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Housing highlights from the Autumn Budget 2017

 

Of the 25 key elements of the Government’s Autumn Budget, there are three areas that are set to boost the housing sector by helping first-time buyers, building more homes and boosting skills in the construction sector – ‘no silver bullet solution’ but a step in the right direction.

Image source: BBC

The key areas included:

  • The Chancellor has promised £44bn in capital investment to boost the housing market and
  • 300,000 homes to be built every year by mid-2020s;
  • Mr Hammond has abolished stamp duty for all first-time buyers (FTB) for homes up to £300,000.

Abolishing stamp duty for FTBs

Any incentive that helps first-time buyers to purchase their first property is welcome, however, the previously mentioned £5,000 saving announced by the Chancellor is more likely to be £1,660 as detailed in the official Budget documentation. Why? Because the average first-time buyer across the UK will not be able to purchase a property at £300,000. Londoners, however, are used to far higher property prices for a one or two-bedroom property and will most likely feel the benefit of a £5,000 saving.

According to the Government, 95% of first-time buyers who pay stamp duty will benefit. First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000; they will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property; with 80% of people buying their first home paying no stamp duty. There will be no relief for those buying properties over £500,000.

300,000 new homes a year

The Chancellor is injecting funds to support the home building industry, specifically helping those businesses that are not already dominant in the sector. Mr Hammond pledged £15.3 billion in new financial support for house building over the next five years – taking the total to at least £44 billion. This includes £1.2 billion for the government to buy land to build more homes and £2.7 billion for infrastructure that will support housing.

In addition, the government will also create five new ‘garden’ towns and make changes to the planning system to encourage better use of land in cities and towns. This means more homes can be built while protecting the green belt. To address the UK’s vacant property issue, the Government announced an increase in the maximum empty home Council Tax premium to 100%.

£64 million for construction and digital training courses

One of the biggest challenges faced by the construction industry is a skills shortage, which is why a new pledge of £34 million towards teaching construction skills like bricklaying and plastering, and £30 million towards digital courses using AI will be more than welcome.

This funding is provided in advance of launching a National Retraining Scheme that will help people get new skills. It will be overseen by the government, the Trades Union Congress (TUC) and the Confederation of British Industry (CBI). They will decide on other areas of the economy where new skills and training courses are needed.

Henry Knight, Managing Director, Springtide Capital commented: “It is good to see further support for the housing industry, specifically digging deeper into the fundamental issues facing the construction industry. The abolishment of stamp duty land tax for first-time buyers purchasing a property up to £300,000 is another positive move, and contrary to some opinions, I can’t see it impacting house prices dramatically.”

Sources:

https://www.gov.uk/government/publications/autumn-budget-2017-documents/autumn-budget-2017

http://www.bbc.co.uk/news/business-42079174

Gross mortgage lending 14% higher year-on-year

 

According to the latest UK Finance Update on Lending, gross lending is estimated at £23.1 billion for October, 14% higher than a year ago.

Other highlights from the report included:

  • £15.3 billion was lent by High Street banks
  • 7.1% credit outstanding

THE ECONOMY

The UK has experienced a muted first half of the year, and the same can be said of the second, with growth at 0.4%. However, the unemployment rate remains low at 4.3%.

As predicted, inflation reached 2.8% in October, however, according to UK Finance, “inflation is likely to peak in October, before starting to fall.” Consumer spending continues to feel the pinch as wage packets are squeezed with higher prices and lack of wage growth: with households trading down and focussing on essential purchases.

The Monetary Policy Committee met on 2nd November and decided to raise interest rates by 0.25% to 0.5%; this has meant the withdrawal of historically low-rate deals.

HOUSING

Remortgage activity and first-time buyers have been the main contributors to October’s mortgage lending, with an estimated £23.1 billion borrowed, an increase of 14% year-on-year. Two-thirds of money borrowed was from High Street banks, at £15.3 billion.

Outstanding credit grew slowly in October, sitting at 7.1%.

