Posts with tag: first time buyers

Share of New Lending for Buy-to-Let Drops to Lowest Level since 2012

Published On: December 12, 2018 at 10:29 am

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The share of new lending for buy-to-let properties dropped to its lowest level since 2012 in the third quarter (Q3) of 2018, according to the latest Mortgage Lenders and Administrators Statistics from the Bank of England (BoE).

During Q3, the share of new lending to buy-to-let landlords decreased to 12%, which is the lowest level recorded since Q4 2012.

On the other hand, the share of new lending to first time buyers remained steady in Q3, at 21%.

Overall, the outstanding value of all residential mortgage loans continued to increase in Q3, to £1,430 billion, which is 3.2% higher than in the same period of 2017.

The value of gross mortgage advances grew by 3.7% in the year to Q3, to reach £73.5 billion. This is the highest level seen since Q4 2007.

New mortgage commitments (new lending that lenders have agreed to advance in the coming months) were 4.7% higher than a year ago in Q3.

Remortgaging, as a proportion of new lending, was two percentage points higher than Q3 2017. However, it dropped marginally on a quarterly basis, to 30%.

The proportion of high loan-to-income (LTI) lending (loans above four times the value of annual income for a single buyer or above three times the annual income for joint buyers) has risen by 1.8 percentage points in Q3, to 47%. The share of loan with a loan-to-value (LTV) ratio exceeding 90% also increased, to 4.3%.

The value of outstanding mortgage balances with some arrears increased for the first time since Q2 2016, to £14.5 billion, compared to £14.3billion in Q2 2018. These balances still account for only 1% of the total.

Share of New Lending for Buy-to-Let Drops to Lowest Level since 2012

Mark Pilling, the Managing Director of Spicerhaart Corporate Sales, comments on the release: “The latest Mortgage Lenders and Administrators Statistics reveal that the value of outstanding mortgage balances with some arrears increased for the first time since 2016 Q2, to £14.5 billion.

“With the recent rate rises, I had predicted we would start to see arrears rise again, and I fear this could be the start of a more permanent shift. Consumers racked up a record £17.1 billion of credit card debt in October – 11.6% higher than a year earlier – and October is not usually a month associated with big spending. Since those stats, we have had a record spending day on Black Friday, most of which was online, so likely to be spent on cards, and we have Christmas coming up – traditionally a time when many families overstretch themselves in terms of spending.”

He continues: “There are growing concerns that many people are now relying on credit cards for everyday purchases, and, while many in this situation are able to keep their heads above water now, if there is another rate rise, payment shock coming off a fixed rate deal or rise in the cost of living, many people may struggle to make their monthly mortgage payments or rent – which, in turn, will impact landlords and, where appropriate, their ability to make mortgage payments.

“Repossession should always be the last resort, and lenders should always look to find another option if it is available. We can help lenders find solutions that best suit them and their customers, so it is important that lenders start looking at all their borrowers and identify those who are already having difficulties managing their mortgage, or are likely to experience future difficulties.”

Shaun Church, the Director of mortgage broker Private Finance, also responds to the report: “High LTI lending is at its highest level since the financial crash, accounting for nearly half of all new lending. With the property market stagnating, banks and building societies have been drumming up business elsewhere, by relaxing their lending criteria and increasing income multiples. In recent weeks, we have seen some lenders increase their income multiple to up to six times the annual income of borrowers.

“Income criteria has long been the primary obstacle for first time buyers looking to purchase their first home, this relaxation by lenders has therefore been welcomed and embraced by borrowers across the UK. And, with mortgage rates hovering near record lows, servicing a larger mortgage is unlikely to be too great a financial burden, for now. However, with interest rates expected to nudge upwards, slowly but surely, borrowers pushing themselves to the limits of affordability run the risk of overextending themselves when rates do eventually increase. Before rushing into a higher income multiple, borrowers should think carefully about potential rates and repayments, and more broadly about their future financial circumstances and commitments, to ensure they’re not putting too great a strain on their finances.”

