Posts with tag: first time buyer

Remortgaging and First Time Buyers Driving Market

Published On: November 24, 2017 at 9:53 am

Strength in remortgaging activity amongst homeowners, alongside higher first time buyer numbers, are likely to have been the drivers of the mortgage market in October, according to the latest estimate from UK Finance.

The organisation’s most recent estimate, for the month of October, shows £23.1 billion borrowed over the month, which is 14% higher than a year ago. Two thirds of this was carried out by high street banks, which equated to £15.3 billion.

House purchase approvals in October totalled 40,488, which is weaker than the 41,447 average recorded over the previous six months and 3% lower than in October 2016.

Remortgaging and First Time Buyers Driving Market

Remortgaging approvals for the month reached 34,036, however, which is up on the 27,163 average seen over the previous six months and 37% higher than in the same month last year.

UK Finance notes that the housing market position is a little mixed, similarly to the economy.

Since the start of 2017, residential property transactions have averaged just over 100,000 per month, with October’s figure marking the highest monthly number since March 2016. This has been supported by recovering levels of house purchase approvals over the year.

However, UK Finance’s house purchase approvals data, which covers just over two thirds of the market, shows a little weakness in October. If activity continues to fall back over the last couple of months of the year, overall activity levels in 2017 will be similar to those in 2014-16. In other words, there has been little recovery in property transactions over the last four years.

The difference between then and now, the organisation explains, is that the mix of activity favours first time buyers more, with cash buyers and buy-to-let landlords making up a small portion of overall activity.

This is not a big surprise, however, as first time buyers have been supported by a variety of Government housing schemes, good credit availability and competitive mortgage rates, while tax changes have weighed on buy-to-let and cash activity.

Common factors, such as the Stamp Duty change in March 2016 and some aspects of the tax relief changes, which came into effect from April 2017, have affected buy-to-let landlords alongside cash buyers, as some cash transactions are for second homes.

However, a range of other regulatory changes has also weighed on buy-to-let activity. These include the Prudential Regulation Authority’s [PRA’s] stress tests, which came into force in January this year, and tougher underwriting standards for portfolio landlords – those with four or more mortgaged properties.

The tax relief changes have also had the effect of dampening landlords’ ability to re-leverage their portfolios, leading to the number of buy-to-let loans for remortgaging to level off over the last few months.

Homeowner remortgage loans have fared much better, with levels reaching an eight-year high in the 12 months to September. UK Finance expects this to continue in the short-term, as its remortgage approvals data shows a large increase of over a third in approvals in October, as customers locked into deals ahead of the interest rate rise earlier this month.

Commenting on the latest data, Mohammad Jamei, the Senior Economist at UK Finance, says: “The anticipated bank rate rise saw a flurry of remortgage activity, as many homeowners took advantage of the competitive rates on offer. Borrowing was also boosted by stronger first time buyer activity, as this segment benefitted from good credit availability, lower rates and Government housing schemes.”

First Time Buyers Driving the Housing Market in Huge Shift

Published On: September 27, 2017 at 10:11 am

Author: Em Morley

Categories: Property News

Tags: first time buyer,first time buyers,housing market,mortgages

Although housing market activity has been growing modestly since the start of the year, first time buyers are now driving the market in a huge shift, according to the latest market commentary from UK Finance, for September 2017.

Overall housing market activity resembles what we saw just over two years ago, in 2015, the organisation reports.

The rise of the first time buyer

However, the mix of activity has shifted, with first time buyers driving the market, rather than cash and buy-to-let. The level of property transactions seen of late, of just over 100,000 a month since the turn of the year, is not expected to change much in the short-term, as the leading indicator of activity – house purchase approvals – has now returned to where it was at the beginning of the year.

First Time Buyers Driving the Housing Market in Huge Shift

The Bank of England’s (BoE) Agents’ survey suggests that part of the strength in first time buyer activity is down to demand for new build homes using the Help to Buy equity loan scheme. There are also several other Government schemes aimed predominantly at first time buyers, such as the Help to Buy ISA, which are no doubt helping to boost their numbers.

