Posts with tag: first time buyers

64% of would-be homeowners rent first

Published On: May 24, 2016 at 10:58 am

Tags: deposit,first time buyers,property,rental market,renters

Nearly two-thirds (64%) of would-be homeowners in Britain rent a property before picking up the keys to their own place, according to new research.

Data from the report by Clydesdale and Yorkshire Banks underlines the difficulty that many potential buyers are facing in the current market.

Renters’ struggles

Saving up for a deposit is one of the greatest hurdles facing first-time buyers. The survey found that renters are not likely to get assistance from their family, with only 41% saying that this was the case. This was in comparison to 62% living with their parents.

Building up a sufficient deposit is also a challenge to tenants currently living in the rental market, with an average months rent standing at £681.70.

Of those living with their parents before purchasing their own home, 21% said they don’t pay rent. One-third of would-be homeowners said that they put this money towards their deposit instead.

52% said that they pay a fixed amount each month to their family, with 22% contributing towards food and bills.

Stress

In addition, the research found that those currently residing in rental properties find getting a foot on the property ladder more stressful. 28% admitted they were finding the process difficult, in comparison to 16% of those still living with their parents.

Steve Fletcher, head of customer banking networks at Clydesdale and Yorkshire Banks, said, ‘buying a first home is one of life’s most significant financial milestones and the banks can work with the individual needs and circumstances of potential first time buyers to help make their dreams of becoming a homeowner a reality.’[1]

64% of would-be homeowners rent first

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Additional research conducted by Royal London indicates that nearly five million renters in Britain have no plan in place to cover their rental payments, should they become too ill to work.

This alarming figure comes despite 27% of renters in work saying they were aware of someone who had struggled in a similar situation. 34% admitted they didn’t know how long they could pay their rent for should they be unable to continue in their employment

60% said that they could only continue paying their rent for three months or less.

Solutions

In terms of solutions, 53% said their first move would be to apply for state benefits, while 47% would cut their expenses and 39% would use their savings.

Just 7% of renters in employment said that they had consulted a financial advisor.

Debbie Kennedy, head of protection for Royal London Intermediary, noted, ‘renters who assume that housing benefit will be there when they need it could find the reality is very different. A series of cuts to housing benefit means that more people would not get their rent paid in full if their income fell unexpectedly.’[1]

‘It would be bad enough to be taken ill without the added anxiety of getting behind with the rent and facing possible eviction. Income protection may be more affordable than people realise and can provide a financial safety net and enable people to focus on getting better,’ Kennedy added.[1]

[1] http://www.propertywire.com/news/europe/uk-property-market-buyers-2016052411948.html

A Brexit Would Help First Time Buyers

Published On: May 20, 2016 at 10:14 am

Author: Em Morley

Categories: Property News

Tags: Brexit,EU referendum,first time buyers,house prices

First time buyers in the UK would benefit from a Brexit in next month’s EU referendum, according to a leading ratings agency.

Moody’s reports that a decline in house prices followed by a vote to leave the EU would make it more affordable for first time buyers to get onto the property ladder.

Vice President and Senior Analyst at Moody’s, Gaby Trinkaus, explains: “First time buyers would benefit from lower competition for housing, as house price and rental inflation would slow down if immigration is curbed.”

A Brexit Would Help First Time Buyers

She adds that whatever the outcome of June’s EU referendum, the outlook is picking up for first time buyers in the capital.

“Regardless of the referendum vote, the ambitious affordable housing agenda for London following the mayoral election will help those looking to get on the housing ladder.”

Earlier this month, Sadiq Khan was voted the new Mayor of London, after putting housing at the core of his mayoral manifesto.

Many housing experts have claimed that a vote to leave the EU would cause a house price crash, however, a recent poll suggests that property professionals are calling for a Brexit.

Just yesterday, the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA) claimed that leaving the EU would have “damaging consequences” on the property market.

However, Moody’s claims that a Brexit would be a positive move for first time buyers, many of which are currently priced out of the market.

In March, UK house prices increased at the fastest monthly rate since 2004. The boost is thought to be due to a rush of landlords investing in the buy-to-let sector ahead of Stamp Duty changes.

