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Latest CML figures show lending to first time buyers still rising
Lending to UK first time buyers increased by 12% in October compared to the previous month and is now 14% up on the same month in 2013, according to the latest figures from the Council of Mortgage Lenders. By value, there was £4.4 billion advanced to first time buyers in October, 10% up on September and 22% higher than October last year, the CML data also shows. But first time buyer affordability changed fractionally, with first time buyers typically borrowing 3.39 times their gross income, compared to 3.4 in September. The typical loan size for first time buyers fell slightly month on month to £125,800 in October, down from £126,000 in September. First time buyers in October paid 19.5% of gross income towards covering capital and interest payments, little changed from 19.6% in September but still significantly less than the recent peak of 24.8% in December 2007. Lending to home movers also strengthened month on month. In October, the number of loans advanced to movers was 35,000, a 10% rise on the previous month and up 4% on October last year. By value, lending to movers totalled £6.5 billion, 8% up on September and up 10% on October last year. Remortgage lending activity saw a decline month on month in October, with the number of remortgage loans totalling 26,600. This was 6% down on September and 11% down on October last year. The value of these loans at £4.1 billion was down 7% on the previous month and down 5% on October last year. There were 19,600 buy to let loans in October, representing lending of £2.7 billion. This continued the growth seen last month with loan volumes and the value of these loans up 8% on September. Compared to October 2013, the number of loans increased 22% and the value of these loans went up 29%. ‘This has been a year of change for our industry, but the market has shown remarkable stability with house purchase and buy to let lending showing steady, consistent growth throughout 2014 compared to 2013,’ said Paul Smee, director general of the CML. ‘There have been fluctuations month to month but overall the market appears to be showing a positive direction of travel going into the New Year. Stamp duty reform was long overdue and it is welcome that the tax has been changed. It will now be interesting to see how the market reacts. The new structure should be less of a barrier to mobility for those looking to get on the housing ladder or movers looking to switch homes,’ he added. According to David Newnes, director of Your Move and Reeds Rains estate agents, while first time buyers have been forging ahead in the market this year, more recently lending to new buyers is starting to wane. ‘Mortgage market measures introduced in April have trimmed back lending since, coupled with the ongoing debate about when interest rates might rise and the LTI cap this has discouraged… Continue reading
Renting costs twice as much as owning a home in US cities
People renting a home in the United States can expect to pay twice as much of their incomes on their rent than an owner on mortgage payments, new research has found. It means that it is more affordable to buy a home now in most US metros than it was 15 years ago, even for those putting down less money on a home, according to a Zillow analysis of third quarter income and home value data. Renters, however, continue to pay an increasing share of their income to their landlords as rents soar and incomes remain flat. On average, US home buyers making the nation's median income and purchasing the typical home spend 15.3% of their income on their monthly house payment, down from the historical norm of 22.1% during the pre-bubble period from 1985 to 1999. On the other hand on average, US renters spent 29.9% of their monthly income on rent in the third quarter of 2014, up from 24.9% historically. Younger buyers, earning less money in many areas and making smaller down payments on a home, should expect to spend slightly more of their income on mortgage payments at around 17.4%. The Zillow report says that homes for younger buyers remain affordable thanks to continued low mortgage interest rates and their tendency to shop for less expensive properties. However, the report warns that continuously rising rents across the country could drive more people into the home buying market, but they also make it more difficult for first time buyers to save for a down payment. A breakdown of the figures shows that Washington DC renters can expect to spend 27.1% of their income on rent, up from 16.2% historically while in Miami, rent as a percentage of income has risen from 26.5% before the bubble to 44.5% currently. ‘Despite rising home values, homeownership remains very accessible for buyers that can scrape together a down payment, even if that down payment is relatively modest, find a home to buy and secure financing,’ said Zillow chief economist Stan Humphries. ‘But what keeps me up at night is the fact that it still remains so difficult for so many potential buyers to make those particular stars align, largely because renting is so unaffordable these days,’ he explained. ‘It's very difficult to come up with a down payment when so much of your monthly pay cheque, especially on an entry level salary, is going to your landlord instead of into your savings. Buying conditions are getting better every day, and in time the allure of fixed housing payments and building wealth through home equity will draw more buyers out of rentals and into home ownership,’ he added. The report also points out that home ownership rates in the US have steadily declined, even as the housing market has recovered, in part because millennials have delayed their entry into the housing market. But it is likely that by the end of 2015, millennials aged 23 to 34, will overtake Generation X as the biggest… Continue reading
Number of Scottish households facing higher moving costs set to rise
More households in Scotland could potentially see the upfront cost of moving rise when the new Land and Building Transaction Tax rates come into force in April 2015, a new analysis suggests. In October, during the draft Scottish Budget, John Swinney, the finance secretary, announced that from April next year Scotland would be scrapping the current stamp duty system and replacing it with a LBTT. At the time the Scottish government said that up to 90% of home buyers would be better off under the new regime but this was before Chancellor George Osborne announced stamp duty reforms last week. Following the LBTT announcement real estate firm Knight Frank looked at the numbers and found that, based on the rates announced and compared to the stamp duty system that was in place across the UK at that time, the new LBTT would favour buyers of properties at £325,000 or less, where less tax would be payable. Sales above £325,000 would incur a higher rate of tax. However, the firm has now re-done the calculations based on the stamp duty changes which will apply in Scotland until the change and the point at which it now becomes more expensive to buy a property under the new LBTT system has fallen from £325,000 to £254,000. Knight Frank says that this means that a lot more households could potentially see the upfront cost of moving rise when the LBTT rates come into force in April. According to figures from the Registers of Scotland, the average price of a detached property is higher than £254,000 in nearly a third of all the local authorities in the country. Under the current system, a house costing £390,000 will incur a stamp duty payment of £9,500, whereas the upfront costs under the new LBTT system for the same property will be 72% higher at £16,300. ‘Prior to the introduction of the new levy in four months’ time, we expect to see an increase in the number of prime sales and homes coming to the market as both buyers and vendors look to move before costs rise,’ said Oliver Knight. ‘Homes worth £250,000 plus accounted for 72% of the total £215 million stamp duty take in Scotland last year. The new regime could hit receipts at this end of the market if there is a slowdown in transactions, and perhaps raise questions among policy makers about the rate structure,’ he added. Continue reading
