Posts with tag: first time buyers

Homebuyers Need to Save for 10 Years to Afford a Deposit in 34 Local Authorities

Published On: June 30, 2017 at 9:25 am

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Prospective homebuyers will need to save for ten years to be able to afford a deposit for their own home in 34 local authorities across the UK, according to a study by MoneySuperMarket.

The price comparison website analysed average house prices and typical salaries, in combination with data from its mortgage affordability calculator, to work out the average deposit needed to buy a house in the UK’s 441 local authorities.

In 20% of local authority areas, the average minimum deposit is greater than £50,000.

In Camden, the average deposit figure is 56.5% of the property’s value, which equates to homebuyers saving for 27 years – the longest of any area in the UK.

Unsurprisingly, London dominates 16 of the top 20 UK boroughs with the highest average deposit requirements.

While many prospective homebuyers will want to buy a house in the area that they currently live, many will find that affording a home in their own area could well be an impossible dream.

Using Land Registry and Office for National Statistics (ONS) house price data, MoneySuperMarket worked out the average minimum deposit for all local authorities across the UK. This is the minimum deposit that an average salaried couple would need to put down to buy a typical home in their own area. The size of the deposit is determined by how much the couple could borrow on a mortgage, given what they earn.

The results show just how difficult it can be to buy locally, with deposits reaching as much as £688,772 in Kensington and Chelsea and £490,737 in Camden.

The graphic below highlights the highest average minimum deposit in every region, along with the top 50 across the UK.

Landlords can use these figures to determine where they should be investing in private rental homes; areas with high deposit requirements will mean that many prospective buyers are priced out of purchasing a home, so will be forced to rent instead. You will likely find high tenant demand in these locations.

If you do decide to invest, remember to target the right tenants and provide safe, secure and comfortable homes to those renting from you.

Homebuyers Need to Save for 10 Years to Afford a Deposit in 34 Local Authorities

Homebuyers Need to Save for 10 Years to Afford a Deposit in 34 Local Authorities

 

Homebuyer Activity Dropped in April, but is Up on Last Year

Published On: June 14, 2017 at 8:11 am

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Homebuyer activity was down by 14% on a monthly basis in April, but was up by 19% on last year, shows the latest mortgage lending trends report from the Council of Mortgage Lenders (CML).

The data shows that homebuyers borrowed £9.6 billion in April, amounting to 51,200 loans, which is down by 16% on March, but up by 9% on April 2016.

Within this, first time buyers borrowed £4.1 billion – down 16% on March, but up by 8% on April last year. They took out 25,400 loans – 18% less than in the previous month, but 2% more than 2016.

Homebuyer Activity Dropped in April, but is Up on Last Year

Homebuyer Activity Dropped in April, but is Up on Last Year

Meanwhile, home movers borrowed £5.5 billion – down by 11% on March, but up by a significant 28% annually. This equated to 25,700 loans – a drop of 15% on a monthly basis, but up by 17% year-on-year.

Homeowner remortgage activity was down by 16% by value and 18% by volume on March’s figures, the CML found. Compared to April last year, remortgage lending was down by 15% by value and 16% by volume.

Gross buy-to-let lending also saw month-on-month decreases – down by 17% by value and 16% by volume. Compared to last year, the number of loans rose by 1%, while the amount borrowed remained unchanged.

In another set of data – seasonally adjusted figures – the CML found that first time buyer and home mover lending increased by value and remained relatively unchanged by volume compared to March.

Buy-to-let and remortgage activity also stayed fairly similar in April from March.

The proportion of household income used to service capital and interest rates continued to sit near historic lows in April for both first time buyers and home movers, at 17.3% and 17.5% respectively, the report shows.

Affordability metrics for first time buyers saw the average loan size rise from £133,500 in March to £136,500 in April. The average household income also increased, from £40,000 to £40,700. This takes the income multiple to 3.57, from 3.53.

The average amount borrowed by home movers in April grew from £172,400 to £175,500 on a monthly basis, while the typical home mover household income rose between March and April, from £54,100 to £55,200. The income multiple went up to 3.35 as a result, from 3.34.

The Director General of the CML, Paul Smee, comments: “April comparisons are distorted by the weakness last year following the Stamp Duty changes, and the normal seasonal lending surge in March. But the seasonally adjusted picture shows lending relatively unchanged month-on-month across all lending segments.

“Heading into the summer months, we expect the market to remain slightly lopsided. Buy-to-let and home movers may well remain subdued, as they have been for the last six months. But both first time buyer and remortgage lending should maintain momentum on the coattails of the attractive deals available.”

