All posts by Holley Samuel

Is Now Really the Right Time to Buy a House?

All, Mortgages

The housing market appears to be at its peak. We are seeing record house prices after two years of unprecedented demand and high competition among buyers. Many people are starting to wonder if they should wait until prices fall to purchase a property.

Since December 2021, interest rates have gone up three times now standing at 1% following last week’s rise from 0.75%. There are signs that the property market will start to slow down or even fall, and the latest interest rate rise can already be felt in the mortgage market as mortgage costs have risen.

With inflation eating away at savers nest eggs, a drop in incomes and the rising costs of energy, fuel and food, we are in a cost-of-living crisis.

Does this make now a bad time to buy a home and should you wait for prices to fall?

House price growth, according to Nationwide, stood at 14.3% in February and 12.1% in March. The recent rate rise has caused mortgages to be more expensive and this should slow down house price growth in the coming months. Predictions from Capital Economics show that mortgage rates could rise from 1.8% in March to 3% next year. How much it will fall is difficult to predict – with many market commentators believing it will be a modest fall and simply a price correction.

Although interest and mortgage rates would still be low in historical terms, it will come as a shock to those who are relatively new to the property market and used to very low rates.

Just as there are forecasts that house prices will fall next year many believe that the market will simply slow down progressively over the next few years. The strong employment market and mismatch in supply and demand will continue to underpin property values.

First-time buyers

Any fall in house prices is usually an indicator of a wider economical downturn and first-time buyers are usually the hardest hit in these market conditions. Even if homes are cheaper, mortgage rates and associated costs will be more expensive. According to analysis by Hamptons, the average first-time buyer purchasing a typical home worth £229,000 with a 10% deposit will be paying an extra £612 compared to when the interest rate was 0.75%. So even if property prices drop, monthly repayments will be higher. It’s important to get sound advice from a mortgage broker who can work out the numbers – because waiting to buy could cost more in the long run.

Renters

For those who are renting, continued high levels of demand are pushing rents up even further. Therefore, for anyone who believes they will be better off buying than renting, now should be as good a time as any to make the transition to home ownership. Waiting for a house price crash could end up costing a first-time buyer in the long run if this doesn’t happen. In addition, Capital Economics predicts that inflation will hit 8.7% this year, eating into any deposits buyers have managed to save.

Existing homeowners

For existing homeowners, there appears to be a rush to fix mortgages for 5 or even 10 years. According to Twenty7Tec, last month almost 7,000 people searched for a 10-year fixed rate mortgage – a 72% increase on the same month last year and a 25% increase in those looking for a 5-year fixed rate. The number of people who were looking for 2- and 3-year fixed rate mortgages fell by more than 50%. With borrowers’ outgoings rising every month – and set to increase further when the fuel price cap rises in October – borrowers are seeking stability with their mortgage outgoings.

We strongly advise you to get independent mortgage advice if you’re not sure whether to wait or buy now – we can look at your circumstances and help you work out how much you will be paying now, and how much you could pay if interest rates continue to rise but the housing market simply slows down rather than seeing big house price falls. Contact us today.

The Spring Mortgage Market

All, Mortgages

The days are longer, and the weather is warmer – but are we in a new phase for the mortgage market? The latest figures from Google Search reveal that there has been a 400% rise in searches over whether mortgage rates will go up, showing that this is a huge concern for many people looking to purchase a property.

Some recent statistics

According to the government house price index, house prices in the UK have increased 10.9% on an annual basis, with the average property in the UK being valued at £276,755. House prices in the UK have risen by 0.5% since January this year.

In February 2022 the estimated number of property transactions of residential properties with a value of £40,000 or above was 112,240, which is a 20.8% decrease compared to the previous year. Between January and February 2022, UK transactions increased by 4.4% on a seasonally adjusted basis.

In addition, Knight Frank has estimated annual growth of 5% in 2022, with just a 1% growth the year after. It said higher mortgage rates, the cost-of-living squeeze, and increased supply will slow house prices.

The mortgage market

We have now had the removal of the last of the Covid-19 restrictions, but we are seeing the rise in cost of living, interest rate rises and rising inflation. These changes are causing concern among borrowers, but it’s worth noting that we are reverting to pre-pandemic rates, and this is very much an expected and much needed correction. However, borrowers are worried about what this all means for the future of the mortgage market.

