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The Most and Least Affordable Locations for First-Time Buyers

As the government launches First Homes – its latest scheme designed to help first-time buyers in England onto the property ladder – new research has revealed the most and least affordable locations following a turbulent 12 months for the UK property market.

Compiled by online mortgage broker Mojo Mortgages, the First Homes scheme affordability index looked at various factors affecting home affordability in June 2021 including house prices, mortgage repayments, average annual salary and monthly take home pay to work out where in England was most and least affordable.

The figures have been released following the launch of the government’s First Homes scheme this month; designed to help first-time buyers and key workers onto the property ladder in their local areas that might otherwise have had to move to another city to afford their first home.

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First Home properties will be priced at a discount of at least 30 per cent of the original market value to allow more affordable deposits and mortgages with prices being capped at a maximum of £250,000 (£420,000 in Greater London). However, it’s important to note that this discount will apply to the lifetime of the property, meaning that same percentage discount will apply when the home is resold in the future.

Based on the average monthly mortgage payment as a percentage of income*, Oxford was the least affordable location in England for first-time buyers with the average monthly mortgage repayment taking up 49.37 per cent of a couple’s take home pay. This is based on an average property price in the city of £540,005 and an average annual salary of £31,232.

Bath (47.65 per cent) and London (47.12 per cent) followed close behind highlighting the difficulty of getting onto the property ladder in these areas. However, it’s clear there was some variance across the capital’s 32 London boroughs.

The ten least affordable areas in England based on mortgage as a percentage of income were as follows:

  • Oxford (49.37 per cent)
  • Bath (47.65 per cent)
  • London (47.12 per cent)
  • Reading (38.98 per cent)
  • Poole (38.72 per cent)
  • Cambridge (38.49 per cent)
  • Brighton (37.19 per cent)
  • Slough (36.68 per cent)
  • Cheltenham (36.38 per cent)
  • Exeter (35.03 per cent)

In contrast, it was Bradford that was most affordable for first-time buyers.

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With an average property price of £145,981 and an average annual salary of £28,790, this equated to 14.30 per cent in terms of monthly mortgage payments as a percentage of income – the lowest in England.

Blackpool (15.94 per cent) and Stoke-on-Trent (17.35 per cent) followed closest behind with the top ten most affordable areas for first-time buyers as follows:

  • Bradford (14.30 per cent)
  • Blackpool (15.94 per cent)
  • Stoke-on-Trent (17.35 per cent)
  • Sunderland (17.56 per cent)
  • Middlesbrough (17.70 per cent)
  • Hull (17.72 per cent)
  • Carlisle (17.82 per cent)
  • Durham (18.10 per cent)
  • Liverpool (18.56 per cent)
  • Bolton (19.19 per cent)

Regardless of location, the First Homes scheme could make a significant difference to a first-time buyer’s monthly outgoings once on the property ladder in terms of mortgage payments as well saving for that all important deposit.

For example, for those in London that purchase a property under the scheme, they can expect to pay on average around £766 less a month on their mortgage repayments, taking their percentage spend of income from 42.17 per cent to 32.97 per cent –  a significant saving.

BY PETE CARVILL

Source: Property Wire

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Lenders hand out most mortgages to first-time buyers in nearly 20 years

Banks and building societies handed out more mortgages to first-time buyers in March than any time since 2002.

Across the UK, 42,330 mortgages were issued to first-time buyers in March, marking the highest monthly total since December 2002 when 44,000 were advanced, according to trade association UK Finance.

Many people who would have taken their first step on the property ladder last year may have put their plans on pause due to the coronavirus pandemic, with the market having been effectively shut for part of 2020.

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Last peak was in July 2002

A total of 58,810 mortgages were advanced in March to home movers, the highest figure since August 2007. The peak month for home mover activity was July 2004 when 93,500 mortgages were advanced.

The peak month for lending to first-time buyers on UK Finance’s records was July 2002, with 54,100 loans.

