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Lockdown helped third of homebuyers get onto the property ladder

A third of UK homebuyers have been helped onto the property ladder due to lockdown according to new research by Yes Homebuyers.

The research found that for 27% of recent homebuyers say the restrictions of the lockdown due to the COVID-19 pandemic meant they were able to save to get a property, with 46% of those asked stating that the drastically reduced spend across their social life helped them to get a foot on the ladder.

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A further 33% said working from home and a lack of commuting helped their savings, a reduction in family costs helped 10%, while 6% received an inheritance due to bereavement and 5% saved on rent due to moving back home with their parents.

Matthew Cooper, founder and managing director of Yes Homebuyers, commented: “There’s no-one on the planet who wouldn’t like to erase the last year from history and lockdown has been hard for so many people for a whole variety of reasons.

“At the same time, there have been some great stories of resolve, survival and adaptation emerging across all areas of life and this is indicative of our nation and how we come together when times are tough.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

“While we’re all chomping at the bit to get back to some form of normality, it’s also great to see that for a third of homebuyers lockdown has, at least, helped them to achieve their goals of homeownership.

“With little else to spend our money on and a further saving due to the stamp duty holiday, there’s never been a better time to get a foot on the ladder and hopefully, many more will continue to benefit.”

Source: Property Wire

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Details of new 5% deposit mortgage scheme to be outlined in Budget

Ultra-low deposit mortgages are set to make a comeback with a new 5% deposit home loan guarantee scheme.

Details about the new scheme are expected to be set out in Chancellor Rishi Sunak’s Budget on Wednesday.

The scheme will be available to current homeowners as well as first-time buyers looking to buy a house for up to £600,000.

The initiative will be available to lenders from April and is designed to increase the appetite of mortgage lenders to offer high loan-to-value lending to creditworthy customers across the UK.

Under the scheme the Government will offer to take on some of the risk of low deposit loans, meaning lenders would have some protection from potential losses.

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Low deposit loans are often seen as more of a risk because borrowers could end up in negative equity if house prices fall – meaning they owe more than their property is worth.

Lenders will be able to purchase a Government guarantee that compensates them for a portion of their losses in the event of foreclosure.

All lenders under the scheme will offer mortgages fixed for at least five years as part of their range of products, providing options for consumers with smaller deposits who want the security and predictability of a mortgage with a fixed rate over a longer term.

The new initiative follows in the footsteps of the UK-wide Help to Buy mortgage guarantee scheme, which was launched in 2013 and helped to reinvigorate the market after the 2008 financial crisis.

That scheme, which also offered 5% deposit mortgages, is no longer running.

It helped more than 100,000 households across the UK to buy a home, but it also drew accusations of pumping up property prices.

Many low deposit mortgages vanished from the market last year amid concerns about the wider economy.

However, more recently, lenders have been bringing back low deposit deals, clustered around the 10% deposit level.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

For example, Yorkshire Building Society launched two new 10% mortgages on Wednesday exclusively for first-time buyers.

In recent months, house prices have jumped to record highs, fuelled by buyers wanting to move to make lifestyle changes, as well as a temporary stamp duty holiday.

The stamp duty holiday is due to end on March 31, but it could be extended by another three months in the Budget, according to recent reports.

Rightmove estimates that 100,000 buyers who agreed a purchase last year are set to lose out if the deadline remains at March 31.

In total, it estimates an additional 300,000 property transactions in England could get through if the deadline is extended to June, saving buyers £1.75 billion in total.

Rightmove’s property expert Tim Bannister said: “We estimate that around 100,000 sales will miss the current March deadline, and so if the holiday is extended to the end of June it would give these the chance to complete in time, plus a number of other sales could now make it through that were only agreed at the start of this year.”

Kate Eales, head of regional residential agency at Strutt & Parker, said a possible extension “is likely to motivate potential buyers who thought about entering the market but might have been put off by lockdown restrictions and felt they had already missed the boat with this holiday altogether”.

She added: “An extension, combined with the recent Government road map to normality, is likely to work together to encourage more to come to the market and take advantage of the holiday.”

Prime Minister Boris Johnson said previously: “I want generation rent to become generation buy and these 95% mortgage guarantees help to deliver this promise.

“Young people shouldn’t feel excluded from the chance of owning their own home and now it will be easier than ever to get on to the property ladder.”

Mr Sunak said previously: “By giving lenders the option of a Government guarantee on 95% mortgages, many more products will become available, helping people to achieve their dream and get on the housing ladder.”

Source: Express and Star

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Study reveals rental costs before buying a first home

The average adult in Britain will pay out more than £63,000 in rent before they get onto the property ladder, a new study has found.

Researchers found that people who have bought their first home within the last five years had typically paid £625 every month in rent to their landlords.

