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Discounted Starter Homes in UK will not help many families, research has found
Discounted starter homes could be out of reach for the majority of families in need of an affordable home in many parts of the UK, it is claimed. First time buyers will be able to buy 200,000 new starter homes over the next five years at a minimum discount of 20% of the market value with discounted prices capped at £450,000 in London and £250,000 elsewhere. However, according to an analysis by the Local Government Association while the national starter homes scheme could help some people onto the housing ladder it won’t help everyone who wants one of these homes. The LGA pointed out that crucial details of the scheme are yet to be confirmed but it is concerned it will help the fewest numbers of people in areas where the housing affordability crisis is most acute and will be out of reach for many people in need of an affordable home in the majority of local areas. Although house builders will be able to build and sell starter homes below the price caps, councils are concerned that this could be difficult for developers to achieve without compromising on quality, particularly in areas with higher house prices. Town hall leaders are calling for the system to be flexible regarding the number, type and quality of starter homes so that they meet the needs of local communities. Councils also need powers to provide affordable rented homes that are crucial for enabling people to save money towards a deposit, and the means to secure investment in vital infrastructure that new home buyers will expect and will rely on. The analysis by real estate services firm Savills for the LGA reveals that discounted Starter homes prices will be out of reach for all people in need of affordable housing in 67% or 220 council areas and are out of reach for more than 90% of people in need of affordable housing in a further 80 council areas. People in need of affordable housing are defined as those who would have to spend 30% of their household income to rent or buy a home. The research says that for the average earner with a minimal deposit of 5% looking to buy an average priced house, a 20% discount would make it possible to borrow enough to buy a starter home in just 45% of all council areas in England. This includes all average priced homes in the North East of England, 95% in the North West and 90% in the East Midlands. Being able to save a 20% deposit would make an average priced home with a 20% discount affordable to buy in a further 29% of local areas. This includes a third of council areas in Yorkshire and Humber and the West Midlands. The average earner living in 85% of London boroughs, 49% of council areas… Continue reading
Call for UK housing policy to be revised as number of first time buyers remain flat
The number of first time buyers in the UK has remained flat despite mortgages becoming more affordable than ever, new research has found. Record mortgage affordability is keeping the housing market afloat, but current housing policy needs to be revised to meet home ownership targets according to a new report by the Intermediary Mortgage Lenders Association (IMLA). Overall, it forecasts a continuing recovery in mortgage lending during 2016 and 2017, with a particular pickup in lending for house purchases by owner occupiers from an estimated £142 billion in 2015 to £155 billion in 2016 and £169 billion in 2017. However, reviewing 2015 activity, the report finds that even though mortgage affordability has hit its highest level ever, with buyers spending a record low 8.6% of their income on interest by the third quarter of 2015 and even first time buyers spending only 9.7% by November. It adds that first time buyer numbers have fallen marginally year on year, suggesting the government may need to revisit housing policy to successfully increase owner occupation levels. IMLA’s research shows that as a result of this increased affordability, first time buyer mortgage repayments are lower than average rents in every region of Britain, although this is not yet being translated into the desired increase in home ownership with factors including deposit affordability issues and tighter lending criteria also having an effect. The rise in affordability over the past year has been supported by cheap mortgage deals, alongside rising incomes. Mortgage rates are at record lows. February 2015 saw the average two year fixed rate at 75% LTV fall below 2% for the first time and by October the average two year fixed rate at 90% LTV slipped below 3% for the first time. In a trend particularly benefitting first time buyers, the last year has seen high LTV loans become substantially more affordable, with those borrowers opting for higher LTV options facing a smaller marginal cost for borrowing between 75% to 90% and between 75% to 95%. IMLA’s analysis finds the implied marginal cost of borrowing between 75% and 90% LTV, which was as high as 21.3% in the middle of 2010, had fallen to 12.9% by the end of 2014 and was only 7.8% by December 2015. However, improving affordability of higher LTV loans in 2015 did not spark a rise in aggregate high LTV lending or the number of first time buyers, which fell back slightly in the year to November 2015 compared to the same period of 2014. Deposit affordability issues and tighter lending criteria mean that not all buyers can access the deals available, even though high LTV loan repayments are now more affordable than ever, the report points out. The IMLA is concerned that the government’s decision to terminate the Help to Buy mortgage guarantee scheme at the end of the year could make it harder for first time buyers, as it may reverse the recent improvements in high LTV loan pricing. Continue reading
Tenants who want to buy a home are prepared to make sacrifices, new study finds
Over two thirds of tenants in the UK are saving for a deposit and are prepared to move away from family and friends so they can afford to buy a property, new research has found. The research study by online letting agent PropertyLetByUs, also shows that just under a third of tenants have given up hope of ever buying their own property. Some 46% of tenants can only afford to purchase a property if they move to a cheaper area and one in six tenants would consider taking in a lodger to help with the mortgage payments. Tenants were also asked how long they thought it would take to buy their own home and a third said within the next two years, almost 20% said within the next three years and 4% believe it will take them five years while 1.5% said that it would take them over 10 years. However, tenants do aspire to move up the rental ladder before they purchase their own home, with 51% saying that they are hoping to move into a nicer property when they can afford to. ‘Savvy tenants recognise that they may have to look further afield for properties they can afford. Many are prepared to move to areas that are some distance from their friends and families,’ said Jane Morris, the firm’s managing director. She pointed out that the latest data shows that a growing number of young people are renting for longer. According to PwC, almost 60% of 20 to 39 year-olds in England will rent their homes by 2025, while just 26% will have got on the housing ladder. This younger age group will find it increasingly difficult to buy and are likely to be older than previous generations, before they can afford their own home. ‘What is clear is that the majority of tenants still aspire to purchasing a property. But many tenants recognise that they will have to make sacrifices and compromise, so they can afford to buy a home of their own,’ said Morris. Continue reading