March 2021 was the original deadline for a stamp duty holiday in England and Northern Ireland, but the period has been extended.

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“Since the housing market emerged from its shutdown last spring, we have seen a remarkable recovery in demand, which continued through quarter one 2021,” said Eric Leenders, managing director of personal finance at UK Finance.

“Existing home owners have taken advantage of the stamp duty concessions, with changing working and living patterns encouraging more to use their existing equity, either to move further afield or to fund further housing purchases for themselves or family,” Leenders added.

By Michiel Willems

Source: City AM

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House prices to continue upward trend this year, Nationwide predicts

Nationwide Building Society, the UK’s second-largest mortgage lender, has predicted that house prices will continue to rise this year beyond the end of the stamp duty holiday.

The lender has warned, however, that higher costs could make it harder for first-time buyers to get on the property ladder.

The society’s chief executive, Joe Garner, said everyone had been a “little bit surprised” by how strong the housing market had been throughout the Covid crisis, even when taking government support, including business loans and wage subsidies, into consideration.

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Figures published by the Office for National Statistics last week showed house prices rose 10.2 per cent in the year to March, the highest annual increase since the lead-up to the financial crisis in August 2007.

Mr Garner said demand had been underpinned by a “structural shift” in the kind of homes that buyers were looking for in the wake of the Covid-19 pandemic, which has caused a home-working boom, and fuelled interest in larger homes with gardens outside city centres.

Mr Garner said: “People don’t say: ‘Oh look, there’s a discount on stamp duty, let’s move home.’ That’s not how it works. People are thinking of their house less as an investment and more as a home.”

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A Nationwide survey of homeowners last month found that 25 per cent were either considering, or in the process of, buying a house as a result of the pandemic, compared with 28 per cent in September. Usually, only about five per cent of homes switch hands in the UK, meaning that only a small portion of those homeowners need to act in order to keep the housing market moving.

Mr Garner continued: “There will be periods when it goes down a bit, but particularly as people are buying much more for their long-term home, it doesn’t matter so much the day-to-day value of the property if it’s somewhere they really want to live.”

Source: Scottish Legal

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Boost for first-time buyers as more ultra-low deposit mortgages hit the market

In a further boost to first-time buyers, more lenders are bringing 5 per cent deposit mortgages onto the market.

New deals announced by Metro Bank and Cambridge Building Society are not part of a new government-backed mortgage guarantee scheme which was launched this week to increase the availability of 5 per cent deposit loans.

Major lenders including Halifax, HSBC UK, Barclays, NatWest and Santander are taking part in that scheme and unveiled new 5% deposit products earlier this week.

Cambridge Building Society said that, from 5 May, it will launch deals including a two-year fixed-rate mortgage at 3.99 per cent, with a £199 application fee and a five-year fixed-rate mortgage at 4.09 per cent with the same fee. The maximum loan for this range is £400,000.

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Metro Bank is now offering a five-year fixed-rate deal at 3.89 per cent for borrowers looking to get on the housing ladder with a 5 per cent deposit. The maximum loan size available is £570,000.

The bank said it had already been developing its new mortgage when the government mortgage guarantee scheme was announced in the recent Budget.

Metro Bank launched into near prime residential mortgages in March, offering flexibility for borrowers who may be struggling to get a mortgage elsewhere.

Charles Morley, director of mortgage distribution at Metro Bank, said that the bank has been making a number of new hires across its mortgages business recently.

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Pandemic recovery

The number of low deposit mortgages generally available fell dramatically in the early days of the coronavirus crisis as lenders became more concerned about riskier loans and the possibility of house prices falling.

Under the new government scheme, lenders can purchase a government guarantee that would compensate them for a portion of their losses in the event of a repossession.

It mirrors a previous Help to Buy mortgage guarantee scheme, which was launched in 2013 in response to a similar shortage of low-deposit mortgages following the 2008 financial crisis.