If there’s anything that previous crises have shown us, it’s that the mortgage market is resilient and able to adapt to change. When the stamp duty holiday ended, many existing and aspiring homeowners believed that the mortgage market would slow down and prices would fall, but demand just kept on rising. We saw an imbalance between supply and demand with not enough properties to satisfy the number of buyers wanting to buy their first home or move up the property ladder. Following the pandemic we saw a huge shift in buyer priorities with a move away from city centres to homes with more space inside and out, and more rooms to allow for home or hyprid working.

The start of this year has continued the trend of high demand and rising prices despite the interest rate rises – with demand 6% up on the same period last year. In addition, the buy-to-let market has remained strong, and we have seen a shift towards product transfer and remortgaging.

But will the high demand continue into this year? One challenge is the rise in our cost-of-living. Economists from Experian have estimated that the NI rise, energy and fuel price rises, interest rate rises, and the removal of the Universal Credit uplift could add as much as £4,500 a year to the expenses of the average UK household. However, the mortgage market has remained resilient because those with mortgages, including fixed-rate options, are more likely to react when they feel the true impact of rising costs. In addition, those with mortgages are possibly impacted proportionally less than those on lower incomes. In addition, estate agents are continuing to report that demand for new homes is still there.

The latest research from Mortgage Strategy shows that borrowers are taking a more proactive approach to their mortgage needs with Google search data revealing a 3,500% increase in those searching for mortgage broker in their area and are also researching the mortgage market in advance of speaking to an advisor.

If you are considering buying a new home or coming to the end of your current fixed rate deal, talk to us at The Mortgage Hub to find out more about your options and to get advice on the property market in your area.

How to Help Your Children onto the Property Ladder

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Over the last few years, it has been increasingly difficult for first-time buyers to get onto the property ladder. Following the pandemic, demand for homes skyrocketed as people’s priorities changed. Instead of wanting to be close to public transport links and amenities, there has been increased demand for homes with more space inside to accommodate home working, and larger gardens or better access to green spaces. The lack of supply combined with the stamp duty (LBTT) holiday and historically low interest rates has continually pushed up prices.

Although low-deposit mortgages returned last year, banks are still wary of lending to those seen as higher risk especially with the current rise in living costs.

We now find ourselves in a situation where many first-time buyers have been priced out of the market and unable to secure borrowing. This is where the Bank of Mum & Dad can step in.

According to Legal & General, over 80% of parents have helped their children with a gift or a loan towards a deposit to purchase a property. However, banks have become increasingly aware that parents are unable to help their children or grandchildren to buy a first home with cash. There are other options as banks have made available schemes to help parents who wish to enable their children to buy their first home.

There are various schemes to help parents assist with a property purchase for their children – guarantor mortgage, family mortgage, joint mortgage, and joint borrower sole proprietor mortgage. All of these make it less risky for the lender and enlist the help of a family member to help a first-time buyer to purchase their first home. With these schemes, the bank will allow parents to provide collateral on the loan either by a charge over an existing property or by putting money into a specific savings account. There may be an age limit for a guarantor, which is usually 75 years old.

Parents will effectively loan their savings for a set period of time as collateral and will be able to access to the money at a later date with interest – this means that they aren’t left out of pocket by helping their children. In this case, parents will need to consider where else they would put their money and whether they’ll miss out on valuable interest. In addition, this type of lending can be more expensive than other standard loans, but in some instances having a guarantor can be enough to reassure lenders in offering high LTV mortgages. It’s also worth considering whether there will be any tax implications which is why we would strongly recommend getting independent financial advice (and something lenders will insist upon).

Some loans, such as joint mortgages, enable parents and children to buy a property together, but both parties will need to appear on the deeds of the property too. This can have tax consequences if the guarantor already owns a property such as their own home which is highly likely. This will mean that they will have to pay a stamp duty (LBTT) surcharge of 3%. To avoid this, you could opt for a joint borrower, sole proprietor mortgage. This names the guarantor on the mortgage but keeps their name off the property deed which then avoids additional capital gains tax and stamp duty liabilities.

If you are considering a specialist mortgage when helping your children onto the property ladder, then talk to The Mortgage Hub today. We can talk to you about the options.

The Mortgage Guarantee Scheme Gains Popularity in Scotland

All, Mortgages

The latest data released this week shows that a total of 6,535 homes were purchased using the government’s help to buy mortgage guarantee scheme in the six months between April and September last year. First time buyers account for 84% of those taking out this type of mortgage and the total value of mortgages supported by the Mortgage Guarantee Scheme was £1.2bn.

