Year: 2021

By Nicky Burridge

Zoopla, 04 August 2021

Whether you’re a first-time buyer or a homeowner looking to move up the housing ladder, here’s how the surge in popularity for houses could impact you.

Key takeaways

• Interest in houses for sale has more than doubled as the pandemic drives buyers to search for more space.
• The number of people looking to snap up a family house has soared by 114% compared with levels typically seen at this time of year between 2017 and 2019.
• The average cost of a house has jumped by 7.3% during the past year, while the typical price of a flat has edged ahead by just 1.4%.

In search of a spacious new home? You’re not the only one. Demand for houses has more than doubled as buyers search for more space in the wake of successive lockdowns.

Family houses are the most sought-after type of property, with the number of buyers looking to snap one up soaring by a whopping 114% compared with levels typically seen at this time of year between 2017 and 2019.

But while demand for all types of houses, from terraced to detached, has more than doubled, the number of buyers looking to purchase a flat has risen by only 34%, according to our latest House Price Index report.

This has led to the average cost of a house jumping by 7.3% during the past year, while the typical price of a flat has edged ahead by just 1.4%.

In fact, price growth for houses has outstripped flats across all regions of the country

But the greatest disparity has been seen in Wales, where the cost of a house has risen by 10.2% year-on-year, while the price of a flat has edged up by just 0.9%.

Why is this happening?

On the one hand, demand for houses has been stoked by the stamp duty holiday, with bigger savings on offer for larger properties (typically houses).

But it also reflects a surge in buyer interest for more space, with successive lockdowns driving people to reassess their homes and lifestyles.

At the same time, the trend for working from home has prompted people to leave city centres in favour of more rural locations, which are more likely to consist of houses rather than flats.

What could it mean for you?

First-time buyers

It could be good news if you’re a first-time buyer purchasing a flat rather than a house. The cost of flats has risen much more slowly than property values across the wider housing market during the past year.

It’s worth remembering that there’s significant variation across the regions though. Price growth for flats is down 0.5% in London during the past 12 months, while it’s up 5.2% in Scotland.

If you’re a first-time buyer eyeing a house, be prepared to face stiff competition. However, with no property to sell, you have an advantage over buyers in a property chain.

And remember that there are schemes available to help make buying your first home more affordable, such as first-time buyer stamp duty relief and Help to Buy.

Home-movers

Soaring demand for houses means that if you are planning to sell a house, you could be in a good position to secure a quick sale.

You are likely to have seen its value rise during the past year too. Price growth for houses has been particularly strong in Wales and the North West, where it has jumped by 10.2% and 8.8% year-on-year respectively. It’s been weakest in London, where it has increased by 5.6%.

But if you are selling a flat, you may find the gap between the value of your current home and the house you want to purchase has widened in recent months.

Gráinne Gilmore, head of research at Zoopla, explained: “There is a continued drumbeat of demand for more space among buyers, both inside and outside, funnelling demand towards houses, resulting in stronger price growth for these properties. Sellers will need to consider this when it comes to pricing expectations.”

Regardless of the type of property you are selling, if you are looking to purchase a house, you are likely to face stiff competition from other buyers.

So it’s important to do your homework and be prepared to move quickly when you find something you like.

How can Zoopla help?

• Thinking of selling? Our My Home experience enables you to find out how much your existing property is likely to be worth, helping you to plan for your next purchase.
• Looking for a new home? With competition intense, you can get ahead by registering with us to receive alerts whenever a property that meets your criteria is listed for sale. Our advanced search tools also help you find properties in your price range and area that are already listed.
• Whether you are buying or selling, in the current fast-paced market, find a local estate agents to give you expert advice.

What’s the outlook?

While buyer demand for all property types has eased slightly, it remains up 80% compared with typical levels for this time of year.

But these high levels of demand are not being matched by the volume of homes on the market. And this means that buyer competition for houses is set to remain intense.

According to our research, house price growth for all property types is expected to hit 6% in the coming months.

But as the stamp duty holiday ends and economic conditions become more challenging, it’s set to fall back to between 4% and 5% by the end of the year.

Sub-1% FIVE year fixed mortgage deal, the lowest rate on record

• Five-year fix for 60% loan-to-value available at 0.99% with £1,499 fee 
• Available to home movers and remortgages

Britain’s biggest building society has ramped up the mortgage price war after launching a record low sub 1 per cent five-year fixed rate deal.

While rates below 1 per cent are not unusual for two-year deals, Nationwide is offering this rate to those with a 40 per cent deposit remortgaging or moving, fixed until 2026.

The 0.99 per cent rate on this five-year fixed rate deal is the lowest ever recorded for this type of home loan, according to Moneyfacts data.

