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Agents urge government to do more boost housing supply, including ‘targeted stamp duty exemptions’

The prime minister’s housing announcement last week will do little to boost the supply of much needed housing.

Boris Johnson, keen to repair his fortunes after a bruising Tory revolt against his leadership this week, unveiled plans to make it easier for people to buy their own home.

Johnson’s intention to extend Right to Buy and allow housing association tenants to buy their properties at a discounted price has provoked a mixed property industry reaction.

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Crucially, he scrapped a manifesto pledge to build 300,000 homes a year, which will almost certainly have a negative impact on the supply of much needed housing coming onto the market.

Eleanor Bateman, policy officer for Propertymark, said: “Sales and lettings agents do not have enough homes to meet demand from buyers or renters. What they needed to hear from the Prime Minister was more detail on how his government intends to ensure the planning system is geared up to boost new supply.

“The Prime Minister talked about unlocking small publicly-owned development sites, converting agricultural buildings and supporting self-build schemes – but these are simply not going to deliver the number of houses we need on the ground to cope with demand.

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“Making it easier for people to save for a deposit or to get a mortgage as part of his Levelling Up agenda will have little value if there are not the houses available for them to buy.

“But it’s not just about ramping up building. We think more could be done to maintain the turnover of existing homes, such as incentivising right-sizing through targeted stamp duty exemptions, something that could be further facilitated through policies that deliver more suitable homes for older and disabled people.”

On the mortgage review, Nathan Emerson, Propertymark CEO, commented: “We welcome the Prime Minister’s promise to review the mortgage market, as with rising interests rates many first-time buyers and current homeowners will continue to need support to access finance.

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“However, as well as reviewing lending options, the UK Government should consider what it can do to encourage sustainable routes to homeownership, such as extending the Help to Buy Equity Loan to the second-hand market and re-opening the Help to Buy ISA.

“Fundamentally, the UK Government must increase the supply of housing and incentivise movement in the housing market so that alongside access to finance, prospective purchasers have something to buy.”

By Marc Da Silva

Source: Property Industry Eye

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Will the UK’s property slowdown turn into a house-price crash?

Not falling, but definitely decelerating. That’s the story on UK house prices. Look at the headline number and you will see an annualised rise of 10.5% – or 74% over the last decade. Look more closely and you will see that while the monthly number is up for the 11th consecutive month, it’s by a mere 1%.

Mortgage approvals are falling – now slightly below their pre-pandemic average. Mortgage rates are rising – the average two-year fixed mortgage is up 0.69 percentage points since December, says Hargreaves Lansdown, and is now just over 3% for the first time in seven years. Finally, data from Zoopla suggests that 5% of properties saw a price cut in May (by an average of 9%). None of this quite screams crash, but it whispers slowdown – at a time when it is hard to see reasons for prices to keep rising.

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The pandemic property panic is over. There are even mutterings that the exodus to the countryside might be reversing. And while most people are on a two-year fix so will not feel rising rate pain for some time, it makes sense for new buyers to think twice about taking on new mortgages into a cost of living crisis and a rising interest-rate environment. The question then is whether slowdown will turn to crash.

This doesn’t happen often: in the 90 years since 1931 there have been only 16 years in which we have seen nominal house-price falls. Even in the 1970s – the years we think of as endlessly crisis ridden – houses served their owners remarkably well. House prices doubled between 1970 and 1973 and had quadrupled by the end of the decade (from £4,000 to nearly £20,000 at the end). If prices had risen only in line with inflation they would merely have tripled.

A store of value
Unlike most assets in the 1970s, houses ended up more valuable in both nominal and real terms. They acted as a hedge against inflation, a store of wealth, and also via the capital gains they made, a source of wealth. So well did they do that Kit McMahon, the former deputy governor of the Bank of England, noted that borrowing to buy a house is a “cheap, almost risk-free method of financing an appreciating asset with a depreciating debt”.

