Bank of England forecasts low interest rates for longer

Bank of England forecasts low interest rates for longer

By Szu Ping Chan

Business reporter

BBC News

The Bank of England has signalled that prolonged Brexit uncertainty will keep interest rates lower for longer.

Policymakers said the UK would avoid falling into recession this year, but warned that Brexit and trade worries were weighing on the economy.

The Bank kept interest rates on hold at 0.75%.

The Monetary Policy Committee (MPC) that sets interest rates also warned that a no-deal Brexit would hit the economy.

Policymakers said it would lead to weaker growth, higher inflation and a further drop in the value of the pound.

However, the Bank stressed that interest rates could move up or down if the UK left the European Union without a deal.

The minutes of the Bank’s September meeting said that policymakers would have to balance raising interest rates to keep a lid on inflation against cutting them to support growth.

How does the Bank see the outlook?

The UK economy contracted by 0.2% in the three months to June. The Bank expects the economy to expand by 0.2% in the third quarter of this year.

While this is weaker than the 0.3% growth predicted last month, it means the UK is expected to avoid a technical recession, defined as two consecutive quarters of economic decline.

A survey by the Bank showed that consumer spending remained robust, with many families choosing to spend more time in the UK this summer rather than go abroad because of the weaker pound.

It said the increase in “staycations” had boosted spending on restaurants and hotel accommodation.

The Bank also said the government’s decision to inject more money into departments in the latest Spending Review would boost UK growth by around 0.4% over the next three years.

What about Brexit?

The MPC said that the ongoing uncertainty over the UK’s relationship with the EU risked a further period of “entrenched uncertainty”.

They said ongoing uncertainty would lead to weaker growth and less inflationary pressure, reducing the Bank’s need to raise interest rates.

The minutes of the meeting said: “The longer those uncertainties persisted, particularly in an environment of weaker global growth, the more likely it was that demand growth would remain below potential.”

However, policymakers repeated that more clarity that the economy was heading towards a Brexit deal meant that increases in interest rates would be needed over the next three years.

Why does the Bank think rates will stay low for longer?

The Bank of England, like many of us, is on hold, and in a Brexit holding pattern too.

Although there is no change in the Bank of England’s interest rate decision, marking out the UK from its counterparts in the US and euro zone, there are interesting Brexit developments in September’s deliberations of the Monetary Policy Committee.

For the first time, the Bank has felt the need to signal a direction of travel for interest rates in the now plausible scenario of “political events” leading to “a further period of entrenched uncertainty” about Brexit.

The committee concluded that the longer that uncertainty continues, particularly against a background of a weak global economy, the more likely that growth, and also inflation will slow.

The implication of these minutes being that UK base rates would also remain lower for longer.

It has until now signalled that rates are likely to rise gradually back from its post-crisis lows only if there was a “smooth Brexit”, a deal with a transition.

Or else under no-deal, amid exchange rate falls, inflation rises and slower economy, there could be either cuts or rises.

What did the MPC say about the global economy?

Policymakers said the US China trade war had intensified over the summer, which would continue to weigh on overall growth.

Manufacturing output continued to be weak, and while policymakers said the direct economic impact of ongoing trade tensions was likely to be “relatively small”, they said the trade war was “having a material negative impact on global business investment growth”.

They did not say how the recent attacks on Saudi Arabia’s oil supply would affect inflation except to say that prices had risen sharply following the attacks.

It’s an autumn mortgage bonanza

It’s an autumn mortgage bonanza

If you have a 10 per cent deposit or equity in your home, banks will fight for your business

Carol Lewis

September 14 2019, 12:01am, The Times

Homeowners and would-be buyers have a phenomenal choice of cheap mortgages after a flurry of new deals.

The number of loans available to those with a deposit, or equity, of 10 per cent or more has been boosted by the unprecedented arrival of 65 products in the past month.

Unfortunately, those struggling to get on to the ladder are missing out on the bonanza, after 11 products requiring only a 5 per cent deposit were withdrawn. With more than £26 billion worth of mortgage deals due to mature next month, lenders are competing hard for remortgage customers. According to Moneyfacts, a financial data analyst, most of the deals are for those with deposits or equity of between 20 and 25 per cent.