However, there is a sting in the tail with a hefty £1,499 fee – although, this is soaked far more into the overall cost of the mortgage compared to a shorter-term fix.

Mark Harris, chief executive of mortgage broker SPF Private Clients said: ‘Just when it looked as though mortgage rates couldn’t possibly go any lower, they have.’

‘While there has been a flurry of sub-1 per cent two-year fixes in recent weeks, this is the first five-year fix pegged at such a low rate.’

The deal, available to both home movers and those looking to remortgage (not first-time buyers), comes with that large product fee, which can be either added to the mortgage or paid upfront.

This means that a typical borrower with a £200,000 repayment mortgage on a 25-year term will pay £758 per month, if they opted to add the fee to the mortgage.

The next best alternatives are HSBC’s 1.06 per cent rate with a £1,499 fee and Nat West’s 1.09 per cent rate with a £995 fee, according to Moneyfacts.

A £200,000 repayment mortgage on a 25-year term with HSBC’s cheapest deal would cost £765 per month were you also to add the fees to the mortgage – or £766 with Nat West.

The benefits of Nationwide’s superior interest rate will likely be felt even more by those requiring higher loan amounts.

Chris Sykes, associate director and mortgage consultant at Private Finance said: ‘This rate is almost unbelievably good for the right client with a sufficient loan amount to justify the fee.

‘It is always worth comparing costs of different loans as this may not be best on a £100,000 loan due to the £1,499 fee, but on a £500,000 loan it may be significantly better than the next best alternatives.’

Nationwide has relaunched a three-year fixed-rate mortgage range for any buyers looking for a fixed rate period in between the more common two year or five-year periods.

Those with either a 40 per cent deposit or equity can secure a rate of 0.94 per cent matching the equivalent rates on Nationwide’s two-year fixed mortgages.

The three-year fixed rate deals all come with a no fee and £999 fee option and will be available to first-time buyers, those remortgaging and home movers.

With Nationwide having stepped up the mortgage price war there is now some expectation that rates might yet faller further among other lenders.

‘Although we may have hit the bottom of where rates will go, usually where one lender goes others follow suit, so I wouldn’t be surprised if we see the likes of HSBC, Nat West and Santander following suit in the next couple of weeks,’ said Sykes.

‘It really does send a message in regards to the expectations of lenders into the long term, with inflationary risks they cannot be that worried that we will see high interest rates in the coming years or they would not be offering such rates.’

Is the mortgage market distorted?

Whilst rate drops have continued to grab the headlines, the gap between those that have large deposits and equity and those that don’t is still wide.

The average five-year fixed deal for those with 40 per cent deposits or equity is 1.81 per cent, according to Moneyfacts, whilst those with 10 per cent deposits or equity the average rate is 3.47 per cent.

Prior to the pandemic, in February 2020 there was just a 0.8 per cent difference on average between those with 40 and 10 per cent deposits or equity.

But there are positive signs that this gap might be beginning to narrow again, which could be good news for those with smaller deposits and less equity built up within their homes.

Chris Sykes adds: ‘The current gap is down to the economic environment that we are in currently in as banks feel they are taking a higher risk at the higher loan to values these days compared to the pre pandemic levels of risk.’

‘We have seen significant reductions in 90 per cent pricing over the last few months, when these products came back out during the pandemic, they were typically 3.5-4 per cent, whereas now they are much more competitive.’

By ED MAGNUS FOR THISISMONEY.CO.UK

PUBLISHED: 21 July 2021

 

What is a green mortgage and which homes qualify?

 

If you’re looking for a mortgage deal right now, you may have noticed that more banks and building societies are offering loans they are referring to as ‘green mortgages’.

 

Over the past 18 months, more lenders have been introducing these types of deals, which offer lower interest rates and various cashback offers to owners of energy-efficient properties.

 

So what exactly is a ‘green mortgage’?

 

There’s no single definition, says James Pagan, head of mortgage products at Nationwide. Lenders are experimenting at the moment, so it’s a catch-all phrase which covers everything from mortgages which give lower interest rates on home loans, to offering you a cash payment if you buy a property which qualifies as a green home.

 

How do I know if a property will qualify?

 

It’s all about the EPC, or Energy Performance Certificate, which was introduced in 2007. Every home which is being sold, or is newly built, has to have an EPC inspection which measures its energy efficiency on a scale of A to G, looking at things like how thick the loft insulation is and whether the boiler is working efficiently.

 

The criteria of lenders can differ, but usually ‘green mortgage’ deals are offered to owners of a property with an EPC rating of A or B.

 

An EPC is valid for ten years. You’ll find the EPC rating on every property listing, so you can see straight away how green a home is. If for any reason it’s not present, make sure you ask the estate agent for the details.