By Michiel Willems

Source: City AM

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New research reveals the UK’s Help to Buy hotspot

Research by lettings and estate agent Benham and Reeves has revealed which UK cities are currently seeing the most demand from homebuyers for properties eligible for Help to Buy.

With the current Help to Buy equity loan scheme expiring last month, the Government announced a replacement scheme to start as of this April. The latest version of the scheme is restricted to first-time buyers and includes regional property price caps.

Benham and Reeves analysed what proportion of Help to Buy stock was already sold subject to contract or listed as ‘under offer’ across 25 major UK cities and what this demand translates to as a percentage of all Help to Buy stock listed.

Bristol is currently the UK’s Help to Buy homebuyer hotspot, with 60% of all homes eligible for the scheme already sold subject to contract or under offer.

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Portsmouth and Swansea also rank high, with half of all homes listed with the help of Help to Buy already taken by homebuyers.

Oxford is home to the next highest level of Help to Buy homebuyer demand at 48%, with Leeds (35%), Southampton (34%), Glasgow (33%), Cambridge (32%) and Bournemouth (31%) also ranking within the top 10.

It’s a three-way tie for the 10th top spot, as London, Manchester and Liverpool all see Help to Buy demand from homebuyers currently sit at 29%.

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Marc von Grundherr, director of Benham and Reeves, said: “While the stamp duty holiday has been a great way of boosting market health during a very tough period, further fuelling demand has only helped push house prices further out of reach for many first-time buyers.

“This has made the aspiration of homeownership all the harder and it’s clear that many are reliant on a leg up via the Help to Buy scheme as a result, with high demand for homes that qualify in cities all over the UK.

“Of course, it’s fair to say that Help to Buy in its various forms has also helped drive demand with homebuyers purchasing property that they would otherwise have been unable to afford.

“So perhaps instead of introducing yet another demand-based initiative to artificially inflate house prices, it’s time the Government really start looking at building more houses if they do wish to ‘help those that need it most’.”

Source: Property Wire

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40% of FTBs in the UK have taken advantage of the stamp duty holiday

New research by regulated property buyers GoodMove has revealed that 39% of first-time buyers in the UK have taken advantage of the stamp duty holiday, and a further 8% have not yet bought a home but are planning on using the stamp duty holiday extension to do so.

Those aged 25-44 are most likely to have taken advantage of the stamp duty holiday in the past year at 42%, and 18–24-year-olds are most likely to say they either haven’t taken advantage of Stamp Duty when they bought their home (50%) and say they won’t take advantage of the holiday in the future (10%).

House prices and deposits are at an all-time high now, with first-time buyers now requiring up to 20% of a property’s value for a deposit. GoodMove’s research found that most (53%) have saved for a house deposit by themselves, with a further 34% having help from their parents or other family members to secure a deposit.

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Over a quarter (28%) of people have received money for their deposit through inheritance, 11% of Brits have taken out a loan to help them buy a home and 10% have received help from government schemes. Nearly one in ten (8%) said they have won a lot of money in the past and this helped them secure a house deposit.

When asked what the most complicated part of the home buying process was, the top reasons were saving up for a deposit (33%), finding a good mortgage deal (32%) and the mortgage application process (28%). Just 2% of respondents didn’t think any part of the process was difficult or complicated.

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Nima Ghasri, director at GoodMove, said: “First-time buyers generally have the hardest time buying a home, with securing a deposit and mortgage approvals among the hardest part of getting on the property ladder. In this campaign, we wanted to see exactly how first-time buyers and those looking to buy a home in the immediate future have bought their home and secured their deposit as well as what they found the hardest part to be.

“It’s great to see so many first-time buyers taking advantage of government schemes and also securing deposits by themselves and proves to us that the property market isn’t all that bad for first-time buyers and people can get onto the property ladder!”

Source: Property Wire

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New mortgage guarantee scheme set to be announced in Budget

A mortgage guarantee scheme to help prospective homeowners with smaller deposits onto the property ladder is set to be announced in the Budget on Wednesday 3 March.