The new products have lowered the average rates available on five-year fixed-rate mortgages — the most popular loan on the market. The 80 per cent loan-to-value (LTV) mortgages had the largest drop in interest rates with the average falling from 2.87 per cent in August to 2.77 per cent this month. The average two-year fixed rate is 2.45 per cent compared with 2.51 per cent a year ago.

This average, however, disguises just how cheap some deals are getting. The best two-year fixed rate is from HSBC at 1.24 per cent, 60 per cent LTV, with a £999 fee. Darren Cook, a finance expert at Moneyfacts, says: “It seems that lenders have taken heed of the Prudential Regulation Authority’s warning about reducing rates on riskier, higher loan-to-value mortgages. As a result, the number of mortgages available at 95 per cent loan-to-value has fallen from 391 to 380 over the past month and the average five-year fixed rate at 95 per cent loan-to-value has increased by 0.01 per cent.

“Borrowers with a 5 per cent deposit may benefit from waiting until they accumulate a 10 per cent deposit to secure a more favourable rate and have a greater choice of products. There is double the number of mortgages at 90 per cent loan-to-value compared with the 95 per cent,” he says.

Chris Sykes of Private Finance, a mortgage broker, says that it isn’t only off-the-peg mortgages that are having a bumper season. “Many mainstream lenders are coming out with bespoke mortgage ranges that offer a far greater degree of criteria flexibility. HSBC, Natwest, Skipton, Bank of Ireland, Santander, Halifax and other mainstream lenders are hoping to attract the high-net-worth clients that would previously have been ineligible with them.”

This should make deals easier for the self-employed, small business owners and those paid primarily in bonuses, who have found it hard to get loans since stricter lending criteria were brought in under the Mortgage Market Review. The review, instigated in the wake of the financial crash and put into action in 2014, made banks much more cautious about lending.

Bespoke lending can offer greater flexibility on affordability criteria, for instance, taking account of bonus payments or fixed-rate terms for periods other than the usual two or five years. Some, such as Clydesdale, have loans designed for particular professions.

Despite the fall in the number of 95 per cent LTV products, first-time buyers are still the largest property buying group and a key target for lenders. Halifax launched a 100 per cent mortgage for them this week — with the catch that they will need to persuade mum and dad to lock away some savings as security.

The Family Boost mortgage is fixed at 2.9 per cent for three years up to a maximum loan of £500,000 and 10 per cent of the purchase price is deposited as savings, which attract a respectable 2.5 per cent interest. Either the borrower or family member must have a Halifax reward or ultimate reward current account.

Russell Galley, a managing director at Halifax, says: “As part of our commitment to lending £30 billion to first-time buyers by 2020, we are offering families a way to help give the next generation the boost that they need to get on to the property ladder, while providing competitive rates to buyer and supporter.”

According to Halifax, the average deposit for those buying their first home is £41,099, 52 per cent higher than it was in 2009, at £27,059.

There is good news too for those contemplating retirement. Hodge Lifetime, a subsidiary of Hodge Bank, launched a fixed-for-life retirement interest-only mortgage for people aged 50 or over. The loan is repayed when you, or your relatives, sell your house. The bank offers a fee-free version at 4.55 per cent and one with an arrangement fee of £995 at 4.35 per cent at 70 per cent LTV.



Look To Your Broker For A Guiding Hand When Buying During Brexit

Look To Your Broker For A Guiding Hand When Buying During Brexit

As the nation collectively bemoans the sluggish progression of the UK’s departure from the European Union, those looking to move house could be forgiven for delaying their decision until there is more certainty. We speak to Rob Clifford, chief executive at national mortgage network, Stonebridge, for his take on the current market and what you should consider when looking for your next mortgage product.

It would be easy to suggest that the ongoing Brexit pantomime, and talk of an economic downturn in the event of a disorderly departure, could prompt would-be homebuyers to hold off making a mortgage application.

However, while the country’s political progress may seem woeful, the mortgage market hasn’t been idly standing by. Recent figures from UK Finance show that lenders approved just over 14,000 more mortgages in the first six-months of this year, compared to the same period of 2018, which demonstrates encouraging confidence in the market.

As a prospective buyer, conditions certainly look favourable, despite the fact that the UK has not yet struck a Brexit deal.

At this point, we are in no doubt that Brexit has been a factor getting in the way of any significant growth in house prices, with London in particular experiencing a marginal decline in property values over the past two years according to figures released by Nationwide. Depending where in the country you are looking to buy, now could be a great time to get a good deal. However, with Bank of England governor Mark Carney warning of potential drops in house prices in the event of no-deal, it is natural to be nervous.