 

New-build homes will have a Predicted Energy Assessment (PEA) before they’re finished. This will give you a predicted energy-efficiency rating which you will need to provide to your mortgage lender.

 

What sort of deals can I get?

 

Nationwide’s Green Reward Cashback offers an automatic £250 payment if you buy a property with a B+ rating, or £500 if you buy an A-rated home.

 

James Pagan says: “We are trying to encourage and reward people who buy properties which are already energy-efficient.”

 

Barclays, meanwhile, offers lower interest rates on some of its fixed-term deals if you buy a new property directly from the builder or developer, and it is in band A or B. Interest rates for these deals currently start at 1.74 per cent.

 

Royal Bank of Scotland also has some green mortgage deals, offering £250 cashback to buyers of energy efficient homes, and discounted two- or five-year fixed-rate deals.

 

And Paragon Bank has green deals for properties with EPC ratings of A, B, or C. These are aimed at buy-to-let landlords, who can access lending rates from 3.5 per cent.

 

How do I go about making a property more energy efficient?

 

There are all sorts of things you can do. Insulation – of lofts and cavity walls – is key to preventing heat loss, as is double or triple glazing. A new boiler will be a more efficient way to provide heating and hot water, while you can also generate your own green energy by using solar panels.

 

Why does it matter?

 

Around 14 per cent of the UK’s total emissions are created by housing – almost as much as those caused by shops and offices. Cutting domestic emissions could have a significant impact on global warming.

 

And you should expect to see green mortgages becoming more and more commonplace, because the Government is putting pressure on mortgage companies to increase the proportion of energy-efficient homes they lend on.

 

“There is a scenario where the energy efficiency of your house affects how much you can borrow and the price that you will pay,” said Pagan.

 

Source: Rightmove Property News, May 26^th 2021

Many of us have heard horror stories about Japanese knotweed on a property – and how this might impact a property sale, or a mortgage application.

 

However, Rob Stevens, head of risk at Nationwide building society, has this simple advice for buyers and sellers who find themselves face-to-face with a knotweed situation: keep calm and carry on.

 

“Japanese knotweed is high profile, but it is just like any other problem really,” he said. “Once you know you have it, you can deal with it.”

 

Why is Japanese knotweed a consideration for mortgage lenders?

 

The reason knotweed is an issue to mortgage lenders is that if left to spread, its root system can cause cracks in foundations and walls, and damage sewers and drains.

And this is a widespread issue, too. A recent study by Environet UK suggested that five per cent of UK properties might be affected.

 

In Stevens’ experience, most people don’t even realise they have knotweed on or near their home until they come to sell – at which point it is spotted by a surveyor or valuer.

 

If you are aware of the problem the only safe cause of action is honesty.

Sellers who do manage to hide their knotweed problem – cutting it back or selling their home over winter when it dies back naturally – could end up being sued if it can be proven that the plant was present at the time of the sale.

 

Once you know there is a problem the first step, said Stevens, is to work out how serious it is.

 

Japanese knotweed: the “seven-metre rule”

 

Most lenders informally abide by what is called the “seven-metre rule”.

 

If the knotweed is more than seven metres (or just under 23 ft) from your home, you or your buyer should have no problem getting a mortgage, but it will be something to keep an eye on.

 

If it is closer, then action will have to be taken, even if the weed has not actually reached your property.

 

“If the distance is less than seven metres, generally we will still proceed, subject to the fact that the customer is carrying out work to eradicate it,” he said.

 

This means using a specialist certified by the Property Care Association to remove the knotweed. You must also get a warranty for the work, as knotweed has a nasty habit of reappearing. It is usual for the buyer and seller to agree to share the cost of this work, just as they might if a structural issue emerged in a survey.

 

If this is done, said Stevens, not only should a mortgage offer be made, but there should not be any demands for larger deposits or higher interest rates because of the knotweed.

 

Still, the Government was concerned enough about knotweed to convene a select committee of MPs to review the situation before the coronavirus pandemic.

 

As a result of that investigation, the Royal Institution of Chartered Surveyors is currently consulting on whether the seven-metre rule is actually the best way to assess the risk of knotweed to a property. Its recommendations are due to be published later this year.

 

Source:

Rightmove Property News

May 12, 2021

New ‘Help to Build’ scheme will make it easier and more affordable for people to build their own homes.

• New £150 million ‘Help to Build’ scheme to make it easier and more affordable for people to build their own homes
• New homes can be made to order or built from scratch, and will benefit small building firms as part of the government’s Plan for Jobs
• £2.1 million additional funding to help communities decide where they want new homes, shops and offices to be built and what they should look like

New plans supported by over £150 million in new government funding will make it easier and more affordable for people to build their own homes, the Housing Secretary Robert Jenrick has announced.