Moody’s believes that the London property market could be even more affected by a Brexit, and landlords may struggle to pay their mortgages because of a drop in rental demand.

Trinkaus comments: “A decline in rental demand could hit landlords’ ability to pay their mortgages on buy-to-let properties if London becomes less attractive to foreign nationals.”

Moody’s also warns that self-employed Britons are more at risk than employees, as their pay may fluctuate in the event of a Brexit. The firm believes that if a vote to leave the EU has a bigger negative impact on the UK economy than expected, mortgage arrears would increase among self-employed borrowers.

It says: “The highest risk would apply to those borrowers with additional risk characteristics, such as poor payment history, high loan-to-value or interest-only features.”¹

How do you think a Brexit would affect the housing market?

¹https://www.theguardian.com/business/2016/may/19/first-time-buyers-brexit-moodys-eu-referendum

Landlords Pushing Up the Price of First Time Buyer Homes

Published On: May 16, 2016 at 9:56 am

Author: Em Morley

Categories: Landlord News

Tags: average house price,buy-to-let landlords,first time buyers,house prices,Stamp Duty

Have buy-to-let landlords pushed up the price of first time buyer homes? Rightmove’s latest data seems to suggest so.

Aspiring first time buyers have been left with a property “famine” after landlords rushed to beat the 3% Stamp Duty surcharge at the beginning of the year.

Landlords Pushing Up the Price of First Time Buyer Homes

Although Chancellor George Osborne claimed that his crackdown on the buy-to-let sector would open up the market to first time buyers, it appears that the opposite has occurred.

Rightmove’s House Price Index for May found that the flood of landlords rushing to beat the 1^st April Stamp Duty deadline has left fewer properties on the market, particularly in the lower end sector.

The average price of a first time buyer home – properties with two bedrooms or less – has surged by 6.2% over the past month, to £194,224. This is the greatest monthly increase recorded for this sector since February 2012.

Overall, the average asking price across all sectors has risen by 0.4% since April, and 7.8% annually, to £308,151.

For first time buyers, the greatest annual increase in house prices was seen in Croydon, Greater London, where prices rose by 18.6% to £297,770.

Outside the capital, Dartford experienced an 18.5% jump to £244,310, while Luton’s average price was up to £186,900.

There have, however, been some price drops. The largest, 7.5%, was in Llandudno, where the average price is now £145,703.

The Director of Rightmove, Miles Shipside, comments: “Buy-to-let investors have had a bricks and mortar feast between the Chancellor’s announcement in November and the tax deadline at the end of March, and the result is a famine of suitable property and higher prices. First time buyers are still eager to secure some of the very limited suitable supply in many parts of the country.

“Estate agents have perhaps been focused on getting investor sales through to completion before the tax hike, and some may have been surprised by the continuing momentum and scarcity of stock to meet ongoing demand.”

He adds: “The net effect is eye-watering increases in asking prices in some towns, and is further stretching first time buyers’ affordability, even though they are competing against fewer buy-to-let investors in the market.”

The Housing Crisis is Deepening as Homeownership Remains Unaffordable

Published On: May 11, 2016 at 8:48 am

Author: Em Morley

Categories: Property News

Tags: affordable homes,first time buyers,housing crisis,property ladder

The housing crisis is deepening, as homeownership remains unaffordable for the high number of aspiring first time buyers who cannot get onto the property ladder, according to new research conducted by YouGov on behalf of the HomeOwners Alliance and BLP Insurance.

The study, now in its fourth year, polls over 2,000 UK adults on their housing concerns and the latest trends affecting homeowners and those looking to buy a home.

The survey highlights the growing appetite of first time buyers to get on the housing ladder. Around three-quarters (73%) of non-homeowners now say they would like to own their own home, compared to 69% last year, 68% in 2014 and 65% in 2013.

The Housing Crisis is Deepening as Homeownership Remains Unaffordable

Although the desire to own a home is mounting, the ability for first time buyers to purchase a property and save for a deposit remain the UK’s main concerns, with 82% and 80% respectively saying that these are serious issues.

