Posts with tag: first time buyers

10 Years for First Time Buyers to Secure a Deposit

Published On: June 26, 2018 at 8:52 am

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New figures reveal that on average, first-time-buyers have no alternative but to rent a property for a longer period of time, due to a 10 year save for a 15% deposit, despite the halt in property prices.

According to Nationwide, property prices have experienced a decline by 0.2% during the May period. In addition, annual growth plateaued to 2.4% from the previous 2.6% in April. Yet, there remains a high demand for rental properties due to the difficulty of saving for and securing a deposit for a mortgage.

During the beginning of 2018, the average single first-time-buyer would need to save for 10 and a half years if they were to raise a 15% deposit on their first property, according to recent data provided by Hamptons International.

For a first-time-buyer who began saving in the first quarter of the year, the purchasing of a property would not be possible until the autumn of 2028. Similarly, a single Londoner intending to invest in their first property would need to save for 17 years in order to raise a 15% deposit.

On the other hand, the average couple intending on buying their first home would need to save for five years in order to purchase their own property by the spring of 2023, five years less than a single first-time-buyer.

Aneisha Beveridge, an analyst at Hamptons International, commented: “Saving a deposit is still the biggest barrier to buying a first home. It takes a single person more than a decade to save up in the current climate.

“But the additional support from Help to Buy brings down the time it takes to raise a deposit by over six years for a single first-time buyer.

“Slower house price growth in the capital has meant that it’s now six months quicker for a couple, who share household spending, to save up for a 15% deposit in London.

“But it still takes a couple in London eight years to save up, twice as long as someone buying a home in the north.”

Mortgage Repayments now Cheaper than Rent in All Parts of the UK, Reports Santander

Published On: June 21, 2018 at 8:53 am

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Monthly mortgage repayments are now cheaper than rent costs in all parts of the UK, so long as first time buyers can raise the deposits they need to get onto the property ladder, according to a report by Santander.

The bank claims that households could save an average of £2,268 per year through purchasing a home, rather than renting one.

Santander used recent rent price data, taking the average monthly cost of £912 per household, and compared it with monthly mortgage repayments of £723 for the typical first time buyer.

This gives homeowners an average saving of £189 per month, or £2,268 a year, compared with private tenants.

The bank’s research is based on Land Registry figures, which report an average first time buyer house price of £213,462. It also assumes a 76% loan-to-value (LTV) mortgage at 2.48%, with no fees.

The study includes a regional breakdown, indicating that the largest annual savings are in London, at an average of £3,468, while the smallest difference is in the East of England, at £516 per year.

Santander addressed the issue of how first time buyers would raise a deposit to buy their own homes, which it put at a staggering average of £51,905.

When asked how they would save such funds, 38% would move back in with their parents and 21% would give up alcohol to raise the deposit needed.

Miguel Sard, the Managing Director of Mortgages at Santander, comments on the findings: “Many first time buyers understandably focus on the challenge of saving for a deposit and wonder how they will afford a property. However, it is often assumed that, when you purchase a property, you will be under greater financial pressure, and our research shows the reverse is true.

“Of course, buying a property is a major financial investment with upfront costs to consider, but, long-term, the financial benefits can be significant.”

He adds: “With annual savings averaging well over £2,000, this can really mount up over time and, of course, once the mortgage is paid off, you have a valuable asset to show for it.”

Positively, the Santander research takes monthly mortgage repayments into account when calculating the difference between owning and renting a home. Another recent study by developer Strata looked only at deposits and fees when making its bold statement. Read more on the story here.

Lifetime Tenants Could Spend £1m More on Housing than Homeowners

Published On: June 20, 2018 at 9:13 am

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With so much rhetoric within the media and supporting studies suggesting that many young people today will become lifetime tenants, it’s no surprise that research is looking into how much owning a home compares with renting from a landlord.

The latest in these studies comes from new build property developer Strata, which found that lifetime tenants – those unfortunate youngsters who never manage to buy their own homes – could end up spending a whopping £1m more on housing over their lives than their homeowner counterparts.

The firm compared the average cost of owning a home in the UK to typical monthly rent payments over a 60-year period.

The research took a typical homeowner, who had rented from the age of 21 to 30 before purchasing a home, owning their property until the age of 81. It used the average first time buyer home value of £212,079, and assumed a 16% deposit and £4,800 in fees, including lender valuations, surveys, and mortgage and legal costs.

