Posts tagged ‘first time buyers’
First time buyers could save more than £1,300 a year by purchasing a home rather than renting one, research showed today.
It typically costs first time buyers just under £110 a month less to live in a three bedroom property they own than they would have to pay to rent a similar home, saving them a total of £1,316 a year, according to Halifax.
The group said the monthly cost of living in a three bedroom property you owned added up to around £677, including mortgage repayments, maintenance costs and insurance, compared with average rent of £787 on a comparable property.
The savings that can be made by buying rather than renting are a considerable turnaround compared with five years ago, when buying a home typically cost £37 a month more than renting one.
The fall in the associated cost of buying a property has been driven by the decline in mortgage rates seen since 2009.
The average interest rate paid by a first time buyer borrowing 90 per cent of their home’s value had dropped to 3.09 per cent at the end of June, down from 4.92 per cent in June 2009, reducing typical monthly payments by £57.
Halifax also pointed out that although the cost of buying a home had actually increased by £25 a month during the past year, this had been more than offset by a £42 a month jump in rents.
It added that the fact that it was now cheaper to buy a home than rent one, may have contributed to a 29 per cent jump in first time buyer numbers during the past year.
Buying a property is cheaper than renting one in all regions of the UK apart from the East Midlands, where it is still £15 a month cheaper to rent, and East Anglia, where being a tenant costs £9 a month less.
The biggest savings that can be made by being a homeowner are in London and the West Midlands, where first time buyers could save an average of £82 a month by living in their own home rather than a landlord’s, followed by Wales at £45 a month.
Craig McKinlay, mortgage director at Halifax said: “It is clearly encouraging that since 2009 there has been a significant decline in the cost of buying a home for those for those trying to get on the housing ladder.
“The improvement is due to a combination of lower mortgage rates and rising private rents. Buying costs have been remarkably stable for much of the past five years making home ownership a more attractive option.
“With greater availability of mortgages that require smaller deposits, the property ladder has also become even more accessible for those who can afford the monthly costs of owning but had previously not been able to save the necessary deposit.”
The number of people taking their first step on to the property ladder hit a seven-year high in July, research showed today.
A total of 30,000 first time buyers bought a home during the month, the highest level since August 2007 and 25 per cent more than in July 2013, according to LSL Property Services.
There was also a 10 per cent drop in the amount first time buyers put down, with deposits falling to £26,642, £3,000 less than a year earlier.
The Government’s Help to Buy scheme continued to have an impact on the proportion of a property’s value that lenders were prepared to advance, with average loan to value ratios rising to 82.9 per cent, compared with 79.5 per cent in July 2013.
But it was not all good news for people taking their first step on to the property ladder, with the typical mortgage rate they secured rising for the fourth consecutive month, increasing to 4.19 per cent, up from 3.99 per cent in March.
This higher rate also led to the size of mortgage repayments as a proportion of income growing to 22.6 per cent, compared with 20.2 per cent a year ago.
People typically spent £155,844 on their first home, 8 per cent more than the average amount paid a year earlier.
Despite the drop in the average deposit put down by first time buyers, people still needed to save the equivalent of 72 per cent of their annual pay towards their first home.
But this figure was down from 82.6 per cent of earnings in July 2013, also reflecting the fact that the average salary of people buying their first home had risen to £37,000 from £35,843 a year earlier.
David Newnes, director of estate agents Your Move and Reeds Rains, part of LSL Property Services, said: “The first-time buyer market is still active, even as the wider property market is starting to show signs of cooling down.
“As the economic recovery gathers momentum, more buyers are finding themselves in a position where they can afford to own their own home.”
He said a whole generation of first-time buyers had found themselves stuck on the side-lines of the property market as the economy recovered from the recession and real wages fell.
But he added: “The recent increase in high loan-to-value lending options – enabled by Help to Buy – has allowed them a shot at getting on the ladder at long last, and the number of first time buyers has climbed to a seven year high.”
Strong house price growth seen in recent months has pushed the average price paid for a first home above the £150,000 barrier in London, the South East, East, South West and Wales.
Unsurprisingly, London was the most expensive place in which to buy a first property at an average of £251,061, followed by the South East at £194,955.
At the other end of the spectrum, Northern Ireland and Yorkshire and Humber had the cheapest properties at an average of £89,470 and £103,741 respectively.
First time buyers in London typically saved £62,253 for a deposit, nearly six times more than the £10,710 put down by people getting on to the property ladder in the North East.
Britain’s biggest mortgage lender is slashing the amount it will advance through Help to Buy, as a think-tank called for the scheme to be wound up.