The government will offer incentives to lenders in order to bring back 95% LTV mortgages which were removed from the market as a result of the pandemic.

According to The BBC, the scheme will involve the government offering to take on some of the risk that comes with low-deposit mortgages in order to bring them back onto the market.

The new scheme will reportedly not be limited to first-time buyers but there will be a maximum property limit of £600,000, and will be offered from April.

No end date for the scheme as been confirmed.

The scheme is based on the Help to Buy mortgage guarantee scheme which ran until December 2016.

Mark Harris, chief executive of SPF Private Clients, reacted to the news: “Turning ‘Generation Rent’ into ‘Generation Buy’ has been a focus for Boris Johnson for a while so the return of 95% LTV mortgages for first-time buyers doesn’t come as a complete surprise.

“This, coupled with the extension of the stamp duty holiday, will result in a Budget which is a real boost for buyers.

“It is positive news for first-time buyers, particularly as it is not restricted to new homes, although critics may argue that it will only aid house price inflation.

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“But without such a scheme would developers be so keen to put spades in the ground?

“The supply of new housing is nowhere near where it needs to be to satisfy demand.

“For those with little in the way of deposit, finding a 95% LTV mortgage has been pretty much impossible in recent months.

“The odd building society here and there has offered them, with Saffron building society launching at 95% LTV in June but it only lasted a matter of days.

“Furness BS also has a selection of 95% products but these are restricted to certain postcodes.

’The only other current option to obtain a mortgage at this level is to call upon a third party, typically a parent, to provide extra security in the way of deposits or equity within the ‘guarantor’ property.

“Not everyone is in a fortunate position to do so.

“The last time there was a mortgage guarantee treasury scheme was via Help to Buy.

“The mortgage guarantee offering closed to new loans on 31 December 2016 (the equity loan continues, albeit in a revised form today) but by then, many of the high-street names had removed themselves from the scheme and ‘self-insuring’ their 95% offerings.”

Rightmove put together the latest figures on asking prices and how many properties could be eligible under the scheme.

Their data found that 86% of properties up for sale have an asking price of £600,000 or less, with the national average asking price for all properties standing at £318,580, a 3.0% increase from February 2020.

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The national average asking price of a first-time buyer property is £200,692, which is 3.6% higher than February 2020.

Since the Help to Buy mortgage guarantee scheme was first launched in 2013, national asking prices have increased by 29% from £246,748 in October 2013 to £318,580 in February 2021.

Mark Hayward, chief policy adviser at Propertymark, added: “A government backed mortgage guarantee scheme will help first-time buyers get on the housing ladder at a time when for many owning a home seems an impossible dream.

“Alongside the potential extension of the stamp duty holiday that we have been calling for, this new scheme will go some way in giving some hope to first-time buyers at a time when the size of deposits required means they fall at the first hurdle.”

By Jessica Nangle

Source: Mortgage Introducer

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First-time buyer market share ‘stable’ despite rising prices

The proportion of first-time buyers taking out a mortgage has remained stable year-on-year despite increases in the average price and deposit, according to research by Halifax.

The bank’s analysis of UK Finance data estimated first-time buyers made up 50 per cent of all home purchase loans last year, compared to 51 per cent in 2019.

The proportion of first-time buyers purchasing with a mortgage remained stable despite the average price they paid reaching £256,057 last year, an increase of 10 per cent from 2019.

The average deposit paid by a first-time buyer also increased by almost a quarter (23 per cent) to £57,278 last year, compared to £46,449 in 2019.

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However, with the housing market effectively closed during the first national lockdown, the overall number of first-time buyers fell to 304,657 in 2020, down 13 per cent compared to the previous year.

YearNumber of first-time buyersAnnual changeFTBs as percentage of all home purchase loans
2015298,080-4%46%
2016328,51010%48%
2017345,9205%49%
2018353,1202%50%
2019351,260-1%51%
2020*304,657-13%50%
Sources: UK Finance and *Halifax estimate for 2020

The property market re-opened in the second half of 2020 but first-time buyer transactions were also down during that period, but only by 2 per cent when compared to 2019.