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Still, the starting price always matters. In 1970, the house price/earnings ratio was around 4.5 times. Today it is more like seven times. That might be mitigated by much lower rates and access to credit, but it is still a big difference. So do earnings – look at the volatility in 1970s house prices and you will see they fluctuated with real wages. If we see real wage growth at levels that can withstand higher mortgage rates, we will see house prices rise. Finally, not all houses are equal in a time when real wages for workers are rising. In the 1970s big country houses took a nasty hit (as owners or buyers lost fortunes on stockmarkets), while smaller houses that were less costly to run and to travel to and from did not.

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So think perhaps of the kind of country houses far from cities that have seen their prices soar in the last few years as the equivalent of growth stocks, says James Ferguson of MacroStrategy on our latest podcast. Smaller suburban or urban houses are more akin to value stocks. That might give you a clue as to the kind of house that might make it to the end of this decade as an appreciating asset financed with a depreciating debt.

By Merryn Somerset Webb

Source: Money Week

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Low stock continues to shrink the gap between asking and sold prices

The gap between the expectations of buyers and sellers in the UK property market has narrowed to a record low, according to the latest market analysis from London lettings and estate agent, Benham and Reeves.

Based on data from the top four existing indices, the research looks at where the average house price sits overall when taking into account mortgage approved house prices from Halifax and Nationwide, seller expectations via the Rightmove House Price Index, and sold prices from the UK House Price Index.

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It also highlights how the gap has changed between buyers’ and sellers’ expectations, as well as asking price and actual sales price, on a quarterly basis across London and the UK.

Current property values

Based on a geometric mean of all four existing data sets, Benham and Reeves put the current average UK house price at £296,406 for the first quarter of 2022, up 2.6% on the previous quarter and 10.4% annually. In London, the current average is £562,146 having climbed 1.8% quarter to quarter and 6.3% in Q1 on 2021.

Market gap between mortgage approval price (buyers) & asking price (sellers)

Despite a hat trick of base rate increases from the Bank of England during the final quarter of 2021 and the first of 2022, mortgage approved house prices via Nationwide and Halifax climbed by 2.7% on a quarterly basis.

At the same time, the average asking prices also climbed for the fourth consecutive quarter, although at 1.7%, this rate of growth was more muted.

This means that the gap between what buyers are prepared to pay (£269,769) and what sellers are hoping to secure (£348,129) has reduced to just 29%, the smallest gap recorded since Benham and Reeves began their house price index in 2018.

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In London, the average mortgage approval price also increased by 2.2% on a quarterly basis, with asking prices up 1.3% on the previous quarter.

This means that the capital’s sellers remained less expectant compared to the wider UK market, with the gap between the average mortgage approval price (£518,333)and the average asking price (£653,333) sitting at just 26%.

However, as with the UK overall, this is the smallest gap between buyer and seller expectations recorded in the London market since the Benham and Reeves Index began in 2018.

Market gap between asking price (sellers) & sold price (buyers)

During Q1 2022, the gap between the asking price expectations of UK home sellers and the price paid by the nation’s buyers fell to its lowest on record. With the average buyer paying £277,287, home sellers were having to reduce their asking price (£348.129) by just -20.3% in order to secure a sale. This is undoubtedly due to the severe lack of stock available on the market causing many buyers to offer above and beyond what they may have otherwise, simply to secure themselves a property.

Across London, the gap between the average sold price (£524,570) and the average asking price (£653,333) fell to just -19.7% during the first quarter of 2022. This was also the smallest gap between seller expectation and buyer intent recorded by Benham and Reeves since 2018 bar just one. During the first quarter of 2021, this market gap had closed to 19.5%, the only time it has been smaller than it currently is.

Marc von Grundherr, Director of Benham and Reeves, commented: “Despite a string of interest rate hikes, UK homebuyers continue to make hay while the sun shines, with mortgage approved house prices climbing yet again in 2022.

“At the same time, asking prices have also increased but they haven’t done so with the same gusto. As a result, this continued optimism from the nation’s buyers means that the gap between what they are borrowing and the notoriously ambitious asking price expectations of UK sellers is now at its smallest since we began our records back in 2018.

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“But while buyers continue to swamp the market at mass, the challenge facing them is a severe lack of available stock and this is having a notable influence on the market reality gap between asking prices and sold prices.

