Posts tagged ‘Help to buy’

Best mortgages for first time buyers

If you’re a first time buyer, you may be feeling a little overwhelmed by the sheer volume of decisions required to take the first step onto the property ladder. One of the first choices you’ll undoubtedly need to make is about finance. But which mortgage should you choose?

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As a first-time buyer, it is unlikely that you’re a cash buyer and so you will need to arrange finance to make your purchase.

There are hundreds of different mortgage products to choose from, depending on factors such as the size of your deposit and how much you can afford to pay out each month on your mortgage repayments.

It is not just a question of choosing the cheapest rate (although this is a big factor), which is why it is worth speaking to a mortgage broker.

Jonathan HarrisJonathan Harris, director of mortgage broker Anderson Harris, says: “There is more choice of mortgages at higher loan-to-values for first-time buyers than at any time in the past several years, but the new mortgage market rules have added a level of difficulty.

“Lending criteria are stricter with lenders checking you can afford your mortgage both now, and when interest rates rise. To make matters more confusing, lenders have interpreted the new guidelines in different ways so using an independent mortgage broker will help you navigate this minefield.”

Here are a few suggestions of mortgages for first time buyers from mortgage brokers Anderson Harris:

– Mortgage deal for a first-time buyer couple with a 25 per cent deposit and earning a joint salary of around £90,000. For a property with a purchase price of £360,000 and a loan of £270,000, we would recommend a two-year fix with Chelsea Building Society at 2.69 per cent with a fee of £345.

– Mortgage deal suggestion for a first time buyer looking to use Help to Buy as they only have a 5 per cent deposit and a single salary of £35,000. For a purchase price of £140,000 and a loan of £133,000, a two-year fix with Lloyds Bank at 3.98 per cent and no arrangement fee.

– Mortgage deal suggestion for a first time buyer looking to buy with the help of the Bank of Mum and Dad as guarantors. Most lenders will shy away from guarantors, with only a very small handful of small building societies now providing them. Halifax has the cheapest HTB 95 per cent deals on the market and is flexible with applicants who have just started in a new job, perfect for the recent graduate moving to  new city for a job and getting a deposit from Mum and Dad. Its two year fixed rate has a rate of 5.19 per cent.

July 30, 2014 at 3:57 PM Leave a comment

First time buyer deposit falls to £24K

The number of people buying their first home has soared by nearly a third during the past year as lenders accept lower deposits, research showed today.

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Around 146,600 first time buyers purchased a property in the six months to the end of June, 27 per cent more than in the same period of 2013, according to LSL Property Services.

The group said it was the highest number of first-time buyers during the first half of the year since 2007, before the financial crisis struck.

It attributed the surge in people getting on to the property ladder to a new willingness among lenders to advance mortgages to people with smaller deposits.

It said the average deposit put down by a first-time buyer was £24,530 in June, 18 per cent less than a year earlier and the fifth consecutive month in which it has been less than £25,000.

At the same time, typical property prices paid by first time buyers have remained broadly stable, rising by just 2.9 per cent to £119,743.

David NewnesDavid Newnes, director of estate agents Your Move and Reeds Rains, part of LSL Property Services, said: “The bottom of the market continues to recover, even as activity further up the price bands is beginning to show signs of slowing down.

“Lenders have been more willing to lend to higher loan-to-value borrowers. Help to Buy has boosted confidence and with it demand among first-timers who have been carefully saving up for their deposit.”

But he warned that new loan-to-income caps announced by the Bank of England could have a “stifling effect” on first time buyers, adding that there would need to be careful interpretation of them to ensure they did not cut good buyers out of the market.

Around 26,500 people got on to the property ladder during June itself, 10.4 per cent more than a year earlier and the second consecutive month in which first time buyer numbers topped the 26,000 threshold.

But despite the growing number of first time buyers entering the market, the dream of home ownership still remains far off for many people.

In June, 93 per cent of tenants registered with Your Move and Reeds Rains wanted to become homeowners, but only 17 per cent expected to be able to buy a property within the next 12 months, and 14 per cent did not think they would ever be able to afford to buy one.