Benefitting much less from Government schemes, home movers have largely been treading water over the last few years. The shortage of homes on the market for sale has also meant that some would-be movers are struggling to find suitable homes, and so do not put their properties up for sale.

In the buy-to-let sector, Government interventions, coupled with regulation, have led to a flat market, with around 6,000 property purchases a month since April 2016, after the Stamp Duty surcharge on additional homes came into force.

Regional shift

As well as a change in the type of activity, there is some evidence to show that the regional mix has also shifted, away from London, the South East and East Anglia, towards the north of England, Wales and Scotland.

The common characteristic in this divergence is that regions that have typically been less affordable have shown signs of weaker activity, while regions that are relatively more affordable have been more buoyant. The latest Royal Institution of Chartered Surveyors (RICS) and BoE surveys also reflected this shift.

At a regional level, the difference in affordability (as measured by the typical income multiple for homeowners) between the most and least affordable regions has diverged since 2013, with the gap doubling over this period.

This trend may reverse, and we may see some rebalancing, if the shift in activity is sustained. It’s also the case that sentiment and price expectations in regions where affordability is stretched have weakened or are negative.

Remortgage activity

On the remortgage side, strong competition and low funding costs have meant a growing number of homeowners are taking advantage of the near record low mortgage rates. UK Finance expects more homeowners to refinance in the coming months, as prospects of the first interest rate rise in over ten years gain new impetus.

Buy-to-let remortgage activity has been growing until very recently, but the number of loans made over the past 12 months has been lower compared with the previous 12 months. Tax changes that come into effect in April this year are likely to restrict the ability or willingness of landlords to re-leverage their portfolios.

Lending in August

Despite the shift in housing market activity, by buyer type and region, total mortgage lending has been stable, estimated to be £24.2 billion in August. Adjusting for seasonal factors, this figure would be £21.4 billion, which is in the same ballpark as monthly lending over the course of 2017.

While we won’t have the breakdown of August lending for some time yet, the drivers of lending are likely to be first time buyers and homeowners remortgaging, as has been the case for July. The picture in July is also similar to that of April, May and June, so a continuation doesn’t seem too unreasonable.

Looking ahead, UK Finance expects more of the same, though it anticipates that the pace of growth will slow somewhat, dampened by a potentially more challenging economic outlook.

Portfolio landlords

From 30^th September 2017, portfolio landlords – those with four or more buy-to-let properties – will be subject to more specialist underwriting standards when applying for a new buy-to-let mortgage. This includes looking at the landlord’s experience in the buy-to-let sector, the cashflow associated with all of their existing properties, and inspection of their business plans.

UK Finance does not expect this to cause a surge in activity before the change, followed by a lull in buy-to-let purchases.

Gross mortgage lending remains steady in May

Published On: June 18, 2015 at 11:01 am

Author: Em Morley

Categories: Finance News

Tags: Council of Mortgage Lenders,first time buyer,gross mortgage lending

Latest reports from the Council of Mortgage Lenders has indicated that gross mortgage lending during May remained stable, both month-on-month and year-on-year.

Despite rising by 2% on April to total £16.2m, total lending was 3% down on the £16.8m recorded a year ago. However, forecasts from the Bank of England suggest that the market will improve over coming months, backing up the CML’s belief that a recovery is starting to take shape.