“Sellers will always overprice when entering the market in order to leave a little room to do the dance during the negotiation stage. Although they continue to do so, they are finding that buyers are willing to come up that bit more than they previously have in order to secure a property.

“This has caused the gap between asking prices and sold prices to narrow to its lowest on record.”

Source: Property Reporter

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Property market remains robust despite economic headwind

Much has been spoken about the rising cost of living and mounting financial pressure on UK households; yet, the property market continues to be brisk as the imbalance of supply and demand continues to underpin market activity.

According to Iain McKenzie, CEO of The Guild of Property Professionals, buyer enquiries are up 31% compared to the last ‘normal’ market in 2019.

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He adds: “We continue to find ourselves in a market where mortgage approvals and sales are up, but there is half as many properties available to buy, and according to Rightmove, stock levels are down 55%. This prolonged mismatch between demand and supply continues to push housing prices up.

“Competition for properties is fierce, which means homes are selling quickly and often for over asking price. In fact, Rightmove reports show that asking prices have hit their fourth consecutive record high in as many months.”

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According to HMRC, over 433,000 homes in the UK changed hands in the first four months of 2022, making it the third busiest start to a year since 2007. Last year was an exceptional year due to Covid-19 and 2016 saw a surge prior to the introduction of the 3% additional homes surcharge. Except for last year, April 2022 has been the busiest since 2007.

While demand is high, and the market is brisk, economic headwinds are mounting and this will filter through to the property market.

McKenzie says: “Expectations of global and UK economic growth have been pared back, while consumer confidence has plummeted to its lowest level since records began in 1974. Optimism is weaker than during the global financial crisis, Brexit or Covid-19. The Covid recovery, war in Ukraine and rising energy and food prices, alongside a strong labour market and low unemployment have created a perfect storm.

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“Inflation is pushing a 40-year high. Thanks to fixed-rate mortgages, many households are cushioned from the impact of the latest base rate rise, but day-to-day budgets are increasingly feeling the squeeze. These growing pressures will no doubt have an impact on the market, and it is likely that we will start it begin to moderate. Unlike the rapid emergency brake scenario seen during the global financial crisis in 2008, any gear change in the property market is liable to be slow and steady.”

Even with the economic pressures, forecasters anticipate that we will continue to see positive house price growth over the course of the year.

McKenzie concludes: “The average price of a home is now nearly £47,000 more than in March 2020. This compares to a rise of less than £9,000 in the two years previously. Month-on-month price growth continues across nearly all regions of the UK, with all the main property price indices indicating the annual rate of price growth remains firmly in positive territory. The average price of property now equates to over eight times the current average annual earnings. With earnings growth failing to keep pace with property price rises and cost of living increases, the relative affordability of property is rising up the agenda.”

Source: Property Reporter

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Supply of rental properties halves in three years as landlords sell-up – Propertymark

The number of properties available to rent through letting agents in the month of March halved between 2019 and 2022.
Propertymark said its survey of 443 agents, working at 4,000 branches across all four UK nations, was a clear indication of the rate at which the private rented market had been shrinking.

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During the period, 94 per cent of landlords who removed their property from the rental market did so to sell it; over half of the rental properties sold in March this year alone did not return to the private rented market.

Nathan Emerson, chief executive at Propertymark, said its research presented a worrying picture for private renters who face chasing fewer properties at elevated rents.

He said the number of properties available to rent had been diminishing with a large portion of landlords choosing to sell their properties.

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“A lack of property is the root cause for rent increases and rising figures on social housing lists.”

Government urged to adopt middle ground
Emerson said more needed to be done to support the private rented sector.

He added: “We know from our qualitative research that the most common reasons for landlords to choose to sell their properties and no longer provide homes are around risk, finances and viability.”

“Landlords and letting agents have been the subject of extreme legislation changes as the UK Government tries to improve the sector. However, without a middle ground, these changes are actually proving detrimental to those they are supposed to protect.”

“Sadly we do not see this improving as the sector braces itself for more changes within the anticipated Renters’ Reform Bill and upcoming energy efficiency targets.”