Estimating that the typical buyer would have rented for nine years before getting onto the property ladder themselves, at an average of £909 per month – adjusted for inflation over the period – Strata gave a total spend of £427,363 for the average homeowner over the period.

In contrast, lifetime tenants would spend the same £909 per month on average rents, which was again adjusted for inflation, to hit a huge total of £1,624,980 over 60 years.

This equates to a massive difference of £1,197,616, with lifetime tenants spending an average of 280% more than homebuyers.

Naturally, figures vary dramatically across the UK, with the typical difference reaching almost £2m in London. The North East had the smallest change, at £720,000.

Nevertheless, it appears from the data that Strata left out a significant chunk of homebuyers’ housing costs – monthly mortgage repayments. Therefore, while purchasing a property may be cheaper than renting is for lifetime tenants, the study fails to determine which option is most cost effective.

Glory Days of Rock Bottom Mortgage Rates Could be Coming to a Close

Published On: May 18, 2018 at 9:39 am

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UK Finance has revealed a small increase in lending to first-time buyers compared to the previous year, whereas remortgaging has softened slightly after a busy start to the year.

The Mortgage Trends Update for March 2018 from UK Finance has revealed an increase in lending to first-time buyers compared to the previous year, whereas remortgaging levels have softened slightly after a busy start to the year.

In a different report, figures from the Bank of England show similar results. Gross mortgage lending in Q1 of 2018 was £61.1bn, up 3.4% from £59bn in Q1 of 2017.

Private finance comments on the report; “March is usually a time when the market springs into action, however the latest figures from UK Finance paint a subdued picture across all areas of the market.

“After a recent rally of remortgage activity, it looked like March was the month this market finally ran out of steam. The recent decision by the Bank of England to hold interest rates at 0.5% however shouldn’t be met with complacency by homeowners.

“The glory days of rock bottom interest rates are coming to a close, with a rate rise a near certainty as soon as the UK economy starts to pick up. Homeowners yet to lock into the favourable deals on the market are therefore playing a risky game of ‘rate rise roulette’. Locking into a long term fixed rate can buy borrowers some immunity for almost a decade from climbing interest rates.

“For first-time-buyers, the market has flattened, with a modest increase of 2% year on year. While the market may be more subdued, competition to attract first-time-buyers remains fierce amongst lenders. Those in a position to make their first step onto the housing ladder therefore shouldn’t be discouraged or dissuaded by these figures.

“The buy-to-let market suffered another disappointing month, while lenders are trying to tempt would-be investors back into the market with competitive mortgage rates, it would seem the punitive tax measures have had their desired effect in curbing activity in this area of the market. With lending down by 20% year on year, potential landlords are saying goodbye to their buy-to-let ambitions.”

UK Finance has revealed a small increase in lending to first-time buyers compared to the previous year, whereas remortgaging has softened slightly after a busy start to the year.

UK Finance has revealed a small increase in lending to first-time buyers compared to the previous year, whereas remortgaging has softened slightly after a busy start to the year.

 

Key highlights of the report included:

  • £5.1bn of new lending to first time buyers in the month, which was up 2% on the previous year
  • 31,200 new first-time buyer mortgages were completed in the month, 1.9% fewer than the previous year
  • £6.1bn of new lending to people moving homes in the month, which was 4.7% down from the previous year
  • The £5.6bn lent to people remortgaging their homes this year is a figure down by 9.7% from the previous year

Commenting on the data, Jackie Bennett, Director of Mortgages at UK Finance, said: “Remortgaging levels softened in March, after a busier than usual start to the year saw customers locking into attractive deals ahead of a potential interest rate rise.

“There has been relatively flat growth in lending to first-time buyers, reflecting recent Bank of England figures showing a fall in mortgage approvals.

“Meanwhile the buy-to-let market remains subdued, as recent tax and regulatory changes continue to have an impact on demand.”

 

Key findings in the buy-to-let sector:

  • 12,600 new buy-to-let remortgages were completed in the month, up 0.8% on the same month last year
  • 5,500 new buy-to-let home purchase mortgages completed in the month, which was significantly lower than the previous year (19% less). UK Finance suggests this is due to recent tax and regulatory changes, including the limiting of landlords’ Mortgage Interest Tax Relief (MITR), the three per cent Stamp Duty Land Tax (SDLT).