The ‘Help to Build’ scheme will ensure that self and custom home building can become a realistic option to get onto the housing ladder through lower deposit mortgages.

Lowering the required deposit will free up capital, so people can build the home that they want and need whether it’s a commissioned, made to order home, or a new design from scratch. The scheme will provide an equity loan on the completed home, similar to the Help to Buy scheme.

Made to order homes allow people to customise the home they want based on existing designs. This could include more office space, or a particular design to support a family’s requirements including for disabled or older people.

Self and custom build could deliver 30-40,000 new homes a year: a significant contribution to the country’s housebuilding ambitions.

The scheme is part of the government’s wider Plan for Jobs as the new plans will also benefit small building firms. SME builders account for 1 in 10 new homes and the scheme will help scale up the number of self and custom build homes built every year.

Housing Secretary Rt Hon Robert Jenrick MP said:

Building your own home shouldn’t be the preserve of a small number of people, but a mainstream, realistic and affordable option for people across the country. That’s why we are making it easier and more affordable – backed by over £150 million new funding from the government.

The scheme we have launched today will help the thousands of people who’d like to build their own home but who’ve not yet considered it or previously ruled it out.

Our plans will help get more people on to the housing ladder, ensure homes suit people’s needs like home working or caring for relatives, whilst providing an important boost to small builders and businesses too.

The Prime Minister has commissioned Richard Bacon MP to lead a review on how we can scale up the delivery of self and custom build homes. The review will report its findings and recommendations in the summer.

This follows the news that major lenders have signed up to the government’s new 95% mortgage guarantee scheme to help more people than ever on to the housing ladder. Lloyds, Santander, Barclays, HSBC and Natwest are launching mortgages under the scheme today with Virgin Money following next month.

The government has also announced £2.1 million in funding to help communities have a greater say in how their local area is developed. The fund will boost neighbourhood planning by giving additional support to local authorities in under-represented areas.

Neighbourhood planning gives communities direct power to develop a shared vision for their neighbourhood and shape the development and growth of their local area. Communities are able to choose where they want new homes, shops and offices to be built, have their say on what those new buildings should look like and what infrastructure should be provided, and grant planning permission for the new buildings they want to see go ahead.

A further £330,000 is also available to councils wishing to pilot this approach to neighbourhood planning.

The Self and custom build action plan has also been published today, which sets out government measures to support the sector.

This includes the next steps in the review of the Right to Build legislation, to assess whether further reforms are needed and confirmation of further funding for the Right to Build Task Force which will help local authorities, community groups and other organisations help deliver self and custom build housing projects across the UK.

From: Ministry of Housing, Communities & Local Government

Published: 24 April 2021

New 95% mortgage scheme launches

A new government-backed mortgage scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit.

• 95% mortgage guarantee launches today, available on high streets across the country
• Scheme part of a range of ownership options to help make home ownership a reality
• New figures show demand for home ownership has soared during lockdown, with nearly 80% of private renters now saving for a deposit
• Today’s launch further strengthens government commitment to supporting the housing sector

A new government-backed mortgage scheme to help people with 5% deposits get on to the housing ladder is available to lenders from today (19 April 2021).

First announced at the Budget, the scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit to buy a house of up to £600,000 – providing an affordable route to home ownership for aspiring home-owners.

The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.

The scheme is now available from lenders on high streets across the country, with Lloyds, Santander, Barclays, HSBC and NatWest launching mortgages under the scheme today and Virgin Money following next month.

The government has made clear its commitment to tackling inequality in the housing market and levelling up the country. Official statistics show more homes were delivered in 2020 than in any year since 1987.

In 2019 a pledge to build 300,000 new and attractive homes a year was announced with an investment of over £12 billion in affordable housing over the next 5 years – the largest investment in a decade.

Since 2010, more than 687,000 households have been helped into home ownership through government schemes, but when asked, 69% of private renters and 63% of those living at home who had looked into a mortgage said they cannot find many mortgages with a low deposit. Today’s new 95% mortgage scheme will now make it even more accessible to own a home.

Miguel Sard, Managing Director of Home Buying and Ownership at NatWest said:

We welcome the government’s new mortgage guarantee scheme to give further support to those with smaller deposits. For those customers, particularly younger or first-time buyers, saving up for a big deposit can often be difficult, and we know people in these groups are some of the hardest hit by the effects of the pandemic.

A government-backed scheme will help segments of the market for whom home ownership has felt far out of reach in recent months.

Mark Hayward, Chief Policy Advisor at Propertymark, said:

Over the past few months, there has been an increase in the number of prospective buyers and the number of house sales taking place. Coupled with the decision to extend the Stamp Duty holiday further, the Mortgage Guarantee Scheme will provide additional options for more people to become homeowners.

