Property prices showing slow down

Latest data from the Land Registry shows that things are starting to slow down and even the powerhouse of property prices: London has shown prices are still growing – but at a slower pace.

Data shows the average house price in England and Wales is now £177,299 compared to the highest levels ever seen six years ago in November 2007 of £181,324. This is a rise year on year of 7.2%, but that’s a small fall in growth since last month. And not everyone is benefiting from rising prices as 863 were sadly repossessed and lost their homes in July 2014, although this is 33% lower than last year when 1,283 homes were repossessed. Twenty two percent of those repossessed were in the North West, with Yorkshire and Humber the next top spot for repossessions.

Some good news all-round though, although property prices will always go up and down, it’s the volume of sales which affects the economy as people spend a lot of money when moving and around £8,000 in the first two years they move in.  So, good news that actual transactions increased by 7% year on year with numbers heading back towards pre-credit crunch days, with nearly 80,000 properties changing hands.

But not every price bracket sold well in July 2014. We sold 30% less properties priced at under £150,000 and a staggering 37% less homes under £200,000. In fact, it seems only the rich and wealthy in England and Wales seem to be on the move lately. To see sales growth year on year, you need to spending more than £400,000 (up 6% year on year) while sales of properties of £500-£600k are up 20% and those worth one million or more selling 19% more than they did last year!

Regionally, while London still saw growth of 18.4% year on year, in contrast, Yorkshire and Humber saw hardly any growth year on year at all, just 1.4%, this including prices falling by 2.2% in the last month, reversing previous annual gains. Of the 10 regions covered by the report, seven showed monthly falls, although all saw a a rise year on year.

Areas with average property price under the 1% stamp duty include Wales, the North East, North West and Yorkshire and the Humber. Although the highest average is a staggering £460,000 in London, this is a bit of a nonsense figure as it’s an average of the likes of Kensington and Chelsea at over £1.3 million to Barking and Dagenham at £262,000. However one problem in London is the lack of new first time buyers coming through. This, I think is mainly a problem around stamp duty. Most First Time Buyers don’t pay any stamp duty outside of London, but when everyone of the 32 boroughs is seeing their average price go above the £250,000, 3% stamp duty mark, this is a huge tax to have to pay.

Someone buying a property at £249,000 would pay out 1% stamp duty at £2,490, plus other costs, the price of buying is around £5-6,000. Over £250,000 they would have to pay 3% stamp duty, so at £251,000 this would be £7,530 plus other expenditure of £2 to £3,000, so first time buyers would have to find twice the savings – very unfair on hard working Londoners!

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Consumers Becoming More Confident About Credit

october-24Consumers are becoming less weary of credit, leading to an increase in demand for credit cards and home mortgages. A report from the British Banker’s Association is claiming that mortgage approvals, as well as credit card spending, are both on the rise.

While the increase in spending is good news for many consumer-driven businesses, the levels of borrowing are far from the dangerous dependence on credit observed during the credit bubble of 2006 and 2007. Lower interest rates have increased the level of borrowing from consumers, but only within a relatively safe margin.

Savers, on the other hand, are suffering from interest rates that are at their lowest point in several years. Economists have claimed that, while the current situation is far from the dangerous credit bubble of previous years, low interest rates and few incentives to save money could lead to a serious decline in savings.

The BBA report shows 42,990 mortgages for residential purchases were approved in September – an increase from the 38,834 mortgage applications approved in the previous month. The amount of mortgages approved in September is 7,000 higher than the six-month average, showing a significant increase in borrowing.

Despite the large increase in the number of borrowers, mortgage brokers claim that the level of confidence displayed by homebuyers is significantly lower than what we saw during the previous housing bubble. Consumers today tend to “play safe with credit” instead of borrowing to purchase property that’s beyond their means.

SPF Private Clients chief executive Mark Harris claims that borrowers are generally interested in “overpaying on their mortgages, taking advantage of low interest rates and paying down debt where they can.”

He believes that homeowners are reluctant to take on more borrowing while there is still uncertainty with regard the economic climate, despite growing confidence in the lending industry.

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UK Mortgages at ‘Most Affordable Level in 14 Years’

august-18-01New figures indicate that mortgage rates are at their most affordable level since the late 1990s. On average, borrowers spend approximately 27 percent of their income on mortgage payments as of the second quarter of 2013. The figure is significantly below the average mortgage payment as a fraction of income for the last 30 years.