Financial help from the Bank of Mum and Dad remains a key factor in helping people to get on to the property ladder, with 39 per cent of first-time buyers in June receiving family help to build up their deposit.

A further 7 per cent put money they had inherited towards a deposit, while 4 per cent used a Government scheme, such as Help to Buy.

Only 45 per cent of first time buyers completely self-financed their property purchase during the month.

Meanwhile the Resolution Foundation warned that the number of people facing mortgage repayment problems could double by 2018 as interest rates rise.

It estimates that the number of households who had to spend more than a third of their post-tax income on mortgage repayments would rise to 2.3 million by 2018 from 1.1 million –  the equivalent of one in four households with a mortgage.

The number of households spending more than half of their post-tax income on all forms of debt repayment, defined as being in debt peril, also looks set to double to 1.1 million.

The group called on policymakers to learn the lessons from the past and tighten lending criteria and reduce the UK economy’s dependence on debt.

It added that an “orderly and managed dismantling of the debt overhang” was needed, so that people who were lent money during looser credit conditions did not suffer affordability problems.

July 25, 2014 at 7:00 AM Leave a comment

Highest number of first time buyers for 7 years

The number of people getting on to the property ladder hit a seven-year high during the first half of the year, figures showed today.

First time buyer

An estimated 144,500 people bought their first home in the six months to the end of June, the highest number for the first half of the year since 2007, before the financial crisis struck.

The total was 25 per cent up on the same period of 2013, according to mortgage lender Halifax.

It was also the third consecutive year in which first-time buyer numbers have surpassed the 100,000 mark during the six months to June.

The increase in first time buyers outstripped the improvement in the number of existing homeowners who bought a property, with the number of next time buyers increasing by only 20 per cent during the period.

As a result, first time buyers accounted for 46 per cent of all home purchases during the six months, the highest proportion since 2000.

Despite recent strong house price inflation, low interest rates helped to keep mortgage repayments affordable for people buying their first home.

The typical person getting on to the property ladder had to devote 31 per cent of their post-tax income to mortgage repayments.

Halifax said this figure was significantly below both the peak of 47 per cent of earnings reached during the first half of 2007 and the long-term average of 34 per cent.

But first time buyers did have to put down significant deposits, with these averaging £31,129 – 9 per cent more than they put down a year earlier.

The size of the deposit as a proportion of the purchase price has almost doubled since the financial crisis struck, to stand at 19 per cent during the second quarter of 2014 compared with 10 per cent in 2007, as lenders withdrew high loan-to-value mortgages.

The average age of a first time buyer has also increased, rising to 30 years old in 2014, compared with 28 in 2009.

Craig McKinlay, mortgages director at Halifax, said: “First time buyers are an important segment on the housing market, accounting for 46 per cent of home purchases in the first six months of the year.

“The resurgence in the number of first time buyers getting on to the housing ladder has been buoyed by improving economic conditions, rising employment levels as well as Government schemes such as Help to Buy.”

The typical first time buyer paid £167,137 for their home during the first half of the year, putting 60 per cent of people above the £125,000 threshold at which Stamp Duty kicks in.

Unsurprisingly, there were significant regional variations, with first time buyers in London paying the most for their property at an average of £306,354.

This figure was more than £100,000 above those in the South East, which had the second highest purchase price at an average of £203,826.

The North was the least expensive region in which to get on to the housing ladder, with first-time buyers paying an average of £110,410 there, meaning 72 per cent of them did not have to pay any stamp duty.

People buying their first home in London had to save the most for a deposit at £76,435, while those in the North West put the least down at £16,532.

July 19, 2014 at 8:00 AM Leave a comment

Mortgages ‘restricted’ to 4.5 times annual salary

The number of homebuyers able to borrow more than 4.5 times their income will be restricted, the Bank of England announced today.

House sales

By October, banks will only be able to lend 15 per cent of their total residential mortgages at or above this level. Any mortgages offered from today will count towards that proportion.

The main region to be affected will be London, where 19 per cent of loans were equivalent or above 4.5 times the borrower’s annual salary, according to the Council of Mortgage Lenders. It compares to just 9 per cent for the whole of the country.