The thing to keep in mind with any purchase of this magnitude, is what house prices will do over the long-term, rather than within the next 12 months. If you’re planning on living in your next home for a number of years, as the vast majority of people do, then a short-term dip in value is hardly likely to impact the eventual sale price.

With the Bank of England’s base rate remaining unchanged from its current 0.75% level, a mere 0.25% increase from where it bottomed out in 2017, mortgage products remain exceedingly good value for buyers in the short term. If you do decide that now is the time to purchase your next home, there are a few things to keep in mind.

Believe it or not, the Brexit process won’t last forever, and it is wise to plan for a gradual increase in interest rates and therefore the cost of your mortgage. So, shop smart. Whether or not you take advantage of the Government-backed Help to Buy scheme, or have a sizeable deposit, make sure your plans factor in any potential rate increases. This is especially important with new build homes on the government scheme, as you will obviously need to be able to pay back your equity loan, as well as the mortgage on the property.

More good news for borrowers is the fact that many lenders are reducing mortgage product fees and rates. Research from shows that 95% loan to value (LTV)  mortgage products have one of the lowest average fees at £914, down £46 from 2018’s average, while interest rates have also fallen on this product over the past 12-months from 3.98% to 3.25%.

As a buyer, this means you may be able to get into your next property sooner than expected, but it is crucial that you properly consider the many dozens of lenders (banks, building societies and specialist lenders) competing for your business and the myriad of deals available. Alongside affordability in the face of potential interest rate rises, be mindful of your LTV and work with your chosen broker to ensure the deal suits your lifestyle and circumstances.

While it may seem a confusing time to be buying a property, there are plenty of opportunities amid the uncertainty. Whether you’re a first time-buyer or moving to another property, building a relationship with a trusted mortgage broker can pay dividends. With access to exclusive deals, and expert knowledge of the markets, they will guide you through the thousands of mortgage products available in the market, helping you pick one that meets your current and future needs.

By Stonebridge



What an election may mean for your finances

What an election may mean for your finances

We look at the possible outcomes for tax, pensions, savings and property under a new government

Carol Lewis, September 7 2019, 12:01am,

The Times

There is a much-cited dictum that people vote with their wallets. Hence politicians tend to focus on personal finance — income tax, stamp duty and pensions — in the lead-up to a general election.

Within the next day or two we could learn the likely date of the next election. However, with politicians short of time and their attentions focused on other matters, the party manifestos are likely to be more piecemeal than usual.

Steve Webb, the director of policy at Royal London, an insurer, says: “If a new government ends the uncertainty over Brexit, one way or another, this could improve the economy and investment returns. But if it mishandles Brexit, there could be serious economic consequences for people’s wages and investments.”

So how will an election hit our wallets?

Interest rates
While rates are widely expected to plummet to offset a no-deal Brexit, a key consequence of a Labour win could be the opposite. Webb says: “If a Labour government was expected to borrow heavily, this could lead to a sharp increase in interest rates.”

This might be good news for savers and those buying annuities, but bad news for those with mortgages. Webb says: “Higher interest rates would also reduce deficits in company pension funds.”

Income tax
During his campaign to become the Tory party leader Boris Johnson pledged to raise the threshold for higher-rate income tax in England from £50,000 to £80,000. At present 40 per cent tax is levied on income of between £50,000 and £150,000. Scotland and Wales set their own tax bands. This policy would not be all good news for higher-rate taxpayers because they could lose tax relief on their pension savings.

Steven Cameron from Aegon, an insurer, says: “An increase to benefit higher earners will be partly offset by a proposed increase in national insurance contributions and the loss of higher-rate tax relief on pension contributions.”

Webb believes that “other, less high-profile tax rises” could be introduced to pay for the tax cuts.

If Labour won an election, Webb says: “Labour has a radical policy agenda, which would seriously dent the incomes of the wealthy. Labour has talked about increases in income tax for higher earners, increases in corporation tax, increases and reform of inheritance tax, and increases in capital gains tax.”

Labour has proposed that the 45 per cent additional income tax rate will kick in at £80,000 rather than £150,000 with a 50 per cent rate to apply to income over £123,000.