He adds: “While these products adhere to stringent stress testing, and we’re far off from the lending levels of the past, those looking to borrow greater sums in relation to their income should be cognisant of the risks associated with such products. Seeking the advice of an independent mortgage broker can help borrowers ensure they opt for the right mortgage to match their needs and circumstances.”

First Time Buyer Sales Down and Landlords Exiting the Market

Published On: December 4, 2018 at 10:13 am

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Analysis of the 2018 sales and lettings data from NAEA Propertymark and ARLA Propertymark reveals trends from the year.

NAEA Propertymark’s overview of the housing market:

  • Over the course of 2018, demand was lower than last year with an average of 324 house buyers registered per branch, compared to 366 on average throughout 2017. Looking back over the last 10 years, it’s up by 31%, from 222 per branch in 2008.
  • The number of properties available to buy hasn’t changed drastically year-on-year, with 38 available per branch throughout 2017 and 39 in 2018, hitting a two-year high with 46 in September. However, supply has dropped significantly over the last ten years, from 89 on average per branch in 2008.
  • The number of sales agreed per branch throughout the year fell in 2018, from nine on average per month in 2017, to eight this year. Historically, this figure has remained fairly consistent, only moving between 12 and seven from 2008 to now.
  • Despite the fact first time buyers benefitted from stamp duty relief in 2018, the proportion of total sales made to the group fell by one percentage point year-on-year – from 26% on average in 2017 to 25% in 2018.

ARLA Propertymark’s overview of the private rented sector:

  • The supply of rental accommodation dropped slightly in 2018, from 189 on average per branch in 2017, to 187 this year. It reached an annual high in October, when letting agents were managing 198 per branch.
  • In line with this, as landlords continued to face legislative change, the number of buy-to-let investors selling their properties increased from an average of three in 2017 to four in 2018. In April and May this year, the figure spiked to five per branch – the highest since records began in 2015.
  • The number of tenants experiencing rent hikes also increased this year, to 25% each month in 2017, to 28% on average this year.
  • Agents reported a spike in the number of prospective tenants searching for homes in July, when 79 were recorded per branch, compared to 68 on average across the year.

Mark Hayward, Chief Executive, NAEA Propertymark comments on the findings: “2018 has been a busy year for the property market, with the Government launching several consultations to address important issues – most notably to regulate the sector, improve the buying and selling process, and address the issue of leaseholds. The housing market has notably slowed, particularly over the last couple of months, which could be a by-product of Brexit uncertainty, as buyers hold off on purchases until the outcome is clear.”

David Cox, Chief Executive, ARLA Propertymark comments on the findings: “The number of landlords exiting the rental market is rising, and those who aren’t worried about it yet, should be. Buy-to-let investors have faced a huge amount of legislative change over the last 18 months alone, and as costs rise, they are being driven out of the market and new ones are being deterred from entering. The Government is developing a joined-up approach for legislating the private rented sector, but until this has been put into action and the market is made more attractive for landlords, rents will continue to rise, competition will intensify, and tenants will continue to suffer.”

First Time Buyers Make Up Majority of Help to Buy Purchasers

Published On: December 3, 2018 at 10:56 am

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Statistics from the Government’s Help to Buy (Equity Loan scheme) Data to 30th June 2018, England document has revealed a 15% year-on-year increase in the number of those in England using the scheme.

The document highlights that since the scheme was launched (1st April 2013) to 30th June 2018, 183,947 properties have been purchased with an equity loan. The total value of these loans is £9.90 billion, with the value of the properties sold under the scheme amounting to £46.52 billion.

The Government has also pointed out that 81% of the total purchases were made by first time buyers. In London, the maximum equity loan was increased from 20% to 40% from February 2016. Since that time to 30th June 2018, there have been 9,470 completions in London, and 7,885 of which were made with an equity loan higher than 20%.

Lucy Pendleton, founder director of independent estate agents James Pendleton, has commented: “Those looking for some clues as to what is propping up house prices across the country need look no further. First time buyers are piling into Help to Buy and they don’t seem to give two hoots about the Brexit uncertainty that is holding back the rest of the market.

“First-time buyers, still under huge financial pressure despite relatively low borrowing rates, still account for the lion’s share of these loans and their appetite isn’t waning. They have taken 16% more Help to Buy loans nationally in the past year and in London they are literally hoovering them up.