John Eastgate, Sales and Marketing Director at OneSavings Bank says: “Buy-to-let lending has demonstrated some resilience despite the tax and regulatory interventions introduced in recent years. The purchase market was always most likely to bear the brunt of these changes, and today’s figures endorse that.

“Caution needs to be exercised by policymakers who can ill afford to further undermine a market that provides more than a fifth of all housing stock in the UK, and which contributes in excess of £15bn to the UK economy every year.

“Despite these figures, it remains the case that buy to let is now a two-speed market, with amateurs exiting and professionals picking up the slack. Buy-to-let is still a profitable investment, with our own research suggesting landlords could see a net profit of £162,000 per property over the next 25 years.”

It’s Good News for First Time Buyers, but Bad News for Tenants

Published On: May 16, 2018 at 9:23 am

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A significant number of homes suitable for first time buyers could flood the property market in the coming year, as new figures from the National Landlords Association (NLA) show that approximately 380,000 landlords (39%) intend to sell their investments.

The report indicates that 45% of landlords who intend to sell property in the coming year plan to offload individual flats and apartments, with a third (33%) looking to sell terraced houses – both of which are typically affordable and attractive options for those taking their first steps onto the property ladder.

Significantly, just 7% of landlords who plan to sell say that they intend to sell to other landlords, signalling renewed hope for many first time buyers and homeowners looking to progress up the property ladder.

The data comes as separate findings from UK Finance show signs of buoyant first time buyer activity of late.

Richard Lambert, the CEO of the NLA, says: “These findings sound like positive news for potential new homeowners, but the reality is, not everyone wants or is in a position financially to buy.

“In fact, if all these homes are sold as planned, then it will lead to a significant fall in the supply of property available to those who choose to rent, or have no other option but to rent.”

The NLA has been looking into this issue recently, and has produced a video and discussion paper about the relationship between landlords and first time buyers in the market.

Lambert adds: “Everyone seems to have a gut instinct about the extent to which they feel landlords and first time buyers compete for homes in the UK, but homeownership is a highly emotive issue, so the facts are often overlooked.

“There’s certainly no denying that competition exists, but the significant barriers to homeownership are more likely to be the high cost of a deposit or ability to access mortgage finance.”

He concludes: “With our new video and discussion paper, we hope to provide more of an accurate picture of these issues, and, importantly, we want to focus the debate on what can be done to ensure that everyone has a roof over their head – regardless of whether they rent or own.”

Access these documents from the NLA here: www.landlords.org.uk/news-campaigns/news/the-hustle-homes

Should Millennials be given £10,000 to Help Buy a Home?

Published On: May 10, 2018 at 8:06 am

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Resolution Foundation’s recent proposal aims to help young people by redistributing wealth in the form of a ‘citizen’s inheritance’.

‘A new generational contract: the final report of the Intergenerational Commission’ was published on 8th May, a report detailing the Commission’s conclusions and analysis of the intergenerational challenges that the country is currently facing. This includes the idea to introduce the £10,000 ‘citizen’s inheritance’ for those aged 25.

Following a two-year study, “drawing on a deep and wide-ranging examination of the experiences and prospects of different generations in Britain”, the resulting conclusion is that every person in Britain should receive £10,000 when they turn 25. From this initial phase, there will be a transition with the idea to eventually offer it to older ages, starting with those turning 35 in 2020.

This ‘citizen’s inheritance’ is to be a restricted-use asset endowment available to all young adults in order to support skills, entrepreneurship, housing and pension saving.

This is considered to be a way of bridging the gap between millennials and baby boomers. Do you think this is the right step to take?

Dave Willetts, Executive Chair of the Resolution Foundation, has stated in the foreword for the report: “It is very good news that fairness between generations has now entered the mainstream political debate. Too often we were drifting into decisions and policies which weakened our generational contract without being aware of what we were doing.”

The outlook of the report is a positive one, but it should be considered that we would be swapping one tax for another. The £10,000 inheritance would be funded by a change to inheritance tax. It would be instead replaced with a lifetime receipts tax with lower rates and fewer exemptions. It would be paid by recipients, rather than estates.

The report points out that “a £10,000 boost today would at least double the wealth of more than six in ten adults in their late 20s”.

What would you do with this inheritance? Or, more relevantly, what would you do as a 25 year old with access to £10,000 to invest your future?