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Survey confirms UK Help to Buy is popular with first time buyers
The UK Government’s Help to Buy scheme is now the most popular way for first time buyers to get on to the housing ladder, new research suggests. As well as helping first time buyers who can afford to pay a mortgage but are struggling to save a deposit it eases the pressure on families to plug gaps in savings, says the study from mortgage and loans provider Ocean Finance. It found that half of first time buyers would use the Help to Buy equity loan or mortgage guarantee schemes to overcome the barrier of having a small deposit at a time when deposits are the biggest barrier to getting on the housing ladder. The Government started the Help to Buy scheme in 2013 in an attempt to kick start the housing market following the financial crisis which saw lenders tighten their mortgage lending rules and most 95% mortgages disappear. This meant borrowers needed to fund deposits of at least 10% and often, up to 25%, which took home ownership out of the hands of many first time buyers. Almost 40% of first time buyers questioned said being able to save a big enough deposit is the main barrier to owning their own home. This is following by rising house prices, which makes it harder to fulfil tough affordability checks and at the same time, pushes the amount needed for a deposit even higher. Alongside its equity loan and mortgage guarantee schemes, the Government is set to launch a Help to Buy ISA this autumn. The ISA is designed to boost the savings of first time buyers with a top up from the Government of 25%, up to a maximum of £3,000 on savings of £12,000. Almost a quarter of those questioned by Ocean said they planned to open a Help to Buy ISA. That compares with 14% who expect to rely on help from their families to fund their deposit. ‘The Help to Buy scheme is doing its job and helping to remove the deposit barrier that many first-time buyers face. Too many first time buyers have been frozen out of the housing market because they couldn’t save the 25% needed to get the best deals and make their mortgage affordable,’ said Gareth Shilton, Ocean’s spokesperson. ‘It’s interesting to see appetite for the new Help to Buy ISA also, and we’re looking forward to seeing take up levels of this scheme once it’s launched. The big question, of course, is what will happen when the Government steps back from supporting schemes to get the housing market moving. House builders and lenders need to be having conversations to see how they can work together to ensure the momentum isn’t lost,’ he added. Continue reading
Warning over too much mortgage regulation in the UK
Regulators’ determination to reform the UK mortgage market has resulted in a layering effect which threatens to stifle consumer access to credit if it goes unchecked, according to a new report. The cumulative impact of new MMR financial regulations introduced last year and the implementation of the European Union Mortgage Credit Directive, is affecting the lending recovery, says the Intermediary Mortgage Lenders Association (IMLA). The report acknowledges and accepts the need and ‘inevitable’ cost of improving the safety of the banking sector and preventing a repeat of the financial crisis but it warns that the common objective of building a ‘sustainable’ market with enough room to deliver positive outcomes for consumers is threatened by the sheer volume of new rules. It also points out that the overlapping effect may unwittingly tip the balance too far away from consumer choice and it is calling on the Bank of England to establish a in industry panel to guard against too many rules. The report raises concerns over regulators’ potential ‘bias to action’ where they perceive a high cost to their reputation if they are seen to be too permissive, compared with a low risk of being too restrictive. IMLA cites the Financial Policy Committee (FPC) decision in June 2014 to impose interest rate stress tests and limit high loan to income (LTI) mortgage lending as an example of this bias. The actions came at a time when the effect of the MMR on the market was still unclear, and saw the fledgling recovery of 2014 followed by a subsequent downturn in mortgage activity that brought eight successive months of approvals falling year on year. Despite the slowdown, the FPC was given further powers in February 2015 to cap loan to value and debt to income levels for mortgages. These powers are as-yet unused but the IMLA suggests these actions support the view that regulators perceive a ‘normal’ mortgage market to be significantly smaller than that which existed before 2007, which has implications for access to home ownership as the UK population grows. To prevent regulatory layering from choking off the recovery, IMLA calls on the Bank of England to maintain an ongoing review of the new regulatory framework to identify unnecessary overlap and costs. One solution it proposes is a joint Bank of England industry panel that specifically focuses on identifying areas where regulations are unnecessarily complex or duplicative. ‘No-one is questioning the need for continued caution or the regulators’ responsibilities to put boundaries in place to ensure the mortgage market is sustainable in the long term,’ said Peter Williams, executive director for IMLA. ‘You could also argue that regulators and industry will naturally have differing views about what constitutes normal or healthy activity and this is exactly why it’s in consumers’ interests to put a permanent forum in place where the two can put the vast tomes of new regulation under the microscope,’ he pointed out. ‘We must ensure that future regulatory… Continue reading
Average residential rents in Scotland reach new peak
Average rents in Scotland reached a new peak of £544 per month in May after a record monthly increase of 1% and annual growth of 2.7%, the latest buy to let index shows. The rise was led by a 1.9% monthly increase in the south of Scotland, the biggest regional change and annual growth is now the fastest since the summer of 2014, according to the latest index from Your Move, one of Scotland’s largest lettings agent networks. The average Scottish rent has reached an all-time high of £544, following a 1.0% boost in May 2015. In contrast, over the past six months, rents have risen by an average of just 0.1% per month. May’s rise represents the strongest monthly uplift on record, as rent growth begins to pick up. This also represents a significant increase from 1.6% annual growth in April 2015 and 1.3% in March, after a recent lull in annual rent rises. According to Brian Moran, lettings director at Your Move Scotland, the rental market has seen growth more than doubled since March, when annual rent rises were only 1.3%. ‘After a downtrend in rent growth over the winter months, we’re now back on par with the rate of rises a year ago. In fact, at the same time last year, rents were rising at a moderately faster pace, with 2.8% annual growth in May 2014,’ he pointed out. He also explained that affordability is one of the main handicaps reining back private sector rents from rising even faster, but with recent boosts to wage growth, most household incomes are weighing in higher, and tenants can finally afford to pay more. ‘However, this needs to go hand in hand with supply. With a strong economy and sturdy jobs market, demand for homes to let is standing tall. The stock of available housing needs to rise to match this level to maintain the delicate balance with rent rises, and tenant incomes,’ he added. Rents are higher than a year ago in all but one of the five regions of Scotland. Compared to last year, rents in Glasgow and Clyde have seen the biggest movement, rising 5.7% in the past 12 months, equal to £30 in absolute terms. This brings the typical rent in the region to £566 as of May 2015. The second most significant increases were found in the South and the East of Scotland, with average rents in these both regions up 2.7% since May 2014. Rents in the Highlands and Islands experienced more moderate annual rent growth of 1.9%. Edinburgh and the Lothians is the only region where typical rental prices have fallen year on year. The average monthly rent in the region is now 0.6% lower than it was a year ago. At £593 per month, the average rent is now considerably below its November 2014 peak, when prices reached £617. On a monthly basis, rental prices have risen across all regions of Scotland. Rents in the South… Continue reading