“It’s here they are putting the scheme to particularly good use because house prices are still relatively high despite the fact they are cooling. That’s not that surprising but the scale of the increase certainly is, with first time buyers’ use of the scheme ballooning a massive 32% in the capital.

“Transaction levels nationally remain depressed but hunger for Help to Buy shows no sign of abating with the scheme helping first time buyers buy £5.8 billion worth of property in the first half of 2018.”

Shaun Church, Director at Private Finance, has said: “The Help to Buy scheme has undoubtedly been a much-needed helping hand for many first time buyers struggling with high housing costs. Approvals have continued to grow year-on-year, suggesting there is still strong demand for options onto the housing ladder, which don’t require a hefty deposit.

“Londoners have strongly benefited from the maximum equity loan doubling in size, with 83% of all completions using the scheme in the capital being made with a loan of more than 20% in Q2. This is some compensation for the fact that Londoners do not stand to benefit as much from recent cuts to stamp duty for first-time buyers, given only properties under ￡300,000 are fully exempt.

“Though Help to Buy is a valuable route to homeownership, where possible it is best to exit the scheme once the five-year interest-free grace period is over or sooner if this is viable. As Help to Buy caters to a more niche market, the rates available on more traditional mortgage products are generally more competitive. Help to Buy borrowers are also expected to pay 10-20% back of the current value of their home rather than the original equity loan, so exiting the scheme enables them to enjoy more of the capital gains from their property should their home rise in value.”

Craig Hall, Head of Broker Relationships and Propositions, Legal & General Mortgage Club, has commented: “With its largest quarter to date, today’s figures show the vital role Help to Buy continues to play in the market.

“Not only has the scheme enabled builders to deliver more homes, with an increased supply of 78% in the last five years, but it is consistently supporting the buyers who need it most – 81% of those who use it are first time buyers.

“Given the quarter on quarter increases we have been seeing, it is likely we have reached the 200,000 mark by now.  It’s good news that the scheme has now been extended beyond 2021, however, we still need to look at what will happen post 2023.

“Whether it’s through an increase uptake of Shared Ownership, lenders offering higher loan-to-values (LTVs), Starter Homes, the Bank of Mum and Dad or intergenerational mortgages, we need to focus our attention on what the plan for the future is now if we are to prepare for the scheme’s end.”

Are Developers Pushing Up House Prices through Help to Buy?

Published On: November 26, 2018 at 9:57 am

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Young first time buyers looking to get onto the property ladder can now do so two years earlier than before, thanks to additional support from Help to Buy schemes, according to new research from Compare My Move. However, are developers actually pushing up house prices by taking advantage of the schemes?

Compare My Move found that it takes young first time buyers in the UK an average of 12 months to save the 5% deposit needed to take advantage of the Help to Buy Equity Loan scheme, while renting a property from a private landlord. This compares to the three years that it would take to save the necessary 15% deposit required if not using the Help to Buy scheme.

As a result, it would save first time buyers more than £10,000 to use the Equity Loan scheme.

However, this is a growing level of discontent with the Help to Buy scheme, as developers have been accused of selling new build homes to first time buyers at hugely inflated prices.

New data, compiled by reallymoving.com, shows that homes being sold under the Government’s Help to Buy scheme are routinely overpriced, by almost 10%.

Many experts believe that property firms are trying to cash in, as they know that first time buyers who use Help to Buy can borrow much more money, which is why a growing number of people are now opposed to the scheme.

The findings reflect another study by property investment platform British Pearl, which found that 31.5% of Britons do not support Help to Buy, with many believing that it has actually made housing less affordable.

Surprisingly, millennials were the least likely to support the scheme, which was set up specifically to benefit this group of buyers.

So, although young first time buyers can now get onto the property ladder an average of two years earlier through Help to Buy, is it actually benefitting the market at large?

In his Autumn Budget, the Chancellor announced an extension of the scheme to 2023.