What is the Mortgage Guarantee Scheme?

The Mortgage Guarantee Scheme was introduced in April 2021 and gave borrowers the opportunity to purchase a new home with a deposit of less than 10%. It can be used to buy both new build and existing homes and unlike Help to Buy it can be by both first-time buyers, home movers and those looking to remortgage. It isn’t available on buy-to-let properties, or second homes and it is only available on properties with a value up to £600,00.

Who’s using the scheme?

The number of people using this scheme has increased significantly with data showing when comparing the total mortgage completion in each region, the scheme appears to have supported a larger proportion of mortgages in the South East and Scotland, but is lower in London, Northern Ireland and the North East.
The average value of a property purchased or even remortgaged through the Mortgage Guarantee Scheme was £196,702. The national average house price stood at £269,945. In terms of value bands, 27% of mortgage completions were in the lowest value band, 63% were on prosperities valued less than £200,000 and 24% were on properties valued above 250,000.

As for house types, the figures show that 34% of mortgages using the scheme were terraced, 28% were semi-detached and 22% were for flats or maisonettes. Detached properties accounted for only 8%.

Housing supply on the rise

According to Propertymark, January 2022 saw a sharp increase in the number of properties that were being listed for sale. The number of new instructions per estate agency branch went up from five in December to nine in January. After three months of decline, this is an 80% increase. Registrations from house hunters also went up and the good news for sellers is that, according to Rightmove, 37& of properties sold above asking price in January compared to 25% in the previous month. In comparison, January 2020 saw only 9% of properties sell above asking.

Whether you are a first time buyer, a second stepper or looking to remortgage talk to us at The Mortgage Hub. We can assess whether you are suitable for the government scheme. Even if you are, it might not be the best deal for you so talk to us to get an idea of the most suitable product available.

Property Demand in 2022

Mortgages

Over the last two years we have witnessed an unprecedented property market. At the start of the pandemic no one could have predicted how the market would be affected by being forced to essentially close from March to June.

During the pandemic, if you weren’t a key worker you were confined to your home to work, home school your children and socialise. Everything was taken online, and gardens were the must-have feature of any home.

The announcement that there was a stamp duty (LBTT in Scotland) gave people an incentive to search for a property that better suited their new lifestyle, and low borrowing rates and the mortgage guarantee scheme gave people further opportunities to move. Many people were spending less money on travel and commuting whilst still working and so they had more savings to put towards a property.

Now, nearly two years on, the housing market has enjoyed its largest New Year figures in five years with demand for all types of properties at a record high. Demand from buyers went up by an impressive 49% in January 2022 with house prices rising at an annual rate of 7.4%, pushing the average price of a property up to £242,000.

There has been a lack of supply across the market over the last 18 months which has pushed up prices. According to Zoopla’s latest house price index, record demand was recorded for all property types with buyers searching for both houses and flats. Although more homes are coming to the market, there is still a significant imbalance in supply and demand.

House prices

In 2021, property prices went up by 7.4% with higher gains for houses compared to flats. The cost of detached, semi-detached and terraced houses increased by 8.8% over the year to £289,500. However, the price of flats went up by just 2.2% to £175,700.

Three-bedroom homes outside of London were the most sought-after property type – with demand four times higher than the average calculated over the last five years.

Supply and demand

The number of homes on the market is currently 44% below the five-year average, but at the end of 2021 this was 47% down. Demand continues to outstrip supply, but the good news is that there is growing correlation between the types of home buyers most want and those that are available.

We saw a rate increase today, but this is not expected to have a big impact on the property market, as, by historical standards, mortgage rates remain low and the majority of people will be protected from any base rate rises as three-quarters of homeowners are currently on a fixed rate deal.

The number of homes coming onto the market is good news for first-time buyers – at present flats offer better value as the price rise for this type of property has been modest compared to houses. For house owners wanting to move up the ladder, it’s great news as demand for two- and three-bedroom houses is high and with more properties being put up for sale, you’ll have more choice.

If you are looking to move this year – or want to check your mortgage deal is suitable for your circumstances, talk to us at The Mortgage Hub.

Will Lending Rules be Relaxed?

Mortgages

The Bank of England has announced that it plans to relax mortgage lending rules in 2022, removing the requirement for borrowers to prove that they can meet the repayments should rates go up by 3% on the lender’s standard variable rate.

