If you’re a first time buyer, you may be feeling a little overwhelmed by the sheer volume of decisions required to take the first step onto the property ladder. One of the first choices you’ll undoubtedly need to make is about finance. But which mortgage should you choose?
As a first-time buyer, it is unlikely that you’re a cash buyer and so you will need to arrange finance to make your purchase.
There are hundreds of different mortgage products to choose from, depending on factors such as the size of your deposit and how much you can afford to pay out each month on your mortgage repayments.
It is not just a question of choosing the cheapest rate (although this is a big factor), which is why it is worth speaking to a mortgage broker.
Jonathan Harris, director of mortgage broker Anderson Harris, says: “There is more choice of mortgages at higher loan-to-values for first-time buyers than at any time in the past several years, but the new mortgage market rules have added a level of difficulty.
“Lending criteria are stricter with lenders checking you can afford your mortgage both now, and when interest rates rise. To make matters more confusing, lenders have interpreted the new guidelines in different ways so using an independent mortgage broker will help you navigate this minefield.”
Here are a few suggestions of mortgages for first time buyers from mortgage brokers Anderson Harris:
- Mortgage deal for a first-time buyer couple with a 25 per cent deposit and earning a joint salary of around £90,000. For a property with a purchase price of £360,000 and a loan of £270,000, we would recommend a two-year fix with Chelsea Building Society at 2.69 per cent with a fee of £345.
- Mortgage deal suggestion for a first time buyer looking to use Help to Buy as they only have a 5 per cent deposit and a single salary of £35,000. For a purchase price of £140,000 and a loan of £133,000, a two-year fix with Lloyds Bank at 3.98 per cent and no arrangement fee.
- Mortgage deal suggestion for a first time buyer looking to buy with the help of the Bank of Mum and Dad as guarantors. Most lenders will shy away from guarantors, with only a very small handful of small building societies now providing them. Halifax has the cheapest HTB 95 per cent deals on the market and is flexible with applicants who have just started in a new job, perfect for the recent graduate moving to new city for a job and getting a deposit from Mum and Dad. Its two year fixed rate has a rate of 5.19 per cent.
Mortgage lending looks set to rise above £200bn this year but the housing market will slow down in 2015, a lending body predicted today.
Home loan advances look set to total £208bn in 2014, the highest level since 2008, according to the Council of Mortgage Lenders.
The group said it had revised up its previous forecast of £195bn after housing market activity in the early part of the year had been stronger than it previously expected.
It has forecast a further rise in lending 2015, with total advanced reaching £220bn by the end of the year.
But it warned that it expected a combination of affordability pressures, reinforced by higher interest rates, and tougher mortgage lending regulations to lead to a slowdown in housing market activity next year.
Bob Pannell, CML chief economist, said: “While there has been a strong year-on-year recovery this year, we are mindful that house prices were already elevated relative to earnings when the current revival took hold.
“With house price inflation outstripping income growth across large parts of the country, and interest rises in prospect, it seems feasible that household demand may start to fade as affordability pressures intensify.”
He added that for some time the CML had been less optimistic than some public bodies, such as the Office for Budget Responsibility and the Bank of England, that housing market activity would return to its longer-term level of 1.4 million to 1.5 million sales a year.
Instead, it is forecasting transaction volumes of 1.23 million this year, the highest level since 2007, before sales levels fall slightly to 1.15 million next year.
Net mortgage advances, which strip out redemptions and repayments are expected to climb to £20bn this year, the highest level since 2008, but still a far cry from advances of £108bn seen in 2007.
The CML said that while better mortgage availability had supported the recovery in demand during the past two years, there were signs that this source of stimulus may now be coming to an end as lenders approached the limits of their risk appetite in terms of maximum loan-to-value and loan-to-income ratios.
At the same time, the introduction of tighter lending criteria under the Mortgage Market Review and the recent measures announced by the Financial Policy Committee are also likely to lead to a more conservative risk appetite among lenders.
The CML also warned that several years of improving mortgage arrears and home repossessions may be coming to an end, as rising interest rates add to the financial pressure some households are under.
It is predicting that the number of people who are in arrears of at least 2.5 per cent of their outstanding loan will fall to 135,000 this year, before rising to 145,000 in 2015.
Repossessions are expected to follow a similar pattern, dropping to 25,000 this year, then increase to 28,000 in 2015.
But Pannell said: “Given the favourable jobs markets, it seems reasonable to think that the majority of households will cope well with initial gentle rate rises.”
Which are the most popular properties in July so far? With asking prices from less than £160,000 to almost £65m and located in a variety of places – from the River Thames to North Yorkshire – here are the most viewed properties on Zoopla.
1. It is a new entry at the top slot this month – a three bedroom luxury apartment in the heart of Royal Greenwich. It includes three bedrooms and three bathrooms and covers a floor space of 909 sq ft. It has an asking price of £580,000.
2. As well as seven bedrooms, this gated property close to Hampstead Village includes a cinema room, indoor and outdoor swimming pools, garages for three to four cars, and a separate staff flat on the lower ground floor. It has an asking price of £46.5m.
3. This high tech home in Helsby, Frodsham, is flooded with light despite a substantial proportion lying beneath the ground. It boasts keyless doors with fingerprint recognition and natural climate control.
4. This Grade II listed house is on a tree-lined street in London’s St John’s Wood. It has an asking price of £16,750,000 and provides plenty of space for entertaining with a 131 ft landscaped garden and off street parking for two or three cars.