Millennials are Less Likely to Support the Help to Buy Scheme

Published On: November 23, 2018 at 10:29 am

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Millennials are some of the least likely Britons to support the Help to Buy scheme, amid concerns that it is pushing house prices up, according to a poll by property investment platform British Pearl.

The survey of more than 2,000 Brits found that 31.5% did not support the Help to Buy scheme, which is designed to help first time buyers get onto the property ladder, with many believing that it has actually made housing less affordable.

Of the third who were opposed to the Help to Buy scheme, 37.5% blamed it for house price inflation, while 35.8% argued that the Government should instead use cash “to build more homes”.

More than a quarter (26%) of those who disagreed with Help to Buy claimed: “It’s unnecessary and those who can’t afford to buy should rent”, while 24.3% believed: “The Government shouldn’t interfere in the market.”

Millennials are Less Likely to Support the Help to Buy Scheme

Millennials are Less Likely to Support the Help to Buy Scheme

The poll found that millennials were among the least likely to be in favour of the Help to Buy scheme, while older respondents were actually more likely to support it.

Just 59.8% of 16-24-years-old supported the scheme, along with 66.7% of 25-34-year-olds. However, 70.1% of 45-54-year-olds did, as well as 73.1% of the over-55s.

The responses show that, generally, the younger someone is, the less likely they are to trust the Help to Buy scheme, suggesting that one of the main demographics that Help to Buy is supposed to appeal to are the least likely to feel that it would benefit them.

The research also revealed that people in Norwich were the least likely to be in favour of the scheme, with just over half (55.1%) supporting it. However, in Bristol, more than three-quarters (75.9%) said that they did support Help to Buy.

Income also affected people’s perception of the scheme, with those earning between £35,001-£45,000 being the most likely to support it (74.3%), while those taking home between £65,001-£75,000 being the least likely (60.9%).

Since the first phase of the Help to Buy scheme was introduced in April 2013, the average UK house price has soared by 36.7%, from £170,335 to £232,797 in August this year.

Experts have argued that the scheme has caused prices to become inflated, amid intensified competition from buyers who have more cash to spend.

James Newbery, the Investment Manager at British Pearl, responds to the findings: “While there were certainly good intentions behind Help to Buy, and it has helped people onto the ladder, our poll proves a significant portion of Brits are still to be sold on the scheme.

“Its merits are either not being communicated effectively enough to generation rent, or people are beginning to believe the scheme has become part of the problem, rather than the solution.”

He believes: “Public opinion is becoming jaded by a persistent lack of stock and ever-increasing property prices, so something clearly needs to be done to address Britain’s housing crisis and the country’s perception of how the Government is handling it.

“Millennials — who form part of the key demographic Help to Buy was designed to give a leg-up to — clearly still have a bone to pick with what’s been laid on the table for them in terms of housing options.”

Newbery adds: “The digital revolution has benefited those with the cash to spend, by offering them unitised ownership and, in turn, increasingly diversified portfolios. Yet it is young people who people who feel more disconnected from property than ever, as platforms like British Pearl attempt to bridge that divide.”

It may be disappointing for those stuck in rental housing to learn, therefore, that the Help to Buy scheme has been extended until 2023 by the Government.

First Time Buyer Levels in London at the Highest Rate since 2015

Published On: November 23, 2018 at 10:00 am

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First time buyer levels in London have hit the highest rate since 2015, according to fresh analysis of the mortgage market by UK Finance.

The organisation has taken a close look at the capital, as well as Northern Ireland, Scotland and Wales. It has assessed homeowner mortgages, as well as remortgaging and first time buyer levels over the third quarter (Q3) of the year.

London

In Q3, 11,700 first time buyer mortgages were completed in London, which is up by 2.6% on Q3 2017. This £3.55 billion of new lending was 6% higher on an annual basis. UK Finance found that the average first time buyer in the capital was 32-years-old and had a gross household income of £70,000.

8,100 new home mover mortgages were completed over the same period, some 4.7% fewer than in Q3 last year. The £3.49 billion of new lending was up by 0.3% year-on-year. The average home mover in London was 37-years-old and had a gross household income of £95,000.

Some 15,200 new homeowner remortgages were completed in the capital in Q3, which is 3.4% higher than in the same quarter of 2017. The £4.76 billion of remortgaging was 4.6% more on an annual basis.

