Posts with tag: first time buyers

Tenants optimistic despite rising costs of housing

Published On: March 2, 2016 at 10:21 am

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The latest report from Your Move has indicated that tenants remain optimistic, despite rises in housing costs, mortgage and deposit fees.

In January, a number of tenants were asked when they planned to buy their first home. 15% said that they were confident of doing this within the next year. This was a rise from the 6% who were equally as confident in September 2015.

Homeownership dream

Additionally, the number of renters who said that they would never realistically be able to make it onto the property ladder was 10%, down from 12% in September and 13% in February 2015. Those in rental accommodation who want to own a property remains very high, with 94% of tenants dreaming of their own home.

This optimism towards home-ownership goes against the soaring costs attributed to owning a property. The average first-time buyer deposit was £28,393 in January, a rise of 6.3% year-on-year and the highest since August 2013. In turn, this has impacted on the number of initial buyer income taken up by deposit costs. In January 2015, a property deposit accounted for 70.3% of first-time buyer income. By January 2016, that figure had increased to 72.2%, the greatest since December 2013.

Similarly, the LTV rate is starting to decline, with January’s total of 82.9% showing a 0.5% monthly fall. This means that first-time buyers will be able to borrow less against the value of their desired home. As a result, they will be forced to pay more upfront. However, the absolute number of higher LTV loans increased in January by 7.3% in the month, according to the Mortgage Monitor from e.surv.

Tenants optimistic despite rising costs of housing

Tenants optimistic despite rising costs of housing

Fearless

Adrian Gill, director of estate agents Your Move and Reeds Rains, noted, ‘first-time buyers are moving from weariness to fearlessness. They are long-used to the housing market being a sellers’ arena and have come to expect daunting deposit costs and prohibitive property prices.’ He went on to say however, ‘the desire among first-time buyers to own their own home is outweighing those considerations as they resolve to get on the property ladder sooner rather than later-be that through saving money or compromising on their property specifications.’[1]

‘Moreover, despite the gloomy headline figures, there are still enough positive fundamentals in the property market to make taking the plunge a worthwhile investment. High LTV loans are plentiful , the average mortgage rate is still at rock-bottom levels-bolstered by the Bank Of England’s refusal to contemplate raising rates anytime soon-and the economic outlooks remains mostly sunny. Indeed, first-time buyers getting on the ladder now are demonstrating cunning as well as courage-they understand that, while the homeownership costs may not be ideal, conditions could be worse. After months of turbulent fortunes, they’ve come to know better than to look a gift horse in the mouth,’ Gill concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/tenants-remain-optimistic-in-the-face-of-rising-home-ownership-costs.html

Buy-to-let tax changes criticised by Savills

Published On: March 1, 2016 at 10:28 am

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Savills has become the latest high-profile organisation to slam the upcoming buy-to-let tax changes. The firm believe that not a single alteration in legislation will assist first-time buyers get on to the ladder, as desired by Chancellor George Osborne.

Wrong tactics

Lucian Cooks, Savills’ director of residential research, noted that, ‘none of the measures aimed at buy-to-let investors will directly help the prospective first-time buyer overcome the underlying deposit hurdle. Neither will Government schemes eliminate this issue for the bulk of younger households. Therefore, the underlying demand for private rented accommodation is likely to continue to rise.’[1]

Undoubtedly, the changes to the private rental sector will cause a comprehensive shift in investment patterns.

‘For those (investors) requiring debt, we believe these measures will mean that future investment will be more targeted at lower-value higher-yielding stock, albeit avoiding markets heavily reliant on welfare payments, given the Government’s ongoing austerity agenda,’ Cooks continued.[1]

Buy-to-let tax changes criticised by Savills

Buy-to-let tax changes criticised by Savills

Mortgages

Utilising data from the Council of Mortgage Lenders, Cooks suggests that just 31% of available stock in the private rented sector comes with a mortgage. This indicates that the mortgage interest problem could be lesser than some analysts believe.

With this said, the proposal is sure to affect cash surpluses landlords are able to achieve. Cooks observed, ‘our calculations indicate the net cash surplus on the average buy-to-let property will fall from £2,900 to £1,100 over this period.’[1]

‘This assumes a property worth £227,400 with a mortgage of £119,700 and generating a gross income yield of 5%. Those with greater levels of debt or invested in lower yielding markets will be more affected, he concluded.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/current-buy-to-let-changes-wont-directly-help-first-time-buyers-savills-warns

 

Loophole Means Buy-to-Let Landlords Could Rent Out Starter Homes

Published On: February 29, 2016 at 12:44 pm

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A loophole in the Government’s Starter Homes scheme means that buy-to-let landlords could rent out discounted homes intended for first time buyers, according to the Liberal Democrat leader, Tim Farron.

