Category Archives: Mortgages

Mortgages

Applying for a 95% Mortgage? What You Need to Consider

It was announced in the spring budget earlier this month that the government will be introducing a new 95% mortgage guarantee scheme from April 2021, which will run until December 2022. The scheme has been introduced in response to a large-scale withdrawal of low LTV mortgages following the pandemic, pricing many first time buyers out of the market. As the Prime Minister put it, the new scheme will help ‘generation rent become generation buy’.

The new scheme means that some of the UK’s major lenders will be able to offer low-deposit mortgages on all residential properties valued up to £600,0000. The announcement was welcome news for many people, including those wanting to move up the property ladder or remortgage their existing home as the scheme is open to all. You don’t even technically need to be a first-time buyer to apply.

However, it’s important to understand that obtaining a 95% mortgage isn’t an easy or simple process, as you will still need to be prepared and meet the lender’s criteria especially in terms of affordability. In fact, affordability tests have not been relaxed as part of the scheme, which will catch out some buyers without prior experience of mortgage applications.

Here’s what to consider if you are thinking of applying:

Credit history

A good credit score is essential when looking to secure a good mortgage deal. If you’re a first time buyer applying for a low-deposit mortgage you will need a good credit score for your application to be accepted. It’s important to keep up with your credit card, utility bill, mobile phone, loan and other payments to show lenders that you are able to repay your debts. You should also be on the electoral register. It’s important you aren’t financially tied to someone with a bad credit score as this can negatively impact you.

Affordability

Even though the mortgage guarantee scheme means you only need a small deposit, you’ll still have to prove that you can afford the monthly repayments. Mortgage lenders have to adhere to restrictions whereby no more than 15% cent of their new business can be through offering mortgages that are over 4.5 times over the applicants’ annual income. This means that lenders won’t typically lend to higher LTI (loan to income) applicants for those with a 5% deposit. This is something to be aware of when applying, especially if you’re buying alone.

COVID19

Have you been impacted by the pandemic? Lenders will be cautious about lending to people who have been financially adversely affected by the pandemic. If you have been furloughed, taken a mortgage holiday, or have had your days or hours reduced, you could find it more difficult to secure lending. You will need to provide bank statements, P60 and proof of deposit or income to accompany your application.

Get the right advice

It’s essential that you talk to a whole of market mortgage broker if you would like to apply for the new mortgage guarantee scheme. At The Mortgage Hub, we can talk you through the application process and find out if you are eligible for a mortgage without it impacting your credit score. We can also find the best mortgage for your circumstances and work out what your repayments will be.

COVID-19 Property Market Update 

Many existing and potential homeowners are wondering whether to move now or delay their plans until they have a clearer picture of how long the pandemic will last. 

Since the market reopened here in Scotland in June, people have flocked to estate agents to purchase a new home. Properties are going to closing date, achieving record offers overs and competition is fierce as pent up demand combined with government incentives and a re-evaluation of our priorities has resulted in a mini property boom. 

The recent tax break announcement created a flurry of interest from buyers and gave an immediate boost to the housing market – according to The Telegraph, the lockdown resulted in £27bn of lost sales and buyers and sellers have been making up for this ever since.

The prime rural market has benefitted the most as people search for more space and better value. Buyers appear to be prioritising larger properties with more outside space, and they have re-evaluated the importance of proximity to transport links, local amenities and the ability the work from home. 

According to Zoopla, agreed sales fell by 92% during lockdown. Buyer demand, which is measured by the number of property enquiries, has jumped to 46% above pre-lockdown levels with a significant rate of recovery.

The prime rural market has benefitted the most as people search for more space and better value. In July, asking prices reached a new high of £320,265 – a rise of £7,640 (Rightmove) and Zoopla has forecast price growth of between 2% and 3% by the end of the year. Here in Glasgow house prices were 2.3% higher in August compared to 2% in August 2019.

 What is the outlook?

 With few distressed sellers just now – which is usually what drives house prices down in a crisis – it appears that the property market is holding strong. This is due to job and payment retention schemes and the availability of mortgage holidays. In addition, the eviction ban is protecting tenants who can’t pay their rent. 