Rhys Schofield, managing director at Peak Mortgages and Protection, said the rental market was brutal for tenants and landlords.

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He said: “If we think sale prices are rocketing, rents are going up even faster due to such acute supply issues. With the impending changes over the next few years around minimum EPC ratings for rental properties, there is a ticking time bomb of 3.5m properties not at those new minimum standards, which will only make supply shorter without targeted government support.

“The end goal of getting to net zero is absolutely the right thing to do but as with most things with the current government, the detail and support in how to get there without causing a great degree of difficulty for those concerned is lacking.”

By Samantha Downes

Source: Mortgage Solutions

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Housing supply rising faster in rural markets with 19.2% increase in new listings

After months of low supply in the UK housing market, the number of listings is finally starting to rise, according to new data from Knight Frank.

Late into the spring market, supply is picking up as economic jitters mount and a belief grows that house prices may be peaking.

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Listings have been low since the end of the stamp duty holiday last September as owners hesitated due to a lack of purchase options. The result was a vicious circle of low supply that led to double-digit house price growth, spurred on by low mortgage rates, savings accumulated during the pandemic and the so-called ‘race for space’.

However, as stock levels increase it is not a uniform process across the country, data from OnTheMarket shows.

There was a 19.2% increase in the number of new listings between January and April this year in England and Wales. However, while there was an increase of only 5.7% in London (the smallest rise), the number of new properties listed for sale in Wales jumped by a third.

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The disparity reflects how supply is building more quickly in rural rather than urban markets.

The 20 local authorities that registered the biggest increase in supply over the period were, on average, classified as 55% urban. For the bottom 20 areas (where supply fell), they were classified as 92% urban on average.

James Cleland, head of the country business at Knight Frank, commented: “I suspect it is a hangover from last year when so many rural owners didn’t list their house as they didn’t think they would be able to find anything to move to. What was a vicious circle is becoming a virtuous circle as higher levels of supply leads to more stock coming on.

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“A stronger sense of seasonality in more rural areas will have contributed to supply rising more quickly in the first few months of the year. It’s also likely that in urban centres like London, sellers are less motivated by concerns over peaking property prices after weaker growth during the pandemic.”

By Rozi Jones

Source: Property Reporter

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UK Housing Market Slowing After Prices Hit Record High

The average price of a UK home has topped £250,000 for the first time, but the proportion of sellers applying discounts to properties is increasing, according to an index.

Typical property prices hit £250,200 in April but the pace of price growth is slowing, Zoopla said.

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House prices increased by 8.4% in the year to April, cooling down from 9% growth in March.

Zoopla said it expects the rate of house price growth to slow further, to 3% by the end of the year.

It said that since the second half of April, around one in 20 properties have had price reductions of 5% or more – an increase from one in 22 properties with reductions during the previous month.

Where prices are being cut, the average reduction is 9% – and when applied to the average home value, this equals a price reduction of around £22,500.

Sellers are also waiting slightly longer typically to achieve a sale, Zoopla said.

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Outside London, the average time between a three-bedroom house being listed for sale and a sale being agreed increased from 16 days in March to 18 days in April. In London, this average figure increased from 17 days in March to 21 days in April.

Buyer demand for properties however continues to outweigh supply.

Demand is currently 61% up on the five-year average, while the supply of homes for sale is down by 37% on this measure, Zoopla said.

Grainne Gilmore, head of research at Zoopla, said: “High levels of buyer demand mean that the market is still moving quickly, but the time to sell – the time taken between listing a property and agreeing a sale – is starting to rise across most property types in most locations.

“We expect that this measure will continue to rise during the rest of the year as buyer demand levels start to fall, punctured by changing sentiment around the cost of living and personal finances.

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“Another signal that the market is starting to soften is the number of properties where asking prices are being cut by more than 5%.

“Some one in 20 properties has been re-priced this month, with the average new asking prices some 9% below the original.

“The annual rate of price growth will ease this year – on a monthly basis, price growth has already moderated.

