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First-time buyers spending 40% of pay on mortgages

August 5, 2024August 5, 2024 interestratesinfo

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People buying a house for the first time are spending about 37% of their take-home pay on mortgage payments, according to the Nationwide.

The figure is well above the long-term average of 30%, the building society said, making it tougher for new buyers to afford a house.

House price growth picked up in the year to July as wages rose, it added.

Prices increased by 2.1% over the year, the fastest pace since December 2022.

Some people were feeling more confident about getting a mortgage as their pay packets went up, Nationwide chief economist Robert Gardner said.

But relatively high mortgage rates and affordability issues also acted as a brake for prospective buyers.

What can I do about my mortgage now the base rate has been cut?

August 5, 2024August 5, 2024 interestratesinfo

Last week’s Bank of England interest rate cut, the first since 2020, spelled good news for millions of homeowners and would-be buyers – but it has also given them lots to think about.

If you are looking to buy a home, what sort of mortgage do you go for, and is this going to push house prices even higher? And if your existing mortgage deal is about to end, should you grab another one right now, or hold fire in case lenders launch cheaper products?

The cut, from 5.25% to 5%, should translate into lower borrowing costs for homeowners with a base rate tracker mortgage, or whose monthly payments are linked to their lender’s standard variable rate (SVR).

However, almost 7m of the UK’s 8.4m existing residential mortgages are on a fixed rate, so most people won’t see any change. A chunk will, however, need to consider their options over the next few months because their current deal is coming to an end.

Here we round up some of the advice from mortgage brokers.

I got £12,000 free cash using little-known trick to buy £228k first-home at 26

July 29, 2024July 29, 2024 interestratesinfo

PERSONAL assistant Aimee Shipp always wanted to own a home – and skipped University and getting a degree so she could start saving aged 18.

At just 26, the savvy saver bought a £228,000 flat in Harlow, Essex as she worked as a personal assistant.

In her first job, aged 18, she started saving for a house deposit.

She was being paid £32,000 a year, despite having no higher education qualifications.

By 20, this had risen to £35,000 and by 22 she was earning £38,000 a year as a PA.

Aimee said: “I didn’t want to go to university and get saddled with debt, I wanted to get a job and save to buy a home of my own, so that is exactly what I did.”

Last year, she finally decided she had saved enough money to put down a deposit on a home of her own, so started to search for apartments she could afford.

Interest rates cut hopes rise as Bank of England says mortgage approvals steady

July 29, 2024July 29, 2024 interestratesinfo

The Bank of England has reported that the number of mortgage approvals for home buyers remained “broadly stable” in June, with 59,976 mortgages for house purchase approved, compared to 60,134 in May.

The Bank’s Money and Credit report stated: “Net mortgage approvals (that is, approvals net of cancellations) for house purchases, which is an indicator of future borrowing, remained broadly stable at 60,000 in June.”

Since August last year, the base rate has stayed at 5.25 percent.

However, with inflation hitting the two percent target level for the past two months, there are hopes that interest rates can start to be reduced, possibly as early as Thursday, easing the pressure on borrowers.

Just one in eight would-be first-time buyers can afford average starter home

July 29, 2024July 29, 2024 interestratesinfo

Only one in eight potential first-time buyers can afford the average starter property in their area, new analysis has revealed.

High house prices, increasing living costs, insufficient savings, rising rents and mortgage rates have all combined to push home ownership out of reach for many young people, according to the study by the owner of Skipton Building Society and analysts at Oxford Economics.

It revealed almost four in every five potential first-time buyers have insufficient savings for the deposit needed to get onto the property ladder in their area.

The challenge is greatest for potential first-time buyer households in the bottom 25 per cent of earners – those earning £22,850 or less a year.

For these first-time buyer households, fewer than one in 100 can afford to take the first step onto the property ladder in their local area.

Rightmove backs Labour efforts to turn renters into first time buyers

July 29, 2024July 29, 2024 interestratesinfo

Rightmove has thrown its weight behind the new Labour government’s bid to help first time buyers – and it wants it to go further.

