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First time buyers need average earnings of £50,000 to buy a home
First time buyers in the UK need to earn on average of £50,000 a year to get on the property ladder, new research reveals. However, in 51 out of 65 cities, the average salary is below the minimum required to buy a flat, according to the study from comparison website GoCompare. The most affordable place to buy in the UK is Blackburn where a salary of £14,000 a year could be enough to buy a flat but a minimum household income of £140,000 a year is needed to buy a flat in London. In the capital a minimum of £275,000 is needed to buy a detached house where the average price is at £869,415 yet the median average salary in the capital is just £30,338. So Blackburn is almost 10 times cheaper than London. The median average salary in the Lancashire town is £18,444, making it one of the few places in the UK that are affordable. After Blackburn, the cheapest places to buy property are Hull, Blackpool, Grimsby and Stoke-on-Trent where a salary of just £15,000 could be enough to purchase a flat. Outside of London it is Brighton, Edinburgh, Bristol and Oxford which are the most costly. Minimum salaries to get on the property ladder in these cities are £60,000, £60,000, £58,000 and £54,000 respectively. ‘Although owning a home may be achievable in places like Blackburn and Sunderland, in other parts of the country the rapid rise in property value and a growing urban population is pricing many of the British public out of home ownership,’ said Ben Wilson, home insurance expert at GoCompare. ‘London’s high prices are well documented, but it’s in other parts of the south of England that the gap between average salary and average house price is at its most alarming, with places like Brighton requiring a minimum household income of £180,000 to afford a detached house,’ he added. Continue reading
Home buyers in UK unlikely to see mortgage costs rise in short term
Home buyers in the UK are set to see mortgage rates remain at historic lows for some time yet despite original forecasts that they might rise by the end of this year. The Bank of England has indicated that the current 0.5% base rate is likely to be around for some time yet with a rise not looking likely until well into 2016 or even 2017. Rates have now been this low for 80 months. But there are concerns that home buyers will get too used to low interest rates and this could backfire in the future when interest rates do rise. According to James Jones, head of Consumer Affairs at Experian, buyers need to work out what they can afford, and plan ahead for unforeseen costs that may make repaying debts harder over the years ahead. A survey of people who had failed to secure a mortgage last year suggests that many are failing to do the basic research needed to get proper control of their finances. Some 13% did not know how much money they have left over at the end of the month and 18% did not know what monthly repayments they could afford. The research also found that 14% did not have a big enough deposit for the property they wanted and 12% were unable to secure the size of mortgage they needed. Another piece of research has found that almost three quarters of home owners with interest only mortgages are worried they may not be able to repay their loan. Interest only deals mean borrowers pay the interest on the loan during the life of the mortgage and then must repay the capital when the mortgage term ends. Just 31% of those interest only borrowers questioned said they have a separate investment policy in place, such as an endowment or an ISA, to pay the capital, according to the research by mortgage broker Ocean Finance. While 16% said they plan to switch to a repayment mortgage before their current loan ends, 31% said they expect to have to sell their home to settle the outstanding capital. And a fifth of home owners said they don’t have a plan in place to repay the capital. ‘Interest only has become a time bomb because so many people took out the products to cut the cost of their mortgage, with no view of how they would repay the capital element. Borrowers who have an interest only mortgage with no repayment plan need to take action,’ said Gareth Shilton, Ocean’s spokesperson. ‘It’s advisable to seek advice on whether they can overpay on their current interest only deal, switch to a repayment mortgage, or use an ISA or pension to settle the capital payment,’ he added. Interest only mortgages became popular in the 1990s as a way for consumers to afford homes at a time when property prices were soaring. Lenders often agreed interest only loans without confirming borrowers could repay the capital owing… Continue reading
UK prices up almost 10% year on year, latest index data shows
UK house prices increased by 1.1% between September and October and re up 2.8% quarter on quarter and 9.7% year on year, the latest property index shows. This means that the average house price is now over £200,000 at £205,240, according to the Halifax index data and the report says that house price optimism remains high. The 1.1% monthly rise followed a previous month’s fall of 0.9% and the market is up and down with the quarterly figures being more reliable in terms of indicating overall trends, according to Martin Ellis, the Halifax’s housing economist. He pointed out that house prices over the three months from August to October with growth of 2.8% were higher than in the preceding three months and the quarterly rate of change increased from September’s 2% and was a little above the 2.5% average over the first nine months of the year. Some 68% of Britons expect average property prices to be higher in 12 months’ time with just 5% expecting it to be lower, according to the latest quarterly Halifax Housing Market Confidence Tracker. The Halifax report also points out that figures from HMRC show that home sales increased again in September. UK home sales increased by 1% between August and September, to 106,030. This was the second successive monthly rise. Sales in the three months to September were 4.4% higher than in the preceding three months. Mortgage approvals are also on an upward trend despite falling in September. The volume of mortgage approvals for house purchases, a leading indicator of completed house sales, increased by 4% between the second and third quarter of the year despite a 2.5% decline in September. Approvals in the three months to September were 10% higher than in the same three months last year. However, supply remains at a record low. New instructions by home sellers declined in September for the eighth successive month. This contributed to the stock of homes available for sale remaining at record low levels. ‘Improving economic conditions and household finances, together with sustained low mortgage rates, have boosted housing demand during 2015. Strengthening demand is filtering through in to higher sales levels although the ongoing shortage of supply is acting as a significant constraint on activity,’ said Ellis. ‘The imbalance between supply and demand is likely to persist over the coming months, maintaining upward pressure on house prices,’ he added. Rishi Passi, chief executive officer of Oblix Capital, believes growth on this scale isn't sustainable. ‘Wage increases and low inflation are bolstering household finances, helping to take some of the sting out of these increases,’ he said. ‘The diminishing prospect of an interest rate rise also means lenders are continuing to offer historically attractive rates to the market, which is good news for first time buyers and developers alike,’ he added. Continue reading
