First homes: is now the time to buy?

Although it is likely that interest and mortgage rates will increase as we hopefully head towards the light at the end of the COVID tunnel, there are still plenty of rates currently at an all-time low.

The stamp duty holiday may be over, however the housing market is still in an exceedingly positive place with high demand and low interest rates.

Of course, getting onto the property ladder is the goal for many younger people across the United Kingdom, however, saving for a deposit is still one of the biggest hurdles. Although turning ‘generation rent’ into ‘generation buy’ was a big part of the government’s plans, there is no doubt that the pandemic has created more opportunities for first-time buyers to buy their first homes. With the vast majority of lenders offering reduced rates to help with the impact that the pandemic had on so many people nationwide, it is certainly a beneficial time to take advantage if you’re looking to get on the ladder.

Saving for a deposit can often be a difficult process for potential firsttime buyers – especially considering rent and living costs can be high for many. It can seem almost impossible for people looking to get onto the property ladder for the first time to raise the appropriate funds. Given the difficulties young people face, it comes as no surprise that parents have become the UK’s ninth biggest home buying lender.

Obviously, property is expensive for most and it is common for many people to struggle to save funds without help, whether that be in the form of a gifted deposit or a ‘help to buy’ scheme. While now is a good time for first-time buyers to buy, it may not be that easy for many. It’s all well and good telling people to ‘take action before it’s too late’, but for some that simply isn’t an option. Considering this, is it really as ‘do or die’ as some people are saying?

Well, the short answer is no. While now is a good time to buy and if you are in the fortunate position of both wanting to move and being financially able to – then maybe doing so sooner rather than later is a good idea. For everyone else, however, there are more options.

Nobody can accurately predict what the housing market will do in the long run, but there are nonpandemic induced government schemes available to first-time buyers that will likely be available for the longer term. With the government emphasising intent to help people looking to get on the property ladder, the feeling is one of optimism moving forward.

It’s important not to rush into a move. If you’ve been looking to move and are in a position that means you are able to move right now, then that’s great - but it isn’t quite ‘now or never’. An influx in help-to-buy schemes has more to do with the nature of the market than the pandemic itself and it is therefore relatively safe to assume that whenever you decide to take that first step onto the ladder, the appropriate help will be available.

If you’d like to discuss the options available to you, contact us today.

First time buyers: what are the options?

2021 has seen some welcome good news in the first-time buyer market, with mortgage affordability for people buying their first home improving by 20% since the turn of the year according to Mortgage Broker Tools’ latest index. We take a look at some of the newer options available to first-time buyers that can help to get you on the property ladder.

This year has seen a whole host of new plans, schemes and initiatives enter the market in the wake of the pandemic in order to help those looking to buy their first home to get their foot in the door. Turning ‘generation rent’ into ‘generation buy’ was a key goal for the current government, and the addition of various help-to-buy schemes have helped to move things in the right direction.

Help-to-buy

Help-to-buy is a scheme that is designed to aid first-time buyers in their attempts to get onto the property ladder in England by providing an equity loan of up to 20% of the value of a newbuild property. This loan is added to any potential deposit for a home, meaning any potential buyer would only have to raise a 5% deposit with a 75% mortgage making up the difference. The maximum equity loan on offer in London is 40% to reflect the higher property prices in the capital – meaning a buyer would need to raise a 5% deposit for a 55% mortgage. Changes to the scheme this year include higher building standards and regional price limits.

Shared ownership

This scheme offers buyers the chance to buy a portion of a home while renting the remaining amount. For example, you pay rent on the percentage of the property that you don’t own, often calculated at around 3% of the unsold equity per year. Once your 5-10% deposit is available for the portion of the property you wish to buy, the monthly mortgage payments will be calculated, and the combined payments would usually equate to a manageable amount. This scheme allows for a more manageable way of buying your first home – or at least part of it.

Deposit Unlock

New for 2021, the deposit unlock scheme is a 95% loan-to-value newbuild lending scheme that aims to support borrowers with only a 5% deposit who are in the market for a newbuild property. This scheme is available to first-time buyers and property owners alike. The scheme is available on over 1000 newbuild sites across the nation with that figure expected to rise.

The property market can be intimidating for a first-time buyer, especially with prices at an all-time high, but with the various schemes now readily available, there are manageable methods to use when buying your first home. The average maximum loan size available in the UK has increased by nearly 10% from £230,555 to £276,000 this year alone, a statistic that demonstrates the fact that it’s not all doom and gloom for first-time buyers in the UK property market.