In a statement over the weekend the portal said it welcomes proposals to help first-time buyers, including Labour’s initiative to give local first-time buyers the first chance to buy homes on developments. Its housebuilding targets and planning reforms should also positively impact those buying for the first time.

Rightmove cautions that its analysis suggests some limitations with a mortgage guarantee scheme, and it is only likely to be able to support a small number of first-time buyers. However, it says making it permanent would also at least give first-time buyers the confidence that it is an option for them.

A new first-time buyer study by the portal reveals that only 37% of homes for sale will be eligible for first-time buyer stamp duty relief in England when the existing thresholds revert from April 2025.

Landlord property purchases slump to record low

July 29, 2024July 29, 2024 interestratesinfo

Landlords purchased just 10% of homes sold across Britain during the first half of this year – the lowest share for at least 15 years.

The figure comes from Hamptons which says the new low is a sharp contrast with the 16% recorded in 2015 – before tax and regulatory changes reduced the appeal of investment in buy to let.

More recently, high mortgage rates combined with political uncertainty and the threat of new rental regulations have weighed on the appetite for new investors to enter the market. The share of investor purchases has been gradually falling further over the course of 2024 so far, reaching a low of 9.7% in June.

Assuming current trends continue into the second half of the year, in number terms, there are likely to be 113,630 new buy to let purchases across Britain in 2024, 75,900 or 40% fewer than in 2015.

Soaring UK mortgage rates have pushed 320,000 adults into poverty, thinktank says

July 29, 2024July 29, 2024 interestratesinfo

As many as 320,000 UK adults have been pushed into poverty by soaring mortgage costs after the sharpest increase in interest rates since the 1980s, a leading thinktank has said.

Highlighting the damage caused by Britain’s exploding mortgage timebomb, the Institute for Fiscal Studies (IFS) said individuals who needed to renew their home loans or take out new ones in the past two years had experienced a sharp fall in their disposable income.

It said some households were paying thousands of pounds more in additional mortgage payments, in a development that was likely to have driven up poverty rates among mortgagors by 1.4 percentage points between December 2021 and December 2023.

It said this jump in relative poverty – defined as people living in households with income below 60% of the median – was the equivalent of 320,000 more adults falling below the breadline.

Millions of homeowners have faced a leap in borrowing costs after 14 consecutive increases in the Bank of England base rate from a record low of 0.1% in December 2021 to 5.25%, where it sits now, in its most aggressive assault on inflation for four decades.

Tribunal slams ‘reprehensible’ landlord who illegally evicted nurse

July 29, 2024July 29, 2024 interestratesinfo

A landlord who sub-let an unlicensed HMO, failed to pay thousands of pounds in rent to the owner and illegally evicted a tenant has been handed a £4,872 rent repayment order.

The tenant – a nurse at a nearby hospital – moved in during December 2020, paying £550 per month and a deposit of £580, a First Tier Property Tribunal heard.

He shared the four-bedroom house in Croydon Road, Wallington (main image), with five other men, and said landlord Samuel Babajide Saibu did not live there.

The tenant was given two weeks’ notice in December 2022 but refused to leave as he needed more time to find somewhere else and paid the rent in January 2023. Saibu changed the locks, meaning that the tenant had difficulty recovering his possessions, and didn’t repay the deposit or the last month’s rent.

My mortgage fix ends in January – how low could rates get by then?

July 29, 2024July 29, 2024 interestratesinfo

Is the mortgage market turbulence getting you down? Have you got a mortgage-related question you need answering? Email in and we’ll get one of our experts to reply. Nick Mendes, mortgage technical manager at John Charcol, has given his advice to a reader below. If you have a question for our experts, email us at money@inews.co.uk.

Question: My five-year mortgage fix ends in January next year. We have a 80 per cent loan-to-value mortgage and were paying under 2 per cent. I know we’ll pay much more from next year, but I just wondered if you could share any insight on what sort of rate we might be looking at?

Answer: There has been considerable mortgage rate repricing among lenders in recent weeks. With a bank rate reduction imminent – whether on 1 August or 19 September – we finally appear to be heading towards an easing of rates.