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Help to Buy mortgage scheme helps over 40,000 onto the UK housing ladder
Since the launch of the UK government’s flagship Help to Buy mortgage guarantee scheme over 40,000 loans have been completed with the overwhelming majority going to first time buyers. One of the main aims of the scheme was to get people onto the housing ladder and the official figures show that 40,079 have taken a loan and of these 78% were purchases by first time buyers. The data also shows that the total value of mort gages supported by the scheme is £5.9 billion and the mean value of a property purchased or remortgaged through the scheme was £156,031, compared to a national average house price of £272,000. Compared to total mortgage completions in each region, the scheme is supporting a higher proportion of mortgages in the North West and the East, and a lower proportion in London and the South East. Under the scheme, which was launched in October 2013, the government offers lenders the option to purchase a guarantee on mortgage loans where the borrower has a deposit of between 5% and 20%. The scheme can be used for mortgages on both new build and existing homes, by first time buyers, home movers and those remortgaging. In order to qualify for a loan supported by the Help to Buy mortgage guarantee scheme, there are a number of eligibility criteria which are set out in the scheme rules. For example, the scheme is not available on buy to let mortgages or second homes, and the property value must be £600,000 or less. Meanwhile, new research shows that the number of first time buyers relying on the ‘Bank of Mum and Dad’ for support has dropped significantly. Clydesdale and Yorkshire Banks’ annual first time buyers survey shows that 46% of the nation’s first time buyers needed help in saving for their deposit in 2014 compared with 63% in 2013 and 78% in 2012. ‘It has been very encouraging to see the recovery of the property market with lending to first time buyers at the highest level for seven years. It is also positive that the number of first time buyers relying on the Bank of Mum and Dad to get on the property ladder has decreased significantly,’ said Steve Fletcher, head of Clydesdale and Yorkshire Banks Retail Network. ‘This reflects the increased availability of first time buyer mortgages with a low deposit as well as growing economic confidence particularly among house buyers,’ he added. However, the research also shows some stark regional first time buyer differences with 27% in Yorkshire receiving support from their parents compared to 57% in the South West. Continue reading
Specialist lending set to see growth among UK home buyers
Specialist lending is predicted be one of the key battlegrounds in the mortgage market over the next two years in the UK with new lenders launching and High Street providers targeting the sector. A new survey has four the nearly two thirds of brokers expect new specialist lenders to open for business while another 13% of intermediaries believe High Street lenders will wake up to the potential for growth and offer specialist services. Around 60% of brokers believe specialists will take a bigger share of the mortgage market over the next two years. The scale of demand is underlined by brokers’ views as around half believe that 20% or more of their clients would benefit from applying to a specialist lender. In the past year two out of five brokers say 20% or more of their clients have had difficulties proving their income. However high rates in comparison to the ultra-low deals offered by High Street lenders are seen as the most significant barrier to the expansion of the specialist market and 52% of brokers highlighted rates as the major issue ahead of 47% who say regulation will be the main brake on growth in the specialist market. Indeed, some 32% say clients lack of understanding of the specialist market could also constrain growth. However, just 15% of brokers say their own lack of understanding of specialist options will hurt the market. ‘Industry figures show that intermediary market share is increasing and we expect the significance of the specialist market to grow,’ said Steve Griffiths, head of sales and distribution at Kensington. ‘Our experience over 20 years shows that homebuyers and remortgage clients do not all fit High Street criteria and while they will be entirely creditworthy may have issues with proving income which applies to the self employed and also those in full time jobs,’ he explained. ‘The focus on rates is important but there is also a real need for advice and individual underwriting which is why Kensington will be investing in providing support brokers to help them identify and place specialist cases,’ he added. The research also shows that around 37% of brokers believe the specialist lending market will be constrained by a lack of capacity to lend. However just 22% believe reputational issues will hit growth. Continue reading
Institutional investors being priced out of London market, index suggests
Yield compression, foreign investment and a lack of supply have led to institutional investors being priced out of the London market, according to the latest IPD UK Annual Residential Property Index. The UK as a whole saw a total return of 13.5% in 2014, putting extra strain on investors hoping to enter the market, particularly in London. The strongest districts for overall returns were to be found outside of prime central London, with returns in inner London and outer London the highest in the UK, driven largely by capital growth. The Index results show that the net yield in central London has fallen to 1.8%, its lowest level since the start of the index, and the first time that the figure has fallen below 2%. Across the UK the net income yield has fallen to 2.4% across all residential market lets. ‘If you invested in London residential at some point during the last 10 years, the chances are that you’re laughing all the way to the bank,’ said Mark Weedon, vice president and head of alternatives at MSCI. ‘However, if you are looking to put money into the sector now, our data shows that investors seeking income will find themselves’ priced out by foreign investors and owner occupiers when trying to buy existing stock in London,’ he explained. ‘There is now a de facto exclusion loan on central London for most institutional investors, at a time when concern over access to housing has seldom been higher,’ he added. Inner London delivered total returns of 24.4% in 2014 with a comparatively small rise in rental values of 3.1%, while outer London saw returns rise to 21.1% and rental growth of 3%. Central London (zone 1) returns slipped to 9.8% from 14.7% in 2013, while rents also increased by 4.8% in this area. Outside of the capital, the South West and Midlands performed the strongest, returning 9.7%. Northern England and Scotland also saw an improvement in returns to 3.5%, the first time returns have entered positive territory in those areas since 2007. This area also experienced a rise in rental growth from 1.5% to 2.4%, the only region outside of London to see this. Comparatively, commercial real estate returned 17.8% in 2014 according to the IPD UK Annual Property Index. Bonds and equities returned 11.8% and 0.5% respectively. ‘It is clear that market forces not related to the underlying rent generating capability of residential property are affecting values and that this is pricing large investors seeking long term stable income out of the London market,’ said Weedon. ‘It is no surprise that investors are now considering building to let which will enable them to achieve a decent percentage income return in areas of high employment and strong owner occupier demand,’ he added. The IPD UK Annual Residential Property Index is based upon properties let on modern residential leases, primarily assured short hold tenancies, the index now has 14 years of historical data. The index… Continue reading