At its peak, there were 1.9 million homeowners that took a mortgage repayment break – a sixth of all mortgaged homeowners. However, lenders have reported that only a small number of these requested an extension. If these people were to become forced sellers at the end of their mortgage break, but this would still not top pre pandemic property transactions. In addition, Hansen Lu, of Capital Economics, said that when the mortgage break scheme ends, regulatory changes mean that lenders’ own internal forbearance procedures will be more generous than they were ten years ago, and the impact will be reduced.

What’s more, according to the Bank of England, mortgage approvals reached a 13-year high in August as the rush to buy homes continued. The number of mortgages approved hit their highest level since October 2007 with a total of 84,700 mortgages  approved in August, a 28% increase on the previous month’s total.

It’s a seller’s market, so the advice is to sell now and for buyers, there are still some exceptional mortgage deals available. Even with the strict guidelines surrounding house sales, people are still encouraged to go on house viewings especially as initially it can be done virtually as agents increasingly embrace technology. Although many buyers tried to negotiate discounts when the market reopened, agents instead are seeing competitive bidding. Estate Agency is still subjected to social distancing measures and a change in the way they conduct themselves with restrictions on viewings to one member of a household, a ban on open houses and vendors vacating the property during the measuring, photography and viewings. However, this doesn’t appear to have dampened appetite.

Talk to us at The Mortgage Hub on 01698 200050 if you would like to discuss your mortgage options and for general advice about the property market here in Scotland.

What’s Driving The Property Mini-Boom?

Despite the country slipping into recession, house prices currently are at their highest level. What has driven this mini-boom and how long will it last?

On Monday Rightmove reported that the portal has had its busiest week in 10 years. Since June 29th when the property market in Scotland reopened, estate agents have reported a surge in enquiries, house prices have been steadily rising, mortgage applications have rebounded, properties are achieving record numbers of viewings and the offers over are far exceeding the pre lockdown levels.

According to The Halifax, the average UK house price has hit the highest level on record in July following months of pent up demand from house hunters. What’s more, the announcement that the LBTT threshold has been increased has provided a further boost to the market.

Reports suggest that we are facing a looming unemployment crisis when the Furlough scheme comes to an end at the end of the year. However, the sharp decline in GDP currently is not matched by the property market and there is little evidence to suggest that this mini-boom will end any time soon.

Pre Covid, the property market was strong and RICS data showed that there was a ‘Boris Bounce’ in February following the election and mortgage approvals for homebuyers were at their highest levels in four years at the start of the year. Lockdown meant that these property transactions were delayed and completed as soon as the lockdown was eased.

What’s more, since March there has been an increase in people’s desire to move home. They have possibly spent more time outdoors and appreciated the importance of access to a garden or green space and have come to realise the importance of having space to work from home. Being in lockdown for the best part of four months will also have made people assess what they do and don’t like about where they currently live.

Those who were most affected Covid are less likely to be homebuyers – and those hit the hardest are the people on a lower income. The lower the pay the more likely they are to lose their job in the recent round of redundancies. The average first-time buyer is in their early 30s and it is those in their early to mid 20s who have been most likely to have been furloughed.

The LBTT threshold change to £250,000 has also had an impact. The Institute for Fiscal Studies warned that this could result in an increase in house prices, making first time buyers worse off.

There is no doubt we are in a mini-boom, but we believe that this will level out later in the year into 2021 but this will be dependent on unemployment levels, the availability of high LTV mortgages and demand for rental property. A recent report from global bank ING says that prices will level out later on in the year.

Should You Continue With Your House Purchase?

This week it was announced that the UK is officially in recession. So, what does this mean for you if you’re planning to move?

During a recession when finances are tight job security is in question, many are cautious about buying a new home. However, this is a very unusual time for everyone in the UK – the likes of which we have never seen before.

The property market came to a standstill in March and went off with a bang when it reopened on June 29th . It was feared that house prices would crash but to date, the opposite has happened. The recession is a result of a public health crisis and not a financial one, so the financial system isn’t at a standstill as it has previously been. The government has taken unprecedented steps to protect jobs and prop up the housing market. Estate Agents have reported a huge upsurge in interest in properties and new seller enquiries and property portals have reported incredible visitor stats since the start of July.

What’s more, in July it was announced that LBTT would be waived for all properties up to £250,000 until March 2021 to further incentivise those considering moving and the Help to Buy scheme has been extended. There has been restored confidence in the market and transaction figures have rebounded – with a particular rise in the purchase of first homes and newly built properties.

