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First time buyers boost UK housing market activity
The UK housing market has reported healthy growth in March, on the back of a surge in first time buyer activity, new research shows. There has been a lot of talk about buy to let buyers flooding the market to beat Aprils extra stamp duty deadline, but the latest figures from Connells Survey & Valuation show that first time buyer activity in March jumped 15% compared to March 2015 and 41% compared to February 2016. In March, the total number of valuations carried out rose 8% year on year and grew by 21% month on month and this was primarily due to the first time buyer sector posting strong monthly and annual growth figures. Indeed the figures show that there was a dip in buy to let activity in March. Corporate services director John Bagshaw believes first time buyers figures have been aided by an increased uptake of Government plans designed to assist the bottom of the market. ‘The Help to Buy scheme has become more widely recognized and used by those who need a little help getting the capital together to fund a mortgage for a first home. Equally, more first time buyers are taking advantage of special first time buyer discounts on certain properties, which has helped those on lower incomes step onto the ladder,’ he explained. Remortgagors and home movers have also seen a significant boost in valuation activity in March. Total remortgaging volumes were up 25% month on month and up 33% year on year. ‘Those seeking to move up the property ladder are making solid strides this month. With home values high and continuing to increase across all parts of the country, albeit at an uneven pace, many property owners may view it as a good time to either upscale to something bigger and better or downsize and enjoy the surplus capital,’ said Bagshaw. ‘The remortgaging sector has also enjoyed an energetic March. The rates of growth have come down somewhat from what we were seeing in previous months, as those looking to remortgage to fund a second home take a step back to re-assess and absorb the stamp duty changes,’ he pointed out. ‘But with the average mortgage rate still very low and no Bank of England rate rise on the horizon many are taking advantage of the bargain rates in order to release capital on their home or switch to a better mortgage deal,’ he added. The stamp duty changes, which became effective on 01 April impacted the buy to let market in March. Valuation activity in this sector dropped by 27% between February and March 2016, as well as dipping by 36% compared to the same month a year ago. ‘The buy to let market has endured a turbulent month but we expect this to be a short term tumble, with investors adopting the standard kneejerk reaction to legislative changes by proceeding cautiously. This is particularly true for a tax increase like the stamp duty… Continue reading
UK mortgage industry welcomes removal of affordability clause from hybrid lifetime loans
The UK home mortgage industry has welcomed a decision by the Financial Conduct Authority (FCA) to remove the need for an affordability assessment on home owners taking out hybrid lifetime mortgage products. The FCA said it has made the modification because it does not consider that an affordability assessment is required where there is no risk of arrears and repossession in the event of missed payments. ‘The modification works by dis-applying the requirement to carry out an affordability assessment where interest payments are anticipated or required, providing that the specific lifetime mortgage allows the consumer to exercise at any time an option to convert the product to interest roll-up,’ the FCA said. Lifetime mortgage contracts that give consumers the option to pay interest for a period became subject to affordability rules based on the requirements of providers following the Mortgage Market Review in 2014. But the Equity Release Council has been campaigning for the FCA to review its affordability assessment of these products and said it is pleased the argument has been taken on board. ‘This has the potential to help more consumers make use of options already offered by equity release providers in later life and encourage further innovation within the market,’ said Nigel Waterson, chairman of the Equity Release Council. ‘The optional payment of interest within a lifetime mortgage is different to that of a residential mortgage with the opportunity for consumers to switch to roll-up when they wish,’ he explained. ‘This change highlights the growing recognition that equity release has an important part to play in the planning of funding for later life and we look forward to continuing to work with the FCA in the future,’ he added. The Council of Mortgage Lenders also welcomed the decision. ‘This may look like a small change, but it is a really significant one that should allow the lifetime mortgage market to develop in a far more sensible and consumer friendly way. It removes one barrier to the provision of sensible, safe and worthwhile lifetime mortgage products,’ said Paul Smee, CML director general. Alice Watson, product and communications manager at Retirement Advantage Equity Release, said she believed that the affordability assessments were an unintended consequence of the Mortgage Market Review (MMR) and added an extra and unnecessary step to the application process. ‘The FCA’s decision is yet further recognition that the equity release market continues to grow and is a serious option for increasing numbers of over 55s across the country. The good news is that ultimately it is consumers who will benefit from this change, which will make access to lifetime mortgages more straightforward for more people and should allow providers to develop even more innovative solutions,’ she pointed out. Continue reading
One in five home sales in UK fall through, latest data shows
The number of house sales failing to successfully complete in the UK fell in the first quarter of 2016, with just one in five house sales falling through, according to new research. Figures from independent home buyer Quick Move Now indicate a house sale fall through rate of 20% in the first quarter of the year, a drop of just under 8% from the final quarter of 2015. The annual year to date fall through, which the firm says gives a greater overview of how the property market is performing generally, was fairly constant throughout 2015 and into the start of 2016 at around 29% and finished the first quarter of 2016 at 29.07%. ‘The start of 2016 has been an interesting time for the UK property market. Strong demand and low supply in many areas has led to a strong financial performance and whilst it is encouraging to see that the number of sales falling through before completion fell in the first three months of 2016, many property owners and would be buyers would still be shocked to learn that one in five sales doesn't go through,’ said Danny Luke, business manager at Quick Move Now. The two biggest reasons why house sales didn't complete in the first quarter of 2016 were the vendor pulling out of the sale for a higher offer and either vendor or buyer pulling out because they felt the sale wasn't progressing quickly, both at 25%. The firm said that many areas experiencing very strong demand and low supply, so vendors are keen to achieve the best possible price for their property so are willing to pull out of an agreed sale if made a better offer. Other reasons included the buyer changing their mind, 18.75% of cases while a buyer being refused lending by a mortgage provider accounted for 12.5%, the chain collapsing, survey issues and a buyer wanting to renegotiate after the initial offer had been accepted all accounting to 6.25%. ‘A lack of properties coming to market has led to prospective buyers having to move very quickly in order to secure a property, and may mean they put an offer in on a less than ideal property due to fear that they'll be unable to find anything else, which accounts for buyers changing their minds and trying to renegotiate after the initial offer has been accepted,’ explained Luke. ‘Some inevitably get cold feet about such a large investment, or find that a survey confirms their fears, and pull out before the sale completes,’ he added. Continue reading
