a key reason why it was a good time to invest in a buy-to-let property, although the figure was down from 17 per cent in January.

Today’s figures come after letting agency chain Sequence said there were nearly seven would-be tenants chasing every available property as demand to rent soared by 17 per cent in the year to the end of August.

October 1, 2014 at 7:00 AM Leave a comment

UPDATED: Mortgage approvals drop to lowest level in a year

The number of mortgages approved for people buying a property fell for the second month running in August, figures showed today.

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A total of 10,357 loans were in the pipeline for house purchase during the month, down from 10,703 in July, according to the Bank of England.

It was the lowest monthly figure since September last year, with the exception of April and May, when the market was disrupted by the introduction of tough new lending criteria under the Mortgage Market Review.

The data adds to growing evidence that the booming property market is beginning to cool, as buyers become more cautious in the face of recent strong house price gains and the prospect of future interest rate rises.

mark_carneyBank of England Governor Mark Carney warned last week that the point at which interest rates would start to rise from their current record low of 0.5 per cent was “getting closer”.

Total mortgage advances increased slightly during the month, rising to 17.46 billion, up from 17.2 billion in July.

The figures came as the National Association of Estate Agents warned that the younger generation continued to be squeezed out of the property market.

The group said the number buyers aged between 18 and 30 remained at an all-time low of just 3 per cent of sales in August.

There was some good news, with the proportion of sales accounted for by people buying their first home rising to 28 per cent during the month, the first increase since April and up from just 20 per cent in July.

But the majority of people getting onto the property ladder are thought to be aged aged between 31 and 40, with this age group accounting for 45 per cent of all sales, the highest proportion ever recorded for August.

Mark HaywardMark Hayward, managing director of the National Association of Estate Agents, said: “Reports from our NAEA members suggest that the high house prices of the current housing market are still proving a barrier for the younger generation.

“It is evident that first-time buyers are indeed getting older, with the majority of home buyers this month aged 31 to 40, suggesting some correlation between the increase in the first-time buyer market and this age group.”

The number of properties for sale fell slightly during August, dropping to an average of 49 per estate agent branch, down from 51 in July.

There was also a dip in the number of sales agreed, with transactions falling to an average of eight per branch in August, compared with nine the previous month.

But there was an increase in the number of people looking to buy a home, bucking the recent trend, with 372 house hunters registering with estate agents, up from 368.

But nearly 90 per cent of estate agents think the expected increase in interest rates will affect demand for property, with 39 per cent of agents saying they have already seen a cooling.

Meanwhile, the Government has announced plans to extend the Help to Buy scheme to enable more young people to get on to the property ladder.

It said first-time buyers aged under 40 would be offered discounts of 20 per cent on 100,000 new build homes.

The discount will be made possible by releasing brownfield sites to builders and exempting them from certain taxes.

 

September 29, 2014 at 9:59 AM Leave a comment

Help to Buy scheme needs a ‘permanent replacement’

The Government should introduce a permanent replacement to its Help to Buy scheme to enable more people to get on to the property ladder, a report claimed today.

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Mortgage insurer Genworth estimates that up to two million people who would like to have bought their first home since 2007 may not have been able to do so.

The group blamed the situation on the introduction of tougher mortgage regulations and greater capital requirements for lenders.

It said since new regulations were introduced in 2008 and 2009, there had been a dramatic reduction in high loan-to-value mortgages, while those that remained had become more expensive.

But it said the situation could be improved by introducing a mortgage insurance scheme to help lenders spread the risk of high loan-to-value loans.

The group found that someone buying a home costing £147,000 with a 75 per cent loan-to-value two year fixed rate mortgage would pay £496 a month, but someone buying the same property with a 95 per cent loan-to-value loan would face repayments of £843.

But it said a system of mortgage insurance for high loan-to-value loans could help to keep mortgages for people with small deposits affordable by transferring some of the risk away from lenders, while it would also protect the safety of the financial system.

Simon CroneSimon Crone, vice president for mortgage insurance (Europe) at Genworth, said: “The scale of frustrated demand is growing larger by the day.

Help to Buy must become a precursor to a permanent system where mortgage insurance for high loan-to-value loans – backed by capital relief – plays an ongoing role in helping first time buyers access the market, ensuring a sustainable rise in house building and protecting the safety of lenders and the financial system.”

The group used government and industry data to compare the number of people entering the housing market with expected demand.

It found that the number of people buying their first home was consistent at 10.26 million a year between 1985 and 2006, only slightly below the figure of 10.29 million, which would be expected based on population trends.

But it said since 2007 there had been a large and persistent deficit in first-time buyer numbers.

It estimates between 2007 and 2013 1.8 million people who would have hoped to buy their first home have been unable to do so.

It added that although the Government’s Help to Buy scheme had helped, nearly half of people who were expected to want to buy a home during 2014 were still unlikely to be able to do so.

Based on figures for the first six months of 2014, Genworth estimates there will be 296,200 first time buyers during the year as a whole, despite demographic trends suggesting more than 500,000 people would like to get on to the property ladder in 2014.

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August 30, 2014 at 10:00 AM 1 comment

Housing minister insists affordable homes are available in London

Hardworking families in London are being provided with ‘tens of thousands’ of new homes, the Government’s housing minster has exclusively told Zoopla.

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Brandon Lewis, who was appointed to the Government post earlier this year, insisted affordable homes are being provided for those wanting to live and work in the capital.

His comments come in the same week that the Government’s flagship Help to Buy scheme was deemed ‘a flop’ by the opposition – particularly for those hoping to buy in London.

Brandon LewisHousing Minister Brandon Lewis said: “Everyone has the right to live in a safe and affordable home. This Government has worked tirelessly to make that possible and fix the broken housing market we inherited from the last Government.

“Our current affordable homes programmes is on track to deliver 170,000 new homes by 2015, to be followed by a further 165,000 by 2018, which will be the fastest rate of affordable house building for 20 years.

He claimed the Government’s Help to Buy scheme, which helps those with a small deposit to buy a home, was a key element in helping people onto the property ladder.

“Our Help to Buy scheme has enabled over 40,000 aspiring households to buy their first home with a fraction of the deposit they would normally require, and our action to cut the deficit has kept interest rates low and mortgages more affordable,” he said.

“And in London Help to Buy equity loans have allowed over 1,400 people to get a foot on the housing ladder. We have also increased discounts for council tenants looking to exercise their Right to Buy and have introduced new housing zones to boost house building and create tens of thousands of new homes for hardworking families across the capital.

However, he admitted that more need to be done to improve the property market. As well as struggling to save for a deposit, many home buyers are unable to keep up with the sharp rise in house prices, particularly in London.

The typical value of a home in Britain has increased almost £18,000 in the past year to £275,721, while in London they have risen by more than £60,000, according to Zoopla.

Lewis said: “The sector is clearly moving in the right direction, but there is still more to do, and improving the housing market will continue to be a vital part of our long-term economic plan,” he said.

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August 22, 2014 at 2:23 PM Leave a comment

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