The concern surrounding buying a home during a recession is that house prices may fall after a property purchase leaving buyers in negative equity. There’s also a fear that the Furlough scheme has delayed the number of job losses and that when the scheme ends there will be a raft of redundancies.

One thing is for sure – house prices are steadily rising and mortgage companies are bringing back products. House prices fell in 2018 due to a very specific lack of funding in the mortgage market. This isn’t the case this time so we believe that property will still be one of the strongest investments you can make. At present, there is an imbalance between demand and supply which is putting upward pressure on prices at the moment, and as a result we have seen the price growth for UK homes rise to 2.7% in June, up from 2.4% in May. We see this trend continuing for the foreseeable future.

If you’re buying a new home, you may prefer to delay your  purchase and wait to see how the recession plays out but the danger is that if your job is secure and you have the funds and meet the lending criteria, now is a great time to secure an attractive mortgage rate.

If you are thinking buying, make sure you have the right advice and don’t miss out on the LBTT break and low mortgage rates. Talk to us to discuss your circumstances before making a decision as we may able to help you decide what’s best for you.

Lowest Ever Mortgage Rates

The average interest rate for two-year and five-year fixed rate mortgages has dropped to the lowest levels since records began in 2007 according to the latest figures from Moneyfacts. That makes it a great time to remortgage.

We are currently averaging lower rates than last month’s record low rate following two emergency cuts made to the basic rate in response to COVID-19 – this is the interest rate that the bank sets for lending to other banks. The fall in the official cost of borrowing impacts swap rates upon which fixed-rates mortgages are based – and lenders have passed on the reduction in borrowing costs to their customers.

However, some banks and building societies have reviewed the level of risk they take in lending – this is due to the impact that COVID-19 is having on the UK economy.

With these record-breaking fixed rate deals, now is a great time to remortgage, especially if your deal is coming to the end. In addition, if you’re still sitting on your lenders’ SVR, you could save thousands per year by switching to an average two-year fixed rate deal. The gap between the cost of a two-year and a five-year fixed-rate deal has also narrowed so you could pay a lower premium for the peace of mind knowing what your mortgage repayment will be for the next five years.

However, the number of mortgage products to choose from has more than halved – from over 5,200 products to 2,500.

There are currently less products available to borrowers with a low amount of equity or small deposit – those with 5% can choose from 22 products compared to 279 previously available and the choice for those with a 10% has dropped from 563 to 50. That’s why it’s essential to talk to a mortgage broker to find the right deal.

Although lenders have increased rates on loans for people borrowing 95% of their home’s value, this is only a small rise of 0.04% for a five-year fixed rate and 0.1% for a two-year fixed rate and they are still open for business for this sector of the market.

Because lenders have cut rates for people borrowing 90% of their property’s value this shows that competition is still strong in this area even though there are fewer products available.

At The Mortgage Hub we can scour the whole market on your behalf and help you find the best deal and find out if your application will be accepted. Talk to us for advice – we are currently closed but still working remotely until it is safe to open.

 

A Rise in Buyer Demand

The latest House Price Index from Zoopla shows that UK city house price growth has hit a two year high of 3.9%. In addition, figures show that housing demand was up 26% over the first few weeks of this year compared to the same period in 2018 and 2019.

This means that city house price growth is at a 2 year high. HMRC data shows that in December last year sales were 11% higher than the same period in 2018

Northern regions registered stronger price growth throughout 2019 than many of the southern cities, although there are signs that the spread of price growth across the country has been narrowing in the last few months.

A summary of factors including house affordability, position in the current housing cycle, time to sell and price achieved indicate cities where the momentum in growth over the last quarter of last year will carry into next year.

According to Zoopla, Nottingham, Edinburgh and Glasgow rank as the top three cities with the strongest prospects for 2020 indicating that they will be towards the top of a relatively narrow range of price growth this year.

An examination of market fundamentals by city – including housing affordability, position in the current housing cycle, discounts to asking price and time to sell all indicate cities where the momentum in growth over the final quarter of 2019 will likely carry over into 2020. The ranking for all cities is shown in Table 2 along with the current annual growth rate.

Nottingham, Edinburgh and Glasgow rank as the top three cities with the strongest prospects for 2020, indicating they will be towards the top end of a relatively narrow range of price growth this year. During the four weeks to January 20th this year, the demand for housing has ‘bounced’ with a 26% more people looking for a home than the same period in 2018 and 2019. In fact, all cities apart from for Belfast have recorded an increase in demand compared to the last 2 years.