Lloyds Banking Group, whose brands include Halifax and Lloyds Bank, said it would only advance loans of up to £150,000 under the equity loan part of the scheme, down from the previous limit of £500,000.
The cap applies to all shared equity and shared ownership loans, including Help to Buy, but it will not affect advances made through the mortgage guarantee part of the Government’s scheme.
The new Lloyds’ limit is significantly below the average value of a property bought through the scheme of £207,967.
The cap is likely to be a particular blow for buyers in London and the South East, where the average home costs £437,608 and £228,109 respectively, according to figures from the Land Registry.
Lloyds said one in four of the Help to Buy mortgages it has previously advanced was for more than £150,000, but it stressed that it remained committed to helping first-time buyers.
The news came as the head of the Organisation for Economic Co-operation and Development called for the Government to start winding down the scheme before it distorted the UK’s housing market.
Angel Gurria, the OECD’s secretary-general, also called on Chancellor George Osborne to lower the house price limit for the scheme to the national average of £262,000.
“It was a good idea and it worked. Now the economy is back on track. The price of houses has gone double digit. Do you still really need the mechanism? You need to think about moving towards normality before distortions set in,” Mr Gurria said in an interview with the Times.
He added that the scheme should be wound down over the course of the coming year.
The Help to Buy scheme enables people to purchase a home with a deposit of just 5 per cent.
The Government then either tops this up with up to 20 per cent of the property’s value, known as an equity loan, or it will offer lenders advancing high loan-to-value mortgages a guarantee on a portion of the debt.
But the scheme has not been without controversy, with some critics claiming it has contributed to a house price bubble.
Lloyds is the second lender to announce curbs on the lending it will do under Help to Buy.
Earlier this year, Nationwide said it would no longer advance mortgages to people buying a new build property under the scheme if they were not first time buyers.
A Lloyds spokesman said: “We have taken the decision to temporarily cap shared equity and shared ownership lending to £150,000.
“This is a prudent, short-term change that reflects the fact that we currently hold around a 50 per cent share of this market and is a further step to focus our activity on supporting first-time buyers who have limited options to get onto the ladder.”
In February, the group committed to helping 80,000 first time buyers get on to the property ladder this year by advancing mortgages worth £10bn to them.
It lent £5.7bn to 44,000 first time buyers during the first six months of 2014.
Around 13 per cent of Lloyds’ lending to first time buyers currently takes place through the Help to Buy mortgage guarantee scheme, which is not impacted by the new cap.
Government figures released last week showed that nearly 40,000 people had received assistance to buy a property through Help to Buy since it was first launched in April last year.
The Bank of England is due to review the scheme next month.
The first time buyer is back with a vengeance. The number of people getting on to the property ladder in Britain for the first time is back to 2007 levels, after a long slump during the recession.
The twice-yearly Halifax First Time Buyer Review reported that around 144,500 first time buyers took possession of the keys to a property in the first six months of this year, up 25 per cent on 2013 levels.
Craig McKinlay, mortgages director at the Halifax, cites the generally improving economy, rising employment and the Government’s Help to Buy scheme for their return. He also notes that almost half of this year’s first time buyers managed to escape Stamp Duty by buying under the £125,000 threshold.
Naturally, this is a feat a lot easier if you live in the North West than the South East, but there are thousands of homes listed at prices on or below £125,000 on Zoopla.
Patrick Paton, of estate agents Smiths Gore in Berwick upon Tweed, says buyers could buy a two to three bedroom cottage either within the town or in the countryside around it.
He advises buyers to hone in on properties that have taken time to sell and where the owners might be open to offers. “Look for properties that have been on the market for a little while and haggle,” he said.
He also suggests considering very carefully whether taking on a run-down home makes financial sense. “Doing a property up takes time and eats into spare cash so if the property really needs a new kitchen, you might be better to spread that extra £10,000 across a mortgage by buying a property that already has a nice kitchen,” he added.
Mark Pedley, a sales negotiator at Hunters in Manchester said it is still possible to buy a one bedroom flat right in the city centre for below £125,000 – perfect for young professionals. For those prepared to for a slightly longer walk to work flats in this price range beyond the city’s ring road might also come with extras like a parking space and a balcony.
His advice to buyers is to hone in on an area poised for regeneration, and swoop while prices are rock bottom. In Manchester this could be the central suburb of Ancoats, still slightly grubby around the edges but in a convenient location and the focus for millions of pounds worth of regeneration work right now. “It is the sort of place where you might well make a profit,” said Pedley.
In Thetford, Norfolk, Mark Dickenson, director of Hudson Property Services, says buyers have plenty of choice for under £125,000. They could pick up a one bedroom flat from around £75,000 or a two bedroom flat from around £95,000. The full £125,000 would buy them a two bedroom house in the town centre.