Commenting on the data, UK Finance’s Senior Economist Mohammad Jamei said: “The anticipated bank rate rise saw a flurry of remortgage activity as many homeowners took advantage of the competitive rates on offer. Borrowing was also boosted by stronger first-time buyer activity as this segment reaped the benefits from good credit availability, lower rates and government housing schemes.

“In terms of saving, consumer deposits grew at a slower rate in October, while businesses have continued the trend of bolstering their cash reserves amidst a cautious business landscape due to Brexit uncertainties.”

REGULATION

Landlords with four or more mortgaged buy-to-let properties will now be classed as ‘Portfolio Lenders’ and subject to a different and more rigorous assessment when applying for a buy-to-let mortgage.

Lenders are now responding to rules given by the Bank of England’s Prudential Regulation Authority (PRA), which is enforcing stricter stress testing for Portfolio Landlords to ensure affordability, by introducing new systems and more complicated underwriting processes. Lenders will now need to assess the financial viability of every property in a landlord’s portfolio when deciding whether to offer them a loan. Landlords will need to show mortgage details, cash-flow projections and business models for every property they own when applying for a new loan.

When Portfolio landlords apply for new borrowing or to remortgage, they will need to ensure that each property’s monthly rental income covers 125% of their mortgage payments, which is stress tested at an interest rate of 5.5%.

AUTUMN BUDGET:

  • The Chancellor has promised £44bn in capital investment to boost the housing market and
  • 300,000 homes to be built every year by mid-2020s;
  • Mr Hammond has abolished stamp duty for all first-time buyers for homes up to £300,000,
  • and there are plans to allow councils to charge a 100pc premium on council tax on empty properties.

An overview of the key housing market changes announced in the budget can be found here.

Henry Knight, Managing Director, Springtide Capital commented: “There has certainly been a ‘flurry’ of activity due to the predicted rate rise, with homeowners looking to secure favourable rates. The Chancellor’s plans to address the housing shortage are promising, as is the removal of stamp duty tax for first-time buyers up to £300,000.

“I’d like to stress that it’s essential that Portfolio Landlords understand how they will be affected by the new PRA rules; and which lenders are best suited to provide their buy-to-let funding. I would recommend that Portfolio Landlords seek advice from a buy-to-let mortgage consultant.”

Source: https://www.ukfinance.org.uk/uk-finance-update-on-lending-november-2017/

Housing market shows rebalancing across regions

 

According to the latest UK Finance report, gross mortgage lending is estimated at £24.2 billion, with the market rebalancing in the North of the UK.

Highlights from the report included:

  • Housing market continues to grow modestly, dominated by first-time buyers
  • There is evidence of rebalancing across regions
  • Of the £24.2 billion in estimated mortgage lending, £13.2 billion was lent by High Street banks 

THE ECONOMY

Despite high levels of employment, with yet another 1% decrease in unemployment (now 4.3%); economic growth is slowing, with wage growth at 2.1%.

A lack of wage growth, combined with inflation running at 2.9% in August, has resulted in workers reducing savings and being more conservative with their spending. It is predicted that this will rise to 3% in October and then fall slowly after that.

As inflation rises, the Bank of England Monetary Policy Committee (MPC) may see fit to introduce modest monetary tightening in the form of a 0.25% base rate change. With already tightening budgets, this may propel home owners to secure the current and more favourable mortgage deals through their mortgage consultant.

HOUSING

A slowdown in the economy can also dampen the housing market. However, 12-month averages remain in line with predictions, showing activity that resembles 2015 figures, according to UK Finance. Despite economic challenges, lending sits at £24.2 billion in August.

First-time buyer activity continues to grow, owing to the various Government schemes and the appetite for new-build properties. This is, however, not the case for home movers, whose lack of help from schemes and shortage of available property discourages them from selling.

Buy-to-let still suffers from changes to tax and remains flat, however, remortgage activity among home owners is still increasing, as rates remain competitive.

According to UK Finance, there is also evidence to show that there is a shift away from London, with the North of England, Wales and Scotland showing signs of stronger housing activity. This may be due to affordability challenges, making outer London areas more appealing. UK Finance also identified that of the £24.2 billion in estimated lending, £13.2 billion was lent by High Street Banks.

