If you want to buy a home, you might think it’s a good time to step on the housing ladder – interest rates are at a record low although they may rise in the future, unemployment’s falling and summer’s on the way at last.
Not only that, but traditionally property’s been seen as a good investment, and all you need to do is save a deposit and be able to pay your mortgage, right? Wrong. New rules require lenders to ensure borrowers can afford to meet their initial and on-going mortgage payments on time, and ensure they don’t get into financial difficulty running and maintaining their new home. It also means making sure they could manage if interest rates were to rise.
Time to buy?
The Bank of England Bank Rate is currently 0.5 per cent – a record low, meaning there could be great mortgage deals up for grabs. Of course you should remember to consider any arrangement or products fees when choosing your mortgage. If you add them to the mortgage it’ll mean paying interest on them for the entire term of the loan, so it makes financial sense to pay those fees separately if you can.
Right now, variable mortgage rate deals of around 2 per cent are available to individuals with a good credit record and a 20 per cent deposit to put down towards a property. So far so good, but with the new rules on mortgage lending taking effect on April 26, borrowers will also assess the impact of foreseeable changes in circumstances, such as if you’re expecting to be made redundant or are planning to start a family.
According to Money Advice Service research, the average first-time buyer is paying 3.4 per cent interest on their mortgage payments – around 3 per cent above the Bank of England rate. This is good news for many potential home-buyers, yet there is always the chance that interest rates may rise. To safeguard against this the new rules will also assess your ability to meet mortgage payments in the event that interest rates rise in the future.
Can you afford to buy?
Money Advice Service research also revealed three in four new homeowners overstretched their finances to get on the housing ladder. When you consider that over the past 18 years the Bank of England Bank Rate has fluctuated from a high of more than 7 per cent down to its current rate of 0.5 per cent, a stress test against shifts in the interest rate makes sense. Here’s a typical example – the average first-time buyer will have a mortgage of £140,800 and be making monthly payments of £749. For these people a 2 per cent rise would result in an increase of £171 a month on top of their existing mortgage payments.
If you are thinking about buying a home, it’s essential to consider all the key costs. Using a budget planner will help you plan your finances and cope with any unexpected costs.
All information accurate at time of publication
This article is provided by the Money Advice Service.
If you are looking for a new build home, try the redevelopment of these townhouses in Glasgow.
Where exactly is it? Close to the University of Glasgow campus, and about 1.5 miles north west of the city centre.
Monster housing estate or tiny boutique development? Rather exclusive. This redevelopment of a terrace of townhouses dating from 1883 will contain just 36 flats when it is completed this winter.
How much will it cost me? One bedroom flats are priced from £184,000.
What is so great about it? A magnificent-looking development located on a quiet private street in Glasgow’s fashionable West End, with smashing views over the city. Jennifer Goldie, associate director of Savills estate agents and the selling agent for Lilybank Terrace, says its other plus point is that the terrace has been entirely rebuilt behind its Victorian façade so owners get period charm plus contemporary convenience. “It is the best of both worlds,” she says.
Surely its not completely perfect? Not all of the flats have parking spaces and only a couple have private gardens. The rest of the residents will share a communal garden. And the West End is one of the most expensive parts of Glasgow to live in so your pockets will need to be fairly deep.
Who will my neighbours be? Goldie said the development is particularly attracting older downsizers and young couples, particularly those who work at either the University or the nearby hospital.
What is West End itself like? Glasgow’s answer to Notting Hill, full of cafes, bars, boutiques, clubs and restaurants, and on the doorstep of the lovely Kelvingrove Park and the Glasgow Botanic Gardens, as well as many of the city’s museums and galleries.
Is it any good for kids? Teenagers will love West End’s bohemian vibe and the presence of students gives the area a youthful vibe – there is masses for them to do, but the atmosphere is generally safe. Plenty of open space on the doorstep for younger kids to enjoy, but this development’s lack of private outside space means its not hugely family friendly. Local schools include the high performing Hillhead Primary School.
How are the public transport links? Excellent; Hillhead underground station is a five minute walk.
Is it up and coming? Thoroughly up and come. Average house prices stand at £274,124, up 4.64 per cent in the last year according to Zoopla. This is close to twice the average for the city as a whole, where average prices stand at just over £150,000.
I like the sound of West End, what else is on sale there? The area is stuffed with some lovely period buildings.
This two bedroom flat is on the market for offers over £195,000
Or if you want a classic Glasgow tenement, this two bedroom flat is available at offers over 179,000
Homes in the area tend towards flats but there are one or two houses available, including this six bedroom terrace on the market for offers over £785,000
The rates on Government-backed mortgage deals for borrowers with a small deposit are on the increase, experts warn.