Demand for housing in Edinburgh remains strong overall with 6% annual growth in prices over 2019. However, demand has levelled out in the first 4 weeks of the year compared to the last 2 years.

If you would like to take advantage of the predicted growth this year by investing in property in Edinburgh or Glasgow, talk to us at The Mortgage Hub about securing the best mortgage for your circumstances.

Factors that can affect the value of your home

A recent study of 3,000 property buyers by research company The Advisory found some surprising ways in which your property could be more appealing and sway people to make an offer on your home.

Some of the findings were out of the property owner’s control. These include living on a tree-lined street (which added 15% to the value) and being close to one of the UK’s top schools (adding an average £52,000), being waterside (adding 10 – 15%), living near a Waitrose (adding £40,00) and a Carluccio’s (adding 18%), or having a blue plaque (5%). However, there are several aspects that are within your control and changes you can make before you put your home onto the market.

Energy efficiency

Making your home energy efficient can add 14% to the value of your home. Make sure you are on the best possible tariff using utilities comparison websites and invest in an energy efficient boiler if the existing one is in need of replacement. Draft proof your home and make sure you have sufficient insulation.

Greenery

Surprisingly, having trees and greenery surrounding your home and even a wisteria growing on the property façade can add up to 5% to the value of your home.

Broadband speed

Many people would be much more interested in a property if it had faster broadband, especially as many of us now work from home and rely on on-demand services for home entertainment.

Making improvements

If you make home improvements, it’s imperative that you get all permissions granted otherwise you could find that there are legal issues that can put off potential buyers. In addition, niche improvements that aren’t to everyone’s taste can be a huge turn-off, so think carefully about what you are doing to your home and who it will appeal to.

Check for damage

Water damage or structural problems will put buyers off so get the experts in to make sure everything is in order.

Clutter

According to research from Zoopla, house hunters take just ten seconds to decide if they want to live in the property. If your home is dirty, full of clutter or has an unpleasant odour this is likely to be the outcome. Make sure it’s clean, tidy and clutter free!

There are also several factors that can negatively affect the value of your home. These include Japanese knotweed which as wiped almost £20bn off UK house prices (and can affect the value by 10%). Other factors include living at a number 13, an unpleasant history, living close to a McDonald’s or living in a high crime area. These are factors to consider when you purchase a property because although these may not be an issue for you, it’s important to consider the resale aspect.

Talk to us at The Mortgage Hub if you would like advice on the best mortgage for you.

Two-Thirds of Buyers Choosing Houses Over Flats  

According to the latest research from Zoopla, two thirds of first time buyers across the UK are choosing to purchase three bedroom houses over one and two bedroom flats. In addition, a quarter of buyers in Northern Ireland are looking to buy a four bedroom home.

This latest research shows that first-time buyers are not compromising on the size of their property or the price tag that goes with it, demonstrating that they are taking a long term view of their first home. This could be because of the higher age bracket of those buying their first home and knowledge of the cost of upsizing, taking into account mortgage fees, estate agent fees and LBTT. In addition, buyers are finding that it’s more affordable when they opt for longer mortgage terms with the typical first time buyer taking out a 29 year mortgage term compared to a 25 year term ten years ago.

First time buyers are expected to be the largest purchasing group this year given that they accounted for 36 per cent of all sales last year.

Data from Zoopla shows that the gap between the average price paid between first time buyers and other buying groups has narrowed over the last twenty years. Last year, first time buyers were purchasing homes that were 8 to 12 per cent cheaper than the average, compared to 20 to 25 per cent before 2007.

The largest barriers to buying a home is meeting the affordability criteria and raising the deposit required, even though they are currently putting down 23 per cent of their home’s value compared to 9 per cent before the crisis.

Despite stringent affordability checks, according to the House Price Index figures from Zoopla (to the end of July), Glasgow is currently the most affordable place to buy property with average house prices at just 3.1 times the average wage.

Talk to us at The Mortgage Hub if you would like advice on the type of property you can afford to purchase.

House Prices and Letting – Glasgow Bucks the Trend!