REGULATORY

The housing market currently has a number of Government schemes aimed at stimulating certain areas of the market, all of which will end at some point and new ones launched. According to the UK Finance report, the Bank’s MPC minutes showed the committee voted unanimously to close the drawdown period for the Term Funding Scheme on 28 February 2018, as planned when the scheme was originally introduced back in August .”

In addition, the report also confirmed that buy-to-let landlords with a portfolio will be subject to stricter rules when they apply for a new buy-to-let mortgage, where underwriters (those who make the final decision on a mortgage application) will look at the risk of funding them. Although not set in stone, they will look at a landlord’s experience and how profitable they are with their existing properties. The report confirmed the date of 30th September 2017 for implementation.

Henry Knight, Managing Director, Springtide Capital commented: “As wallets are squeezed with inflation, low wage growth and the rumour of an interest rate rise, it’s a good time to review your mortgage with a consultant. The mortgage market is extremely competitive at present.

“Notably, the gross mortgage lending figures show that only £13.2 billion was lent by High Street banks, perhaps demonstrating what we see at Springtide Capital, that specialist lenders are sometimes better placed to fund some clients and their individual circumstances.”

For more information, please visit www.springtidecapital.com or call 020 3040 4400.

First-time buyer demographics have changed

 

The latest report from the English Housing Survey (EHS), shows a shift in first-time buyer demographics: revealing a distinct change in the age, deposit size and source of deposit finance compared to a decade ago.

Highlights of the survey include:

  • One in five (21%) first-time buyers were aged between 35 and 44 years in 2015-16, up from 16% in 2005-06
  • In 2015-16, three-quarters (74%) of first-time buyers were couple households, a marked change from 2005-06 (66%)
  • Over the same period, the proportion of first-time buyer households with dependent children increased from 23% to 37%
  • Two-thirds of first-time buyers pay a deposit up to 20% of the purchase price, 29% getting help from their family (up from 22% ten years ago)

Source: English Housing Survey (2015-16) 

Research paints a different picture of first-time buyers

The EHS research paints a very different picture of the journey that some first-time buyers may go on when compared to ten or twenty years ago. By understanding these changes and the attributed factors, we can see why the knowledge, experience and guidance of mortgage consultants have become more valuable than ever before.

In 1995, around 20% of first-time buyers were aged 16 to 24. They may have raised funds for their deposit on their own, have submitted a single mortgage application, and they may not have had children at the time of purchasing their first home.

Fast forward to the findings from 2016 EHS, and you’ll find that there are fewer youngsters able to afford a house in the 16 to 24 age bracket. First-time buyers could be slipping into the 25+ bracket as it takes longer to save the level of deposit now required for their first home – house price growth has been outpacing income growth for more than twenty years. As a 25+ mortgage applicant, they may also be a couple and have children.

The hard facts

According to the EHS, Londoners are choosing to raise a deposit of up to £94,088 (mean value) to secure a favourable mortgage rate on their first home, with 29% turning to family to help raise funds ­– a 7% increase in a decade.

While working hard, saving even harder and raiding the bank of Mum and Dad, 74% of first-time buyers will have teamed up with another person and 37% will have children before they buy their first home ­­­– 8% and 14% higher respectively since 2006.

The EHS also found that those purchasing their first property were in the two highest income bands, now accounting for nearly two-thirds (66%) of first-time buyers, compared with 58% ten years ago.

How does this affect a mortgage application?

A mortgage consultant needs to take all of the changing demographics and factors into account, and Springtide Capital is no different.

A joint application, an older applicant, a larger mortgage and having children impacts affordability. A joint application, for instance, increases the amount of evidence of income required, but equally, it increases the chances of funding with two incomes instead of one. The age of the applicant and the period in which they require the mortgage is reflected in the affordability of monthly payments, as is the age restrictions and period of mortgage allowed by lenders.

The affordability of funding for a house (prices having outpaced income for many years) and the costs of running a household with children also needs to be considered. All this has to be reviewed by an experienced mortgage consultant, who not only works out the affordability but also the correct lender to suit an individual’s needs – it’s become more of a balancing act.