Additionally, the proportion of aspiring homeowners who say that the availability of housing is a serious problem has soared to 78%, up from 72% last year. Hopeful homeowners are also increasingly concerned about the quality of housing, with 60% naming it a serious issue.

The study also found that the housing crisis is most severe in the capital. However, the new Mayor of London, Sadiq Khan, has set ambitious aims to tackle the shortage of affordable housing.

Positively, there was a noticeable drop in concern about the rates of Stamp Duty, after the Government’s reforms were introduced almost two years ago.

However, landlords are now facing a further 3% in Stamp Duty on buy-to-let properties. Concerns have been raised that landlords may decide to leave the sector, which would cause a decline in private rental property stock; further exacerbating the affordability crisis.

The Chief Executive of the HomeOwners Alliance, Paula Higgins, comments on the results: “Despite a blizzard of Government initiatives aimed at helping homeowners, the housing crisis is deepening across the country, with ever more non-homeowners wanting their own home, and ever greater concern about the lack of housing.

“Many Government policies have boosted demand for homes, but what this survey shows is that the real problem is the desperate shortage of houses. Until the Government tackles the fundamental issue that we just don’t have enough good quality homes, the housing crisis will continue to deepen and a generation will continue to have their dreams of homeownership crushed.”

The Chief Executive of BLP Insurance, Kim Vernau, also responds: “We are now at a critical juncture for the construction industry and housing market. The Government urgently needs to speed up the delivery of new homes for aspiring first time buyers. Tenures of all types are required across the country, and affordable housing and social housing should also be a priority.”

With a high number of prospective first time buyers struggling to purchase their own homes, demand for private rental property looks set to remain strong. Therefore, good landlords that stick to the law and rent out good quality homes are crucial – make sure you check LandlordNews.co.uk regularly for landlord updates.

Barclays Launches 0% Deposit Mortgage for Homebuyers

Published On: May 4, 2016 at 11:24 am

Author: Em Morley

Categories: Finance News

Tags: bank of mum and dad,first time buyers,mortgages,property ladder

Barclays has launched a 0% deposit mortgage for homebuyers, as research suggests that 25% of all first time buyers need help from the bank of mum and dad to purchase a property.

According to data from Legal & General, family and friends are expected to provide deposits worth a total of £5 billion, averaging £17,500 per property, for 300,000 mortgages this year.

A total of 256,400 mortgage borrowers will receive parental support, 27,500 will get help from friends, while 22,500 will accept funding from grandparents.

Legal & General believes that a lack of housebuilding and the impact of low annual wage growth (2%) against rising house prices (currently increasing at 7.6% per year) are the main reasons that first time buyers are struggling to get onto the property ladder.

Barclays Launches 0% Deposit Mortgage for Homebuyers

The CEO of Legal & General, Nigel Wilson, comments: “If we are ever to end or reduce our reliance on the bank of mum and dad, we need a new innovative approach to housing. Helping first time buyers is necessary, but not the whole solution.

“We need to modernise housebuilding and make it more efficient so that we can increase supply and quality for all forms of tenure, and all income and age groups, from students to pensioners.”

He adds: “Families clearly cannot continue to use all of their net wealth to help their offspring onto the housing ladder without putting their own financial stability at risk.”¹

In London – which has the highest and fastest house price growth in the UK – this year, 51% of buyers will receive assistance with their mortgages.

However, Barclays has now announced that the 0% deposit mortgage has returned. With its family springboard mortgage, buyers will no longer need to put down a deposit.

This deal previously allowed those with a 5% deposit to get onto the property ladder, as long as someone else – often the homebuyer’s parents – put cash equating to 10% of the property price into a savings account linked to the mortgage.

Under the new deal, only the 10% contribution is needed. This cash will be returned to the borrower’s parents after three years, with interest added, provided the borrowers have kept up with their mortgage repayments.

The lender has also raised the maximum amount that homebuyers can potentially borrow as a multiple of their income under the deal. Those with an income of more than £50,000 per year will now be able to borrow up to 5.5 times their income, as opposed to 4.4.

