Category: First Time Buyer

House prices not affordable except in Northern Ireland

The average cost of a home in England was £298,000 in the 12 months to the end of March last year, equal to 8.6 years of average household income, the latest official data shows.

The Office for National Statistics (ONS) calculates this affordability level on an annual disposable household income of £35,000 during the period. An acceptable level of house price affordability is at five years of household disposable income.

It adds that since 1999 “house prices have increased twice as quickly as household incomes in England; house prices in Wales and Scotland have also increased more rapidly than incomes, but the differences are more moderate”.

The department points out that average house price to disposable household income ratios were 5.8 years in Wales – based on homes priced at £205,000 and £35,000 average incomes.

In Scotland, the ratio is 5.6 years – based on homes priced at £185,000 and £33,000 average incomes.

While in Northern Ireland the ratio is 5 years — based on homes priced at £160,000 and £32,000 average incomes.

The ONS says for low-income households, average-priced homes in all four countries have been “unaffordable” since 1999, when it began collecting data in this series.

It says only the 10% of highest-income households in England could afford an average-priced home with fewer than five years of household income in the financial year to 2023.

This is in comparison to Northern Ireland where an average-priced home was affordable with an average household income.

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Income Plus multiples for First Time Buyers

Income plus affordability for first time buyers. Leeds Building Society

A range of new mortgages and improvements in assessing borrowers affordability to repay will result in Leeds Building Society offering first-time buyers up to £66,000 more on average.

The Income Plus mortgages could result in aspiring homeowners with a minimum household income of £40,000 to borrow up to 5.5 times their earnings, compared to 4.5 times on the Leeds BS standard lending.

These changes will result in the average first-time buyer being able to borrow a maximum of £356,000 through Income Plus compared to £290,000 under its standard lending.

Single and joint borrowers, including those who are self-employed, are eligible for Income Plus mortgages which are available at up to 95% loan to value, including new build houses (new build flats 85% loan to value).

They can also be combined with the society’s existing green affordability benefit which enhances the affordability on a new build home with an Energy Performance Certificate of A or B.

Income Plus will be available via the society’s intermediary partners only.

Rates on the seven Income Plus mortgages range from 4.40% at 75% LTV (£999 product fee) to 5.15% (£999 product fee, £500 cashback) and 5.19% (no product fee, no cashback) at 95% LTV. All of the mortgages are fixed for five years and include a standard home valuation survey.

Income plus will support the increasing number of first-time buyers facing affordability constraints.

To discuss your mortgage options contact us.

First time buyer rates still low amid turbulence

Rightmove has released its weekly mortgage report.

The current average asking price of a typical first time buyer property is £225,340.

For someone taking out an average five-year fixed, 85% LTV mortgage, the average monthly mortgage repayment on this type of home is now £1,104 per month if repaying over 25 years, compared with £1,138 per month a year ago (when the average first-time buyer property asking price was £223,426).

The average rate for a 95% loan to value mortgage fixed for 2 years is 5.65%. The larger deposit a buyer can put towards the purchase the lower mortgage rate that can be sourced.

For example the average 2 year fixed rate for a buyer with a 25% deposit is 4.85%. The average 5 year fixed rate is 4.74%.

To discuss your mortgage options get in touch with a local broker through Best Mortgage Services.

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Mortgage rate cuts from Virgin and Co Op

The Co-operative bank for intermediaries has relaunched selected mainstream and buy-to-let (BTL) products for new business and retention products while Virgin Money has launched seven-day specials and reduced selected rates.

The co-operative bank for intermediaries has cut selected two- and five-year fixes by up to 0.32% in its residential range across new business and internal product switches.

Meanwhile, Virgin Money has launched three seven-day specials, which will be available until 22 July.

These include

75% LTV remortgage five-year fix at 4.40%
80% LTV purchase five-year fix at 4.46% with a free valuation
90% LTV purchase five-year fix at 4.75% with a free valuation
All three come with a fee of £995.

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Things to consider when choosing a mortgage.

With rising household bills, switching your mortgage could be one way to save some money. As competition hots up between lenders there are plenty of low rates to choose from. Many of the deals are below 1 per cent.

Here are top tips to choosing a mortgage.

Know your budget. List all you’re your expenses and see what surplus is left over.

Decide which mortgage is right for you. Many people prefer the security of a fixed rate. With variable rates your mortgage payment will change as interest rates change.

