Mortgage drought could affect many people

Industry experts have said that under current plans that have been proposed by the UK’s financial regulator, the Financial Services Authority, many people could be facing a mortgage drought that could leave them unable to get the mortgage finance that they need in order to get onto the property ladder.

The mortgage market is already very restricted, as it has been since the onset of the global financial crisis several years ago which almost brought the banking and financial systems to their knees. However, experts from the Council of Mortgage Lenders have said that things could get even worse under new rules from the FSA.

The Council of Mortgage Lenders has said that if these regulations had been in place over the past four years over 50 percent of mortgages that were granted over this period would have been refused, causing huge problems for those that were looking to buy a property and get onto the property ladder.

The CML claims that this would have equated to around four millions additional mortgage loan rejections if the FSA had its regulations in place in 2005. The group said that this shows just what a negative impact the rules could have in the current financial climate. A review by the CML suggests that under the new proposed regime millions more people a year could be turned down for a mortgage loan.

Figures show that the number of mortgage approvals in the UK have already plunged, with numbers having fallen to around 50,000 per month compared to 135,000 a months before the credit crisis hit. This has been made worse due to the strict restrictions that banks have put in place when it comes to lending, as well as the higher deposit levels being demanded.

Tags: property ladder, Mortgage loan, market, financial, Financial Services Authority, UK's financial regulator, mortgage, council of mortgage lenders

Why first time buyers could benefit from shared ownership

Buying a property has become an almost impossible feat for many first time buyers in the UK these days, not least because getting a mortgage loan has become so difficult. Whilst property prices have fallen since their peak they are still very high in the UK, and with lenders demanding a large percentage of the property value by way of a deposit many first time buyers still find themselves priced out of the market.

In some cases lenders are demanding in excess of 15 percent of the property value by way of a deposit, and this is something that most first time buyers cannot manage, as they have no pervious property from which to take equity. As a result of this many first time buyers are having to move into rented accommodation, which makes it even more difficult to save a deposit to get themselves onto the property ladder.

However, there is another option that could prove ideal for many first time buyers in the UK and this is an option known as shared ownership. With a shared ownership property buyers only get a mortgage for a set percentage of the property value, and the they then pay rent on the remaining share to a housing association. Because they are only buying a share of the property initially they will need a lower mortgage and a lower deposit, but can still get themselves on the property ladder, albeit more gradually than in the traditional way.

The share of the property that first time buyers can get will vary based on the property and the housing association, and could be anything from between 25 percent and 75 percent. Often the houses that are sold as shared ownership are new build, which means that buyers can get their hands on a brand new property without having to find a huge mortgage and deposit upfront.

The great thing about shared ownership is that you will not have to rent the remaining share of the property forever, as you can ‘staircase’. This means that over time you can buy additional shares of the property as and when finances allow until eventually you own 100 percent of the home. Alternatively you may wish to continue on a shared ownership basis and then sell your share of the home to another person that wants shared ownership when you want to move on.

A number of housing associations deal with shared ownership properties, and there are both new build properties available as well as resales from those that want to sell their own shares in these properties. Whilst there may not be a huge difference in the amount that you pay out monthly with shared ownership compared to getting an outright mortgage (although it is generally cheaper) the key advantage is that you will not need a huge mortgage or deposit to start off with and can buy the remainder of the home as and when it is viable for you.

Tags: property, first time buyer, mortgage, property ladder, Equity sharing

Now could be the time to get on the property ladder

According to the results of a recent survey that was carried out many Brits think that it is now a good time to purchase a property and get onto the property ladder. The Building Societies Association carried out the survey, and the results showed that whilst market conditions continued to be difficult in the mortgage sector many Brits were still convinced that this was a good time to buy due to various other factors. Read more

Tags: building societies association, Mortgages, the Brits, property ladder, first time buyers, economics, Business Finance, Royal Institute of Chartered Surveyors

First-time buyers “struggling” to get mortgages

People looking to secure funding to get onto the property ladder are more likely to have difficulties than those in more established jobs and who have bigger deposits to put down, according to Cobalt Capital partner Andrew Montlake. Read more

Tags: first time buyers, Mortgages, property ladder, lenders, first time buyer, credit problems, working lunch, Association of Mortgage Intermediaries

Up to half of under-30s ‘aim to buy homes’

Around 50 per cent of young people in the UK regard buying a home as a realistic goal for them before they reach 30, new research has shown.

Findings from Alliance & Leicester reveal that the timing of achieving this milestone is pertinent with the average age of a first-time buyer being 29, a figure which has risen from 28 in the early 1990s.

Richard Taylor, head of mortgage products at Alliance & Leicester, said that reaching 30 is milestone for many as it is a deadline for certain ‘achievements’ such as owning a property, getting married or starting a family.

