The state of the Housing Market... Could now be the time to buy?
I spent some time this morning reviewing the trends in housing and the overall state of the market.
Having read numerous reports from industry commentators the overwhelming feeling was one of pessimism. I see the world slightly differently and being involved day to day in helping clients to achieve their mortgage and homeownership ambitions I can confidently say that there is hope and help available.
Through my research it also became evident that most industry professionals see rents increasing over the coming year, mainly down to a continued reduction in properties to rent. With the Government, in their attempt to quell the ever-expanding private rental market, making changes to the taxation on investment property purchases and income derived from these properties, as well as making changes to legislation surrounding renting a property, some landlords are deciding to leave the private rental space. The impact…. Higher rents, less availability of properties and more stress and strain on people renting without an end in sight.
Whilst I am a realist and understand that house price rises continue to put some properties out of reach, there are many schemes out there to help and assist almost anyone trying to get onto the housing ladder for the first time. Also, with unemployment at record lows, and income levels increasing at a faster rate than in previous fallow years, now may well be the time to grab the bull buy the horns and get onto the housing ladder, move to a bigger property for your family’s needs, or take some equity out of your property to extend the home you live in.
Based on local knowledge, there are lots of properties being marketed, but potential purchasers are being cautious in their approach to offering on properties, so the market seems to be showing signs of slowing but prices continue to hold up. That may be because of the political uncertainty over Brexit, a new prime minister and potential general election on the horizon, concern over potential interest rate increases (that I personally don’t see happening), mortgage affordability, availability of the right housing stock… and a host of other ‘reasons’ that may or may not have merit in the decision to buy new home.
The truth is that the right house will likely be out there as well as the right mortgage, it just takes a bit more time and research to find them and managing your expectations to what you will be able to afford. There are also deals to be done on houses, if the seller and buyer are both motivated to achieve a mutually agreeable purchase price and have their ducks in a row, financially speaking.
There is also another BIG issue that I see preventing people making positive decisions to buy and creating pessimism, not optimism, in the market….. THE MEDIA!!! Commentators/broadcasters/newspapers are constantly throwing petrol on the fire when it comes to the property market and the opportunity for people, 1st time buyers in particular, to get onto the housing ladder and misleading the public! They are constantly peddling the notion that you need a £30,000 deposit, and that lenders are tightening their belts! Every time I hear this I find it so frustrating as all it does is potentially put scores of people off looking into buying a property, who may very well be in a position to purchase, and instead continue to rent and pour money down what they see as a never ending drain!
To shed some light on what the media NEVER mention, and to get some optimism on the issue…. There are lenders out there that will lend 100% of the share needed to purchase a shared ownership property, there are 95% mortgages that if you were buying a £100,000 property would only require a £5000 deposit, and some lenders will accept a loan to form the deposit, as long as the mortgage remains affordable with the loan taken to fund the deposit (Speak to a Broker before making this decision!). There are lenders that will offer up to 6 x income multiples, some lenders will allow you to take a 40 year mortgage out to keep the cost as low as possible in the first few years, there are lenders that won’t determine if they will lend purely on your credit report, but will assess it fully without prejudice of past credit indiscretions and… mortgage rates are still very, very low, and with current fixed rates you can build certainty to your mortgage payments over 2, 3, 5 and even 10 years!
In a nutshell, do not make decisions based on the media’s misguided approach to the housing market, but make it based on known facts relating to your personal circumstances and situation.
The key here is to speak to someone in the industry, who knows and understands the options available and can find the right lender that will fit with a potential purchasers’ circumstances. A good mortgage broker will discuss your full situation and then advise you accordingly of your options. The outcome of the meeting will be that the broker will advise you of your maximum borrowing amount and potential monthly costs based on available mortgages, which will help you identify the properties available to you. They will also be able to give you a fuller understanding on the property options available, for example purchasing outright, using the Help to Buy scheme, looking at shared ownership properties, plus many more options, and explain these in detail for you to make a positive purchasing decision. Or, it may be that you are not yet able to buy, and this is not necessarily a bad thing. Here at The Mortgage Branch if we determine that you are not yet in a position to buy we will help you to understand what you can do to get yourself into the best possible position, over the coming months, to then be able to take that step onto the property ladder, and help you to put a plan in place to achieve this.
I would also offer an opinion, that should a deal be done with Europe, which I see as highly likely based on the mutually beneficial position that it would place both the UK and Europe in with the current trade volumes coming from Europe and that we supply to their market; as well as all the other benefits that a free trade agreement would provide to jobs and the labour market, housing, security, currencies on both sides of the channel, then there could be a surge in the housing market that would lead to prices increasing as the demand comes back into the market. As mentioned, this is only my opinion, but one worth noting as it may be that there are more deals to be done between now and October 31st, than beyond it.
So in conclusion, you only know what you know, ignore the media pessimism and misleading claims, it may be ag good opportunity to purchase based on the current uncertainly in the market, and for peace of mind and certainly that you are fully aware of your options speak to a professional when it comes to the biggest financial commitment of your life!
David Knight - Director at The Mortgage Branch
Re-mortgaging - options, benefits and considerations…
Firstly, I’ll start off saying that based on industry statistics there are a huge number of mortgages on what is called the Standard Variable Rate, this is possibly the highest rate that the lender has, and will be higher than products that they will offer to new borrowers and existing borrowers wishing to stay with the lender. There are also a huge number of borrowers that simply remain with the same lender and take what is called an Existing borrower deal out. Simple, but not necessarily prudent financial planning.