Shaun Church, the Director of mortgage broker Private Finance, continues: “The mortgage market remained relatively subdued in April and, although lending volumes are higher than a year ago, this is in the context of an extremely quiet April 2016 following the changes to Stamp Duty. The figures for April are also skewed somewhat by a seasonal lending surge in March, which the CML acknowledges. One of most significant barriers to increased activity remains the lack of supply and, while this issue persists, the market will struggle to get into gear.

“However, it isn’t all bad news. Considering the huge economic and political uncertainty of the last 12 months, the market’s relative resilience is a testament to its strong foundations. This should continue to support a baseline of activity in the months ahead. Despite the lack of supply, demand from buyers will be supported by appetite for low mortgage rates and an expanding range of products.”

The Bank of Mum and Dad is Funding 23% More Purchases than Last Year

Published On: May 2, 2017 at 9:55 am

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The bank of mum and dad has leant 23% more for their children’s property purchases over the past year, which highlights a symptom of the UK’s broken housing market, according to research released by Legal & General (L&G) and Cebr.

The rise in funding by the bank of mum and dad emphasises the supply-side crisis in the UK property market, and the critical need to build more homes across all tenures.

The research found that the bank of mum and dad will lend over £6.5 billion in 2017 – up from £5 billion in 2016, providing deposits for more than 298,000 mortgages and helping their children purchase homes worth £75 billion.

The Bank of Mum and Dad is Funding 23% More Purchases than Last Year

BThe Bank of Mum and Dad is Funding 23% More Purchases than Last Year

The bank of mum and dad is now on par with the ninth largest mortgage lender in the UK – up from ten last year – and will be involved in 26% of all property transactions that take place in the UK market this year.

In 2016, a third of prospective homeowners received financial support to buy a property from friends and family. In 2017, that figure jumps to almost half (42%). The amount of assistance has risen from an average of £17,500 in 2016 to £21,600 in 2017 – an increase of 23%.

The research found that millennials are the biggest recipients of bank of mum and dad funding, with 79% of funds going to people aged under 30-years-old.

The study believes that the bank of mum and dad will fund less purchases in 2017 than in 2016 – a 2.5% decrease – from 305,900 to 298,300, but only because overall housing market transaction volumes are down.

Of all bank of mum and dad funding, 76% is used for the deposit, while just 4% goes solely to mortgage payments.

Parents in the South West are the most generous, providing £30,000 of financial support per transaction on average – even more than London (£29,400). Welsh parents were found to give the least – an average of £12,500.

Good quality, well-connected housing is critical to supporting the UK’s economic position and fuelling growth. If people cannot find affordable housing options that support a good quality lifestyle in places that they want to live, they will go elsewhere and take their skills with them.

L&G is playing its part in housing creation, backing a fast growing pipeline of over 70,000 new homes over the next five to ten years and looking to help provide the UK’s population with high quality, affordable living at all stages in their life cycle. This includes investment in Build to Rent projects.

The Head of LGIM Real Assets, Bill Hughes, says: “The growing role of the bank of mum and dad in supporting young people getting onto the housing ladder signifies that the UK property market is simply not building enough homes. This is not sustainable and, as an industry, we need to work together to fix the housing market so that we are providing housing in areas which are well connected and where people want to live. The right approach is to regenerate not just residential housing, but the totality of the built environment of towns and cities in which the homes are built. Infrastructure, local economic growth and jobs are all key to creating thriving communities.”

James Lidgate, the Director of Housing at Legal & General Capital, also comments: “This research further highlights that, as an industry, we need to diversify the housing market in order to keep up with the UK’s housing demands. There is no single solution to housing – it is about all tenures and all forms of construction. Good quality, well-connected housing is critical to supporting the UK’s economic position and fuelling future growth.”

Supply of Homes for Sale at Lowest Level since Records Began

Published On: April 27, 2017 at 9:47 am

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The supply of homes for sale in March was at the lowest level for the month since records began, shows the March Housing Report from NAEA Propertymark.

Supply of homes for sale 

The number of homes for sale on estate agents’ books dropped to an average of 39 in March, from 44 in February.

This is the lowest figure recorded for March since records began 16 years ago, in September 2002.

Supply of Homes for Sale at Lowest Level since Records Began

Supply of Homes for Sale at Lowest Level since Records Began

Annually, the supply of homes for sale dropped by 28%, as agents had an average of 54 properties on their books last March.

Demand for properties

The number of homebuyers registered per NAEA member branch dropped in March as well. Estate agents had an average of 397 prospective buyers on their books last month, compared with 425 in February.

In March last year, there were 417 prospective buyers registered per branch, marking a 5% year-on-year decrease.