Henry Knight, Managing Director, Springtide Capital commented: “First-time buyers are an essential cog in the housing market machine: without them, the market slows – they allow existing property owners to release equity and re-invest in the housing market. At Springtide Capital, we pride ourselves on understanding a changing market and identifying which product and lender are suitable for each applicant.”

Two months to buy-to-let regulatory deadline

 

Landlords brace themselves for more regulation and mortgage brokers expect an influx of new buy-to-let mortgage applications before the deadline.

Some time ago, the Prudential Regulation Authority (PRA), part of the Bank of England, announced that it will start to enforce stricter rules for lenders who are assessing a new buy-to-let mortgage for a landlord who already has four of more properties. The PRA gave a deadline of 30th September 2017, which is now approaching.

An ideal time to review your buy-to-let mortgages

The CML reported that there has been a slight increase in loans taken out on fixed terms of 5 years or longer, which are exempt from PRA stress testing requirements coupled with more bespoke underwriting criteria based on a variety of factors which may include property characteristics, the landlord’s existing portfolio, and the landlord’s tax bracket, in addition to standard interest cover ratio thresholds. CML expect to see £35 billion in buy-to-let mortgages in 2017 and £33 billion in 2018.

Henry Knight, Managing Director, Springtide Capital said: “It’s an ideal time to review the mortgage terms on a buy-to-let portfolio and secure a rate, where circumstances fit, that enables the landlord to maximise security whilst not compromising too much on the yield. As one of London’s leading buy-to-let specialists, we have the knowledge, expertise and lender relationships to help landlords through this regulatory change.”

The facts

The PRA’s supervisory statement outlines minimum expectations that firms should meet in underwriting buy-to-let mortgages, specifically:

 

  • Affordability assessments should take into account: borrower’s costs including tax liabilities verified personal income (where used by the lender) and possible future interest rate increases. When setting the expectations for future interest rate increases, the PRA reviewed the prevailing standards in the industry and considered the impact of changes in interest rates, and calibrated the stressed rate accordingly.
  • Lending to portfolio landlords (defined by the PRA as being those with four or more mortgaged buy-to-let properties) should be assessed using a specialist underwriting process.
  • The PRA wishes to clarify that the provision in Capital Requirements Regulation (CRR) which reduces the capital requirements on loans to small and medium-sized enterprises by around 25% should not be applied where the purpose of the borrowing is to support buy-to-let business.
  • An implementation timeline of 1 January 2017 for the more straightforward changes, and 30 September 2017 for the remainder.
  • Allowing firms to assume reasonable rental increases when assessing affordability in the context of possible future mortgage interest rate increases.
  • Excluding those re-mortgaging (and not increasing borrowing) from the supervisory statement, in a similar way to residential lending.
  • Reflecting the change to mortgage interest tax relief announced by HM Government in 2015, which has already led to several firms increasing their interest cover ratio affordability thresholds. The PRA has reaffirmed its expectation that firms should also take these new costs into account when assessing affordability.

A buy-to-let market update

According to the Council of Mortgage Lenders (CML), the buy-to-let market had a weak start in 2017, contributing to an overall fall in lending of this type in the last 12 months. Although competitive mortgage rates are available, the tax and prudential measures have placed considerable pressure on the market.

CML added: “From April 2017, landlords who are higher rate taxpayers will see a progressive reduction in the tax deduction they can claim from mortgage interest each year, the first stage of a four-year transition. We have not yet seen any sudden contraction in lending as a consequence, but it will make landlords more cautious and is likely to restrict their ability to re-leverage their portfolios. Signs of this have been evident for some months, with fewer landlords releasing equity when they refinance.

“Since January, the Prudential Regulation Authority (PRA) has required lenders to stress test new lending by either 5.5%, or 2% above the pay rate, whichever is higher. Lenders had already prepared for this, and in some cases applied the stress tests in advance of the deadline. This makes it more difficult to sustain a highly-leveraged buy-to-let business model, with negative repercussions in regional markets with low rental yields such as London.”

