Interest-only mortgage borrowers are in the millions

More than two million homeowners have an interest-only mortgage, it has been revealed.

Mortgage 2

The figures have been published amid growing concern about the ability of homeowners to repay the loans before their deals come to an end.

If they reach the end of the deal and are unable to repay their loan in full, they run the risk of being evicted from their home.

While the number of people with an interest-only mortgage remains in the millions, it is a reduction compared to a year ago.

The Council of Mortgage Lenders reported that 2.2 million borrowers had an interest-only mortgage at the end of last year, a decrease of 12 per cent or 300,000 borrowers compared to a year earlier.

An additional 620,000 had a part interest-only and a part repayment mortgage at the end of last year, down 13 per cent or 90,000 during the same period.

The Council of Mortgage Lenders said it showed borrowers were taking action to reduce their mortgage balances.

Lenders have been focusing borrowers’ minds on repaying the debt with letters, telephone calls and even face-to-face meetings.

Paul Smee, the CML’s director general, said: “The regulator, mortgage lenders and the CML are collaborating very effectively so far to help interest-only borrowers manage their loans and avoid surprises when their loans mature. This work will continue, not just over the next year but over the long term.”

He added there may still be options for borrowers who fail to repay their loans at maturity, including releasing equity through a lifetime mortgage, downsizing, or selling and moving into rented accommodation.

May 1, 2014 at 4:43 PM Leave a comment

House price growth reaches double digits

Annual house price growth hit double digits for the first time in four years during April, figures showed today.

House prices

The average cost of a home rose by 10.9 per cent during the year to the end of April, the highest rate since July 2007 and the first double-digit year-on-year gain since April 2010.

Prices rose by 1.2 per cent during the month itself, leaving the typical property costing £183,577, according to Nationwide.

At the same time, figures released by the Bank of England showed mortgage lending remained strong during March, with total advances soaring 31 per cent compared with the same month of 2013 to reach £16.77bn.

Net mortgage lending, which strips out repayments and people switching lender, was £1.79bn, the highest level since January 2012.

But there were further falls in both the number and value of mortgages approved for house purchase for the second consecutive month.

A total of 67,135 loans for people buying a home were in the pipeline during March, down from 76,251 in January, but still 25 per cent up on a year earlier.

Today’s mortgage figures are likely to help calm concerns that a bubble could be building up in the property market following a run of strong data on house prices.

The slow down in mortgage approvals suggests property market activity is beginning to moderate as pent up demand that build up during the recession works it way through the system.

Today’s figures come the day after the Land Registry said house prices fell by 0.4 per cent in March, although prices were still 5.6 per cent above their level in March 2013.

Robert Gardner Chief EconomistRobert Gardner, Nationwide’s chief economist, said: “The introduction of Mortgage Market Review measures could have an impact on activity levels in the months ahead as the new measures bed down.

“However, underlying demand is likely to remain robust, as mortgage rates remain close to all-time lows and as consumer confidence improves further on the back of stronger labour market conditions and the brighter economic outlook.”

But he added that house price growth was continuing to outstrip income growth by a wide margin, and unless the supply of property accelerated significantly, affordability was likely to become stretched.

Nationwide said price growth continued to be driven by London and the South East.

House prices in London were around 20 per cent higher than their pre-crisis levels in the first quarter of the year, while across the UK as a whole values were still around 2 per cent below their peak.

Properties in London for sale:

1. Three bedroom flat in Marylebone for £7m

01.05.14 London 1

 

2. Three bedroom semi-detached house in Harrow for £409,950

01.05.14 London 2

3. Two bedroom flat in SW6 for £840,000

01.05.14 London 3

 

May 1, 2014 at 11:25 AM Leave a comment

How can homeowners earn a £56,000 salary without stepping out of their front door?

British homeowners are earning the equivalent of a £56,000 salary without even stepping out of their front door, according to the latest figures.

wages

The latest rise in house prices means that homeowners can earn the equivalent of double the average wage by simply staying put in their homes.

And it is not just in London where homeowners are seeing an increase, but further afield, according to the latest house price data from Nationwide Building Society.

It suggested the average value of a home in Britain has risen by £3,313 during the past month to £183,577.

To earn this amount of monthly ‘take-home’ pay, a worker would need to earn an annual salary of £56,000 – double the average national salary.

While many homeowners will welcome the increase in the value of their assets, it means prices are increasingly slipping out of reach for many first time buyers.

foster 2

Claire Foster is a hard-working professional in her early 30s, who is living with her parents in the run-up to buying a house

Accountants KPMG warned this week that more people will be unable to afford a home of their own unless more houses are built and suggested rocketing prices would prevent children flying the nest, with half of those aged 20-34 would still be living with their parents by 2040.

Mark Harris, of mortgage brokers SPF Private Clients, said: “Being a homeowner is a pretty lucrative business at the moment so it’s easy to see why home ownership is so desirable and why most of us prefer not to rent.

With prices rising as fast as they are, many homes are in in effect generating an extra salary for the homeowner. When homeowners are hard-pressed, this extra ‘income’ is undoubtedly welcome.”