Sales to first time buyers 

The proportion of sales agreed to first time buyers increased to 25% in March, up from 22% in February.

The total number of sales to first time buyers dropped significantly from 30% in January to 22% in February, so this increase is a step in the right direction, notes NAEA Propertymark.

Sales agreed

The average number of sales agreed dropped in March, to ten per branch. In February, 11 sales were agreed per branch – the highest number recorded since September 2007.

In March, one in every 20 (5%) properties sold achieved more than the original asking price. This figure has continued to rise since the low of 12% recorded in November 2016.

Stamp Duty reforms

A year on since the higher rates of Stamp Duty for additional properties were introduced, two thirds (64%) of estate agents have seen demand from buy-to-let investors drop.

Just under two fifths (37%) of agents have seen house prices rise as a direct result of the Stamp Duty reforms.

The Chief Executive of NAEA Propertymark, Mark Hayward, comments: “There are currently ten house-hunters chasing each available property, and with supply at the lowest level for March since records began, building more homes to satisfy demand needs to be a priority.

“In line with this, while sales to first time buyers rose slightly in March, they’re still much lower than the levels seen in the last three months of 2016, which is cause for concern. The upcoming General Election is a good opportunity for each party to outline their plans for tackling the housing crisis – we hope to see it prioritised so we can make the market a better place once and for all.”

Asking Prices Hit Record High, Particularly for First Time Buyers

Published On: April 24, 2017 at 9:38 am

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Asking prices hit a record high in April, with homes targeted at first time buyers driving growth, according to the latest House Price Index from Rightmove.

Asking Prices Hit Record High, Particularly for First Time Buyers

Asking Prices Hit Record High, Particularly for First Time Buyers

Figures from the property portal show that the average new asking price reached a record high of £313,655 in April, up by 2.2% on an annual basis and exceeding the previous peak of £310,471 recorded in June 2016.

Typical first time buyer asking prices surged by 6.5% in the 12 months to April, reaching an average of £194,881.

Second stepper properties rose in value by an average of 3.1% over the year, to hit £265,940, while those at the top of the ladder increased by 1.8%, to an average of £555,963.

Rightmove also reports that sales agreed – based on properties listed as sold subject to completion – rose by 10% year-on-year, which is the highest level at this time of year since 2007.

This helped average time on the market drop from 71 days in February to 65 in March, while stock increased from 52 to 65 over the same period.

The Director of Rightmove, Miles Shipside, comments: “High buyer demand in most parts of the country has helped to propel the price of newly marketed property to record highs.

“There are signs of a strong spring market, with the number of sales agreed achieved at this time of year being the highest since 2007.”

He continues: “It remains to be seen what effect the run-up to the snap election will have, though any slowdown in activity will be counterbalanced by the market’s current fast pace. Indeed, in locations where choice of suitable property is limited, hesitation could mean losing out to others who still decide to act.”

Shipside predicts that stretched buyer affordability will continue to be a price moderator for vendors who are over-ambitious with their pricing, alleviating the pace of price growth.

He adds: “Strong buyer activity this month has led to 10% higher number of sales agreed than in the same period in 2016. This large year-on-year disparity should be viewed cautiously, as the comparable timespan in 2016 saw a drop in buy-to-let activity with the additional second home Stamp Duty.

“However, they are also up by 3.8% when compared to 2015. With the growth in household numbers and new build supply struggling to keep pace, demand is strong and has led to the highest sales agreed numbers at this time of year since the heady pre-credit crunch levels.”

Home Buying Activity Rose by 7% in February, Reports CML

Published On: April 12, 2017 at 8:18 am

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The latest lending trends data from the Council of Mortgage Lenders (CML) shows that home buying activity rose by 7% in February on a monthly basis.

On a non-seasonally adjusted basis, homebuyers borrowed £8.9 billion in February, up by 6% on January and 2% on an annual basis. This came to 48,600 loans, up by 7% on January and 2% on February 2016.

First time buyers borrowed £3.8 billion in February, up by 6% on the previous month and 12% year-on-year. They took out 24,200 loans, up by 7% on January and 11% on last year.

Home movers borrowed £5.1 billion, up by 6% on the previous month, but down by 4% annually. This equated to 24,400 loans, up by 6% month-on-month, but down by 6% compared with February 2016.

Homemover remortgage activity was down by 26% in value and 23% in volume on January. On an annual basis, remortgage lending was up by 8% in value and 9% in volume.

Gross buy-to-let lending experienced monthly declines, down by 13% in value and 12% in volume. Compared to February last year, the number of loans dropped by 26%, while the amount borrowed fell by 13%.