Housing market reaches a plateau

 

According to the Council of Mortgage Lender’s (CML’s) latest market commentary report, gross lending increased to £22.1 billion in June, up 9% on May and 3% on June last year.

Other report highlights included:

  • Activity and lending flat since the start of the year
  • Reduced consumer expenditure, which may become more acute against a challenging economic outlook
  • Home-owner remortgage activity and first-time buyers supporting lending

THE ECONOMY

CML’s report states that the economy has slowed in the first half of 2017, with growth expected to track at half the rate of recent quarters. In the first three months of 2017 growth was 0.2%, and the three months to June is expected to be 0.3%.

Unemployment continues to remain low at 4.5%. Due to weak growth in wages at 1.8%, workers spending power is being eroded by inflation, with the Consumer Price Index at 2.6% in June.

The CML report continued to add that “A number of Bank of England monetary policy committee (MPC) members have recently voiced their opinions on raising interest rates. Despite this, a rate increase when they next meet in August seems unlikely as inflation is currently in line with the MPC’s expectations as set out in May’s Inflation Report.”

HOUSING

The economic backdrop has meant that the housing market has reached a plateau, with activity and lending flat since the start of the year.

Property transactions averaged 100,000 during recent months, however the recent weakening in house purchase approvals – a leading indicator of activity – could mean fewer transactions in the months ahead.

Henry Knight, Managing Director, Springtide Capital added: “The mortgage market has had a variable 2017 so far. Compared to late 2015 and early 2016 when all areas of transactions were growing, it’s clear that first-time buyers continue to drive house purchase activity. This is a trend that is likely to continue over the coming months and is the first time since 1996 that first-time buyers have exceeded movers. Although the under­lying market is healthy, uncertain economic and political conditions have resulted in an increasing number of borrowers tightening their budgets. Generally speaking, the latest data suggesting a lacklustre housing market and predictions that the Bank base rate could rise from its historic low of 0.25 per cent, gives us a good indication of how future transactions may develop in the second half of 2017.”

If you’d like advice on obtaining a mortgage, simply call Springtide Capital on 020 3040 4400 to book an appointment with an adviser.

Not your average mortgage applicant

 

If you’re one of the many mortgage applicants that do not fit the ‘standard’ tag and are unsure whether you can obtain a mortgage, you’re not on your own, and you probably can.

Are you looking at the wrong lenders?

It’s easy to be attracted to advertising and the lowest rates from lenders, however, if they don’t say yes, then all you have achieved is a ‘no’ on your records. That’s why a mortgage consultant will get to know your circumstances, and won’t always offer you mortgages from a mainstream lender if they think you’ll be refused.

In fact, there are lenders who are actively looking for business from clients who don’t fit the mainstream profile, which make them more likely to say yes.

So, a mortgage consultant will look at a variety of lenders to suit your circumstances but they also go a step further to reduce the chance of refusal – they get to know the lender’s key decision makers, criteria and systems.

Access to underwriters

Something that most people are unaware of is the role of the mortgage underwriter. They work for the lenders and have the final say on whether you’ll receive your funding, basing their decision on you meeting their lending criteria. They also review the accuracy of a mortgage application and whether your home is worth the purchase price and loan amount.

So, it’s good for the mortgage consultant to know the underwriter before the application is submitted electronically. These online forms are designed to ensure that the mortgage consultant answers all the questions needed for the underwriter to make a decision on behalf of the lender.  Unfortunately, they aren’t much help in telling you the type of customer they are looking for and what the wrong answers might be. That’s why mortgage consultants get to know the client they’re looking for (through experience) and potential pitfalls that are likely to trigger a ‘no’ within the application before they even try submitting it.

Mortgage consultants build relationships with the underwriters, so they can call them in advance and ask whether the application is likely to be accepted. In most cases, the mortgage consultant will have passed another client through the lender with similar circumstances, so know the level of risk the underwriter, and ultimately the lender, are willing to take.

A changing market

In addition, mortgage consultants are adapting to a change in where income is derived and the extension in working age. In fact, the Office of National Statistics, recently reported that 4.8 million people are self-employed, which is 15% of all workers.