The Conservatives have promised to look at the pension tax rules for higher earners after it emerged that NHS workers were cutting their hours to avoid paying more tax.

The tapered allowance — which whittles down the amount you can save tax-free into a pension once you earn over £150,000 from £40,000 a year to £10,000 — is particularly unpopular. Cameron says: “The pension lifetime and annual allowances are a disincentive to work and we need action across the board, not only for the NHS.”

Labour has indicated that it might reduce pension tax relief, while the Liberal Democrats have said that they would introduce a flat 20 per cent rate of tax relief on pension contributions and abolish employee national insurance payments on the contributions.

Private landlords haven’t had it easy under the Conservatives, but they are unlikely to fare any better under a Labour government.

George Bull, a senior tax partner at RSM, an accountancy firm, says: “John McDonnell’s recent suggestion that a Labour government would give private tenants the right to buy their homes at a discount is causing consternation, coming hard on the heels of Conservative government restrictions to the tax regime for private landlords.”

The Conservatives have hinted that they could look at reforms to stamp duty and greater incentives for first-time buyers, including an extension to the government’s Help to Buy scheme and a continuation of its Lifetime Isa (Lisa). The Scottish National Party said that it would abolish “gimmicks” such as the Lisa.


Raise the 40 per cent income tax threshold from £50,000 to £80,000
Replace the pension triple lock (which states that the basic state pension will rise by a minimum of either 2.5 per cent, the rate of inflation or average earnings growth) with a double lock (inflation and earnings) from 2022
State pension age to increase to 67 by 2028 and 68 by 2046
Reduction in pension tax relief for high earners
Means-tested winter fuel payments

The 45 per cent additional income-tax rate threshold to be lowered from £150,000 to £80,000
A 50 per cent tax rate to apply to income of more than £123,000
Freeze state pension at age 66
Keep the pension triple lock until 2025
Add 20 per cent VAT on private school fees
Give private tenants the right to buy their homes at a discount*
Large businesses to transfer up to 10 per cent of shares to a fund held by employees*

Liberal Democrats
Limit the tax-free lump sum that can be withdrawn from pensions to £40,000
Keep the triple lock on pensions
Flat rate of tax relief on pension contributions of 20 per cent
Abolish employee national insurance on pension contributions
End winter fuel payments for higher-rate taxpayers

Scottish National Party
Opposed to lowering income tax thresholds for higher earners
Have pledged to campaign to keep the pensions triple lock
Opposed to an increase in the state pension age beyond 66
Extend eligibility of winter fuel payment to families with severely disabled children
Business rate exemption on private schools to be lifted



House price growth is slowing but buying still beats renting

House price growth is slowing but buying still beats renting

Louisa Clarence-Smith, Property Correspondent

August 20 2019, 12.01am

The Times


The era of dizzying rises in the price of property may be over but research suggests that owning a home still makes more financial sense than renting because of low mortgage interest rates.

The monthly cost of paying the interest on a new mortgage is now 62 per cent lower than renting, according to Capital Economics, a research consultancy. It found that the average monthly rent for a property was £859, compared with the £323 average monthly interest on a new mortgage.

In comparison, between 2010 and 2018, the average interest on a mortgage was 55 per cent lower than the average rent. Paying the interest on a mortgage in the 2000’s was only 27 per cent cheaper than paying the rent.

Hansen Lu, an economist at Capital Economics, said: “The era of sustained, rapid house price growth appears to be over. But even so, the cost of owning a home is still favourable compared with renting and is likely to stay that way. That suggests that the strong preference that households have for owner occupation will be sustained.”

House price inflation has slowed since the Brexit vote in 2016 as a result of price falls in and around London, particularly for more expensive homes affected by higher stamp duty. Government figures this month showed that in the year to June house prices across the country rose by 0.9 per cent to an average of £230,000, the weakest growth rate since 2012.

Brexit uncertainty is weighing on the housing market, with property sales at their lowest level since the global financial crisis, according to Savills, an estate agency.

The Bank of England has forecast that house prices could fall by as much as 30 per cent in the event of a chaotic no-deal Brexit.

However, Mr Lu said that while a collapse in house prices or a steep rise in interest rates could make buying a home much less attractive in the short term, there remained a “big picture” case for buying over renting.

Capital Economics said that mortgage payments had fluctuated broadly in line with rents over the past decade.