“A continuation of this trend, even with some small monthly declines, means price growth will reach 3% by the end of the year.”

Vincent Dennington, director at estate agent John D Wood & Co, said: “We are starting to see more and more price reductions on property portals, which is perhaps an early indication that the market is slowing down.

“However, this may also be a sign that properties have been initially overpriced and are not achieving any interest from potential buyers; therefore needing to be adjusted correctly to ensure a reduction generates new interest and ultimately offers.”

He added: “Currently, the market remains buoyant enough that should a property come to market competitively priced, it is likely to create a multi-bid scenario, resulting in final offers going over the guide price.”

By Vicky Shaw

Source: Bloomberg

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UK house prices climb higher to £278,436 as market heat awaits ‘cooling’

House prices in the UK have increased 9.8% in March on an annual basis, with the average property in the UK being valued at £278,000, according to the latest UK house price index data from the Office for National Statistics.

The data found that house prices in the UK have decreased from 11.3% in February this year.

Andrew Montlake comments: “House prices cooled in March relative to February and we can expect more of this throughout the year given the frightening level of inflation. The Stamp Duty holiday, record low interest rates and the race for space triggered an unprecedented surge in demand and activity during the pandemic, but those days are now over.”

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“9% inflation, rising interest rates and a potential recession ahead will impact demand while lenders are becoming ever more cautious, which will restrict what people can borrow. This will almost certainly see the rate of price growth slow during 2022 and into next year. Only the entrenched lack of supply can prevent prices from falling,” Montlake explains.

Average house prices increased over the year in England to £298,000 (9.9%), in Wales to £206,000 (11.7%), in Scotland to £181,000 (8.0%) and in Northern Ireland to £165,000 (10.4%).

London continues to see the lowest annual growth, as average prices increased by 4.8% over the year to March 2022, down from 7.8% in February 2022.

Despite being the region with the lowest annual growth, London’s average house prices remain the most expensive of any region in the UK, with an average price of £524,000 in March 2022.

The North East continued to have the lowest average house price at £155,000.

On a non-seasonally adjusted basis, average house prices in the UK increased by 0.3% between February and March 2022, down from 1.6% during the same period a year earlier.

Average house prices in the UK on a seasonally adjusted basis, increased by 0.6% between February and March 2022, following an increase of 0.9% in the previous month.

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Simon McCulloch says: “More properties are coming onto market and selling faster than ever, and at record-breaking prices, yet house prices continue to rise. Even for first-time buyers, our data shows new instructions are up 54% from 2020.”

“However, the rising cost of living, lenders pulling competitive rates, and base rate rises mean many buyers are becoming limited in what they can afford. Ultimately, there’s a clear dichotomy between rising prices, greater supply, and constrained affordability and we’ll see within the coming months if economic pressures test the market’s current trajectory.”

“It is time the analogue conveyancing process was digitised. Whether you’re a lender, buyer, homeowner, solicitor, or estate agent, adopting new technology will help make the transition for all parties involved quicker and more efficient,” McCulloch adds.

Anne Clare Harper explains: “Much like for the wider economy, house price inflation is being driven by shortages of supply. This shortage relates to housing in general, and to quality housing that people can afford, in the places they want and need to live in, in particular.”

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“The shortage of suitable, affordable housing is being made worse by planning backlogs from lockdown alongside labour and material shortages and inflationary pressures, as well as the fact that many new-build schemes are unaffordable to local people. Construction material prices rose by over 20 per cent (including 10 to15 per cent inflation in the first quarter of this year according to The Construction Leadership Council). So, the trend is unlikely to reverse any time soon.”

“The result is an ongoing and growing constraint on the affordability of home ownership. In England, full-time employees could expect to spend 9.1 times their annual earnings on purchasing a home in 2021, and this figure is not improving with the latest HPI data highlighting that house price growth continues to outpace wage growth.”

“This rate of inflation increases the importance of the Private Rental Sector, which is essential for providing safe, quality housing to millions of people and families for whom home ownership is not the right path to follow.”

“This is a major reason why we are seeing growing appetite from investors such as pension funds, which increasingly realise they play a major role in plugging the gap in quality, affordable homes for people and communities across the UK.”