Halifax claims that a combination of affordable housing and reduced mortgage rates are allowing more Britons than ever to purchase their own property. The 27 percent average monthly payment is a significant decrease from mortgage payments during the peak of the housing market six years ago, and a great step for the country.

Analysts have pointed to the Funding for Lending Scheme as one of several reasons for the increase in the affordability of mortgages, claiming that it has assisted many lenders in offering lower mortgage rates. House prices have rose at a modest rate in the same time period, which has been compensated for by lower interest rates.

The biggest winners in the current housing market are believed to be the first-time homeowners, who currently have access to a far greater range of properties than at any point in the past six years. Despite this, key areas such as London have seen an increase in housing prices that has affected affordability for many first-time buyers.

Despite the excellent news for first-time buyers, some experts are warning that the current interest rates may not last. Mortgage brokers have recommended that any buyers interested in investing in property ‘lock in’ their rates with a fixed-rate loan before the market takes a step towards higher interest rates.

While mortgages have become more affordable across the entire nation, many cities have significantly higher housing costs than others. The average London resident is likely to spend 36 percent of their income on mortgage payments, while residents of Northern Ireland spend just 17 percent on average.

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The data for April has just been released by the Council of Mortgage Lenders and it paints a grim picture of the mortgage market in the UK. In fact, mortgage lending has ground to a halt and it is now at the lowest in 12 months.

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While mortgages remain difficult to qualify for, the most popular at the moment appears to be the fixed-rate two year mortgage but this is quickly falling out of favour as the rates have increased substantially.

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The year is only one-third over and it seems as though the news goes from bad to worse in the area of personal finance. Not only have Britons been hit with the fact that the UK is caught up in a double dip recession and the euro zone is still beset by a huge debt crisis but now major banks have announced that their mortgage rates will be going up as of today, 1 May.

For greater than 1 million homeowners mortgage payments may increase by as much as £200 annually because of these higher rates and the travesty in this is that many of these homes are already in negative equity. This is a huge problem for homeowners who might otherwise be able to refinance their homes because it would be virtually impossible to get a loan larger than the value of the home.

Halifax alone has approximately 850,000 customers who may be paying this £200 extra each year due to these higher rates. Other lenders who have announced an increase in mortgage rates include Clydesdale, Co-operative Bank, RBS and Yorkshire banks. These lenders have announced that rates will rise by as much as 0.5 percentage points for their current customers and is indicative of the fact that the days of low interest rates are over.

Although the Bank of England has kept rates at historic record lows, 0.5%, lenders are raising rates because they feel it is warranted by a floundering economy. During this time when households need as much help as possible, they seem to be getting hit from all sides from taxes to mortgage rates. Finding themselves in negative equity compounds the problem which may make things significantly worse for personal finance as well as the UK economy that is already in trouble.

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It has recently been publicised that millions of mortgages are in forbearance and millions more homes either in repossession or about to be repossessed. Even so, this is not stopping prospective homebuyers from falsifying mortgage applications to try to push loans so that they can purchase homes. It is currently estimated that of every 10,000 applications in 2011, at least 34 had been falsified in some way and were thus fraudulent. When compared to figures from 2006, fraudulent mortgage applications were more than double the 15 per 10,000 of that year.

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Recent statistics released by the FSA indicate that the housing market is really not faring as well as it appears to be on the surface. The whole problem resides in something termed an ‘interest only loan’ and these are not always in the best interest of the consumer, especially in the long run.

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On top of already declining numbers of home sales, two of the UK’s leading mortgage lenders are announcing a rise in the cap on their Standard Variable Rates which may make homeownership even more problematic. Halifax, which was reportedly the largest mortgage lender before the credit crisis, is bringing their rates up by .75 points within a three month period. The SVR will go from 3 points to 3.75 points.

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Homeowners becoming accidental landlords

A relatively new phenomenon is sweeping the UK and that is the fact that homeowners looking to sell their homes have turned into what the Telegraph is calling ‘accidental landlords.’ As recently as one year ago the average time a home was on the market before being sold was approximately 80 days but this year that timeframe has increased by 25 days. Now homes are averaging 105 days before being sold and rather than wait it out, homeowners have simply decided to rent them out.

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