Halifax noted that first-time buyer transactions had bounced back “strongly” in the second half of last year by 52 per cent, from 121,050 in H1 to 183,607 in H2, following the reopening of the housing market from May.

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Russell Galley, managing director at Halifax, said: “Whilst these figures confirm the almost inevitable fall in the overall number of first-time buyers in 2020 – with the entire housing market effectively shuttered during the first national lockdown – they also underline just how strong the bounce back was in the second half of the year.

“Despite the obvious challenges presented by soaring house prices, not least the need to raise an even bigger deposit, first-time buyers still accounted for half of all home purchases, a reassuring statistic given their overall importance to the market.”

Luke Spellman, financial adviser at Spellman Financial Services, said it was unsurprising that the average first-time buyer deposit had increased.

He said: “This will mainly be down to mortgage lenders hiking the minimum deposit required from 5 per cent to 10-15 per cent for the best part of last year.”

The number of 95 per cent LTV mortgages has dropped dramatically during the pandemic.

Data from Moneyfacts showed there were eight products available at 95 per cent LTV at the start of December, around 2 per cent of the number available at the beginning of March (391) before the first national lockdown.

By Chloe Cheung

Source: FT Adviser

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First-time buyers losing interest in city living

City living is losing its appeal among first-time buyers, with the vast majority now preferring more subdued locations, Trussle has found.

As it stands just 29% of first-time buyers plan to buy in a city, compared to 53% in a suburb.

Miles Robinson, head of mortgages at online mortgage broker Trussle, said: “The pandemic has increased the financial pressure many first-time buyers were already feeling, as well as creating a seismic shift in what people expect from their home.

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“As a result, financial pressures and rising house prices, alongside a desire for more outdoor space, means demand in more affordable rural locations is currently outpacing that for urban destinations.

“But lenders are starting to return to the market with higher LTV products, which could make more expensive homes in the city more accessible again.

“And, we may see renewed interest in city living once the vaccine has been rolled out and things begin to return to normality.

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

“As such, only time will tell if the current lust for country properties is a long-term trend or more of a spontaneous response.”

Higher house prices in urban locations are likely to play a huge factor in this trend, with 65% saying it’s ‘impossible’ to get on the housing ladder.

The research found that the average budget for a first home was £174,266.

BY RYAN BEMBRIDGE

Source: Property Wire

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First-time buyers commit to homeownership despite pandemic

The pandemic has strengthened the resolve of first-time buyers who have become more determined to follow their homeownership dreams and save more to get a foot on the housing ladder according to new research.

Three in five (61%) of respondents said that buying a home is more important to them now than it was at the start of the pandemic in March. The research, commissioned by Yorkshire Building Society, shows that over a third expected to buy their home sooner due to the pandemic and nearly half said they had been able to save more for their deposit as a result of the impact of COVID-19.

The research shows that buyers still face challenges when securing their first home. With the average monthly saving for those wanting to buy their first home now standing at £336, Yorkshire Building Society has estimated it will take a single person seven years and five months to save a 15% deposit for the average first-time buyer home, which is valued at £198,512.

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In order to meet the demands for a higher deposit, half of first-time buyers are looking for financial help from relatives. The number seeking support increases to 59% for those buying in the capital.

Ben Merritt, mortgages acquisition manger at Yorkshire Building Society, said: “Getting on the housing ladder seems to be more important now than it ever was. Whether it’s being in shared rented accommodation whilst juggling home and work life, or spending lockdown back in the family home, the pandemic has clearly increased the resolve of first-time buyers who have increased their savings and are more determined than ever to buy their first home.

“It’s a real priority and life ambition for many people, but getting there still remains a challenge which is why we are seeing many lean on relatives for support with deposits. Despite the lower availability of higher LTV products, there are options available to first-time buyers and so it pays to do your research to help you get the support you need.”

Source: Property Wire