Stability

CML economist Mohammed Jamei feels that, ‘economic environment is one that should support increased activity in the near term, coupled with low mortgage rates. But while we expect these factors to support activity, there is a limited upside, driven mainly by affordability constraints.’[1]

Richard Sexton, director of e.surv chartered surveyors, noted, ‘the mortgage market has shown stability against all the odds. Last April saw the new MMR regulations come into play, whilst this April, we were anticipating the most uncertain election in a century. Against these headwinds, the lending recovery has been remarkably resilient.’ Sexton described the stability as, ‘encouraging,’ as he feels it signals a, ‘potentially sustainable long-term trend, rather than the volatile days of recent years.’[1]

Gross mortgage lending remains steady in May

The proportion of lending to borrowers with smaller deposits is holding steady, as banks continue to support first-time buyers. Wage rises are starting to look healthier, while the cost of living remains low, meaning household finances are starting to finally put on some muscle. The threat of mansion tax has lifted, and several housebuilding initiatives are underway. Any remaining caution left from the run up to the election is dissipating, and lenders are optimistic that the summer will see the market stretch its legs and get into its stride.’[3

[1] http://www.propertyreporter.co.uk/finance/may-lending-remained-st4ble.html

Stamp duty reforms save homeowners £701m

Published On: June 3, 2015 at 3:00 pm

Author: Em Morley

Categories: Landlord News

Tags: first time buyer,homeowners

An astonishing new data release has indicated just how much homeowners have saved as a result of the introduction of Stamp Duty Land Tax reforms.

Savings

Findings from myhomemove has suggested that since the introduction of the reforms on December 4^th last year, UK homeowners have saved a huge £701m. Changes brought about by the reforms involve how stamp duty is levied. This cut tax for the 98% of people the purchase homes under £937,500.[1]

The research from myhomemove shows the largest savings made by UK property owners and indicates that each buyer saved an average of £1,400.[2]

Myhomemove CEO Doug Crawford, stated that, ‘the stamp duty reforms have saved UK home buyers a significant amount of money since its introduction and provided an important boost to the property market, just as house transactions were starting to slow down in the run up to the general election.’[3]

Crawford believes that, ‘the changes have a particularly positive impact on those struggling the most to get onto the property ladder, first-time buyers, as they can now save more money towards a deposit for their purchase.’[4]

Stamp duty reforms save homeowners £701m

Substantial Increase

Continuing, Mr Crawford said he feels that, ‘under the old slab system, there was a substantial increase in price at the stamp duty thresholds, which the reforms have reduced significantly, leading to greater movement up the property ladder and enabling homeowners to aspire to own properties that would have previously been unobtainable.’[5]

‘While there are losers from the changes, these are a small minority of buyers. For them, the risk of a prospective mansion tax was far greater than the increase in stamp duty,’ Crawford explained. He went on to say, ‘early signs indicate that the election result has reassured buyers of higher value properties, with many estate agents reporting a buoyant market at the top.’[6]

[1] http://www.propertyreporter.co.uk/finance/new-stamp-duty-rules-save-homeowners-701m.html

First Time Landlords are in Their 40s

Published On: May 8, 2015 at 11:46 am

Author: Em Morley

Categories: Landlord News

Tags: becoming a landlord,buy to let investors,first time buyer,investing in property,landlords

First Time Landlords are in Their 40s

The most common age to become a landlord is between 40-49-years-old, revealed research by Rentguard Insurance.

40% of those buying to let for the first time were in this age range. The second most common age is in the 50+ bracket at 24%, followed by those aged 30-39 at 19%.

The landlord insurance firm asked customers: How old were you when you first became a landlord? on their website.

Somewhat shockingly, 17% of respondents were just 20-29-years-old when they purchased an investment property.

Director of Rentguard Steve Jones says: “The results show that those in their 40s are thinking ahead and looking towards property as an investment for their money.

“With the recent relaxing of pension rules, we expect the 50+ bracket, and even those in their 60s, to be the biggest growing group over the next year or two.”¹

In a report conducted earlier this year, the Halifax found that the average age of a first time buyer purchasing an owner-occupier property was 30-years-old, up from 29 in 2011.

London was the region with the oldest first time buyer, at 32.

¹http://www.landlordexpert.co.uk/2015/05/07/first-time-uk-landlords-are-most-likely-to-be-people-in-their-40s-survey-reveals/