At present, borrowers need to prove that they can afford the monthly repayments via affordability checks but the Bank’s Financial Policy Committee (FPC) has decided this affordability rule is no longer needed and will consult mortgage lenders and industry experts about relaxing the rules, bringing about more opportunities for first time buyers.

In 2014, new affordability guidelines were introduced which protected the banking system from people who had overstretched their borrowing and were unable to repay mortgages, loans and unsecured debt.

The new rules meant that lenders would limit the number of mortgages they offered to people borrowing 4.5 times their income and to ensure that borrowers could afford repayments when their fixed rate deal ended.

At the time, it was expected that interest rates would rise to 2.25% over the next few years, but today the base rate is just 0.25%. Although rates look set to rise, these will be very slow and gradual.

This change is likely to offer better mortgage opportunities to first-time buyers as previously, people buying their first property have lower salaries and smaller deposits.

However, the FPC has decided that limits on number of high loan-to-income mortgages they can provide to borrowers will remain.

Another positive development is that the average cost of a mortgage for those with just a 5% deposit has fallen, with the typical cost of a two-year fixed rate mortgage for someone borrowing 95% of their home’s value fell for the eighth month in a row in November to 3.09%. The cost of a five-year fixed rate deal dropped to 3.39%. These are the lowest reported rates that Moneyfacts has recorded since records began in 2011.

Finally, the number of different mortgages available is at the highest level in 14 years with more than 5,300 deals to choose from at the end of 2021.

Talk to us at The Mortgage Hub if you are considering your next move – or getting onto the property ladder for the first time. We’d be happy to help. Call today on 01698 200050.

First Time Buyer Numbers on the Rise

All, Mortgages

According to the latest research, the number of first time buyers has topped 400,000 for the first time in 19 years.

The research from Yorkshire Building Society shows that first time buyer transactions reached 408,379 last year. This is 35% higher than the number of first time buyers entering the property market in 2020. This represents half of all house purchases with a mortgage, compared to just 37% in 2007.

Comparing it to the last first time buyer peak, this was 19 years ago in 2002 when 531,000 bought their first home. After the financial crash in 2007, between 2008 and 2012, the numbers were around 200,000 each year with the lowest year on record – 2011 – showing just 188,000 people bought their first home.

The key to the rising figures is the availability of mortgages for those with a small deposit along with affordable rates. It is surprising to see these numbers given the uncertainty that has surrounded homeowners and potential buyers since the start of the pandemic.

However, the need for space to work from home, the stamp duty holiday giving the market a much needed boost, low unemployment rates, the introduction of the Mortgage Guarantee Scheme and low borrowing costs have all created the perfect conditions for those looking to get onto the ladder and driven demand. What’s more, during the lockdown people’s spending fell considerably, which meant that potential buyers could save up a larger deposit faster than anticipated and join the race for space.

At present, demand is still exceeding supply which is pushing up prices. However, market commentators believe that this will level off throughout 2022. Yorkshire Building Society believes that it is unlikely that first-time buyer numbers would continue at this level during 2022 and beyond.

Buying your very first property can be daunting prospect and it’s difficult to know where to start. At The Mortgage Hub, we are here to help and guide you through the entire process. We will provide tailored advice based on your current circumstances and future plans, ensuring that you are aware of all potential costs associated with buying and owning a property. We will then source the best mortgage deal to suit your budget, objectives, and repayment preferences.

Talk to our team today for more information on purchasing your first home – we would be delighted to help.  Call today on 01698 200050.

Remortgaging Dominates the Market

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Last month was the second busiest month for mortgage searches since November 2019, with remortgaging dominating the market.

The latest report released by Twenty7Tec has found that the housing market has continued upwards despite the end of the stamp duty (LBTT in Scotland) holiday earlier this year.

Over the last two years, the only other month that has been busier than November this year was March 2021 as we all started to come out of the winter restrictions imposed on us following high Covid19 numbers in January and February. In fact, remortgages accounted for nearly half of the total mortgage searches in 2021 rising to nearly 57% when product transfers are taken into account. On November 4th, remortgage documents overtook purchase document volumes for the first time since November 2020.

In October there was much chatter in the industry about a rise in interest rates and mortgage companies putting their interest rates in anticipation of this move by the Bank of England. Due to this, there was a 7% increase in searches for fixed rate mortgages with other mortgage types falling in search numbers.

The busiest day was November 2nd with and that seventeen of the top 20 days this year for buy-to-let searches were in November.