The thing with the Standard Variable Rate is that it makes lenders money, lots of it! The FCA has implemented the scheme where lenders now must write to exiting borrowers offering a new rate when their current deal ends, some people will take advantage of this, but a huge number won’t or haven’t and will simply roll onto the Standard Variable Rate. The lender, once they send the initial confirmation out that the current deal is coming to an end and offers a new rate will invariably not send out another notice to customers who don’t switch. Good for the lenders bottom line, bad for the borrower.
There may be good reasons why a borrower decides to stay on the Standard Variable Rate, but in the main it is not a sound financial decision to make and one that needs to be avoided where possible.
When it comes to deciding on a new rate, either by ticking a box and sending back the form to the lender to switch onto an existing borrower rate; or reviewing the market either on your own, or by engaging the services of a good mortgage broker there are varying benefits to each option.
If you have simply ticked the box of the new rate and sent the form back to the lender you will have saved time and effort, but will have unlikely saved the level of money that you can by looking at re-mortgaging options yourself, or by using a mortgage broker. There are some very good valid reasons for remaining with an existing lender, and should it be the case that you need to stay with your existing lender for whatever reason then that is fine, but ensure that you do opt for a new deal so as not to move onto the Standard Variable Rate. It is always worth exploring your options before making the decision to ‘tick the box’ however as you may be surprised what options may be available to you.
If you decide to take on the task of finding a new mortgage yourself you will likely spend hours speaking to different lenders to ascertain if they will lend to you, being turned away by some and being accepted by others. And, you will only have time to speak to 2-3 at the most before making a decision on which lender to go with. By doing this you may well dismiss a huge number of other lenders that may offer a better rate, service, or terms to the mortgage that could suit your circumstances better.
Lots of mortgage and insurance brokers regularly have clients say that they have spoken to friends/family to get their advice. While your friends and family will undoubtedly be able to give you some advice which may be good, or it may be bad, are they really ‘best’ qualified to give this advice? Ask yourself the same question if you would get the same advice from friends and family, who held no qualifications in domestic electrical wiring, if you were going to be rewiring your house? The likely event in this instance is that you would employ the advice and services of qualified electrician due to the complexities and risk involved in not getting it right. The outcome - you will get a professional service that will put your mind at rest in the knowledge that it was done correctly. When it comes to the biggest financial outgoing that you will have for the majority of your life the principle should be the same. By employing a fully qualified mortgage broker you will get piece of mind and the knowledge that you are in the best possible position with your mortgage.
If you decide to employ the services of a qualified mortgage broker, you will receive the benefit of them searching the market for the best possible mortgage that fits your circumstances and preferred affordability. It will save you time and effort, as they spend their time doing this for you, not your time, and you will be able to focus on what is important to you during the period that the broker is going into bat for you. It is also highly likely that they will save you a significant amount over the coming years based on the current interest rates available.
One example that I would share is with a client who had never used a broker previously. They were reticent to begin with as they were simply going to remain with their current lender, as they had done for the previous 12 years. They did not see the value in paying my fee at the outset and confirmed that only if I could save them the cost of my fee over the coming years then they would be happy to engage my services. Challenge set. Using the best existing borrower rate on offer by their current lender, I then had to find a better rate in the market with a lender that would accept the client based on their personal situation that was in line with the lenders criteria. I was able to source a broker only deal (a cheaper rate than what the lender was able to offer the general public) and the outcome was to save the client £4500 over the next 5 years! They happily paid my fee, and also received £500 cashback from the lender one month after completion. One very happy customer and one who will never again simply tick the box of the follow-on rate option sent by the lender.
If this client had dealt with a broker at each remortgage point in the previous 12 years they would likely have saved a considerable sum each time and will have either put this money to good use or have been in a position to pay off their mortgage more quickly and saved even more on the reduced amount of interest paid by reducing their overall mortgage term. There are numerous examples of saving clients thousands in mortgage payments when supporting them in re-mortgaging their current deal. If you would like to know what we could save you then please get in touch.
When you come to remortgage try to do the following in preparation:
- Allow yourself the time to obtain a new mortgage offer. Most mortgage offers are valid for 6 months so I would suggest starting the process 5-6 months prior to your existing mortgage dealing ending. This will ensure that you have an offer in place ready to switch your mortgage and prevent you spending any time on the SVR.
- If rates go down during this time most lenders will also allow you to take the new lower rate product and this won’t affect your offer – a good broker will make sure that this happens and keep an eye on rates for you
- Get your finances in order 6 months before your deal comes to an end – clear any credit cards, or debts if possible, reduce your overdraft, DON’T take out any further debt – this will help with your affordability and potentially open the door to more lenders
- Ensure that you are clear on your income and outgoings. If possible, look to increase any overtime available to you, or work as hard as possible to maximise any bonus/commission payments as this could be the difference between obtaining the best rate based on affordability, or just missing out.
- Get any paperwork up to scratch – payslips, bank statements, ID etc… this will help simplify the application process
- Look into your credit report – There are various times when a utility provider may have added a default to your report that you were unaware of, it may be that your score has reduced as your debt to credit limit ratio is high and has remained at a high point for some time, it may be that you are not showing on the voters role – The credit report is the lenders eye into your financial situation and how you manage your finances.
- Do your research – the best way to do this is to speak to a qualified mortgage broker who will be able to review the market quickly and efficiently using their expertise and knowledge, confirm the best options and also the handle any application/paperwork, deal with the lender on your behalf and manage the whole process through for you.
David Knight - Director at The Mortgage Branch