On a seasonally adjusted basis, first time buyer and home mover activity increased by value month-on-month and year-on-year. Buy-to-let purchase and remortgage activity remained unchanged by volume and value on a monthly basis, but decreased yearly, by 44% in value and 42% in volume.

Home Buying Activity Rose by 7% in February, Reports CML

Home Buying Activity Rose by 7% in February, Reports CML

Homeowner purchase lending

There were more loans advanced for house purchase in February than any February since 2007. However, due to the seasonal dip in activity, borrowing was relatively low compared to monthly activity over the past 12 months.

The proportion of household income used to service capital and interest rates continues to sit near historic lows for both first time buyers and home movers, at 17.4% and 17.6% respectively.

Affordability metrics for first time buyers saw the average loan size drop slightly from £132,300 in January to £132,100. The average household income also decreased, from £40,200 to £40,000.

The average amount borrowed by home movers rose to £176,000 from £175,300 in the previous month, while the typical home mover household income increased slightly from £54,900 to £55,000.

Buy-to-let lending 

Buy-to-let activity was driven by buy-to-let remortgage lending, which accounted for over two thirds of total lending. The number of loans for buy-to-let purchase advanced in February was at a ten-month low, in part due to the traditional seasonal dip in activity over the winter months.

The Director General of the CML, Paul Smee, comments: “Seasonal factors traditionally keep the market quieter in winter months, but 2017 began relatively strong on the house purchase side. Borrowers took out more loans to purchase a home in the first two months of 2017 than any year since 2007. This is down to strong first time buyer activity, which has consistently matched home mover borrowing over the past six months – a trend not seen in the UK for 20 years. House purchase activity on the buy-to-let lending side remains weak.

“This trend is expected to continue because of the tax changes from April and because lenders are tightening affordability criteria in response to PRA [Prudential Regulation Authority]-mandated stress tests.”

The Director at mortgage broker Private Finance, Shaun Church, responds to the data: “February was a strong month for the homebuyer market, with ultra low mortgage rates driving high levels of activity. While house prices continue to rise faster than incomes, with the ONS [Office for National Statistics] recording a 5.8% increase in house prices over the last year, low rates are clearly making life easier for buyers, by reducing their monthly payments. This improved affordability is also benefitting first time buyers. Lending to first time buyers was 12% higher in February than a year earlier, which shows that while raising a deposit can prove challenging, low rates provide plenty of opportunity for aspiring buyers to get a foot on the ladder.

“However, other areas of the market are lagging, with the buy-to-let sector continuing to struggle under the weight of regulatory change. While year-on-year comparisons are invalidated by the rush to beat the Stamp Duty changes in Q1 2016, the fact that the number of new buy-to-let loans is falling from month to month is a cause for concern. A strong private rented sector is an essential part of a healthy housing ecosystem, and millions of people depend on it for affordable and secure accommodation.”

He continues: “The buy-to-let market still remains a good bet for investors in the long-term, however, and many will be undeterred from expanding their portfolios. For one thing, rental property still offers more stable returns than asset classes like equities and bonds, which are much more sensitive to macroeconomic turbulence. Furthermore, demand for rental accommodation remains high, and this is unlikely to change any time soon. We expect that the new regime will change investors’ behaviour, rather than deter them en-masse. Growing numbers of landlords are looking to incorporate their portfolios into a limited company structure, which is a highly efficient investment vehicle for investors with the right profile.”

Steve Olejnik, the Chief Operating Officer at Mortgages for Business, adds: “Year-on-year comparisons in buy-to-let mortgage lending are made to look unfavourable as a result of the huge rush in activity in Q1 2016, caused by investors rushing to beat the changes to Stamp Duty. In reality, the buy-to-let market has weathered challenges like the EU referendum and the PRA’s changes relatively well, and the number of new loans remained stable between January and February.

“We believe that a sustainable level of buy-to-let lending is around 15% of overall mortgage lending, and we are currently seeing the market rebalance towards this, with lending to homebuyers continuing to grow from month-to-month. Successful policy changes have been a key driving force behind this fall in buy-to-let’s share.”

Olejnik concludes: “Buy-to-let lending is likely to be more subdued this year than it was in 2016, but it still remains a good proposition for investment, particularly compared to more volatile asset classes, like bonds and equities. It will take a while for landlords to adjust to the new environment of increased Stamp Duty, tougher stress tests and the curtailment of tax relief, but the market still offers strong returns for those who take a sensible and measured approach to their portfolios. Incorporating investments into a limited company vehicle can be an excellent option for landlords with the right profile who seek professional tax advice.”