The Starter Homes initiative, announced last year, offers new build homes to first time buyers under 40 at a 20% discount. The Government hopes to build 200,000 of these properties by 2020.

However, Farron warns that there is currently no requirement under the legislation for the person that buys the home to live in the property.

The Liberal Democrats claimed that the loophole could mean that wealthy parents give their children lump sums to buy the homes, which could then be

Loophole Means Buy-to-Let Landlords Could Rent Out Starter Homes

Loophole Means Buy-to-Let Landlords Could Rent Out Starter Homes

rented out.

Additionally, there is nothing to stop a property investor making a deal with a first time buyer who bought a starter home at a discounted price to share the profits of selling the property on or letting it.

However, the Department for Communities and Local Government (DCLG) insists that ministers are “clear that Starter Homes will not be buy-to-let properties”.

The Government will soon begin consulting on rules as part of the Housing and Planning Bill to include letting restrictions on Starter Homes.

The Lib Dems have also raised concerns that homes bought through the scheme can be sold on at market rates, meaning that just one generation of first time buyers will benefit.

Farron believes: “The Government’s plans for Starter Homes are very badly designed and will fail to help the right people. They will be snapped up by the sons of millionaires and make them a huge profit.

“Those who can’t turn to the bank of mum and dad should not lose out. It is vital the Government makes changes to its housing policy.”1

A spokesperson for the DCLG responds: “We want to ensure that anyone who works hard and aspires to own their own home has the opportunity to do so… We are clear Starter Homes will not be buy-to-let properties and will be consulting shortly on rules to include letting restrictions.”1 

The Chief Executive of housing charity Shelter, Campbell Robb, comments: “Whilst the Government is offering these discounted homes to a select few, for those who aren’t so lucky, all they’re offering is more time spent in expensive and unstable private renting, or living with mum and dad well into their 30s.

“This crisis can be turned around, but only if the Government moves beyond schemes that only help the well off, and starts investing in homes that ordinary families can actually afford as well.”1 

We will bring you the latest property news and landlord law at LandlordNews.co.uk.

1 http://www.independent.co.uk/news/uk/politics/loophole-means-buy-to-let-landlords-could-exploit-government-starter-homes-a6899056.html

Take the Leap into the Property Market This February!

Published On: February 27, 2016 at 9:03 am

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Whether you’re a buy-to-let investor, first time buyer or home mover, 2016 is the year to take the leap into the property market.

Take the Leap This February!

Take the Leap into the Property Market This February!

As we know, we have an extra day this year and the 29th February only occurs every four years. At the height of the property boom, which fuelled the housing crash, this is how frequently many people moved house.

In recent years, buyers and vendors have been more restrained when moving home. The reasons people move have been for more serious and necessary reasons, such as a new job, a baby on the way, debt or divorce.

Due to the need to move quickly, asking prices have also been set at much more realistic values – sellers aren’t just willing to sit in their property hoping that someone buys their property for the hugely inflated figure their estate agent suggested anymore.

With the recession finally behind us, people are considering moving again, and recent data proves that first time buyers are finally being given the chance to get onto the property ladder.

With interest rates remaining low and the economy strengthening, why not make spring the time to move home?

With a shortage of supply and high demand from buyers, it is likely that your home will sell quickly – but ensure you have somewhere to move to first! You may be in luck, however, as many sellers are likely to put their properties onto the market as the good weather arrives.

And if you’re a buy-to-let investor, now is the perfect time to invest. As of April, landlords will face a higher rate of Stamp Duty (3% extra) on the purchase of an investment property. To avoid this surcharge, you must complete on a sale before midnight on 31st March – don’t miss out, the additional costs may crush your buy-to-let dream.

If you’re not quite ready to take the leap into the property market, don’t wait another four years – you don’t know how many opportunities you might miss before 2020…

Londoners Need 266% Pay Rise to Get on Property Ladder, Warns NHF

Published On: February 26, 2016 at 4:07 pm

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Londoners will need a 266% pay rise if they have any hope of getting onto the property ladder in the capital, warns the National Housing Federation (NHF).

The average price of a London property is now a huge £526,085 – more than 16 times the typical salary of £32,838 that the average London worker receives annually, according to data from the NHF, which represents affordable housing providers.

Buying a home in over half of London boroughs would require an income of more than £100,000 per year.

Londoners Need 266% Pay Rise to Get on Property Ladder, Warns NHF

Londoners Need 266% Pay Rise to Get on Property Ladder, Warns NHF

In more affordable parts of the capital, such as Barking and Dagenham, the average income is still half of what is needed to get a mortgage, the report by the NHF found.