A buyer with a 0% deposit could get a three-year fixed rate of 2.99% under the family springboard mortgage, while someone with a 5% deposit could get a rate of 2.79%.

Parents putting cash into the savings account will receive an interest rate of 2%.

The need to raise the huge deposits required is often named the main barrier to getting onto the property ladder by first time buyers. Recent research by Barclays found that 35% of prospective buyers are forced into asking their parents for help.

A separate study by Experian shows that 27% of Britons aged 55 and over have given financial support to someone to help them buy a house, despite 15% saying they are not financially comfortable themselves.

¹http://www.propertyindustryeye.com/bank-of-mum-and-dad-is-a-top-ten-lender/

Landlords to Blame for Decline in DIY Among Under-30s?

Published On: May 1, 2016 at 8:29 am

Author: Em Morley

Categories: Landlord News

Tags: buy-to-let landlords,DIY,first time buyers,Generation Rent,housing crisis

According to new research, buy-to-let landlords are to blame for the sharp decline in under-30-year-olds carrying out DIY work in their homes.

Generation rent cannot afford to buy and fix-up their own homes, reports credit card provider MBNA.

The firm says that spending by under-30s on DIY has fallen by a third since the mid-1990s. It blames the decrease on the rise of buy-to-let landlords.

These figures arrive as a report from Halifax shows that the average age at which people purchase their first home is still rising, with buyers having to take out longer mortgages in order to get on the property ladder.

MBNA’s Mark Elliott explains: “Generation rent is usually barred from making home improvements by clauses in their tenancy agreements. Although [overall] DIY spending has grown by 42% in real terms since 1996, an increase in the proportion of people renting in the UK could impact the sector’s growth in the future.”

Landlords to Blame for Decline in DIY Among Under-30s?

Based on spending trends among millions of credit card customers, under-30s’ spending on DIY has dropped by 32% since 1996, to an average of £108 per year. At the same time, 45-60-year-olds have increased their spending, to an average of £240 a year.

“Any further increases in the average age of first time buyers could impede the DIY sector’s future growth by narrowing the window in which most people undertake DIY tasks during their lives,”¹ says Elliott.

The report from Halifax found that the average first time buyer is now almost 31, compared with 27 in the early 90s. Some predictions say the average age of a first time buyer could be over 40 in the next ten years.

The young adults who are able to get onto the property ladder have to stretch themselves much further with ever-longer mortgages, says Halifax.

It reports that 26% of first time buyers are taking out 35-year mortgages, up from 16% in 2007.

As the average age of a first time buyer rises and the mortgage term is stretched, many will still be paying off their debt into retirement, warns the lender.

The report states: “One in three (34%) young people don’t expect to pay off their mortgage under after their 60^th birthday – more than one in 20 (6%) still expect to be paying their mortgage over the age of 70, while almost one in ten (8%) expect to be paying their mortgage throughout their life.”

The research also highlights the huge deposits that young buyers now have to save. The average deposit size increased by 13% in 2015 to a huge £32,927.

Until now, the size of the deposit has been the single biggest barrier to buying a home. But now, it is the size of the deposit and the absolute level of house prices combined that are keeping youngsters off the property ladder.

“The generation rent report has repeatedly shown that raising a deposit has been the consistent barrier for the majority of would-be homeowners,” says Halifax. “However, the 2016 report tracks the emergence of high property prices being perceived as an increasingly large barrier to purchasing a first home (rising to 60% in 2016 compared with 52% in 2011). The average price of a first property is now £196,801, rising from £134,889 in 2010.”¹

But the situation does not look set to improve. Figures from the Office for National Statistics show that the number of private rental homes has more than doubled in recent years, from 2.13m in 2001 to 4.74m in 2015. And prices in the private rental sector aren’t low either – the average two-bedroom property in London is forecast to cost £2,000 per month by September.

¹http://www.theguardian.com/lifeandstyle/2016/apr/29/buy-to-let-landlords-decline-diy-under-30s-generation-rent-age-first-time-buyer