The Help to Buy scheme was introduced by the Government more than a year ago in a bid to help those with small deposits to secure cheaper mortgage rates.
But the rates are beginning to rise with Santander being the first lender to make the move.
Sylvia Waycot, editor of Moneyfacts.co.uk, said: “Santander has just announced that it is increasing the rates across a handful of its fixed rate mortgages.
“One of the mortgages to be increased by 0.10 per cent is the two-year fixed Help to Buy option.
“The deal, now priced at 5.09 per cent, is available for up to 95 per cent loan-to-value and borrowers will still benefit from not having to pay a set-up fee. The incentive package of a £250 rebate and free valuation also remains.”
An increase in mortgage rates follows an expectation that the Bank of England will increase the Bank Rate – currently at a historic low of 0.5 per cent – before the end of next year.
The number of homes changing hands jumped by 30 per cent during the past year as the property market continued to recover, Government figures showed today.
A total of 106,070 properties were sold for more than £40,000 in the UK during March, according to HM Revenue & Customs.
The number was 30 per cent higher than in the same month of 2013 and the second highest figure recorded since December 2007.
But the total was slightly down on the number of homes that were sold during February, when 111,120 residential transactions were completed on a seasonally adjusted basis.
The slight dip in month-on-month sales had been expected following a fall in mortgage approvals for house purchase reported by the Bank of England for February.
The decrease should help to calm fears that a bubble is developing in the property market following recent strong house price gains.
Halifax said property values rose at their fastest rate for nearly six-and-a-half years during the first quarter of 2014, with prices up 8.7 per cent year-on-year.
The National Association of Estate Agents also reported that demand among potential buyers was so strong in March that one in five people paid more than the asking price in order to secure a home.
Recent gains have left the average property in England costing £259,745, according to Zoopla.
A total of 321,150 properties were sold in the UK during the first quarter of the year, the highest quarterly total since the final three months of 2007, according HMRC.
But it pointed out that although residential property transactions had increased significantly year-on-year, they still remained well down on the peak of nearly 150,000 homes changing hands each month in late 2006 and early 2007 before the credit crisis struck.
Meanwhile, separate research showed that homeowners remain bullish about house price gains going forward.
Consumers who own a property expect values to rise by an average of 8.8 per cent between now and September – nearly twice the rate of increase they predicted this time last year, according to research carried out by Zoopla.
A record 95 per cent of homeowners expect house prices to rise in the coming six months, with just 2 per cent predicting they will fall, significantly down on the 13 per cent who expected losses in 2013.
People in the South East are most upbeat about prospects for the property market, with 98 per cent expecting house price rises, while those in London anticipate the biggest gains of 12 per cent in the coming six months.
But in all regions of Great Britain more than 89 per cent of homeowners think the value of their property will increase in the months ahead.
Homeowners in the South West are predicting the lowest growth at just over 7 per cent, but even this would equate to an annual rate of more than 14 per cent.
Zoopla’s Lawrence Hall said: “Homeowners are expecting house prices to rise at a higher rate than ever before, and this confidence in the property market recovery is finally filtering out of London and across the UK.
“With prospective sellers eager to take advantage of a buoyant market and buyers wanting to snap up the best properties before they slip out of reach, indications suggest the market will remain strong over the coming months as increased supply and buoyed confidence drives activity on all rungs of the ladder.”
Britain’s smallest £1m property for sale offered less space than a London Underground Tube carriage, it was revealed earlier this year. Zoopla looks at what other properties of a similar size are currently on the market to buy or rent.
To some, this property may be little more than a small one bedroom detached house in Bournemouth. To others, it is an immaculate ‘stately home’ with a large garden and parking.
The house is currently on the market for £69,950 via estate agents Dixon Kelley and is just a short drive away from the south coast.
With eco holiday homes being de rigueur, this one bedroom detached property certainly has potential.
It is in the south west of Carlisle, next to the Cumbria Way cycle route, and has planning permission for a short-term holiday let.
Estate agents H&H suggest the brick building covers an area of 10 square meters but warns the measurements may ‘not…be wholly accurate’.
Two bedrooms are included in this small detached house in Scunthorpe.
The property also has a living room, bathroom, kitchen and a conservatory.
It has no property chain and requires updating.
Completely refurbished, this one bedroom home in Windsor requires less work.
It includes a lounge, refitted kitchen, refitted shower room and a double bedroom – all for £88,000.
It also has parking and a landscaped rear garden. Estate agents Horler is handling the sale.