And on average, it takes renters almost eight and a half years before they finally save up enough to buy their own home, spending a total of £63,225 in rent, according to the study from home builder Keepmoat Homes.

This means they’ll have already spent the equivalent of more than a quarter of the average £228,903 property in the UK, it points out.

‘For many people, renting is an important first step towards home independence. It offers benefits like flexibility, allowing you to test different areas and types of home, before you commit to buying somewhere,’ said Tim Beale, the firm’s chief executive officer.

‘However, this research highlights the considerable cost of renting and therefore it isn’t surprising to see that for over half of people asked, say they feel as if the dream of home ownership will never be possible,’ he explained.

‘In reality home ownership can cost less than your rent. For example with our average selling price of £156,000, the standard monthly mortgage repayments would make you approximately £100 a month better off than paying the typical £625 rent,’ he added.

The study also found that of those who had bought their first home in the last five years, or who are still renting, some three quarters believe it is ‘impossible’ to save for a home while renting.

Of those who have bought a home, they spent almost five years saving before putting down an average deposit of £24,033 on their property, more than 80% of the average adult’s salary.

However, four in 10 were able to lean on their parents for financial support when it came to their deposit, while a fifth relied on an inheritance and a quarter even ended up moving back in with their parents to save on rent while 24% considered it but were able to avoid it.

For those respondents still renting, they think it will be at least another four years before they are in a position to think about buying their own home. Researchers also found 18% of renters have taken on two jobs in a bid to save for a deposit while paying out monthly to a landlord.

One in four have forsaken holidays, and a third have cut back on luxuries like magazines, flowers in the home and TV and movie costs while 30% said that they started taking a packed lunch to work and 18% tried to do all of their shopping in the reduced section of the supermarket rather than paying full price.

Unsurprisingly, three quarters of those polled, via OnePoll, believe something needs to be done when it comes to the cost of renting to help those trying to save for their own home.

Source: Property Industry Eye

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New scheme offers mortgage-free home ownership to first-time buyers

There’s a new way for first-time buyers to get on the property ladder – and it doesn’t involve getting a mortgage.

Launched to the public in July, Unmortgage offers people the chance to buy a share of between 5% and 20% in a property, which they can then live in.

Rent, set at local market rates, is paid on the remaining share, which is owned by an investor.

Homeowners have the option of building up their share over time, or can completely buy out the investor, reports the Manchester Evening News.

To qualify, you must have a minimum gross household income of £30,000 (or a maximum of £100,000), and the rent can only cost up to 36% of your income.

The idea is that buyers can become partial homeowners, without needing to worry about the salary-based lending caps normally applied by mortgage lenders.

According to the website, ‘Unmortgage is for you if you can’t afford to buy the home that you can afford to rent.’
Unlike shared ownership, it’s not just available on new builds, giving you more choice in the kind of property you buy . Once you’re in, you’ll be able to increase your share as often as you want.

The scheme also eventually allows you to buy 100 per cent of the property, as opposed to the 40 per cent cap in shared ownership schemes.

Here’s everything you need to know about the Unmortgage scheme:

How does Unmortgage work?    

If you’re a first-time buyer, you’ll need to pay at least 5 per cent of the deposit for your new home. Unmortgage requires new customers to pay at least £12,500 as a minimum to use the service.  

Once you’re up and running, you can buy up to 5 per cent more of your home each year, up until a maximum of 40 per cent. After reaching 40 per cent, Unmortgage expects buyers to either buy the rest of the property with cash or with a mortgage.

You’ll only be able to buy the property in full if its value has not fallen below purchase price.

Who can apply for Unmortgage? 

To apply you’ll need an income of between £30,000 and £100,000 before tax, whether you’re renting alone or with somebody else.

To use the service you’ll need an acceptable credit rating, and if you have struggled to meet rent payments and/or been made redundant in the past, chances are your application will be rejected.

What homes can you buy on Unmortgage?

Unmortgage has laid out a specific set of guidelines for the types of homes its investors are willing to to fund.

These include:

  • Homes in quiet, urban areas
  • Homes with no foundation problems
  • Homes which are ready to move in to
  • Homes with between two and five spacious bedrooms
  • Homes which are freehold, share-of-freehold or leasehold with a lease of at least 100 years.

As investors want to place their money into properties which will increase in value over time, Unmortgage will not help with the purchase of new-builds, properties on main roads, motorways or rail tracks, houses with ‘unfairly sized bedrooms’ or former social housing.

How is rent calculated?

To calculate the rent you pay on your home, Unmortgage will consider the rental value of similar homes in the area and then deduct your deposit from that amount.

Rent can rise each year in line with the RPI (retail prices index) measure of inflation. However, your rent price will not drop if inflation falls.