Access to finance and affordability plays a key role in the ability for people to purchase their dream home, so we are now very pleased to see further support for both first-time buyers and current homeowners looking to buy property or move up the housing ladder.

The scheme is one of a range of flexible home ownership options available. These include Help to Buy, Shared Ownership and the First Homes Scheme. Figures show that the number of mortgage approvals for house purchases in January 2021 was 99,000 – a 40% increase on January 2020.

Part of the government’s Plan for Jobs, the scheme will help to support the housing market and protect jobs and businesses across the housing supply chain, from housebuilders and estate agents, to tradespeople, DIY stores and removal firms.

The intervention comes as new figures published by the government show a greatly increased desire for home ownership and a sharp reduction in 95% mortgage availability over the past year.

The figures show that more than two-thirds of private renters (68%) and those living at home (72%) want to buy, with the majority saying the pandemic has made them more aware of the importance and benefits of home ownership.

The survey also found that 76% of private renters and 70% of those living at home have started saving for a deposit or put more money into their savings during the pandemic.

The delivery of more homes was also an integral part of the government’s most ambitious overhaul of the planning system in decades. The reforms will streamline processes, cut red tape and harness technology to deliver homes faster.

Other government home ownership options available include

 

95% Mortgages: First time buyers will be able to purchase a home with only a 5% deposit. The scheme will help to increase the supply of 5% deposit mortgages for credit-worthy households by supporting lenders to offer these products through a government-backed guarantee.

 

Help to Buy: A government equity loan that supports first time buyers with a low interest loan towards their deposit.

 

Shared Ownership: Gives first time buyers the option to buy a share of their home (between 25% and 75%) and pay rent on the remaining share.

 

First Homes: A new scheme designed to help local first-time buyers and keyworkers onto the property ladder, by offering homes at a discount of 30% compared to the market price.

From: Ministry of Housing, Communities & Local Government and HM Treasury

Published: 19 April 2021

 

New guidance has been released aimed at reducing the number of wall safety surveys being requested by banks and building societies on blocks of flats.

Thousands of flat owners have been unable to sell or remortgage because they cannot get the checks done.

The Royal Institute of Chartered Surveyors (RICS) said it would help lenders save time when the inspections were not needed.

Most lenders are likely to follow the advice but there is no guarantee.

The checks were first developed to assess the potential financial impact of cladding on high-rise flats, after 72 people died at Grenfell Tower.

To begin with, only those who owned flats in tall buildings with dangerous flammable cladding were affected.

But after the government extended its advice to smaller properties in January 2020, mortgage lenders began demanding fire surveys from a much wider range of sellers.

Hundreds of thousands of leaseholders have since been asked for EWS1 external wall safety forms when they sell or remortgage.

This requires a specialist survey – but there haven’t been enough qualified surveyors to do the checks, leaving thousands of owners “in limbo”, according to the government.

‘Costly remediation’

Some owners have also reported being asked for EWS1s when there appears to be little or no flammable materials attached to their building.

RICS said its new guidance would clarify types of properties which will, and will not, require additional inspections to speed up mortgage approvals.

It said the guidance was the result of “painstaking” consultation with valuers, leaseholders, lenders’ fire safety experts and government.

“This announcement is a crucial step in unlocking the market, by ensuring that only those buildings where there are risks of costly remediation as a result of safety concerns from cladding are subject to additional checks,” said Dame Janet Paraskeva, chair of the RICS Standards & Regulation Board.

“The guidance is anticipated to result in a reduction in the number of EWS1 requests which will therefore allow more focus on the assessments of higher risk buildings, which should speed up the overall process whilst ensuring appropriate protection for lenders and purchasers.”

Last year the government tried to solve the backlog by saying that flats in buildings without cladding would no longer need EWS1 checks.

But mortgage lenders refused to recognise the directive.

Housing Secretary Robert Jenrick said RICS’ new guidance would mean “nearly 500,000 leaseholders will no longer need an EWS1 form – helping homeowners to sell or re-mortgage more quickly and easily”.

He added that the government had paid for an additional 500 surveyors to be trained to carry out EWS1 checks when they are necessary.

“The government has also provided an unprecedented investment of £5bn to protect leaseholders from the costs of cladding remediation,” he said.

‘Risk appetite’

In a joint statement, UK Finance and the Building Societies Association, which represent lenders, said that they expected many lenders to follow the guidance “which should see the number of EWS1 requests fall”.

But they added that it was still a decision “for each lender to make based on their own risk appetite”.

RICS said it would work with the government and other stakeholders to ensure the guidance is implemented by 5 April.

It will also publish advice for buyers and sellers about the risks associated with multi-story, multi occupancy buildings.

The Chancellor has announced a new low-deposit mortgage guarantee scheme – but how will it work?