By Becky Bellamy

Source: Mortgage Finance Gazette

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Homebuyers reveal what catches their eye when house hunting

Property listing photos remains hugely influential when it comes to attracting homebuyer interest and securing the best price for a house for sale, research by estate agent photography provider Giraffe360 has revealed.

When asked about their recent house hunt, a huge 93% of homebuyers said that the online photos of a property were an important factor when it came to grabbing their attention while scrolling through the property portals.

An identical percentage of buyers thought that these property listing photos were of great importance when it came to forming the all-important positive first impression of a property.

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A high 94% stated they would be more inclined to view a property that was presented online with good photos, an interactive tour, or both.

The survey of over 1,300 recent homebuyers also revealed that estate agents who are not delivering the visual goods are also damaging their own reputation, as well as their chances of selling a home.

Over three-quarters (78%) stated that they would be less inclined to view a property with bad photos, no interactive tour, or both.

What’s more, 40% of buyers said they wasted time viewing unsuitable properties because the photos were poor, or there was no interactive tour, and so they couldn’t tell the property wasn’t for them until they actually viewed it in person.

Also, 62% of homebuyers would offer below asking price for a home they liked, simply because a below par online portrayal had created a bad first impression.

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It is not just home sellers who are suffering due to poor digital presentation as 81% of homebuyers stated that a poorly presented property listing would also negatively impact their opinion of the selling agent, making them appear unprofessional, low budget, and giving the impression that they offer a poor service.

“The current market is incredibly competitive and with stock levels remaining insufficient, buyers are falling over themselves to secure a purchase. But that doesn’t mean the basic foundations are no longer important when it comes to presenting your home on the market,” Mikus Opelts, chief executive at Giraffe360, remarked.

He pointed out that a poorly presented property listing can still deter buyers from viewing the property and those that do may even reduce their offer as a result.

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“The repercussions aren’t just refined to those looking to sell, and, in this day and age, any agent producing smartphone photos to showcase their latest stock are really shooting themselves in the foot,” Opelts stressed.

“Doing so creates an aura of unprofessionalism and poor service and with the advancements in technology available in today’s market, there’s no excuse.”

The survey of 1,313 homebuyers who have bought a home in the last six months was commissioned by ProperPR on behalf of Giraffe360 via consumer research platform, FindOutNow. It was conducted on April 28, 2022.

By Rommel Lontayao

Source: Mortgage Introducer

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Many first-time homebuyers lack mortgage knowledge

Many potential first-time homebuyers who are capable of paying deposits have no, or very little, knowledge about mortgages, new research from the Nottingham Building Society has revealed.

The Nottingham-commissioned survey showed that 15% of those who are planning to buy their first home admitted they know nothing about mortgages, while 31% stated they know very little about them.

When it comes to arranging a mortgage, 18% would only consider one from their main bank or building society. Nearly one in four (38%) said they will use a mortgage broker who can search the entire market, and 31% plan to use an adviser recommended to them by someone they know.

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Despite this, many first-time homebuyers do realise the importance of having a large deposit. Some 7% have set a target of securing a deposit of 30% or more, 21% want 20% or more, and 36% want a deposit of at least 10%. Just 13% are aiming for a deposit of 5%, and 23% are targeting between 5% and 10%.

Some 8% of would-be first-time buyers currently have £50,000 or more saved as a deposit, and 13% have between £20,000 and £50,000.

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Iain Kirkpatrick, chief customer officer at Nottingham, said it is encouraging to see that many of those planning to buy their first home understand the importance of having a healthy deposit.

“However, it is concerning to see so many admit they don’t know enough about mortgages generally, and how to find the best deal. Seeking independent advice from an expert adviser can be the key to understanding more and could also save thousands of pounds in repayments,” he said.

The Nottingham Building Society commissioned consumer research company Consumer Intelligence to interview 1,023 UK adults, of which 160 expect to buy their first homes within the next five years. They were interviewed online between February 18 and 21.

By Rommel Lontayao

Source: Mortgage Introducer

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