The measure is aimed at preventing a damaging housing bubble, but experts called for greater flexibility – particularly for those living in the capital and the south east.

Adrian Anderson, of mortgage brokers Anderson Harris, said: “These new rules will have a much bigger impact on borrowers in London and the south-east than elsewhere. The key in London will be assessing what income the lender applies the 4.5 times multiple to. More people in London are on basic salaries with a bonus element and this needs to be taken into account.”

The cap is one of two proposals by the Bank’s Financial Policy Committee to limit the future growth of risky high loan to income mortgages.

The other proposal asks banks to check borrowers can afford their mortgage if interest rates rose by 3 per cent.

Paul SmeeCML director general Paul Smee said: “It’s important not to confuse these measures, which are designed to ensure financial and economic stability, with wider housing policy, for which the Bank is not responsible.

“Additional housing supply to help correct the imbalance between supply and demand is the main way of relieving affordability pressure and household indebtedness attributable to mortgage borrowing over the long term.”

It comes as the Government also restricts the maximum amount those using the Help to Buy mortgage guarantee scheme will be able to borrow to 4.5 times income.

Lenders are already placing their own restrictions on the scheme, with Nationwide only allowing first time buyers to apply for the equity part of Help to Buy.

Latest figures show a total of 22,831 people bought a property through the equity loan part of scheme during the 14 months to April 1 last year when the scheme was launched.

scheme_help_to_buy_equity_mortgageThe Help to Buy scheme enables people buying their first home or trading up the property ladder to purchase a property worth up to £600,000 with a deposit of just 5 per cent.

The Government will then either top up the 5 per cent deposit with 20 per cent of the property’s value, known as an equity loan, or it will offer lenders advancing high loan-to-value mortgages a guarantee on a portion of the debt.


June 26, 2014 at 12:00 PM Leave a comment

Landlords’ profits reach four-year high at £20K a year

The cost of renting a home increased by 0.6 per cent during May as the returns made by investment landlords hit a four-year high, figures showed today.

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The typical property in England and Wales cost £745 a month to rent in May, the highest level since December last year.

But despite the jump, rents have only risen by 1.1 per cent during the past year, compared with inflation of 1.5 per cent, as measured by the consumer prices index, according to LSL Property Services.

The group, which owns the UK’s largest lettings agent network, said it was the twelfth consecutive month in which annual rent rises had been below the rate of inflation.

In absolute terms, the cost of renting a home has risen by just £8 during the 12 months to the end of May.

David Newnes, director of estate agents Reeds Rains and Your Move, part of LSL Property Services, said: “Private renting is becoming cheaper in real terms. May’s latest sub-inflation rent rises will help over nine million tenants.

“To put that in context, this is more than a hundred times as many households as have benefited from Help to Buy in its initial stages so far.”

Landlords continued to make gross yields on a property of 5.1 per cent on average during May, unchanged from April.

But when house price growth was taken into account, along with void periods between tenants, total annual returns on a buy-to-let property soared to a four-year high of 12.2 per cent.

The figure was more than double the total return of 5.3 per cent recorded in the 12 months to May 2013.

As a result, the average landlord has seen a return of £20,133 in the past 12 months, with £8,107 coming from rent and £12,026 from capital appreciation.

Tenant arrears also improved during the month, with arrears standing at 7 per cent of all rent due, compared with 8.2 per cent a year ago.

Rents in seven out of 10 regions of England and Wales are now higher than they were a year ago.

The South West saw the fastest annual increase, with the typical monthly rent 3.9 per cent higher than it was in May last year at £657.

It was followed by the East Midlands, where rents have risen by 3.8 per cent in the past year to £575, and the North West, where they are now 2.3 per cent higher at £584.

But the annual rate at which rents in London are increasing has slowed down to 1 per cent, compared with a peak of 7.9 per cent in early 2013.

Despite this, London still remains the most expensive place to rent a home at an average of £1,124 a month.

Three regions of the country recorded rent falls during the past 12 months, with the cost of letting a home dropping by 3.6 per cent in the North East and by 2.3 per cent and 0.4 per cent in the East of England and West Midlands respectively.


June 20, 2014 at 7:00 AM Leave a comment

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