After days of speculation, chancellor Rishi Sunak confirmed in his Budget speech that the government will back a new mortgage guarantee scheme.

Sunak has announced a new guarantee scheme to bring back the low-deposit mortgages that he previously said had “virtually disappeared”.

In his budget speech, the chancellor said it was: “a policy who gives people who can’t afford a big deposit the chance to buy their own home.”

But how will the new government-backed 95 per cent mortgages work? And would you be able to get one?

From small deposits to the risks of negative equity, here’s what you need to know about the new measures aimed at giving (some) first-time buyers a helping hand.

Why has Rishi Sunak put 95 per cent mortgages in the Budget 2021?

Low-deposit mortgages have been wiped out in the last year as a result of the coronavirus crisis’s impact on the UK economy. Most mortgage lenders will only offer a maximum 90 per cent loan-to-value, asking buyers to pay a 10 per cent deposit.

This makes it more difficult for first-time buyers to get on the property ladder, as they can struggle to save up a large enough deposit.

Low-deposit mortgages also became a rarity in the years following the 2008 financial crash, prompting the introduction of the Help To Buy scheme under David Cameron’s government. Higher loan-to-value mortgages have started to reappear in recent years, but the backlog of mortgage applications caused by the Covid-19 crisis prompted lenders to take them off the market.

“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,” said  Mark Hayward, chief policy adviser at Propertymark, prior to the Budget.

“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.”

The new scheme seems to have piqued buyers’ interest already, with Rightmove revealing that the use of our mortgage calculator jumped by 85 per cent within half an hour of Sunak’s announcement, and overall traffic to its website jumped by 16 per cent.

Will the 95 per cent mortgages be for first-time buyers only?

Boris Johnson has said that he wants “generation rent to become generation buy”, but the new mortgages will not be solely available for first-time buyers.

The 95 per cent mortgages will be available to all buyers of properties costing up to £600,000. According to a study by Rightmove, this accounts for 86 per cent of all homes currently up for sale in the UK.

All buyers will also be able to fix their initial mortgage rate for at least five years.

Unlike the Help To Buy scheme, the scheme will not be linked exclusively to first-time buyers, or restricted to new build properties only.

How do you get a 95 per cent mortgage?

The mortgages will be available from April this year, until December 31 2022. It is not thought that banks will be helped to adjust their affordability checks to make the scheme available to a greater number of buyers.

As it stands, mortgage lenders tend to only offer loans of up to 4.5 times the buyer’s salary.

How will this work for 95 per cent mortgage lenders?

Lenders stopped offering 95 per cent mortgages as the economic forecast deteriorated over 2020, due to the fact that they are higher risk products.

“First time buyers have been missing out as banks chose to focus on perceived higher quality loans. For a healthy property market, the first rung of the ladder needs to be working and this will ensure that,” said Dominic Agace, chief executive of Winkworth, prior to the Budget announcement.

These new mortgages will be guaranteed by the government, removing the risk from the loans for lenders.

Which lenders will be offering the 95 per cent mortgages?

In his budget speech, the Chancellor said that “several of the country’s largest lenders including Lloyds, Natwest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month.”

He also said that “more, including Virgin Money will follow shortly after.”

These big names have already committed themselves, with others likely to follow over the coming weeks.

What are the risks for buyers?

With the UK housing market prospects uncertain for the coming years, there is concern that low-deposit mortgage buyers could be at risk of falling into negative equity.

If house prices were to fall, recent buyers with a 95 per cent LTV mortgage would be more likely to owe more money than their house is worth. Buyers who have paid a larger deposit could avoid that issue by having less to repay.

Negative equity makes it difficult (or impossible) to sell or remortgage a home, proving a risk to new buyers hoping to climb the property ladder.

What effect could the 95 per cent mortgages have on the housing market?

Some industry commentators have speculated that the new mortgages could inflate house prices. This was the criticism lobbied at the Help To Buy guarantee scheme, which housing charity Shelter says raised house prices by 1.4 per cent.

Some experts, however, have been more optimistic.

“In my view, this is a better way than Help To Buy,” said Agace, in advance of Sunak’s Budget. “It will avoid the bubbles created around the new build properties that qualified for Help To Buy by spreading it across the whole market.”

“With an effective plan to deliver more homes in the medium to longer term, [the new mortgage guarantee scheme] need not mean significant price rises.”

“Critics may argue that it will only aid house price inflation, but without such a scheme would developers be so keen to put spades in the ground?” added Mark Harris, chief executive of mortgage broker SPF Private Clients, also ahead of the Budget speech. “The supply of new housing is nowhere near where it needs to be to satisfy demand.”

Agace also suggested that the scheme will help stimulate the lower end of the market. “This is a positive solution to the current conundrum in the property market where properties under £600,000 have been increasingly difficult to sell, due to lower mortgage availability,” he says.