“Even in an uncertain housing market we’re seeing those under the age of 30 feeling confident and optimistic about the prospect of getting onto the property ladder before they say goodbye to their twenties,” he continued.

Renting is the option for those living away from home before attempting to climb the property ladder says the research.

Meanwhile, young people are being urged to should begin their savings “in the cradle” by savings experts with the Scottish Widows.

Tags: property ladder, age, option, first time buyer, mortgage products, leicester, Mortgage loan, Renting

Increasing numbers of students preferring to save over travel

Increasing numbers of students are foregoing a gap year to go travelling, preferring to put money away for property, according to new statistics.

Findings from Abbey revealed that 42 per cent of respondents are opting to save towards a deposit on a first home.

This is twice the number of students saving up to go travelling or for a new car after they have graduated.

Nici Audhlam-Gardiner, head of Abbey Mortgages said: “House prices have brought in a harsh new reality for students.”

“They now need to weigh up the benefits of travelling against jumping straight into a career and being able to afford to get onto the property ladder,” he added.

A further 21 per cent of past graduates thought they could definitely have saved more money while at university, while 2.9 million (17 per cent) wished that they had worked harder and played less, according to the figures.

Recent research from Abbey showed that up to 15 million Brits suffered financially as a result of being unprepared for big life changes.

Tags: gap year, property ladder, life changes, Mortgage loan, result, Nici, Nici Audhlam Gardiner, Gap

Joint mortgages with strangers are ‘risky’

Entering into a joint mortgage with someone you do not know is “extremely risky,” say mortgage experts.

Bestinvest has said home buyers could also find themselves “in all sorts of problems” if they enter into a mortgage with a friend who they fall out with.

Peter O’Donovan, mortgage manager at Bestinvest, said: “If you buy a house with someone and you don’t know their credit record, that’s even worse because you are jointly and solely liable for that mortgage. If the other person stops paying you have to continue.”

He added that there is no protection that people entering joint mortgages can take out to protect themselves against defaulting if the arrangement does not work.

According to research conducted by Scottish Widows in July 2007, joint mortgages are becoming popular among graduates who find that they offer the only way onto the property ladder.

Of those graduates surveyed 63 per cent purchased property with a partner.

Tags: Joint, loan, friend, manager at Bestinvest, way, partner

First-time buyers ‘undeterred’ by credit squeeze

Despite a significant tightening of the mortgage market following the US sub-prime crisis, many Brits are keener that ever to get their foot on the property ladder.

According to research by Fair Investment, despite the number of mortgage enquiries seeing an overall decrease in the past few months, the number of first-time buyer enquiries has gone up dramatically.

In the first three months of the year first they were at an average of 56 per cent, while in the last three months they have risen to 74 per cent.

Furthermore, the number of first-time buyer enquiries for 100 per cent mortgages has increased from 77 per cent in the first quarter to 92 per cent in the last three months.

James Caldwell, Director of Fairinvestment.co.uk explains: “Britain’s love affair with the property market is far from over, despite the recent dip and the gloomy forecasts for the next few years.

“Our figures suggest that…first time buyers are still keen to seek out a deal and are fully prepared to opt for 100 per cent mortgages if it means getting their own home.”

Meanwhile, demand for high-end mortgage products has grown, especially for multi-currency mortgages.

Tags: buyer, love, credit squeeze, James Caldwell, First-time, first three months

BTL “stabilises” prices

Although borrowing costs are rising due to the five separate interest rate rises in the past year – which some say could lead to house market turbulence – the continuing strength of the buy-to-let market is providing much-needed stability.

That is the contention of Paragon, whose Buy-to-Let index for July was released today.

According to the index, rents have risen by just over three per cent over the past three months, boosting the annualised growth rate to 12 per cent.

This comes at a time in which the general housing market is widely recognised by analysts to be slowing.

Chief executive of Paragon Group Nigel Terrington, commenting on the new index, said: “Buy-to-let provides housing for young people, who otherwise would be forced to buy and be stretched beyond their means. It would result in dramatically higher levels of repossessions in the housing market.

“As owner occupiers are increasingly struggling under the weight of higher borrowing costs, buy-to-let landlords can provide accommodation for the growing number of young people who want a flexible lifestyle or who aren’t yet ready to step on the property ladder.”

Figures covering the first half of the year from the Council of Mortgage Lenders (CML) have also recently revealed that the buy-to-let market took up 12 per cent of total mortgages in Britain – a record amount.

Tags: landlords, investment, property ladder, Youth, Real estate economics, Nigel Terrington, cml, rate

Young buyers mortgage illiterate

Many first-time buyers are mortgage illiterate, according to new research by AA Legal Services.