House prices in 2022

According to Zoopla, the total value of British homes has risen by an incredible 20% over the last five years

This means that nearly 12 million homes have increased in value by the national average of £49,000 or more since 2016.

House price growth has been underpinned by historically low mortgage rates and with the pandemic resulting in a huge number of homeowners reassessing if their home meets their needs including new home working arrangements. Limited supply has only fuelled house price growth.

Looking to remortgage?

If you are seeking a mortgage on your property talk to us at The Mortgage Hub. You may be looking to move home, switch to a better mortgage deal on your existing home, release equity to consolidate debts or carry out home improvements. We can look at either remortgaging with your existing lender, or depending on your circumstances and current deal, move to another lender for a more competitive rate. Many mortgage deals come with a discounted rate for a set amount of time, so it’s common to find that you may be about to move onto your lenders Standard Variable Rate- if this is the case you may be able to remortgage several months before the end of your deal.

Contact us on 01698 200050 to find out more from one of our friendly mortgage specialists.

Freelancer Mortgages 

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According to a recent report from Foundation Home Loans, nearly 60% of freelancers believe that it is difficult to secure a mortgage when comparing their opportunities to those in employment.

They survey carried out in August of this year revealed that 59% of freelancers believe it takes longer to secure a mortgage because of their employment status and 51% believe that they have a restricted choice of the lenders available to meet their mortgage needs. In addition, 60% of those surveyed believe that many lenders won’t deal with them due to their freelance status. Self-employed borrowers felt that lenders should take full account of all their earnings and the time they have been working for themselves but also taking a flexible approach and consider each case individually.

Only 39% of the self-employed workers surveyed felt that now was a good time to purchase a home – compared to nearly half of employed respondents who felt now was an optimum time to buy. The research revealed that there is a disparity between perception and reality when it comes to mortgage accessibility, as only 14% of freelancers had been denied a mortgage offer due to their employment status.

Covid19

Freelancers were also asked to share their experiences since the pandemic, with nearly three-quarters reporting no negative financial consequences. In fact, employed borrowers were three times more likely to have fallen behind with loan or credit card payments in the past year than self-employed people – and only 13% of freelancers had required a government grant or loan.

According to the research, self-employed workers were more likely to have a low credit score and less than half had checked their credit file. They were also more likely to have a reduction in income over the last year.

There is a disconnect between the perception of what freelancers believe they can borrow and what is available to them with a belief that they have a restricted choice of mortgage products post-pandemic. A blanket approach isn’t fair given the very unique circumstances that freelancers have.

Only a small number of freelancers are currently being declined for mortgages – so it’s important not to discount a mortgage loan if you have a desire to get onto or move up the property ladder.

We can direct you on the products available and give you a better chance of securing mortgage finance so contact us for advice and information.

UK House Prices – Scotland Outperforms UK Average

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According to the latest Halifax House Price Index, annual house price inflation went up to 7.4% in September – this is up from 7.2% with the average UK property price now at a record £267,587. Scotland has continued to outperform the rest of the UK.

House prices in the UK rose by 1.7% in September – this is the strongest rise since February 2007 pushing up inflation to 7.4%, reversing the three-month downward trend in annual growth peaking at 9.6% in May of this year. The average price of a house in the UK is now as expensive as it’s ever been at around £267,500.

There are several reasons for this continued upturn in house prices and the sustained buoyant property market – not just the Stamp Duty (LBTT) holiday (which ended three months later in England than in Scotland), but also the change in buyer priorities and a trend for more internal and external space. Over the past year, the price of flats is up by 6.1% compared to houses rising by 8.9% for semi-detached and 8.8% for detached. Looking at this in asking prices – this means flats have gone up on average by £6.640 and houses by £41,000.

With reports of increasing household bills, potentially rising taxes and NI, as well as fuel bills looking set to go up substantially, there could be lower levels of buyer activity in the coming months. However, borrowing costs are still very low and the job market looks strong which may offset this.

The main factor in rising house prices is the limited supply of available properties, especially in terms of the number of houses for sale, and so this could underpin average prices well into 2022.

Scotland

With an annual growth of 11.5% in September, Wales has recorded the strongest house price inflation of any UK region or nation. This is followed by Scotland which also outperforms the UK national average, with growth of 8.3% and an average house price of £188,525.

Looking to buy?

Talk to our team at The Mortgage Hub if you are looking to take advantage of the current low borrowing rates. We can help you to find and secure the right mortgage for your circumstances.