“Meanwhile, second time buyers with plentiful cheaper mortgage products have been in a boom of activity.”

By Ailis Brennan

Evening Standard

Property news

Borrowers now have the greatest number of mortgages to choose from since the first national lockdown came into force last March.

By Nicky Burridge

February 10, 2021 Zoopla

Mortgage choice has reached its highest level for 11 months as lenders launch a raft of new deals.

There are currently 3,215 mortgages to choose from, such as fixed rate and tracker mortgages, with different terms, interest rates and incentives.

That’s the highest number since March 2020, when the first national lockdown came into force. There were 5,222 mortgages in the market at that point.

And since October, the number of mortgages available has increased by 42%, the biggest four-monthly rise in choice since 2007, according to financial information group Moneyfacts.

Why is this happening?

Mortgage choice fell sharply in the first half of 2020, as lenders withdrew their mortgages while they reassessed the level of risk that they were prepared to take in the face of the Covid-19 pandemic.

Borrowers with only small deposits were hit particularly hard, with nine out of 10 mortgages for people borrowing 90% of their home’s value withdrawn between March and the end of June.

But the fact that choice is improving again, particularly for people with small deposits, suggests lenders are now less risk averse, while stable interest rates point to increased competition in the market.

Who does it affect?

First-time buyers

There was good news for first-time buyers, with the number of mortgages available to people with just a 10% deposit rising to 248, 88 more than in January.

First-time buyers have not only seen an increase in product choice, with the number of deals available for those with a 10% deposit nearly quadrupling during the past four months, but interest rates on the mortgages have also fallen.

In a further sign that competition is returning to this sector of the market, the average cost of a two-year fixed rate loan for someone borrowing 90% of their home’s value fell by 0.09% during the past month, while the cost of a five-year fixed rate deal dropped by 0.07%.

Despite these improvements, choice remains very limited for people with only a 5% deposit, with just five deals currently available, down from eight in January.

Existing homeowners

There is also good news for home-movers and people looking to re-mortgage, as the number of different deals available to choose from has increased significantly, with nearly 500 different mortgages available for people borrowing 60% of their home’s value.

The cost of a mortgage has also fallen for people with large equity stakes of at least 40% in their home.

After being on a steady upward trajectory during much of the second half of last year, interest rates charged on a two-year fixed rate mortgage for these borrowers have dropped by 0.05%, while rates on five-year fixed rate deals have fallen by 0.07%.

What’s the background?

In a further sign that the mortgage market is stabilising after a turbulent year, the number of days for which individual mortgages are available before lenders withdraw them rose from 28 days in January to 40 days.

The move is good news for potential borrowers as it gives them a better chance to secure the deal they want before lenders replace it with a different offer.

Eleanor Williams, finance expert at Moneyfacts, said: “This, coupled with overall average rates remaining quite static and availability continuing to improve, could imply the mortgage market is now the most stable it has been since the onset of the pandemic last year.”

Top three takeaways

• Mortgage choice has reached its highest level for 11 months as lenders launch a raft of new deals

• There are 3,215 different mortgages to choose from, a 42% increase since October
• The number of mortgages available to people with just a 10% deposit rose to 248, 88 more than in January

With the stamp duty holiday due to end on 31 March, Parliament has debated an extension. Here’s what it means if you’re planning to buy or sell a home.

A petition calling for the stamp duty holiday to be extended has received more than 100,000 signatures, triggering a debate to be held in Parliament.

Responding on behalf of the government, financial secretary to the Treasury, Jesse Norman, said that he could not comment on tax policy outside of a fiscal event, such as a Budget.

He added: “The government will continue to listen carefully to representations from the industry and from those who are planning to buy or sell a property.”

Chancellor Rishi Sunak announced in July last year that homes costing up to £500,000 would be exempt from the tax.

It is estimated that nine out of 10 people purchasing a property since the announcement have not had to pay stamp duty, saving an average of £4,500 each.

But as the 31 March deadline for the end of the holiday looms, there have been industry calls for it to be extended.

Responding in December to the petition, the government said: “As the relief was to provide an immediate stimulus to the property market, the government does not plan to extend this relief.

“Stamp duty is an important source of government revenue, raising several billion pounds each year to help pay for the essential services the government provides.”

What’s the background?

The stamp duty holiday was introduced by Sunak in a bid to boost the housing market in England and Northern Ireland during the coronavirus pandemic.

Under normal circumstances, buyers pay stamp duty land tax when buying a property worth £125,000 or more, although first-time buyers only have to pay it on homes above £300,000.

The introduction of the stamp duty holiday raised the threshold at which the tax kicks in to £500,000 for all buyers, amounting to a potential saving of up to £15,000.