If you’d like to discuss the options available to you, contact us today.

Self-employed mortgages: what are the options?

The global pandemic has forced thousands of people up and down the country either permanently or temporarily out of work. With a spike in job losses and redundancies, more people than ever have decided to become self-employed.

Without a steady, guaranteed monthly income, getting a mortgage while self-employed can be a daunting task, so let’s take a look at the options available to you.

Although there are a few more hurdles to jump to get a mortgage while self-employed, it is by no means impossible. Self-employed borrowers are generally viewed as slightly riskier based on the fact that their income isn’t guaranteed to be regular and there is no insurer to vouch for their salary. Because of this, providers require more information in order to prove a borrower has a suitable ‘track record’.

What counts as self-employed?

Aside from the obvious position of being a sole trader, there are a few other forms of employment that fall
into a similar category. Examples of this can occur if you are a partner in a business on a self-employed basis, or if you own a stake of 20%-25% or more in a limited company from which you earn your main income. Although directors of a limited company are not technically self-employed, as an employee of your own business you would fall under the same bracket.

What’s available?

Most lenders will offer the same mortgage deals to self-employed and employed people alike. The difference being that lenders will often ask for extra proof that you have the capability to make the
monthly repayments on your mortgage by not only demonstrating your average monthly income, but
also your regular monthly outgoings such as subscriptions and household bills. It can be a requirement to provide these figures for up to the previous three years in order to assure the provider that your income is somewhat regular and reliable.

With many people being new to the world of self-employment, the requirements can change. Without
the assurance of multiple years’ worth of regular income, there are specialist lenders who have experience dealing with mortgage applications for people who have had less than a years’ experience with being self-employed. For more information on this, it’s worth getting in contact with your adviser who can provide the best outcomes for your individual situation. Most lenders ask for at least two years of being self-employed, so if you haven’t quite reached that milestone – your adviser can help.

If you’d like to discuss the options available to you, contact us today.

Shared Ownership: what do you need to know?

There are many government schemes designed to make buying a home more accessible for people who would otherwise struggle to generate a deposit.

There are plenty of options to suit your individual situation. Shared Ownership is another one of these schemes which has grown in popularity in recent years, but what do you need to know before making a decision?

The Shared Ownership scheme is an alternative route onto the property ladder by giving borrowers an opportunity to purchase a share in either a new build or a resale home. Otherwise referred to as part buy/part rent, this scheme involves the borrower securing a mortgage for part of a house and renting the remainder. This means that both the deposit and the monthly mortgage payments are considerably lower and allows first-time buyers to make their first steps towards owning a home. Once the initial deposit is paid, the borrower becomes an owneroccupier, meaning they have the long-term stability of owning a home at a more affordable price. Since 2016, the number of completions for shared ownerships has increased by over 416% – but why is this scheme showing such a rapid rise is popularity?

Eligibility

Naturally, there are a few criteria to be met before an application for a shared ownership can be accepted. Firstly, you must be at least 18 years old (as with all mortgages) with a maximum household income of £80,000 per annum – or £90,000 for those living in London. The scheme is also exclusive to those who are unable to purchase a suitable home on the open market, meaning it is only available to those who need to use such a scheme. The scheme only applies to borrowers who do not own a home at the time of application and don’t have any mortgage or rent arrears. Usual expectations must also be met such as the ability to display a good credit score as well as being able to pay a suitable deposit for the share of the home being purchased. The Shared Ownership Scheme also prioritises accepting members of the military.

How does it work?

On the face of it, the idea of paying rent and a mortgage simultaneously sounds astronomically expensive – but fear not. Both amounts are based on proportion. This means that the monthly payments for a shared ownership can be the same as an average mortgage. Rent on a shared ownership is typically set at approximately 3% of the unsold equity per year. Once a deposit (usually 5% - 10%) is paid, the monthly mortgage payments will be calculated, and the combined payments would usually equate to a manageable amount.

Crunching the numbers

The vast majority of shared ownership purchasers are between the ages of 20 and 40, with the most common age being people in their late 20’s. This shows that it’s common for first-time buyers to take advantage of this scheme due to its accessibility. As well as this, half of all shared ownerships are taken out by single adults, likely due to the fact that it’s one of the easiest ways to obtain a mortgage on a single annual income. The average value of shared ownership properties based on the most recent data from 2019 was £265,000 as the scheme is most commonly used on lower value properties by first-time buyers or buyers on a strict budget. Another interesting statistic surrounding shared ownership is that 94% of people who utilise the scheme are in employment. It has become increasingly difficult for younger people to save for a full deposit in recent years, so the shared ownership scheme helps employed younger people to secure a mortgage without having to secure the funds for a full deposit. If you are looking for a cheaper or more manageable alternative to a traditional mortgage, the Shared Ownership Scheme is certainly one to consider.