May 1, 2014 at 10:03 AM 1 comment

Living with parents is for longer than expected for the ‘Boomerang Generation’

The idea of the Boomerang generation first emerged during the credit crisis when people who had been living on their own were forced to move back in with their parents to save money. One hard-working 33-year-old professional – Claire Foster – tells her story of how moving back with her folks was only meant to be for a couple of months. But it has now been almost a year.

Foster

Claire Foster with her parents

After a decade of living on my own, I moved back in with my parents. It was only meant to be for a few months as I’m looking to buy a house.

I sold my flat on the basis that I would move out and rent another property to keep my buyers happy and avoid risk losing the sale.

I assumed that by the time the sale of my flat had gone through that I would have at least found somewhere new and would use the few weeks living at my parents to process the purchase of my new abode.

But there was a fly in the ointment. Almost a year since leaving my old home, I’ve not found a new place and I’m still living at my parents.

I’ve been looking near work in Croydon where the price of an average property has risen almost £30,000 during the past year to £318,483, according to Zoopla.

All the properties I have seen have been so-called ‘distressed’ sales that need a lot of work. Mostly, they have been released onto the market following the death of the elderly owner or a couple getting divorced.

And all my viewings have been open houses, where prospective buyers visit the property at the same time rather than on individual viewings. It is fiercely competitive process and it all means that I still have not secured a property to buy. I thought I was in a great position with no chain, a good deposit and a solid mortgage offer, but it seems everyone else attending the open days is in the same position.

As a result, I’m continuing to live with my parents. I love them dearly, but there are undoubtedly challenges.

Last week, after a long week in my full-time job, I was questioned why I was still in my PJs at 10am on Saturday. And then there was the time when my parents told me they had nearly called the fire brigade after I seemed to have spent so long in the bathroom (washing long hair and manicuring nails into a professional shape takes time).

The pressure is certainly on me to buy a new space of my own, but I seem to be losing the battle so far against rising house prices.  One of my other concerns was all my belongings from my flat pushing my parent’s home contents over the limit but they checked their Direct Line Home Insurance Plus policy and luckily they are covered up to £100,000.

Croydon has seen some of the fastest growth in house prices among London boroughs, along with Tower Hamlets. The rises have been so staggering in the area that it is now being described in newspapers as a ‘hot-spot’.

Having previously been perceived as being stuck in something of a 1960s timewarp, a huge cash injection is seeing the area being transformed. The town is being tipped as a future technology and creative base, with rents currently being considerably cheaper than the likes of trendy Shoreditch in the centre of London.

It also has good transport links, with three stations, buses and trams. The fastest trains reach London Bridge in 15 minutes.

Properties for sale in Croydon:

1. Four bedroom detached house for £1,950,000

30.04.14 Croydon 1

2. Two bedroom flat for £245,000

30.04.14 Croydon 2

3. Four bedroom semi-detached house for £525,000

30.04.14 Croydon 3

April 30, 2014 at 11:56 AM Leave a comment

UPDATED: The great housing divide as prices soar in London, but fall in Wales

House prices rose at their fastest pace for nearly four years during March, official figures showed today.

27.03.14 Prices 1

The average cost of a home in England and Wales increased by 5.6 per cent in the year to the end of March, the highest rate of annual growth since August 2010, according to the Land Registry.

But values dipped slightly during the month itself, falling by 0.4 per cent to leave the average home costing £169,124.

The London market continued to be the main driver of growth, with house prices in the capital soaring by 12.4 per cent year-on-year to reach a new record high of £414,490.

Growth was also strong in the East, with prices rising by 7.1 per cent in the 12 months to the end of March and the South East at 6.1 per cent.

But at the other end of the scale prices fell by 1.6 per cent in Wales year-on-year and they edged ahead by just 1.8 per cent in Yorkshire and the Humber.

Five regions also reported monthly price falls, with Wales recording a drop of 4.2 per cent, followed by the North West at 1.8 per cent.

Prices also fell in the East Midlands, Yorkshire and the Humber and the South East.

On a brighter note, sales levels continued to rebound with 63,123 homes changing hands during January, the latest month for which figures are available, 46 per cent more than in January 2013. Within this total, 1,011 properties sold for £1m-plus, a 61 per cent jump year-on-year.

The number of properties that were repossessed also continued to fall, dropping by 31 per cent compared with a year earlier to stand at 979 in January.

David Brown, commercial director of LSL Property Services, said: “Price rises may have slowed slightly, but this isn’t a backwards step for the market. 

“Year-on-year house price growth remains strong and buyer sentiment is high.

“In terms of volumes, the UK property market continues to show significant and sustained growth.”

There has been a run of strong data on the property market in recent weeks, as a combination of strong demand and a shortage of homes being put up for sale has driven prices higher.

Recent gains have left the typical cost of a home in England standing at £259,745, according to Zoopla.

But today’s figures showing a month-on-month fall are likely to ease concerns that a bubble may be building up in the market.

They follow data from the British Bankers’ Association showing that the number of mortgages approved for house purchase fell for two consecutive months during February and March.

Housing intelligence group Hometrack also recently said there were signs of growing price resistance among buyers in London, which could slow the rate of house price appreciation in the coming months.

April 30, 2014 at 10:41 AM Leave a comment

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