Homeowner confidence

Despite the uncertainty surrounding Brexit, according to Zoopla confidence in the housing market remains high with property owners expecting prices to rise by 4.8% during the rest of 2019. In addition, 81% of people think that the value of property in their area will increase.

However, it appears that there is significant regional variation with homeowners in the northern regions feeling the most optimistic with over 90% of homeowners in Scotland expecting house prices to increase. In contrast, those in southern regions were much more pessimistic and expected a downturn in prices.

In addition, home owners in Scotland were expecting the biggest gains on 5.5% over the next six months. This is followed by homeowners in the North East and the Midlands.

The least pessimistic homeowners are in London, where just 32.8% believed that house price rises would stop in the next six months and actually fall by 6.7% with people in the south east also feeling very downbeat.

Letting

In other news announced this week, rents in the private rented sector (PRS) rose in Q1 of this year despite other sectors being impacted by Brexit uncertainty. The average property to rent in Scotland rose by 1.7% and in Glasgow, although tenants have been shopping around before renting a property, rents are up 2.9% with three bed properties rising 8.6% compared to last year. The demand for one and two bedroom properties posted strong growth at 5.3% and over half of all of Glasgow’s properties were let within just one month.

House prices

Glasgow posted the strongest gains in the UK with property values rising by 5.1% during the last year. Compared to the rest of the UK, house prices growth has fallen to its lowest level in seven year with the average property selling for 3.9% under the asking price, according to Zoopla.

In London homes are selling for 5.7% less than the asking price, but in Glasgow and Edinburgh homes are still being sold for more than the original asking price.

Talk to us at The Mortgage Hub if you would like independent advice on the best mortgage product for your needs.

The Mortgage Hub is an independent mortgage advisor serving the greater Glasgow area. Whether you are planning to buy your very first home and need the right first time buyer mortgage, or are looking to re-mortgage due to a house move or to growing family – we understand your journey is so much more than a financial process, it’s a journey to achieve your dreams, improve your lifestyle and achieve your true potential.

Buying a Fixer Upper? What You Need to Consider

As we reported recently, if you purchase a second home that is uninhabitable you can avoid the LBTT surcharge. Not only can you avoid this additional tax payment, you could also maximise your return on investment.

According to recent research from Rightmove, over 90% of people would consider buying a property in a state of disrepair. If you’re among them and decide to purchase a property in need of renovation, what should you consider?

Get the right advice

The first step is to get the right advice from the off. Talk to architects, builders and your local council to find out what you need to be aware of and what the common pitfalls are. Also talk to your local estate agent and find out how much value certain projects will add to your property as this is very much dependent on the area in which you’re buying. For example, spending money on a driveway in a rural area may not add any value whereas a driveway in an urban area where there are parking charges could make a huge difference. Talk to us at The Mortgage Hub about how you can get the best mortgage deal as soon as you see a property you are interested in buying – getting the right mortgage deal can make a huge difference to your budget and return on investment. There are many factors to consider so talk to the experts.

Work out your budget

Work out your purchase price, cost of all associated fees and get a clear picture of how much you have to spend on the renovation. Don’t work your way up – work your way down starting with the must-haves and finishing with the would-likes. Don’t forget to include a buffer as renovation projects often go over budget. Don’t try to stretch your budget by cutting corners and if you do need to cut costs apply this to your decorating and décor rather than building work. You won’t get your value for money by skimping on quality building.

Consider the type of property

It’s important to consider whether the property is located on a World Heritage Site or is a listed building. This will greatly impact the renovations that you can undertake. There could be stipulations that some original features need to remain intact, you may not be able to change the layout and any works may need to be in keeping with the design of the home. Don’t forget the outside – are there any protected trees in your garden that are at odds with your plans for landscaping? If you do opt for an older property it may be worth paying extra for a structural survey – we can advise you on this.

Don’t forget the garden

There’s no point in spending all your time and money on the inside of your property if you have no kerb appeal! Make sure you consider the outside of the property and factor in any costs to get this area up to scratch. Research has shown that outside space can add up to £22,000 to your home (Zoopla 2018) so it could be well worth the extra investment.

Work out what buyers want

Buyers want to see lots of space, plenty of natural light and a well-considered internal layout with plenty of storage to put clutter out of sight. A renovation that delivers sparkling clean kitchens and bathrooms with a hint of luxury will be a winner.

Talk to us at The Mortgage Hub about purchasing a second home or a property that needs renovating.