This change in the market has meant two things, the change of some lender’s policy and the emergence of specialist lenders who are looking to capitalise on the opportunity.

Although mainstream lenders have begun to accept self-employment more readily, they still require three years’ accounts and approach with caution. They are also adapting their models for those applicants who will be working past 65.   However, there are a number of more specialist lenders geared up specifically to deal with those clients that have with more complex circumstances, helping to ensure there are both options and lenders that can understand.

It’s all about affordability and credit

The self-certified mortgage (for those who were self-employed), is no more, as every mortgage has to be affordable, no matter how you earn your money or how long you’ll be working.

This means that as a mortgage applicant, you have to be able to prove that you can pay the mortgage now and in the occurrence of any unexpected interest rate rises of up to 3%. On top of this, you need to show that you’ve managed to pay your mortgage or rent successfully in the past, can manage your finances (minimal overdraft usage), don’t have too many red flags on your credit history and can evidence your income. The application also takes any future changes, such as income or future events into consideration, along with your monthly expenditure.

So, all-in-all, it’s good to have a mortgage consultant who knows how to pass the ‘test’.

Henry Knight, Managing Director, Springtide Capital added: “There are many reasons why a mortgage applicant might find it difficult to obtain a mortgage. We regularly help those who are rebuilding their credit due to death of a loved one, divorce or redundancy. On the other scale, we have very successful entrepreneurs who are self-employed and Barristers with complex incomes. We pride ourselves on helping the client to realise their ambitions by taking the time to understand their circumstances and pairing them with a lender that we feel gives them the best chance of acceptance. This comes from having both experience and excellent relationships with a variety of lenders. We also do this in addition to all of the expected compliance concerning affordability and rate comparison.”

If you’d like advice on obtaining a mortgage, simply call Springtide Capital on 020 3040 4400 to book an appointment with a mortgage consultant.

Housing transactions propped up by first-time buyers

According to the Council of Mortgage Lender’s (CML’s) latest market commentary report, gross lending hit £18.4 billion in April.

Other report highlights included:

  • Transactions continue to be driven by remortgage activity and first-time buyers
  • Buy-to-let and home mover numbers remain subdued
  • Number of first-time buyers over the last year overtakes the number of home movers for the first time since 1996

THE ECONOMY

CML’s report states that the economy has grown slower than expected at 0.3% in the first three months of 2017.

Unemployment remains low at 4.6%, however, the Bank of England’s predictions of a rise in inflation has been realised, now sitting at 2.7%. It’s expected that this will have an impact on consumer spending, with March data showing that wages are falling.

The CML report continued to add that “given that wage growth remains weak, even in the face of rising inflation, the Bank of England’s monetary policy committee (MPC) continued to signal that it would be willing to tolerate a degree of above-target inflation.”

HOUSING

The housing market continues to be subdued, with little change in the last six months and down slightly compared to a year ago.

There have been 100,000 housing transactions on average each month, which has resulted in an average of 67,500 house purchase approvals for the past six months. The Monetary Policy Committee (MPC) has left their expectations for house approvals at a figure of 71,000 per month.

Henry Knight, Managing Director, Springtide Capital added: “Whilst 2015 and 2016 showed steady growth across all components of transactions, 2017 sees a heavy reliance on the growing purchase activity from first-time buyers. It’s fair to say that the buy-to-let stamp duty changes have reshaped the housing market, perhaps giving first-time buyers the opportunity to snap up properties, which previously would have been purchased for investment purposes. However, with the end to the Help-to-Buy mortgage guarantee scheme in 2016, continuing affordability issues and a requirement for large deposits, there is no sign of the first-time buyer market getting any easier.”

If you’d like advice on obtaining a mortgage, simply call Springtide Capital on 020 3040 4400 to book an appointment with an adviser.

Mid-priced boroughs in London drive up house prices

 

Image source: Rightmove

According to property search portal Rightmove, the average price of a newly marketed property in Greater London has jumped by 1.4% (+£8,656) this month.

The reason? The outer London mid-priced boroughs have helped to drive the property price average to £649,772. The Rightmove report contrasts this with the smaller increase of 0.4% (+£2,941) in Inner London.