Despite typical earnings of £59,000 in the Royal Borough of Kensington and Chelsea, it is the least affordable area, with the average house price of £1.94m costing 33 times the average income.

The Chief Executive of the NHF, David Orr, insists that a secure and affordable home should be available to everyone.

“Living in London doesn’t have to mean living in cramped, overpriced, insecure accommodation; the housing crisis is not inevitable,” he believes.

The report marks the launch of the NHF’s 100,000 Affordable Homes for London campaign, which urges the next London mayor to give the affordable housing sector access to public land.

In return, the NHF has pledged to help the mayor tackle the current housing shortage, which is estimated to be around 151,000 homes.

“Both Sadiq Khan and Zac Goldsmith have correctly identified housing as one of the biggest challenges facing London,” says Orr. “We’re here to say that we know how to help.”1 

Last week, the House of Lords’ National Policy for the Built Environment committee warned that housing associations should be able to play a bigger part in the crisis, as the Government will not reach its 240,000 house-building target by relying on the private sector alone.

Over the last mayoralty, housing associations have built 40,000 homes for rent and sale in London.

Earlier this week, the Council of Mortgage Lenders (CML) warned that first time buyers and home movers are already stretching their mortgages in order to get onto or move up the property ladder, as house prices spiral.

The latest property market news can be found at LandlordNews.co.uk.

1 http://www.housing.org.uk/press/press-releases/266-pay-rise-what-the-average-londoner-needs-to-buy-a-home/

 

Homebuyers Stretching Their Mortgages to Get on Property Ladder

Published On: February 23, 2016 at 12:42 pm

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A record number of first time buyers and home movers took out mortgages for over 25 years in 2015, as soaring house prices make it harder to get onto, or move up, the property ladder.

Affordability issues have also increased the amount of borrowers taking on mortgages worth more than 4.5 times their income, causing the Chief Economist at the Council of Mortgage Lenders (CML), Bob Pannell, to warn that a “potential problem is building under the noses” of the Bank of England’s Financial Policy Committee (FPC).

Statistics from the CML found that in the second half of last year, 58% of first time buyers took out mortgages for longer than the typical 25-year term. At the peak of the last housing boom in 2007, this was just 42%.

Homebuyers Stretching Their Mortgages to Get on Property Ladder

Homebuyers Stretching Their Mortgages to Get on Property Ladder

Meanwhile, 36% of home movers took out mortgages over the traditional 25 years – double the proportion before the housing crash.

Higher retirement ages and pension freedoms may have encouraged these buyers to borrow for longer, but the CML believes it is mainly a result of the need to stretch incomes to get onto the property ladder.

The CML’s data also shows a sharp rise in the proportion of borrowers taking out mortgages worth over 4.5 times their income.

Around two years ago, this type of lending was cracked down on, due to fears of a housing bubble. Banks and building societies are now only permitted to approve 15% of lending at that level.

After the clampdown from the FPC, the proportion of borrowers taking on such large loans fell, but in the fourth quarter (Q4) of 2015, the number of first time buyers and movers borrowing high amounts almost returned to 2014 levels. Over the quarter, 11% of first time buyers and 9.8% of movers borrowed more than 4.5 times their earnings to purchase a home.

Pannell explains how the mortgage market has changed: “After peaking at 10% just ahead of the FPC action in mid-2014, the proportion of high income multiple lending eased back considerably over the following year, to just below 7%.

“But the picture has changed a lot over the past six months or so. [It] has increased sharply, especially for movers, and retraced a good chunk of the previous year’s reduction.”

Pannell notes that there may have been “a precautionary ‘knee-jerk’ response from lenders” to the new rules when they were first announced, which is now unravelling as they get used to working within the guidelines.

However, he says that lending at all levels above 3.5 times earnings has risen and there are signs “that borrowers are now stretching their incomes more than in mid-2014”.

He adds that the 15% cap on 4.5 times lending means “we should expect to see a build-up of lending just below the 4.5 times threshold”.

At present, the FPC is monitoring the buy-to-let mortgage market, following a boom in borrowing by landlords.

However, Pannell believes: “A potential problem is building under the noses of FPC policymakers, and it has nothing to do with buy-to-let lending.”1

As buy-to-let investors seek to rush through rental property purchases ahead of the 1st April Stamp Duty deadline, it appears that the mortgage market across all sectors will see vast change in the coming months.

The latest information for landlords on property and finance can be found at LandlordNews.co.uk.

1 https://www.cml.org.uk/news/news-and-views/affordability-bites/