He says buyers looking for a deal should search out areas that have been held back by poor local transport links, but where improvements are imminent. Thetford’s prices are currently low in part because the 33 mile drive along the single carriageway A11 to Cambridge is “horrendous” and can take up to an hour each way.
This winter, however, works to turn the road into a dual carriageway will be completed, slashing journey times by up to half. This, believes Dickenson, will encourage more commuters to look at the town, boosting prices. “My advice would be to get in early,” he said.
For sale for less than £125,000:
1. In Taunton, Somerset your first buy could be small but extremely stylish, not to mention pocket friendly at £53,000. This studio apartment within a grand period house, with use of a good-sized communal garden.
2. A smart two bedroom period cottage in Bolsover, Derbyshire, could be yours for £68,000.
3. First time buyers not afraid of a challenge could pick up a great dooer-upper, a potentially outstanding Georgian Grade II listed double fronted townhouse with scope to extend in Gainsborough, Lincolnshire. The property is on the market for £70,000 so there might even be enough money left to make the necessary repairs.
4. London commuters could opt for a quirky one bedroom weatherboarded cottage in Sandhurst, Kent, available at £124,950.
5. Inland Devon has some great bargains compared to the coast, like this two bedroom terrace in pretty Buckfastleigh, on the market at £120,000.
6. Commuters to Cambridge or Norwich could move to the market town of Thetford, Norfolk, and select a two bedroom house within walking distance of the town centre, for £117,000.
7. But if you want to be in the thick of things The Roof Gardens, a trendy development of flats in the very central Castlefield area of Manchester, are available from £119,000 and will be move in ready next year.
8. Even London buyers can get in on the act, although they are likely to be restricted to outer suburbs and ex-local authority flats, like this one bedroom home in Woolwich, available for £119,995.
The number of people buying their first home has soared by nearly a third during the past year as lenders accept lower deposits, research showed today.
Around 146,600 first time buyers purchased a property in the six months to the end of June, 27 per cent more than in the same period of 2013, according to LSL Property Services.
The group said it was the highest number of first-time buyers during the first half of the year since 2007, before the financial crisis struck.
It attributed the surge in people getting on to the property ladder to a new willingness among lenders to advance mortgages to people with smaller deposits.
It said the average deposit put down by a first-time buyer was £24,530 in June, 18 per cent less than a year earlier and the fifth consecutive month in which it has been less than £25,000.
At the same time, typical property prices paid by first time buyers have remained broadly stable, rising by just 2.9 per cent to £119,743.
David Newnes, director of estate agents Your Move and Reeds Rains, part of LSL Property Services, said: “The bottom of the market continues to recover, even as activity further up the price bands is beginning to show signs of slowing down.
“Lenders have been more willing to lend to higher loan-to-value borrowers. Help to Buy has boosted confidence and with it demand among first-timers who have been carefully saving up for their deposit.”
But he warned that new loan-to-income caps announced by the Bank of England could have a “stifling effect” on first time buyers, adding that there would need to be careful interpretation of them to ensure they did not cut good buyers out of the market.
Around 26,500 people got on to the property ladder during June itself, 10.4 per cent more than a year earlier and the second consecutive month in which first time buyer numbers topped the 26,000 threshold.
But despite the growing number of first time buyers entering the market, the dream of home ownership still remains far off for many people.
In June, 93 per cent of tenants registered with Your Move and Reeds Rains wanted to become homeowners, but only 17 per cent expected to be able to buy a property within the next 12 months, and 14 per cent did not think they would ever be able to afford to buy one.
Financial help from the Bank of Mum and Dad remains a key factor in helping people to get on to the property ladder, with 39 per cent of first-time buyers in June receiving family help to build up their deposit.
A further 7 per cent put money they had inherited towards a deposit, while 4 per cent used a Government scheme, such as Help to Buy.
Only 45 per cent of first time buyers completely self-financed their property purchase during the month.
Meanwhile the Resolution Foundation warned that the number of people facing mortgage repayment problems could double by 2018 as interest rates rise.
It estimates that the number of households who had to spend more than a third of their post-tax income on mortgage repayments would rise to 2.3 million by 2018 from 1.1 million – the equivalent of one in four households with a mortgage.
The number of households spending more than half of their post-tax income on all forms of debt repayment, defined as being in debt peril, also looks set to double to 1.1 million.
The group called on policymakers to learn the lessons from the past and tighten lending criteria and reduce the UK economy’s dependence on debt.
It added that an “orderly and managed dismantling of the debt overhang” was needed, so that people who were lent money during looser credit conditions did not suffer affordability problems.