Most borrowers fail to qualify for comparison site mortgage deals

Most borrowers fail to qualify for comparison site mortgage deals

Kate Palmer

August 18 2019, 12:01am

The Sunday Times

Fewer than four in 100 people looking for a mortgage are actually eligible for the deals found by comparison websites, research for The Sunday Times shows.

Analysis of searches made by 11,000 borrowers shows that just 385 — or 3.5% — would qualify for the mortgages they are shown.

Many comparison websites have a simple calculator for borrowers that asks for the property value, size of deposit and loan length. They then see a list of available deals that fit these criteria — but the loans will depend on lenders’ affordability tests, which scrutinise expenses such as gym memberships, private school fees and spending on credit cards.

The credit reference giant Experian found that only a tiny number of people will actually be eligible for these deals, which represent about 73% of available mortgages. They exclude niche products, such as home loans only available through brokers or offered by private banks.

Homebuyers who fail to pass the tests are either declined outright or offered less money than hoped for.

Borrowers have more luck if they use an eligibility tool, where they input salaries, spending commitments and debts. Experian said 22% of borrowers would qualify for the deals found this way.

Some websites, such as Compare the Market, offer even more detailed eligibility checks, which include a search of the borrower’s credit profile. These are time-consuming to complete, but mean that borrowers are more likely to be accepted for any of the deals they see.

Lisa Fretwell, from Experian, said: “People don’t want to leave anything to chance when buying their dream home — they want to find affordable mortgages they will be accepted for.”

Help to Buy continues to grow and could be extended beyond 2023

Help to Buy continues to grow and could be extended beyond 2023

The number of homes bought through the Government’s flagship Help to Buy scheme increased by 9% in the 12 months to March 2019 with the figures also rising for first time buyers.

The data published by the Ministry of Housing, Communities and Local Government (MHCLG) show that 52,404 home sales were completed under the scheme during the 12 month period, the first time it has reached over 50,000 in a year.

Some 43,248 of these homes were bought by first time buyers using the Help to Buy scheme, a rise of 11% year on year, dispelling the myth that it does not help those taking their first step on the housing market.

In London there were 6,115 purchases using Help to Buy, up 30% year on year and first time buyers made up 95% of sales in the capital, some 5,838 homes.

The average price of properties bought through the scheme across England reached £300,487, up 4% from £288,462 at the same point in 2018.

Since it was launched in April 2013 some 221,405 homes have been bought using the scheme with 81% of them going to first time buyers. The mean purchase price of a property bought under the scheme since the start was £260,218, with buyers using a mean equity loan of £56,257.

Help to Buy offers buyers who have a deposit of 5% an interest free Government loan of up to 40% of the purchase price of new build homes in London and 20% in the rest of the country.

Now it could be extended beyond its current end date of 2023. The newly appointed Secretary of State for Housing, Robert Jenrick, said it will be considered. ‘This is a new administration, a new Chancellor, I think all options are on the table. I intend to have further discussions with Sajid Javid in the weeks and months to come,’ he said.



26th July 2019



Mortgages: switch now to cut your payments

Mortgages: switch now to cut your payments

Homeowners could save £200 a month thanks to competitive rates and higher prices, says lender

Rupert Jones 

The Guardian

Sat 20 Jul 2019 07.00 BST Last modified on Mon 22 Jul 2019 10.58 BST

More than £26bn worth of mortgage deals are due to mature in October, the largest monthly volume of the year, according to new figures released this week.

So if one of those thousands of home loans is yours, you might want to start thinking about looking for a new deal now – particularly as you may be able to make a chunky saving on your monthly payments.

Yorkshire building society – which came up with the figure after analysing market data – says some homeowners whose deals are coming to an end this autumn could save about £200 a month by remortgaging.

That is partly as a result of the current competitive mortgage rates, but also reflects the rise in house prices across much of the UK during the last few years.

Mark Harris at mortgage broker SPF Private Clients says: “Those coming off five-year fixes will find that rates are now considerably cheaper, which should mean you can make a significant saving on your monthly payments.”

He adds: “You may also find that your property has appreciated in value, meaning you qualify for a lower, cheaper, loan-to-value [LTV] band.”

Official Land Registry data shows that the average UK house price in October 2014 was £191,855, and had risen to £229,431 by May this year (the latest month for which figures are available) – an increase of just under 20%.