How is Unmortgage different from renting?

Although you don’t immediately own your new home, you won’t be restricted in what you can do with it. Even though you’re renting the part you don’t own yet, you’ll be able to have pets, nail up pictures and paint the walls. The only thing you won’t be able to do is major renovations, as these don’t always go to plan and could affect the price of your house before it has been fully paid off.

Should you use Unmortgage if you can get a mortgage for a home you love?

Unmortgage has been set up for first-time buyers who can’t get a mortgage for a home they could easily afford to rent. But if you can get a mortgage for a home you love, it’s advised that you speak to an independent advisor for a professional opinion on the best course of action to take.

Do you have to pay stamp duty?

In short, yes. Unfortunately, using Unmortgage will not make you exempt from paying stamp duty, and you may find yourself paying it at  an enhanced rate. The initial stamp duty costs will be split between yourself and the investment partner.

Unfortunately using the scheme will make you exempt from first-time buyer stamp duty discount, so this is something to consider.

Because you’re buying as part of a partnership with a business, both you and the investor will be charged with an additional 3 per cent stamp duty fee on top of the usual rates.

And, if you go from 40% to 100% ownership you’ll be liable to pay stamp duty again on the full property value – but this time without the 3 per cent surcharge.

What fees will you need to pay?

While Unmortgage claims to charge no fees, you will still be liable to pay for solicitor and surveyor fees, as well as any leasehold fees. These costs will be split proportionately with the investment partner.

A RICs surveyor will value the home every year, and online valuations will be provided each month.

Can you move out of your property before you’ve bought it in full?

If you decide you want to move out of your Unmortgage property before you have repaid the investors in full, you can do.

While you’re able to stay in your home as long as you keep up with rent payments, if you decide you want to go elsewhere, the funding partner will be given three months to decide whether they want to buy your stake or sell with you.

If you wish to move on you will be liable to pay certain fees, such as a £350 fee towards valuation costs of the property. You will then be eligible to split any remaining selling costs with the investor – a calculation which is based on your stake in the property.

By Rachel Pugh & Amardeep Bassey

Source: Kent Live

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Older People in ‘Under-Occupied’ Homes are Blocking Property Ladder for Younger Generations

Older people are staying in their homes longer and locking younger buyers out of family properties or homeownership all together.

Economic uncertainty has depressed buying and selling activity among existing homeowners, Nationwide Building Society said, and potential first time buyers are feeling the consequences.

The mortgage lender said homeowners aged 55 to 64 have been in their current properties on average for 17 years—10 longer than homeowners between 35 and 44.

Older owners have remained in their homes even as their children have moved out, resisting “downsizing” amid economic uncertainty. Consequently, a growing portion of homes now have two or more spare bedrooms.

Nationwide said that 54% of homes occupied by their owner are now under-occupied, up from 42% in 2000.

Among owners over 65s, two-thirds of homes have at least two spare bedrooms.

“A possible consequence of the low rate of churn is that the housing stock is not being utilised as effectively as it could,” Nationwide chief economist Robert Gardner said.

Younger buyers are unable to find suitable properties. And increasingly, those first-time buyers are looking for houses, “leapfrogging” smaller starter flats.

Recent figures from the Land Registry show that the prices of flats and maisonettes have fallen, while those of houses, especially detached properties, have risen.

First-time buyers’ preference for houses is perhaps a reflection of the huge cost of home ownership and their older age when buying. The average first-time buyer is now 33.

Furthermore, much like older generations, these young buyers are looking for a property to remain in for years, Richard Donnell, insight director at Zoopla, said.

That’s if they can get on the housing market at all. A report from Santander last week cautioned that the housing market is failing younger generations, just a quarter of whom can expect to own their own homes by 2026.

Among other reforms to the market, the lender suggested the government cut stamp duty to encourage older homeowners to sell their larger properties and downsize, leading to better use of housing stock.

Low rates of turnover have also curbed housing price growth. Nationwide’s figures showed that UK house prices rose on average just 0.3% in July, compared to the same month last year. That marks the eighth consecutive month that house price growth has been under 1%.

Source: Money Expert

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Number of first-time buyers in the UK reaches an all-time high

The number of first-time buyers wanting to get their foot on the property ladder has reached a 12-year high in the latest report from UK Finance.

In the new study, they have revealed that during 2018 the number of first-time buyers applying for mortgages reached 370,000 — 1.9 per cent more than the previous year. This is the highest number of first-time buyers since 2006, when 402,800 mortgages were completed.

It also reveals that £62 billion of new lending in 2018 was up by 4.9 per cent in comparison to 2017.

With government incentives such as Help to Buy lending a hand to the new generation of homeowners, more buyers were able to purchase their first home without the hefty deposit.

