Homebuying

The recent reports on the housing market tell us that the rate of mortgages approved in the UK has dropped by 14.2%. In fact the figures from August show the lowest approval rate in the past seven years.

The tell-tale signs of higher interest rates, stricter lending criteria, lower approval rates and a slowing of house price increases all indicate the housing market could be heading for a slump. There are rumours that this may trigger an interest rate cut before the end of the year to slightly ease the strain being felt by everyone at the minute.

Read more about it at Drop in Mortgage Approvals

A very worrying article on BBC News this morning reporting that there has been some evidence of mis-selling in our mortgage market.  The reports claim that people are being ‘advised’ to exaggerate their salaries in order to get a mortgage and a way of finance brokers to close a deal.

The Financial Services Authority (FSA) is planning a full investigation and tough actions when dealing with those involved.

It seems to have affected the sub-prime section of the mortgage market more than any other as most of the applicants tend to be self-employed and need a self-certified mortgage. Some borrowers have tended to exaggerate their income and the lenders haven’t followed up to check whether it is an accurate and realistic statement.

It highlights the problems we are starting to encounter now though with this irresponsible attitude towards lending and borrowing, a family who were advised to report their earnings were double what they were, are now in financial dire straits and have been close to having their home repossessed.

Read the full article here

Abbey has declared it is to offer a 125% mortgage deal. An odd time to be offering such a deal in the present financial climate. In effect the borrower will be getting a 100% mortgage with an additional 25% secured loan, depending on their individual financial situation.

It is thought this will appeal to many first-time buyers, but be warned, the borrower will effectively be starting off in negative equity, the property will need to gain an extra 25% in value before the house will be in equity. This may not have been a problem over the past couple of years, however the continuation of rocketing property values cannot be relied upon as it is not likely to be sustainable in the long term.

Is this is a brave move for Abbey or a foolish one? Only time will tell.

Read more at Abbey offers 125% mortgage

Yesterday saw the launch of the new Hips packs for 3 bedroom homes in England and Wales. Whilst the Hips have been required for 4 bedroomed homes for a couple of months, it probably hasn’t affected as many people as it will now due to the higher proportion of three bedroom homes in the UK.

The packs will include some compulsory and some optional documents, such as:

• Energy Performance Certificates (EPC’s) for every home to show how energy efficient the house is

• Title deeds to show it is the sellers property

• Any copies of building regulations, planning and listed building consents

• A sales statement stating basic information about the property such as the address and what services are provided to the property ie: drainage and water

They will be compiled by specially trained inspectors at a cost of several hundred pounds to the seller, which will invariably be passed on to the buyer. Whilst the more information the better when preparing to buy a new home, the Hips may complicate the process unnecessarily despite the fact they are designed to speed up the housebuying process.

It is reported that the Hips may have contributed to a slowing down of 4 bed house sales that has been observed over the past few weeks, as much as 60% in some places.

Read the BBC News article here

Visit the website at www.homeinformationpack.gov.uk

I found a really interesting read today on MoneyWeek.com. There seem to be some cracks showing in the property market. Repossessions are on the increase, people seem to have more mortgage arrears than they have in the past years and demand for buying houses seems to be on a slight decline.

Homeowners are finding it harder to pay back their mortgages, as interest rates creep up and ‘cheap offers’ to entice people to take out a mortgage they can’t really afford will run out after a couple of years, remortgage rates may well be on the increase too.

Could the recent problems with credit and loans be causing this change? Could we be heading for a crash? If not, we may at least have a slowing down of house price increases which have grown at a rapid rate over the past few years, this may mean more first-time buyers will finally be able to afford to get their foot on the property ladder.

Read the full article

A BBC News article states that the TUC (Trade Union Council) has reported that over the past 10 years, house prices in the UK have increased four times faster than the annual earnings of most people. Rics (Royal Institution of Chartered Surveyors) have also stated that first time buyers on average have to save £25,600 to secure their own home.

This is £300 more than the average joint take home salary of a couple. No wonder people are not buying houses anymore when it will probably take them years to save a whole years salary.

The average house price is now £200,000 - a rise of 11% per year - whilst incomes have increased by only 3.5% per year.

With interest rates on the up and repossessions more common, will the property market survive?

Read the full article here

Despite the increase in interest rates over the past year, buy-to-let mortgages are still very popular. In fact 12% of all new loans in the past 6 months have been for buy-to-let mortgages. The Council of Mortgage Lenders says these types of mortgage account for 10% of all mortgage types - a rise of 3% from 2002.

There are concerns of another Bank of England base rate increase to 6%. Will this finally slow the buy-to-let market down?

Read the complete article at the Times website here

The Independant recently published a great article on Mortgages. The piece was based on the following question:

‘I want to buy the very best house I can afford before house prices rocket out of reach. How far should I push it, and should I switch to an interest-only mortgage so I can borrow more?’

Statistics from Halifax suggest the average house price in the UK is approximately £199,000, which can lead to first time buyers finding it difficult to get a mortgage. This is increasing the number of those taking out an ‘interest-only’ mortgage which can prove to be a big risk if you have no back up plan to pay off the capital owed.

The article is full of no-nonsense tips for first-time buyers on how best to approach getting and paying your first mortgage, as well the other options available to help you get onto the first rung of the property ladder. Examples include buying with friends, getting a buy to let mortgage or shared ownership.

Read the full article here

In the past 4 years, first-time buyers have seen a giant increase in the size of their mortgage - it has almost doubled since 2003.

From the article:

‘New figures from Abbey show to get on the property ladder new homeowners are now forced to borrow on average £130,000. This compares to the average amount of £75,000 borrowed by first-time buyers four years ago in 2003.’

It seems to be getting more and more difficult to get onto the property ladder, with many young house buyers having to rely on their parents for financial assistance.

With house prices ever increasing, so too is the amount first-time buyers have to borrow for a mortgage. However people need to be be wary of borrowing too much over their salary as the Bank of England’s base rate, which is currently at 5.25%, may also be set to rise, leading to an increase in mortgage repayments which could mean people struggling to keep up with monthly payments.

Read the article at MyFinances.co.uk

The Prime Minister has made clear his enthusiasm for introducing a 25 year fixed rate mortgage amongst the already vast range of mortgage options available to home buyers today. It has been suggested that this long-term fixed mortgage could be a valid way of stabilising the current state of the UK housing market.

However Abbey Mortgages have completed a survey on this very topic and have found that UK homebuyers are more reluctant than the Government about the popularity of this option.

From the article:

‘Abbey surveyed 1,000 people and found that only 23% could confirm they would consider a 25-year fixed-rate mortgage’

This type of mortgage is commonplace in other european countries but from the results given many of the respondents (54%) said they would not consider this type of mortgage due to the uncertainty of future interest rates.

Read more from the article here Finance Markets