 

Can I still buy before the stamp duty holiday ends?

Yes, but you’ll need to move fast. The time it takes between agreeing a sale and completing is normally just under 100 days.

Our research shows that only 54% of sales agreed in January will complete in time, with that figure dropping to 17% in February.

From getting your paperwork lined up in advance, to smoothing out any wrinkles that may disrupt your property chain, here are our top tips to help you beat the deadline.

What happens when the stamp duty holiday ends?

Once the stamp duty holiday ends on 31 March next year, the former stamp duty rules will apply.

This means buyers can be charged between 2% and 12% tax (or up to 17% if they are a foreign investor) on their property purchase, depending on the value of the home they are buying and if they own more than one property.

“The government is committed to supporting home ownership and helping people get on and move up the housing ladder,” it said.

“When the stamp duty holiday ends, the government will maintain a stamp duty relief for first-time buyers which increases the starting threshold of residential stamp duty to £300,000 for first-time buyers that purchase a property below £500,000.”

How much stamp duty will I pay after 31 March 2021?

Stamp duty is calculated as a percentage of the property you are buying. It applies to freehold and leasehold properties, whether you’re buying outright or with a mortgage.

For existing homeowners, the rates are:

• 0% up to £125,000
• 2% on £125,001-£250,000
• 5% on £250,001-£925,000
• 10% on £925,001-£1.5m
• 12% on any value above £1.5m.

For example, if you buy a flat for £275,000, the stamp duty you owe would be:

• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the final £25,000 = £1,250

Total stamp duty = £3,750

First-time buyers after 31 March 2021

Stamp duty relief was introduced in November 2017 for first-time buyers to help people step onto the property ladder.

First-time buyers are exempt from stamp duty on properties costing up to £300,000 and pay 5% on the value of a property between £300,000 and £500,000.

A first-time buyer will pay:

• 0% on the first £300,000
• 5% on the remainder up to £500,000

So a first-time buyer purchasing a £275,000 flat would pay no stamp duty.

For a house costing £475,000, a first-time buyer would pay:

• 0% on the first £300,000 = £0
• 5% on the final £175,000 = £8,750

Total stamp duty = £8,750

However, if the purchase price is more than £500,000, first-time buyers cannot claim the relief and must pay the standard rates.

For example, a property purchased at £700,000 would result in a stamp duty bill totalling £25,000 even for a first-time buyer.

Landlords and second-home owners

For owners of more than one property, a surcharge of 3% on top of the standard stamp duty rates apply.

However, if you sell a home within three years of purchasing a second property, you can apply for a refund of that 3%.

It is also possible under some circumstances to claim multiple dwellings relief.

What about non-UK residents?

From April 2021, an additional 2% stamp duty levy will be imposed on non-UK residents who buy property in England and Northern Ireland.

It means that international buyers of second homes could pay up to 17% tax on expensive properties.

The 2% is on top of standard rates and in addition to the 3% surcharge for any investors who own property elsewhere.

What other government support is available?

During the second lockdown, the government extended its offer of mortgage payment holidays. Those who need help paying their mortgages can still request a holiday of up to six months until 31 March 2021.

To help first-time buyers get on the property ladder, the government’s Help to Buy scheme offers an equity loan of up to 20% of the property value (40% in London). As long as you can raise a 5% deposit, you can then apply for a standard mortgage to pay the remaining amount.

At the Conservative party conference in October, Prime Minister Boris Johnson pledged to “turn generation rent into generation buy” and announced plans for a new scheme to give more people the chance to take out long-term fixed rate mortgages for up to 95% of their home’s value – although details have not yet been released.

What about stamp duty in Scotland and Wales?

Housing is a devolved issue in Britain so stamp duty only applies in England and Northern Ireland.

Scotland and Wales have equivalent taxes:

Scotland

From April 2015, Stamp Duty was replaced by Land and Buildings Transaction Tax (LBTT) in Scotland.

In Scotland, the LBTT rates are:

• 0% up to £145,000
• 2% on £145,001-£250,000
• 5% on £250,001-£325,000
• 10% on £325,001-£750,000
• 12% on any value above £750,000

First-time buyers pay no LBTT up to £175,000.

Wales

Property owners in Wales have paid Land Transaction Tax (LTT) since April 2018.

LTT rates are:

• 0% up to £180,000
• 3.5% on £180,001-£250,000
• 5% on £250,001-£400,000
• 7.5% on £400,001-£750,000
• 10% on £750,001-£1.5 million
• 12% on any value above £1.5 million

In December, the Welsh government introduced an additional charge for second-home owners.

Second home-owners will now pay a 4% levy when they buy homes up to £180,000, rising to 16% for homes worth £1.6m or above.

By Property News team

February 2, 2021 Zoopla