To discuss the options available to you contact one of our advisers today

Loan to income vs loan to value: what does it all mean?

Loan to income and loan to value (or LTV) are phrases you often hear in the mortgage industry. The two terms are easy to mix up, understandably, but they are very different.

It’s important to know the difference because both loan to income and loan to value are key factors used to determine how much you can borrow for a mortgage.

Recently, there’s been a surge in lenders offering 95% LTV products aka mortgages you only need a 5% deposit for. Loan to value means the amount of the house price the bank is going to provide, so a 95% LTV means the bank is forking out 95% of the money needed to buy the property. However, many buyers are finding that even though 95% LTV (5% deposit) mortgages are available, they can’t take advantage of them. This is because of the all-important, loan to income multiple.

A loan to income multiple is where the bank takes your household’s income and multiplies it by a certain amount to work out how much they’re willing to lend to you. At the moment, a common multiple being used is 4.49, although this varies depending on several factors and across different lenders so talk to your adviser for more information. As an example of how income multiples work, say you and your partner are buying a property together and you both earn £25,000 each. If you used a lender offering a 4.49 loan to income multiple, the most they would lend you is £224,500.

This is where the difficulty can occur: if you want to buy a property for £249,000 (which was the average UK house price in January 2021), a 5% deposit would be £12,450. However, say you’re the couple earning £25,000 each from before and the bank will only lend you £224,500. As a result, between the bank’s loan and your deposit, you’ve only got £236,950 in total. You’re missing £12,050. See the problem now? That extra £12,050 is money that you would have to save up and pay as part of your deposit, meaning that your 5% deposit becomes a 10% deposit and you won’t be using a 95% LTV product.

Obviously, property prices vary depending on location, size and type: a three bed house costs more than a one bed flat… unless the house is in Middlesborough and the flat is in Chelsea. Similarly, income varies depending on location, profession, age etc. So, although you now know what loan to income multiple and loan to value mean, it’s still worth speaking to your adviser about how they will impact you specifically.

If you’d like to discuss the options available to you, contact one of our advisers today.

The buy-to-let market: where are we now?

After a whirlwind past 18 months, it would seem some form of normality is on the horizon. The pandemic has changed the face of the housing industry drastically given the unprecedented level of uncertainty we were all subjected to. So, how has the buy-to-let (BTL) market changed as we finally emerge from the other side?

First of all, it’s important to note that the BTL market has been doing really quite well throughout the pandemic and is showing signs of improving still. Fears over the stability of the market echoed as the sheer scale of the Covid crisis was realised, but those worries haven’t quite materialised. 

Various schemes designed to encourage market growth throughout the pandemic have given landlords a boost as lower mortgage rates have helped them to manage their property portfolios more easily.  

Is now the time to invest? In recent times, the property market has boomed. House prices have been at an all-time high recently and with the lower mortgage rates still available to potential landlords, could now be the time to get involved in the BTL market? According to a new report by Shawbrook Bank, landlords are growing increasingly confident about expanding their portfolios as mortgage rates fall and rent rises. 34% of landlords are supposedly looking to invest in the BTL market over the coming 12 months, with 1 in 10 planning to expand into new areas given the changes in tenant priorities since the start of the pandemic. Rural areas are becoming increasingly popular with landlords as living in cities becomes less desirable given the rise in flexible working. 

Lack of supply is good news for BTL market Although rent prices have only seen a relatively modest increase of 1.6% over the last year, the sharp increase in house prices has given BTL properties a big boost in value. According to Shawbrook, the value of the private rented sector had grown to £1.2 trillion by the end of 2020, with BTL properties growing by 5.8% in value year-on-year. With the unprecedented lack of supplies and building materials currently available, rental properties are becoming rare commodities. This could see a substantial increase in rent prices over the next year or so. 

Mortgages for landlords BTL mortgage availability took a massive hit due to the pandemic as lenders withdrew a huge number of deals after the outbreak of Covid. Now, however, with the market settling down, BTL mortgages have returned at lower rates, which is great news for landlords. If getting into the market is potentially on the horizon for you, it is important to seek sound advice to make the most of a good period for the buy-to-let market.

If you’d like to discuss the options available to you, contact one of our advisers today