More support for Help to Buy Announced

The Autumn Statement brought a number of important announcements for homebuyers, not least a doubling of the housing budget to boost the supply of new homes.  Much of the focus is on affordable housing and builds on the 200,000 discounted Starter Homes that have already been pledged.

In addition to the Starter Home Initiative the Chancellor announced Help to Buy: Shared Ownership.  This is expected to number 135,000 homes which will be available to those that want to purchase an initial share of the property, with the option to increase to full ownership as their circumstances change.

Shared Ownership is not a new concept and many housing associations offer it as an affordable way for aspiring buyers to take a first step onto the property ladder.  Different housing associations can apply varying eligibility criteria depending on the target buyer.  The new Help to Buy Shared Ownership properties will not carry any such restrictions, other than qualifying households will earn less than £80,000 outside London and £90,000 in London.

The Help to Buy equity loan scheme has been highly successful in offering an alternative for homebuyers struggling with deposit and affordability requirements.  The scheme has been extended until 2021 and a new variant is to be launched in early 2016.

London Help to Buy will offer a 40% equity loan, double that of the standard 20%, recognising that house prices in London are substantially higher than elsewhere.  Although more detail is due in the New Year it sounds like it will follow the approach of the existing scheme. 

Available on new build property the equity loan is interest free for the first 5 years and available for those with just a 5% deposit.  Assuming it works in the same way, the repayable amount will be the equivalent percentage of the sale price. 

All in all, the Autumn Statement included a number of measures to boost the supply of new properties and hopefully increase the availability of affordable homes.

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Long Term Fixed Rates

Expectations for an interest rate rise may have eased over the last couple of months, but even so borrowers are beginning to plan for the future, and think about what it will mean for them when rates do start to edge up.

Our clients approached the mortgage service for the Guild of Professional Estate Agents looking for advice when purchasing a new family home. A move up the property ladder meant taking on a bigger mortgage, and with two young children, their main objective was to secure a competitive long term rate and stabilise their mortgage payments for the foreseeable future.

After discussions with their mortgage adviser regarding the difference in cost between 2-3 year deals and those over a longer term, the couple decided that a 10 year fixed rate mortgage would fit their requirements.

Their intention was to stay in the property for at least that length of time, and they felt that securing a mortgage now while interest rates remain extremely competitive could give them an advantage in the long term, if rates do start to rise. Their mortgage adviser was able to secure a 10 year fixed rate with a high street bank and the family are hoping to move in to their new home before the end of the year.

Borrowers must of course be made aware that the majority of long term deals carry Early Repayment Charges for the length of the fixed period. It is therefore important for homeowners to think about any changes in circumstances that are likely to occur over the next decade, and decide whether more flexibility may be required.

Most deals are portable, but there is no guarantee that a borrower will meet the lender’s criteria when they come to move.  As a result, being locked into a deal for this length of time will not be suitable for everyone but for the right borrower it could be a good chance to secure peace of mind for the future at today’s rates.

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

House Prices Rise but Regional Gap Widens

Recent figures indicate that UK house prices are continuing to rise.  Nationwide’s house price index showed that UK prices rose by 0.5% in September.  That meant that the annual rate of price growth increased to 3.8%.

The Building Society’s chief economist was encouraged by the modest pick up in house price growth, noting that prices rises were stabilising and somewhat nearer to the pace of earnings growth.

However, there are many that continue to point to the imbalance between the supply of property and the strong demand from buyers.  With fewer properties on the market and plenty of interest from buyers it would not come as a surprise for there to be a continued pick up in house price growth.

The UK wide price increase masks a wide range of regional growth rates.  London in particular continues to see price increases far and away higher than elsewhere in the country.  In fact, Nationwide figures show that the price of a typical home in the capital is now more than twice the UK average.

Far from the rocketing prices of London some areas have shown a slowdown in the annual rate of growth.  To underline how different the growth rate can be depending on location a couple of areas saw a small decline in prices.

The regional variation in prices has led to the divide between prices in the North and South of England reaching a record high.  The third quarter of this year saw prices in the South of England up 8% year on year whilst those in Northern England increased by just 1%.  Putting that into cash terms means that the gap between average prices in the South and North of England has exceeded £150,000 for the first time. 

However, most areas continued to see gains in the third quarter and with the risk that construction activity could lag behind strengthening demand there could continue to be upward pressure on house prices.

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

ECONOMIC NEWS FOR NOVEMBER 2015

At the beginning of November, the Bank of England’s Monetary Policy Committee voted by eight to one to maintain interest rates at 0.5 per cent. The Bank also signalled that a hike in interest rates has now slipped back until at least the latter months of 2016. At the same time, the Bank produced its quarterly inflation report in which its inflation and growth forecasts were cut.

In the wake of that, The Office for National Statistics (ONS) reported that the UK’s inflation, as measured by the Consumer Prices Index, remained at minus 0.1 per cent in October, which marks the first time that it has fallen on an annual basis for two months in a row since it was created in 1997. The Retail Prices Index, which includes housing costs, fell to 0.7 per cent from 0.8 per cent in September and is the lowest RPI rate since November 2009.

At the end of the month, the ONS confirmed that the UK economy grew by 0.5 per cent between July and September. Although this was a drop from the 0.7 per cent increase experienced in the preceding quarter, it still marked the eleventh consecutive quarter of growth. The slowdown is largely blamed on a widening trade gap and a contraction in construction output of 2.2 per cent.

November closed with The Chancellor’s Autumn Statement, which announced that buy-to-let landlords and people buying second homes will have to pay a 3 per cent surcharge on each stamp duty band from April 2016. The Statement also included an extended Help to Buy scheme in London, which will see buyers who can find a five per cent deposit given a loan worth up to 40 per cent of the property; elsewhere the existing maximum loan is for 20 per cent of the property’s value.

The Statement also reported that the Government is putting £6.9 billion into housing, which includes an extra £2.3 billion in loans for the Government Starter Homes programme and £4 billion lent to housing associations and local authorities to build more homes for shared ownership. The Government also announced a pilot scheme to trial the Government’s Right-to-Buy programme for housing association tenants.

Stamp Duty Increase for Landlords and Multiple Homeowners

In the Autumn Statement, Chancellor George Osborne announced a substantial increase in Stamp Duty on the purchase of additional residential properties.  That will therefore apply to situations such as purchase of a property to let out or of a second home.

From April 2016 any such properties will face an additional 3% charge, on top of the existing levy.

This means the new stamp duty structure in England and Wales will look like this:

Stamp duty is applied only to the portion of the property value falling in that band, similar to income tax.

So while a sole home valued at £300,000 would incur £5,000 stamp duty, if that same £300,000 were an additional Buy to Let property for example, the stamp duty charge would increase to £14,000 from April.

Clearly that’s a massive increase in costs so we can expect a flurry of activity as potential “additional property buyers” seek to beat the April deadline.  Anyone thinking about becoming a new landlord or adding to an existing portfolio is bound to be keen to complete the purchase before the new higher charges come into effect.

That could therefore intensify competition for suitable property in the next few months.  From April, however, aspiring first time buyers may find life a little easier as investor numbers ease back. 

Guild Mortgage Service, Provided by London & Country Mortgages

YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Most buy-to-let mortgages are not regulated by the FCA