Look at the whole deal. Don’t just look at the interest rate. Consider application fees, arrangement fees, early repayment charges.

Talk to a Mortgage Broker. Mortgage Advisors continuously search mortgage deals and can advise on the best option for your circumstances. Some of the best deals are only available through mortgage brokers. Get in touch with a local mortgage broker.

Get your paperwork ready. Have at least 3 months bank statements and payslips for proof of income. If you are self-employed most lenders will require at least 2 years accounts. Proof of identity and proof of current address is required.

Check your credit file. Get a copy of your credit report to check that there is no adverse credit registered. Some lenders will decline an application based on the information on your credit file.

Job consistency. Lenders like to see you have been in your current job for at least 3 to 6 months and will need confirmation that the role is permanent.

The larger the deposit the better. Lenders reserve their best rates for those with larger deposits. The more money you can put towards the purchase, the greater choice of mortgages you will have.

Minimise your debts. Try to reduce any debts that you have before applying for a mortgage. This demonstrates to the lender that you can manage money effectively. It could also mean that you will qualify for a larger mortgage when it comes to the lender’s affordability calculations.

Lifetime Fixed rate mortgages

Not one but two mortgage companies will start offering lifetime fixed-rate mortgages in 2021, in a move that could fundamentally change how we finance house purchases.

The longer you fix, the greater your financial stability – but usually you pay extra for that peace of mind. Short term fixes are usually cheaper, but when the fixed rate ends there is a risk that interest rates and mortgage rates will be higher and more expensive.

But the longest most people will fix for is five years, although a few mortgage deals let you fix for as long as 10. Long term fixes may not have taken off because they usually carried hefty early repayment charges or exit fees.

Long term fixes are a welcome solution to first time buyers offering security and certainty to budget finances. The interest rate will certainly be higher than 2 or 5 year fixed rates in the short term but over the course of a 25 year mortgage they could work out better value in the long term. Especially if interest rates nudge higher every 2 or 3 years.

House prices rose by 8.5 per cent in 2020, according to the Office for National Statistics, and the average property now costs £252,000. For such a large price, fluctuations in interest rates can be intimidating for buyers who face the prospect of decades paying it back.

Time will tell if more mortgage companies offer long term fixed rate solutions. Talk to a local mortgage broker to discuss your mortgage options.

Fixed rate mortgages

Fixed rate mortgage

Below are a list of fixed rate mortgage deals suitable for First Time Buyers.

2 yr fixed rate

2.55% 2 year fixed rate with no fees. Available to 95% loan to value. Free valuation for first time buyers

3 yr fixed rate

3.75% 3 yr fixed rate with no fees. Available to 95% loan to value. Free valuation for first time buyers

5 yr fixed rate

3.58% 5 yr fixed rate with £268 application fees. Available to 95% loan to value. Free valuation and £300 cashback incentive upon completion of the mortgage.

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Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt that is secured on it.

The content on this website does not provide Financial Advice but provides information only. Advice can only be provided by a Regulated Mortgage Advisor.

Stamp Duty Rates

Residential Property Stamp Duty Rates

A purchaser pays Stamp Duty Land Tax (SDLT) on all residential purchases above £125,000. Property prices below £125,000 pay zero rate SDLT. Note that this only applies to residential property purchasers. The rates of stamp duty are as follows

£125,000 or below = 0%
£125,000.01 – £250,000 = 2%
£250,000.01 = £925,000 = 5%
£925,000.01 – £1,500,000 = 10%
Above £1,500,000.01 = 12%

For example, a property is purchased for £300,000.

First £125,000 = £0
2% between £125,000 and £250,000 = £2,500
5% between £250,000 and £300,000 = £2,500

Total stamp duty = £5,000.

Stamp Duty Rates for Buy to let Landlords

Buy to let landlords are set to be hit with an extra 3% stamp duty on the above rates from April 2016. In the above example of a £300,000 property purchase, stamp duty on the first £125,000 will be at 3% = £3,750. The next £125,000 will have a rate of 5% = £6,250. The final £50,000 will be taxed at 8% = £4,000. Total stamp duty tax = £14,000. That is a £9,000 increase.

It is not just landlords that will be hit but anyone owning a second home. This could be parents buying a property for their children or a couple setting up home where one is already a homeowner.

The higher rates will only apply to additional properties purchased in England, Wales and Northern Ireland on or after April 1 2016. Transactions below £40,000 are exempt as well as transactions involving houseboats and caravans.