The Yorkshire says a homeowner who initially borrowed 85% of a £200,000 property in October 2014 at a market-average five-year fixed rate of 4.25% could benefit from a lower LTV of 65% and take advantage of the society’s two-year fix priced at 1.54%, which would save £201 a month in repayments. (However, this deal does involve paying a £1,495 product fee).

If you want to take out a five-year fix, decent rates now available for those remortgaging include:

  • 1.77%from Skipton building society, where you can borrow up to 60% of the property’s value, with a £1,995 product fee
  • 1.94%from Platform up to 60% LTV with no product fee
  • 1.83%from Barclays up to 75% LTV with a £999 product fee

Often with remortgages, the lender will throw in a free valuation and/or free legal services.

Harris says if your mortgage deal is coming to an end, be prepared. “Speak to a mortgage broker a few months beforehand, though if you have a broker, they should be getting in touch with you. If you are looking for extra cash for home improvements or debt consolidation, you should mention this so it can be factored into the sums.”

People need to make sure they consider all the options available. “Your existing lender may be in touch offering another deal for you to slip on to, but make sure you compare this with what else is on the market rather than assuming it is the best option for you,” he adds.

Nick Morrey at broker firm John Charcol says remortgaging to a new lender is likely to be the cheapest option, since the likelihood of your existing lender offering you a product that is also the cheapest of all that are out there is slim. However, the latter route will be quicker than a remortgage, as it will not involve any underwriting or legal work.

“If your current product expires in October, you have approximately three months to tee up a remortgage, should that be the best option. Given that it takes on average up to two weeks to get an offer of advance from the new lender, and four weeks for the legal work to be done, this should be enough time to have everything in place to go the day after your current deal ends, he adds. “Considerable savings can be made compared to the deals available this time in 2014.”

According to Harris, if you have savings earning next to nothing in interest but you want to hang on to them rather than paying down the mortgage, it may be worth considering an offset home loan. These mortgages link your savings, and in some instances your current account, to your home loan.

“This will enable you to reduce the interest you pay while still retaining access to your savings in case of emergency.”

Meanwhile, Kevin Roberts, a director at Legal & General Mortgage Club, says a competitive mortgage market and slower house price growth are helping more first-time buyers make home ownership a reality.

However, he points out that HSBC found that people now expect to be on average 39 years old before they buy their first home. “There are clearly still challenges facing people trying to take their first step, particularly if they don’t have the support of a Bank of Mum and Dad.”

First-time buyers, now is the time to get on the property ladder

Banks are approving more loans, rates are low and there’s even an option where you don’t need to borrow

Marc Shoffman

July 6 2019, 12:01am, The Times

  • Housing market
  • Banking
  • Economics
  • London


First-time buyer mortgage approvals are on the rise, but many people are still struggling to get on to the property ladder because of demands for high deposits and wages.

Lenders approved 7.8 per cent more mortgages for first-time buyers in April compared with the same month last year, according to UK Finance, the industry trade body.

The average interest rate on a typical 90 per cent loan-to-value (LTV) two-year fixed rate mortgage is 2.65 per cent, compared with 2.73 per cent in July 2018, according to Moneyfacts, a data company. The average rate on a 95 per cent LTV mortgage over the same period has fallen from 4.04 per cent to 3.25 per cent.

Five-year fixed rates have also fallen. The average five-year fixed rate mortgage at 90 per cent LTV is 3.02 per cent, compared with 3.2 per cent this time last year, while 95 per cent LTV deals have dropped from 4.37 per cent to 3.64 per cent. “For those who can afford it, there is a plentiful supply of mortgage deals on the market that have been tailored to suit the needs of first-time buyers,” says Rachel Springall of Moneyfacts.

Deposit differences
Mortgage rates may be low, but raising a deposit can still be difficult for first-time buyers. There are still big regional variations in house price inflation, which affects requirements and the size of deposit needed. Research by Zoopla, a property portal, found that the average deposit first-time buyers need to purchase a property in one of the UK’s main cities is £38,418, but can range from £18,449 in Liverpool to £119,000 in London.

New mortgage borrowers are benefiting from falling prices in the south, according to Zoopla, particularly in London where prices fell 0.4 per cent in the 12 months to May.