5. This five bedroom apartment at London’s iconic One Hyde Park has an asking price of £64,999,950. The accommodation spans an entire floor and boasts views of both Knightsbridge and Hyde Park.
6. Diversity is at the heart of this £659,000 detached property in North Yorkshire. It can be used as a five bedroom house, a successful B&B with separate owners accommodation or it could be converted to a three bedroom property with an adjoining two bedroom cottage that would be ideal for relatives.
7. This newly built ambassadorial-style and stucco-fronted London home has 11 bedrooms and is spread over five floors – including a lower ground and basement.
8. A nine bedroom detached house in London’s Kensington is being offered (POA) with full planning permission to build a separate cottage, tennis court and garden pavilion.
9. If you would like to live in a modern mansion in the North East, this six bedroom property fits the bill. It boasts high corniced ceilings, sash windows, traditional style marble fireplaces and luxury high quality fittings.
10. This modern apartment by the River Thames in London has an asking price of £158,750 for a 25 per cent share in a shared ownership scheme. It has two bedrooms, two bathrooms and a roof terrace.
Mortgage approvals for people buying a home jumped to a four-month high in June as the market recovered from the introduction of new lending rules that saw an increase in the time it takes to secure a mortgage offer.
A total of 67,196 loans were agreed for people buying a property during the month, the highest level since February, according to figures published by the Bank of England.
Pipeline loans for people remortgaging to a new deal also increased, rising to 31,682, the highest number since March.
The jump in mortgage activity during June suggests the lending market has recovered from the blip it experienced in April and May due to the introduction of the Mortgage Market Review (MMR).
The rules, which included tough new affordability criteria, led to an increase in the time it takes to secure a mortgage offer.
Mortgage brokers and commentators warned at the time of the rules’ introduction in late April that they were likely to lead to a temporary fall in mortgage approvals while lenders got to grips with new systems and processes.
Net lending, which strips out repayments and people remortgaging to a new deal, fell slightly in June, according to the Bank.
Mortgage advances on this measure totalled £2.08bn during the month, down from a spike of £2.29bn in May, but still above the recent six-month average of £1.9bn.
Samuel Tombs, senior UK economist at Capital Economics, said: “The rise in the number of mortgages approved for new house purchase to a four-month high suggests that the disruption caused by the introduction of the Mortgage Market Review regulations in April has faded quickly.
“Looking ahead, further rapid rises in employment and still low mortgage interest rates should stimulate further demand for mortgage lending.
“However, with lenders set to face tough stress tests later this year and action from the Financial Policy Committee in June perhaps dampening expectations of future house price growth, the recovery in mortgage lending still looks likely to be a gradual affair.”
The figures come the day after data from the Land Registry showed house price growth in England and Wales stalled during June.
Property values fell in seven regions, with Yorkshire and the Humber seeing the biggest drop of 1.3 per cent, while prices fell by 1 per cent in both the East Midlands and North East.
Even in London, which has been the main driving force for the market, prices edged ahead by just 0.1 per cent during June.
But across England and Wales as a whole, house prices were still 6.4 per cent higher than they had been a year earlier at an average of £172,011.
The figures add to growing evidence that some of the heat is coming out of the property market, as more homes are put up for sale, easing the mismatch between supply and demand.
Surveys from estate agents also suggest that potential buyers are becoming more cautious in the face of high house prices and concerns about future increases in interest rates.
Recent strong price growth has left the average UK home costing £260,311, according to Zoopla.
Nine out of 10 home owners expect house prices to rise in the next six months despite almost half saying getting a mortgage is more difficult than three months ago, Zoopla reveals.
As many as 92 per cent of home owners are confident that the value of their property will increase during the rest of this year, according to the latest Zoopla Housing Market Sentiment Survey.
The average prediction is that values will rise 7.6 per cent during this period.
It comes amid growing concern that the introduction of tighter mortgage rules is stalling the housing market, with the survey suggesting four out of every 10 home owners believing getting a mortgage is now harder than three months ago.
However, the new rules are not putting the brakes on Britons carrying out home improvements with 79 per cent of home owners planning to spend at the least the same or more on doing up their properties.
However, one significant shift is in the outlook among London home owners, who are no longer the most confident in the country about house prices in their area.
The proportion of home owners in the capital expecting prices to rise in the next six months has fallen from 98 per cent to 92 per cent in the last three months. It follows a sharp increase in London, where average house prices have climbed £63,069 to £567,392.
The Zoopla survey found that the South East, the South West, the East of England and the West Midlands have all overtaken the capital in terms of homeowner confidence.
Zoopla’s Lawrence Hall said: “After months of consistent growth in the capital’s property market we are now seeing a slight increase in caution among London’s homeowners. More broadly, securing a mortgage appears to be getting harder now that the Mortgage Market Review has caused lenders to be more rigorous with their lending criteria and approval process.”
PROPORTION OF HOMEOWNERS EXPECTING PRICES TO RISE BY DECEMBER
|Region||Rise (%)||Flat (%)||Fall (%)|
|South West England||95%||4%||2%|
|South East England||95%||2%||2%|
|East of England||93%||6%||4%|
|Yorkshire and The Humber||91%||6%||4%|
|North West England||90%||7%||3%|
|North East England||87%||8%||5%|
Source: Zoopla.co.uk (July 2014)