As people look for more space and value for money further afield, it pushes up demand in those areas, which in turn pushes up prices.

Boroughs seeing the biggest price hikes

The boroughs seeing the largest increases this month are dominated by those in the mid-price range broadly between £600,000 and £700,000 and sitting either side of the new overall London average of £649,772. The five whose monthly rises stand out are all in Outer London: Ealing (+6.3%) Harrow (+4.8%), Kingston-upon-Thames (+3.9%), Barnet (+3.8%), and Brent (+3.7%).

Miles Shipside, Rightmove Director and housing market analyst comments: “While these prices are beyond the reach of many, these boroughs with average newly-marketed asking prices between £578,000 and £723,000 are in the mid-range for London. With growing needs for space, many Londoners are faced with trying to afford these prices when trading up, and get more for their money further out of the capital. This trend, rather than a recovery in all sectors of the London market, has helped to push the price of property coming to the market to record highs.”

Springtide Capital’s view

Henry Knight, Managing Director, Springtide Capital, commented: “As buyers look for more space to grow and more affordable prices, the appeal of moving to outer London increases. However, these commuter-route hotspots are bound to increase in price as the demand goes up, it’s becoming harder for people to find affordable property even in outer London.”

Housing transactions above the 100k mark for second month

 

According to the latest Council of Mortgage Lender’s (CML) report, momentum continues to build on housing activity levels, as transactions have now been above the 100,000 mark for the second month in a row.

Other report highlights included:

  • Gross mortgage lending for February is £18.2 billion.
  • Lending is increasingly being driven by remortgage activity
  • The number of first-time buyers rose to over 340,000 in the 12 months to January, unmatched over any 12-month period since early 2008

THE ECONOMY

Economic growth in the last quarter of 2016 was bumped up slightly to 0.7% and the economy unemployment rate fell to its lowest rate since early 2005.

However, average weekly earnings growth remains weak, with growth in wages falling to 2.2% in January.

Consumer price inflation reached 2.3% in February, exceeding the Bank’s target for the first time in over three years.

The CML reported: “With wage growth likely to remain weak, real wages will stagnate for much of this year, bearing down on spending. An early sign of this is that retail sales have now contracted for the third month in a row.

“The Bank expects inflation to reach 2.7% by 2018, but signalled it is willing to look past this, as it believes raising interest rates to counter inflation would come at the expense of higher unemployment and weaker income growth.”

HOUSING

The market is getting back to the levels seen at the start of 2016, with house purchase approvals reaching 70,000 in January. This recent acceleration in approvals has seen transactions topping the 100,000 mark for the second month in a row.

Housing transactions are predominantly led by first-time buyers, with home-movers and buy-to-let house purchases both down annually.

CML reported: “Our estimate of lending in February comes in at £21.5 billion, on a seasonally adjusted basis, which marks a second breakout from the narrow tramlines it has been on for the past nine months. On an unadjusted basis, lending was £18.2 billion.”

COMPETITION

Competition between lenders continues to keep rates low, with an average of 1.42% at 75% loan-to-value. This is bolstering a recovery in remortgage activity, with growth at 20%, year-on-year.

Government housing schemes have predominantly been aimed at first-time buyers, which has led to momentum building slowly. In the 12 months to January, there were 340,200 first-time buyers, the highest level of any 12-month period since early 2008.

However, the home-mover market is still subdued at around 360,000 on a 12-month rolling basis.

Finally, buy-to-let house purchases remain sharply down according to CML, stating that their forecast was an average of just over 7,000 house purchases a month, in 2017 – the year started with just 5,900.

Henry Knight, Managing Director, Springtide Capital commented: “We anticipated the downturn in buy-to-let purchases, with the new stamp duty dampening the attractiveness of becoming a landlord. However, there will always be a place for properties to let, whether it’s due to poor credit stopping a person from purchasing a house, work re-location, availability or affordability. It’s positive to see that housing transactions are increasing; however, the imbalance of supply and demand remains.”

For more information and advice on buy-to-let mortgages, please call 020 3040 4400 or visit our website.