Elsewhere, the study also reveals that there were 5,100 new buy-to-let home purchase mortgages completed in December, which has fallen by 5.6 per cent on the same month of the previous year.

‘The mortgage industry helped 370,000 people buy their first home in 2018, the highest number in 12 years, as competitive deals and Government schemes such as Help to Buy continue to boost the market,’ explains Jackie Bennett, the Director of Mortgages at UK Finance to Landlord News.

‘Homeowner remortgaging also saw strong growth, driven by customers locking into attractive rates, a trend we expect to continue in 2019, as more fixed rate mortgages come to an end.

‘Demand for new buy-to-let purchases continues to be dampened by recent tax and regulatory changes. However, the number of buy-to-let remortgages reached a record high of almost 170,000 last year, suggesting many landlords remain committed to the market.’

Planning to buy your first home this year? With house prices rising just £714 in a year, now could be the time.

Source: House Beautiful

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More First-Time Buyers Enter Property Market in November

UK Finance figures show that more first-time buyers got their foot on the property ladder in November, before the Christmas slowdown.

Its Mortgage Trends Update for November 2018 indicated that 36,200 new mortgages for first-time buyers were completed that month. This is a 5.8% increase over November 2017. At £6.0bn, the new lending was up by 9.1%  year-on-year. The figures revealed that the average first-time homebuyer is 30 years old and has a £42,000 gross household income.

Land Registry figures show that in England, the average first-time buyer purchases their first property for £207,538. This is 2.3% higher than last year, but property prices are the same from the month before.

In London, however, first-time buyers in 2019 will pay £413,744 on average to get on the property ladder. This is a drop of 0.9% from a year ago and an increase of 1.1% from October 2018.

In November, 36,200 new homeowner mortgages were completed, which 1.1% higher than in October. New lending totalled £7.8bn, which is 4% higher year on year. In London, the average first-time buyers in 2019 are 39 and have a £55,000 gross annual income.

The total number of new buy-to-let purchase mortgages in November was 6,100, which is 9% fewer than in November 2017. Value-wise, this was £0.8bn of lending, down 111% from the year before.

UK Finance Director of Mortgages Jackie Bennett said that a combination of competitive schemes and dealers helped a growing number of first-time buyers purchase a home during November.

In the meantime, there has been a steadying in homeowner remortgaging, after reaching its highest point in a decade as many fixed-rate deals concluded. In the buy-to-let market, purchases continue to be slow while remortgaging is on the rise due to attractive rates.

Source: CRL

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Young couples losing out on family life as house prices soar

Millennial couples are delaying having children and “putting their lives on hold” because of the sky-high cost of housing, “shocking” figures show.

Young couples are two times more likely than 35-54-year-olds to delay having children in a bid to get onto the property ladder, according to numbers crunched by mortgage broker Trussle.

The analysis also revealed that since 1978, the average house price has risen by 1382% from £14,236 to £211,000, meanwhile the average annual UK salary has risen from £3,269 to just £26,500 – pricing many families out of the housing market.

Ishaan Malhi, founder and chief executive of Trussle, said that young people are “being forced to put their lives on hold in a bid to join the property ladder”, while Labour’s shadow secretary for housing John Healey described the situation as “shocking”.

As part of the study, more than 2,000, participants were asked what sacrifices they had made in order to buy their first home.

A total of 15% of buyers aged 18-34 years old admitted to delaying having children, compared to 7% of 35 to 54-year-olds and 5% of over 55s.

Mr Healey added: “It’s shocking that the number of under-45 home-owners has fallen by a million since 2010, with young people on ordinary incomes increasingly having to make big sacrifices to buy that special first home.”

The new findings support previous research into the relationship between family planning and the decline of affordable housing.

In 2016, a Shelter and YouGov study revealed that due to the housing crisis, 22% of couples were either already delaying parenthood or planning to in the future.

Hannah Slater, policy manager at Generation Rent, said: “With renting the norm for millennials, starting a family is becoming a much harder choice.

“Housing costs are driving rising child poverty rates, so many families are forced to make a choice between delaying or not having children, or having children but living in poverty in insecure homes.”

The survey also highlighted that 15% of millennials delayed getting married, compared to 5% of “Generation X”, meanwhile 13% put off entering into a romantic relationship in comparison to 5% of 35 to 54-year-olds.

According to Dr Kim McKee, co-author of the report titled The Frustrated Housing aspirations of Generation Rent, such housing pressures are felt by millennial women in particular.

She said: “For young women, the decision to start their own family forces them to reflect on their own living situation.

“They worry about being able to give their child a safe and secure home; somewhere they could settle and put down roots.”

Source: Express and Star