This drop means the average annual income required to buy a home has also fallen to £84,000 in London, which Zoopla says is the lowest in four years. In contrast, rising prices in cities such as Manchester and Leicester have pushed the average income needed to buy up by 19 per cent and 20 per cent respectively. Richard Donnell, research director at Zoopla, says: “While affordability in London has improved, first-time buyers will still need to earn more than three times the minimum income required to buy in Liverpool.”

Is now a good time to buy?
Mortgage brokers insist the market is ripe for first-time buyers despite uncertainties such as Brexit.

Joshua Gerstler, director of the Orchard Practice Financial Services, an adviser, says: “We always think that it is difficult for first-time buyers and that people had it much easier ten years ago. Then a decade goes by and they realise they were lucky to buy their first property when they did.

“If you are buying a home for the long term, Brexit should not have any influence on your decision.” Jane King from Ash-Ridge Private Finance, a mortgage adviser, says: “With interest rates low, lenders wanting to lend and a slight relaxation of criteria in the past year or two means now would be a good time to buy, especially with prices falling in some parts of the UK.”

Best buys
NatWest is offering the lowest rate on the market for a two-year fix at 1.38 per cent with a £995 fee, but you will need a 40 per cent deposit. Skipton Building Society offers a market-leading five-year fixed rate of 1.77 per cent with a £1,995 fee also at 60 per cent LTV. Yorkshire Building Society offers a 90 per cent LTV two-year fixed rate at 1.79 per cent with a £1,495 fee.

Some lenders are offering zero- deposit deals. Barclays relaunched its Family Springboard mortgage in May, which lets homebuyers borrow deposit-free at 2.95 per cent over five years as long as a family member or friend puts 10 per cent of the property value into a savings account as security.

First-time buyers can also get on the ladder through the government’s shared-ownership scheme, where you take out a mortgage for a share in the property that you own (usually between 25 and 75 per cent) and pay rent on the rest. Another option is the Help to Buy equity loan scheme, which provides a 20 per cent government loan (40 per cent in London) to those with a 5 per cent deposit to put towards the purchase of a new- build property.

The government has confirmed this week that the scheme will run until at least 2021.

King says that first-time buyers can get good deals with a 10 per cent deposit. “Don’t just look at the headline rate. Buyers should also consider added fees and charges and whether these are refundable if the sale falls through.”

She adds: “They should also check specifically that the lender will agree a loan for the type of property that they want to buy.”



Cheaper mortgage rates for new buy-to-let landlords

Cheaper mortgage rates for new buy-to-let landlords

The week Barclays joined the slew of lenders cutting rates on buy-to-let mortgages.

Buy-to-let mortgage rates are tumbling as lenders unveil cheap deals in a bid to keep landlords in the market.

Figures released by Mortgage Brain, a platform used by brokers, show the average 40%-deposit tracker mortgage is 3% cheaper than it was three months ago, and a 30%-deposit tracker deal is 2% cheaper than in March. This means a landlord taking out a £150,000 mortgage would save £234 a year with a 40% deposit and £144 a year with a 30% deposit.

On Thursday, Barclays joined the slew of lenders cutting rates, including a reduction from 1.59% to 1.55% on its two-year fixed-rate deal to landlords with a 40% deposit. It also cut its 1.88% five-year fix to 1.83% with a minimum 25% deposit.

This followed moves by Halifax on Tuesday, which cut buy-to-let rates on some deals by 0.45 percentage points, and by Nationwide, which trimmed rates on its broker-only products.

Over the past two years, landlords have had to adjust to stricter lending criteria, as well as the phasing out of tax relief on mortgage interest payments by April 2020.

“The buy-to-let market has taken a real hit — there simply is not as much interest from landlords as lenders have been used to over the years,” said Aaron Strutt of broker Trinity Financial .

Lenders have been targeting the buy-to-let remortgage market to drum up some business and, incredibly, they keep cutting rates to tempt landlords in.”

There are also a record number of deals available to new landlords, a sign that lenders are targeting first-timers into the rental market.

There are 1,405 first-time buy-to-let mortgages, up from 645 in 2014, according to Moneyfacts, the price comparison website. The average rate for a two-year fix has plummeted from 4.01% in 2014 to 2.97% this month.

“Entering buy-to-let hasn’t been without its hurdles,” said Rachel Springall of Moneyfacts. “Rules designed to tighten lending don’t seem to have shaken up attitudes to attract first-time landlords.”

The Sunday Times

July 7 2019 12.01am