Jackie Bennett, the Director of Mortgages at UK Finance, comments: “London’s mortgage market remained resilient in the third quarter of this year, despite an uncertain economic environment.

“The number of first time buyers in the capital reached its highest level in three years, boosted by schemes such as Help to Buy. The recent extension of the scheme until 2023 will help even more people get a foot on the housing ladder in the years ahead.

“Remortgaging continues to be strong, reflecting the large number of fixed rate loans coming to an end, as well as customers’ desire to lock into new competitive rates.”

Northern Ireland 

First Time Buyer Levels in London at the Highest Rate since 2015

First Time Buyer Levels in London at the Highest Rate since 2015

First time buyer levels in Northern Ireland were also up over Q3, with 2,700 new mortgages to the group, some 3.8% more than in Q3 2017. The £0.28 billion of new lending was 7.7% higher annually. The average first time buyer in Northern Ireland was 30-years-old and had a gross household income of £33,000.

1,800 new home mover mortgages were completed in Q3, which is up by 5.9% on the same quarter of last year. This £0.24 billion of new lending was 4.3% more year-on-year. The average home mover was 39-years-old and had a gross household income of £48,000.

There were 2,200 new homeowner remortgages in Northern Ireland in Q3, which is 4.8% higher in the same quarter a year earlier. The £0.24 billion of remortgaging was 9.1% more on an annual basis.

Derek Wilson, the Chair of UK Finance’s Northern Ireland Mortgage Committee, says: “The Northern Ireland mortgage market continues to show steady growth in house purchase activity.

“Lending to first time buyers remains the largest sector by value, as borrowers take advantage of what continues to be the most affordable region in the UK.

“These figures underline the importance of boosting housing supply to meet this growing demand.”

Scotland 

9,200 new Scottish homeowner remortgages completed in Q3, some 13.6% more than in the same quarter of 2017. The £1.18 billion of remortgaging was 18% higher year-on-year.

First time buyer levels in Scotland were not as strong as in London or Northern Ireland, however, as 8,900 mortgages were completed in Q3, some 5.3% fewer than in the same quarter of last year. This £1.04 billion of new lending was down by 1% yearly. The average Scottish first time buyer was 29-years-old and had a gross household income of £35,000.

There were 9,500 new home mover mortgages completed in Scotland in Q3, which is down by 1% on Q3 2017. The £1.53 billion of new lending was the same year-on-year. The average Scottish home mover was 39-years-old and had a gross household income of £51,000.

The Chair of UK Finance’s Scotland Mortgage Committee, Douglas Cochrane, comments: “Scotland saw strong growth in remortgaging activity this quarter, as many fixed rate loans come to an end and customers continue to shop around for attractive deals.

“The number of first time buyers has softened slightly compared to the same quarter last year, while home mover purchases remain steady.”

Wales

First time buyer levels also dropped in Wales in Q3, as 2.3% fewer mortgages were completed (4,300). The £0.52 billion of new lending to this group was unchanged year-on-year. The average Welsh first time buyer was 29-years-old and had a gross household income of £35,000.

4,300 new home mover mortgages were completed in Wales in Q3, matching the level recorded in the same quarter of 2017. This £0.68 billion of new lending was 3% higher on an annual basis. The average home mover in Wales was 39-years-old and had a gross household income of £48,000.

Some 4,900 new Welsh homeowner remortgages were completed during the period, which is 2.1% more on an annual basis. The £0.61 billion of remortgaging was 8.9% higher on Q3 last year.

Julie-Ann Haines, the Chair of UK Finance’s Wales Mortgage Committee, explains the data: “The Welsh mortgage market has remained steady, with overall house purchases broadly in line with the same period last year. Remortgaging has continued to grow, as many existing loans mature and homeowners take advantage of a competitive market to lock into attractive deals

“The number of first time buyers is down slightly amid ongoing economic uncertainty, while the buy-to-let market has also softened due to the impact of recent tax changes. However, the overall picture of the market is consistent with the last couple of years and it would appear that this trend is set to continue in the short-term.”