Seven-year age gap between FTB’s across UK

Recent research by Halifax has revealed a seven-year age difference in First Time Buyers depending on where they live.

According to the lender the national average is currently 30, but they say this figure hides the disparity between the oldest and youngest groups buying a property for the first time.

The report found thast the youngest First Time Buyers, at 27 years old, were in parts of Cumbria and South Wales. In areas such as Slough and some London boroughs on the other hand, the average had risen significantly to 34.

This data reveals a link between younger buyers and areas with lower property prices, where the house price to earnings ratio is below the national average. Saving for a deposit is therefore a more realistic and more affordable prospect.

By contrast, areas with the oldest buyers are nearly all in the South East, where the price to earnings ratio is nearly double the national average.

It’s no wonder that so many First Time Buyers need help getting on to the property ladder, and that in the meantime Generation Rent continues to dominate so many parts of the UK.

CML figures show an increase in lending 

The latest figures from the Council of Mortgage Lenders reveal that mortgage lending in the residential market has risen over the last year.

First Time Buyers borrowed £5.1bn in August, an increase of 24% on this time last year, while lending to home movers increased by 3%. 

Remortgage activity amounted to £5.9bn, representing a significant increase of 41% compared to last August.

These figures certainly indicate that appetite among borrowers is still strong. The CML say this is likely to continue over the coming months, with mortgage rates ticking along at near-record lows following the base rate cut in August.

By contrast the report also reveals that Buy to Let lending is down 12% year on year, a drop which is to be expected given the changes to stamp duty on second properties this year, and the upcoming tax changes next 

Tougher rules to be introduced for BTL market

Following a consultation on the Buy-to-Let market earlier this year, the Prudential Regulation Authority has now confirmed it will introduce tougher underwriting criteria, to be phased in from January next year.

The aim is to make sure that borrowers are not over-stretching themselves, and can cope with their mortgage payments as well as the other costs associated with being a landlord.

These costs could include repairs, voids and management fees. Tax liability should also be accounted for, particularly for higher rate taxpayers who will see their tax relief on mortgage interest eroded from next April.

The regulator will require that lenders consider potential increases in interest rates. As a result they will be expected to assume a minimum stress rate of 5.5%, unless the mortgage is fixed for at least 5 years.

A number of lenders have already reviewed their policies and increased their rental requirement, their stress rate, or both. More are likely to follow suit over the coming months, and ultimately this could mean that landlords won’t be able to borrow as much based on rental income.

It’s therefore important for investors to be aware of increasing costs over the coming years and account for these when planning a purchase. 

The July 2016 house price index data for the UK showed a monthly rise of 0.4 per cent, while in England the increase was slightly higher at 0.5 per cent. In London the monthly change was 1.0 per cent but of the English regions it was the North East region that experienced the highest monthly growth with a rise of 2.3 per cent. Falls were seen in Yorkshire and The Humber, the South West and the West Midlands, the latter seeing the greatest fall at minus 0.8 per cent.  

On an annual basis the price change across the UK was 8.3 per cent, bringing the average house price to £216,750. In England the annual price increase was a little higher at 9.1 per cent and the average house price £232,885. London experienced a rise of 12.3 per cent making the price of an average London home £484,716. However, the East of England again saw the greatest increase over the year with a rise of 13.2 per cent, while Yorkshire and The Humber saw the lowest annual price growth at 4.7 per cent. Annual price increases by property type across the UK showed little difference, ranging from 8.1 per cent for both terraced houses and flats and maisonettes to 8.5 per cent for both detached and semi-detached houses.

Detailed statistics for local authority areas continue to show a wide variation but only five areas saw a fall in prices over the year, including the London boroughs of Camden at minus 0.6 per cent, Hammersmith and Fulham at minus 1.6 per cent, and Kensington and Chelsea at minus 3.0 per cent. The highest annual rise was seen in South Bucks at 22.7 percent, while Stevenage, Haringey, Hertsmere and Newham also saw increases above 20 per cent.

Completed sales for England in May 2016 totalled 49,795, a fall of minus 33.5 per cent compared to a year ago when 74,897 completed house sales were made.

Statistics relating to building status showed that the average price of a new build property in England in July was £295,039, down minus 2.2 per cent on June but up 16.4 per cent on a year ago. The average price of a resold property was £228,779, a rise of 0.7 per cent over June and 8.5 per cent higher than 12 months ago.

Statistics on buyer status in England showed that the average price of a house sold to a first time buyer was £195,484 and to a former owner occupier £264,184. Prices to first time buyers increased by 0.3 per cent over June, while re-purchasers saw an increase of 0.6 per cent. Over the year, prices for first time buyers increased by 8.9 per cent and for former owner occupiers by 9.2 per cent.

The latest figures on funding status, which compare average cash and mortgage prices, show that in England the average cash price was £218,331 and the average mortgage price was £240,233. The monthly increase in prices for cash buyers was 0.3 per cent, while mortgage purchase prices rose by 0.5 per cent. However, the annual change for cash purchases was 8.3 per cent, while for mortgage purchases it was somewhat higher at 9.4 per cent.

At its mid-September meeting, the Bank of England’s Monetary Policy Committee unanimously voted to leave its main interest rate at 0.25 per cent. The Bank halved its interest rate from 0.5 per cent to the new historic low in August with the aim of maintaining the stability of the UK’s banking system following the June referendum on membership of the European Union.  

A number of indicators measuring near-term economic activity suggest that the impact of the Brexit vote has been weaker than at first feared. However, the Bank still expects that the pace of economic activity in the July to September quarter will still be half the growth rate recorded earlier in the year. The Bank reiterated that it might yet need to cut interest rates further in the coming months.

The Monetary Policy Committee also voted to stand by its August decision to expand quantitative easing. The Bank will purchase an extra £60 billion of government bonds, which will take the total to £425 billion. It will also buy a further £10 billion of corporate bonds as part of its continuing measures to prevent the economy falling into recession.

Under a new timetable, the next Monetary Policy Committee meeting will not take place until November.

One of the economic indicators that seems to show that consumer confidence has not fallen away since the Brexit vote is that UK retail sales were stronger than expected in August. The Office for National Statistics reported that sales volumes fell by just 0.2 per cent from July and were up by 6.2 per cent from August last year. Furthermore, the sales increase for July was also revised upwards from 1.4 per cent to 1.9 per cent, representing the best performance for the month in 14 years.

Another positive indicator was the slight fall in UK unemployment to 1.63 million between May and July. The unemployment rate was 4.9 per cent compared to 5.5 per cent a year ago. However, the number of people employed in the public sector is at its lowest level since the Office for National Statistics started collecting the figures in 1999, down to 5.33 million, indicating that it is the private sector that is making the jobs.

A key measure of the economy is the UK Consumer Prices Index of inflation; in the year to August, the average cost of everyday household goods and services went up by 0.6 per cent, unchanged from July. The Retail Prices Index, which includes the cost of mortgages, dropped to 1.8 per cent in August from 1.9 per cent in July.