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Mortgage payments for UK first time buyers have fallen sharply
First time buyers in the UK with small deposits are making savings of more than £790 a year, when comparing monthly mortgage payments to the same time last year, new research suggests. This is in part due to competitive interest rates now available as monthly mortgage costs for first time buyers have fallen sharply, according to the latest Genworth Moneyfacts LTV tracker report. The average house price for a first time buyer is £154,559 and for those with a 10% deposit, lower mortgage interest rates mean they can save £67 a month compared to what they would have paid if they’d taken out the same loan a year ago. This adds up to savings of £800 over the course of a year. For those with 5% deposits, the monthly payment on a 95% LTV mortgage for an average first time buyer home was £66 per month lower in March 2016 compared to 2015, equating to annual savings of £792. The report explains that part of the reason for the attractive rates is increased competition as the number of mortgage products at high LTVs has risen in recent months. The number of mortgages available for those with a 5% deposit jumped sharply from 195 in March 2015 to 267 in March 2016. As a result, rates for 95% LTV mortgages reached a record low of 3.92% in March 2016, 0.80 bps lower than a year before. Rates for 90% LTV loans are also much cheaper, having fallen 0.92 bps to 2.82%. However, the total amount of high LTV lending has stagnated even while overall lending has increased revealing that while lenders may be competing for the best customers in the high LTV bracket, they are more focused on increasing lending to customers with larger deposits. Despite a climate which is ripe for high LTV lending and a rising numbers of available mortgages, lending to those with a 5% deposit, which saw a notable boost following the introduction of the Help to Buy Mortgage Guarantee (HTB2) Scheme, has subsequently flat lined. Lending to those with 5% deposits received a much needed boost following the introduction of HTB2, with the proportion of lending at this level climbing from 1.7% in the fourth quarter of 2013 to 3.1% in the first quarter of 2014. It reached a high of 4.2% of total mortgage lending in the second quarter of 2014 but stagnated at around 3% in 2015. The stagnation in lending to those with small deposits is particularly concerning given that the Help to Buy Mortgage Guarantee scheme is due to end after this year. With nothing scheduled to replace the scheme, the fear is that lending to this part of the market could continue to fall. ‘Competitive rates available for those with just 5% or 10% deposits mean they are able… Continue reading
Chancellor warns property prices will take a big hit if UK leaves EU
Leaving the European Union would hit the UK residential property market with prices likely to be hit significantly and make mortgages more expensive, according to the Chancellor of the Exchequer George Osborne. Speaking on national television, he warned that if there is a Brexit, the term used to describe the country leaving the EU, then the values of homes will fall. He also revealed that the Treasury is about to publish a major piece of research on how Brexit would affect that UK economy and that one major issue that emerges is the effect on real estate, ‘You will see the analysis we will do, but I’m pretty clear that there will be a significant hit to the value of people’s homes and to the costs of mortgages. That is one example of the kind of impact, economic impact, that we get from leaving the EU,’ he said on of ITV’s Peston on Sunday politics programme. He has spoken out as the campaigning ahead of the EU referendum on 23 June hots up. The polls have been neck and neck but at the beginning of May an ICM poll put the leave camp slightly ahead at 45% compared to 44% for remain. The warning from Osborne comes as prices have started to ease slightly. The latest Halifax index, just published, shows prices fell by 0.8% in April. The market has been looking healthy recently with data from HMRC showing that sales have risen dramatically from 116,930 in February to 165,480 in March, the highest monthly total since records began in April 2005. While sales in the first three months of 2016 were 32% higher than in the same period last year, much of both the monthly and annual increases is likely to be attributable to a rush to beat the new stamp duty tax rates for buy to let and second homes in April. On top of this the volume of mortgage approvals for house purchases, a leading indicator of completed house sales fell by 2.5% between February and March. This suggests that the number of new buyers seeking to complete ahead of the stamp-duty surcharge had already begun to ease. Approvals, however, were still 15% higher than in March 2015, according to Bank of England, seasonally adjusted figures. Meanwhile, supply remains historically low. New instructions by home sellers fell marginally in March following three consecutive monthly increases. Market conditions remain very tight with stock levels nearly 20% lower than a year ago, at a near historical low, the most up to date monthly report from the Royal Institution of Chartered Surveyors (RICS) shows. Continue reading
Demand for Spanish property facing a number of issues in the coming months
Demand for property on the Spanish Costas has increased from expats who are benefitting from good mortgage rates and there is a rise in construction activity with a number of new developments being started, according to a new report. It also explains that there are a number of other factors likely to affect the real estate market in the coming months including currency rates, the Spanish election and in Andalucía new rules regarding holiday lets. Expat demand is coming from the UK, Scandinavia, and Germany with other northern Europeans also active in the market, says the report from the Survey Spain network of chartered surveyors covering the first quarter of 2016. However, there is likely to be an increased nervousness in the market as the British referendum approaches on 23 June because of fears that the poll will support the UK leaving the European Union. The threat of a Brexit and currency exchange rates are just a couple of major issues that could affect the Spanish property market. The report says that doubt about the referendum result and it’s after effects are causing UK buyers and sellers to hesitate. In addition, the fall in the value of sterling, from the €1.40’s to €1.20’s in the last three months has made the relative costs of property in Spain much more expensive for UK buyers but of course better for those wanting to move back to the UK. ‘However, the latter will be concerned that there is more reduction in value to come and so may decide to hold onto euro asset until closer to the referendum in the UK on 23 June,’ the report says. It refers to a recent letter received from a client which says they are concerned that if the UK leaves the EU then property prices in Spain may fall considerably. There are also risks associated with a change of Government in Spain. The firm has found that more than one client has stated that they will sell and move if a left wing Government should be elected. ‘Again, the uncertainty could be causing buyers and sellers to pause until there is a result, which could be before the end of May or, with a new election, at whenever a new Government is established after the end of June,’ the report points out. The property market could also be affected by decisions made by Spanish banks who still own a lot of properties due to the economic downturn. The Spanish banks are obliged to update their valuation of assets practice to include regular annual or bi-annual valuations of each individual asset. The report explains that this has seen Sareb, the Spanish bank rescue bank, announce a write down of their portfolio by more than €2 billion in addition to a €968 million write down in the past two years. ‘It may be that many private banks will have to do the same, which may result in them lowering… Continue reading