Those looking to get their first mortgage on a property are confused by certain terms and may not be completely aware of what it is that they are buying.

The research found that 40 per cent of new buyers do not know the difference between a leasehold and freehold property, with those aged between 18 and 24 being the worst offenders.

AA Legal Services has expressed concerns that many young people are feeling the pressure of rising house prices and this may be forcing them into getting onto the property ladder without fully understanding what they are signing up to.

First-time buyers spend an average of £159,653 on their first property but 41 per cent have no idea what freehold means and 43 per cent are clueless as to the meaning of leasehold.

“Our research suggests that many homebuyers are so desperate to get onto the property ladder that they may be over looking vitally important basic legal principals,” commented James Molloy head of AA Legal Services.

The term leasehold means the right to hold or use a property for a fixed period of time according to a contract. However, many 18-24-year-olds thought it meant that the property could be rented out and others believed that it made the house exempt from council tax.

Freehold means that there is no limit to how long the property can be held and remains with the holder until he or she willingly transfers it. Six per cent of 18-24-year-olds thought freehold meant exempt from capital gains tax, while two per cent thought that only freemasons could buy freehold properties.

Tags: property ladder, Many first-time buyers, legal, pressure, ladder

Single parents struggle to save for kids

Single parents are finding it difficult to manage their banking, meaning that few are able to put money aside for their children.

According to Engage Mutual Assurance, only one in six lone parents make regular payments into a savings account for their children.

A study carried out by the firm found that married couples are much more likely to save for their child’s future, with 42 per cent making regular payments compared to just 17 per cent of single parents.

This is despite increased child benefit and child tax credit which were announced during the last Budget.

“Rising childcare and education costs, along with increases in the cost of living, mean that today’s parents are feeling growing financial pressures in bringing up children,” said Engage spokesman Karl Elliott.

“For lone parents, living on a single income, these pressures may be especially hard to deal with.

“However, parents should not despair of saving for their children’s future. Tax exempt child savings plans and Child Trust Funds provide simple and affordable means to saving for children,” he added.

Parents are advised to put at least some money aside on a regular basis to help pay for their child’s education and perhaps give them a starting point as they try to make their way onto the property ladder.

Tags: child, way, starting, Trust, exempt child savings, property ladder, Child care, today

Brits happy to leave country to save for house

The British property market is proving to be so inaccessible to first-time buyers that many are considering moving abroad.

According to research carried out by National Savings & Investments (NS&I), one quarter of us are prepared to live in another country while saving for a mortgage on a property back home.

More than 1,000 people were questioned as part of the firm’s Quarterly Savings Survey and it was revealed that 25 per cent would consider moving abroad.

Some are even prepared to go as far as Australia and New Zealand, while Spain appears to be the most popular destination.

The USA and eastern Europe were also named as likely locations, while 24 per cent of Brits said that moving within Britain would also be an attractive option.

“British people clearly have a great appetite for buying a property in this country but find it difficult to save for a deposit while living here,” commented Dax Harkins, senior savings strategist at NS&I.

“It seems many will go to extreme lengths to achieve their goal, even if it means moving to the other side of the world in order to save up for a deposit back home.”

If you are struggling to get onto the property ladder in the UK it may be worth moving to a nation with a cheaper cost of living and giving yourself the choice of moving back or staying abroad in the future.

Tags: new zealand, extreme lengths, mortgage, Quarterly Savings Survey, property ladder, buying a property

House accessibility plunges

The chance of first time home buyers being able to afford a house has plummeted in the last ten years.

Since 1996, accessibility has dropped by an astonishing 230 per cent, matching the low levels seen during the 1980s, says the Royal Institute of Chartered Surveyors (Rics).

An average couple who are looking to get on the property ladder will have to fork out 81.8 per cent of their joint take-home pay, just to make up the £32,784 of up front costs needed to buy a typical house, including deposit and stamp duty.

In 1996, a couple only needed 25.2 per cent of their joint income to start the process of buying a home and analysts predict that things are set to get worse, with a 12 per cent rise in prices in the next two years.

“Spiralling house prices have created a property glass ceiling for many first time buyers,” said David Stubbs, Rics senior economist.

“With couples needing nearly 82 per cent of joint take-home income to fund the upfront buying costs of a typical home, the government’s plans to create an inclusive society seem like a pipe dream.

“Unless the government builds more affordable housing, and raises the stamp duty threshold, many households will continue to struggle to access the housing market,” he added.

Mr Stubbs went on to say that tomorrow’s (January 12th’s) interest rate decision would be watched closely by many households, although analysts expect that another rise will be announced.

Tags: property ladder, upfront buying costs, GBP, last ten years, Politics, Institute, typical house