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.

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.

Here in Scotland, we have seen house prices surge to record highs – with the latest figures from the Office for National Statistics showing that the average house price rose by nearly 11% in the year to March 2021.

According to the ONS, house prices in Scotland increased by 10.6% over the year to March 2021, compared with a rise of 10.2 % in England, 11% in Wales and 6% in Northern Ireland. What’s more, the latest figures from the Nationwide House Price Index show that house price growth reached its highest level for seven years in May at 10.6% and month-on-month prices grew by 1.8%, down slightly from 2.3% in April.

This time last year, property market activity collapsed in the wake of the first lockdown with housing transactions tumbling to a record low of 42,000 in April 2020. However, activity surged in the last quarter of last year and into 2021, hitting a record high of 183,000 in March. Although the stamp duty holiday gave the market momentum, this continued as interest rates remained low and the government announced the Mortgage Guarantee Scheme.

Why is this happening?

Pent up demand caused by the lockdown, a re-evaluation of housing needs, the stamp duty holiday, low interest rates and the reintroduction of high LTV mortgages have resulted in the number of transactions from January to March being nearly half on the start of last year.

The figures from the Office for National Statistics (ONS) reveal that the average price of detached properties in the UK is rising faster than flats as buyers seek more internal space to accommodate an increase in home working, along with high demand for outside space following a year of lockdowns and only being able to socialise with friends and family in our gardens.

Buyers who have continued to earn have also been saving money given that they have been unable to take overseas holidays, make large life changing purchases, or spend money socialising.

Fast-moving market

Many homes across Scotland are getting snapped up within days – sometimes hours – of hitting the market, as competition is rife. The supply can’t meet the current demand, and this is pushing up prices. This fast-moving property market can cause issues for buyers – especially first time buyers – as they are being priced out of the market. In addition, those who have sold quickly are struggling to buy.

According to research from Nationwide, of those moving or considering a move, 33% were looking to move to a different area, while nearly 30% were doing so for more outside space. The majority of movers were looking to make the move to more rural areas especially among the older generation. What’s more, 36% said they were more likely to consider enhancing their home as a result of Covid-19, with nearly half 46% of these looking to add or maximise space.

First time buyers

Demand for property from first time buyers is extremely high and the inevitable upward pressure on prices is making it particularly hard for first-time buyers to get onto the property ladder. Prices are accelerating faster than they can save for a deposit and they are struggling to meet the affordability criteria.

The stamp duty holiday and re-introduction of 95% loan-to-value mortgages have played a huge part in the increase in buyer numbers – with the repeated introduction of restrictions resulting in buyers looking for more space to accommodate the continuing home working requirement. First time buyers who have had difficulty with their credit rating are also struggling as lenders continue to be cautious however, there are options available for credit impaired buyers. However, many people are in the position where they are stuck paying rents that are substantially higher than mortgage payments.

If you are looking to remortgage, move up the ladder or buy your first home, talk to us at The Mortgage Hub to find out how we can help you to secure the best mortgage for your circumstances.

In his Budget last month, Chancellor Rishi Sunak confirmed that the 95% mortgage scheme would boost the market and bring back the low-deposit mortgages that were largely withdrawn as a result of the pandemic. Most lenders were offering a maximum 90% loan to value mortgage. This made it difficult for many buyers to get onto the property ladder as they were unable to save a sufficient deposit. In addition, the market was largely closed during the first lockdown and by the time it reopened, a pent-up demand and a re-evaluation of buyer’s requirements resulted in a buoyant market and rising house prices. This further priced first time buyers out of the market.

The new government-backed low-deposit mortgage guarantee scheme is now available to lenders meaning that more options are available to first time buyers with a small deposit. What’s more, the scheme is open to all buyers, not just first time buyers and is available for all properties costing up to £600,000 and is not limited to newly built homes. According to figures from Rightmove, this accounts for 86% of all homes currently for sale.

The aim was “a policy that gives people who can’t afford a big deposit the chance to buy their own home.”

Until now, first time buyers have been unable to find a 95% LTV mortgage deal although one or two lenders would release products for a few days or weeks at a time and they would be restricted to certain postcodes.

Following the budget announcement, Rightmove reported that the use of their mortgage calculator jumped by 85% within half an hour of the announcement and traffic to the site jumped by 16%.

Mortgages under the scheme will be available until 31 December 2022. The affordability checks will remain the same with most mortgage lenders offering loans of up to 4.5 times the buyer’s salary.

If you are considering taking advantage of this new scheme, talk to us at The Mortgage Hub. We can advise you as to whether this is the best option for you and the costs involved.

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.