Finance Matters

Posts Tagged ‘first time buyer’

HSBC has announced plans to lend more than £15 billion in mortgages this year, with £3m of this ring-fenced for first-time buyers.

This should provide mortgages for up to 150,000 home buyers during 2012, including 27,000 people buying their first home.

The sum amounts to 11 per cent of all the mortgage borrowing predicted for 2012 and represents HSBC’s biggest ever share of the mortgage market.

Martijn van der Heijden, head of lending at HSBC, said that the promised investment “demonstrates HSBC’s commitment to continuing to help people move up or indeed take the first step on to the housing ladder.”

Although analysts have suggested that the economic downturn will cause lenders to tighten their mortgage criteria, HSBC said it had no plans to do so.

Its promised investment will come under its current lending strategy which is designed to ensure that new lending is in the best interests of customers and shareholders, the bank said.

The latest Bank of England Trends in Lending report suggests that there will be an increase in first-time buyer mortgage deals in the first quarter of 2012.

This will help borrowers with high loan-to-value ratios and could allow prospective buyers who are currently trapped in rental properties, to purchase their first property.

The first-time buyer share of the market has improved slightly since autumn 2011, when it hit its lowest level for nearly three years.

The latest data from the Council of Mortgage lenders reveals that first-time buyers took out 17,300 loans, worth £2.1bn, in November 2011, a 4 per cent increase by volume and 5 per cent by value compared with the previous month.

The withdrawal of the stamp duty concession in March is expected to help fuel an increase in first-time buyer activity in the first quarter, with prospective home owners hurrying to purchase their first property before the deadline.

The number of first time buyers increased significantly last year as more high loan to value (LTV) mortgages became available, according to the latest Mortgage Monitor from e.surv chartered surveyors.

The number of mortgages advanced at an LTV of 85% or more increased by 32 per cent to 57,301 in 2011 compared with 43,379 in 2010 and lenders also relaxed the qualifying criteria on this type of mortgage.

The average deposit fell to 38 per cent in December 2011, compared with 41 per cent in December 2010 and for the year as a whole, the average deposit fell to 39 per cent, compared with 43 per cent in 2010.

The number of mortgages approved on first time buyer property (worth £125,000 or less) in December 2011 soared by 25 per cent to 12,343, compared with 9,873 in December 2010.

According to the survey, lending conditions are at their most favourable for buyers since August 2007.

Richard Sexton, director of e.surv, said: ‘The improvement in 2011 is modest, but when taken against the backdrop of the eurozone crisis and turgid economic growth, it’s clear the market demonstrated real staying power last year,’

Barclays also revealed the results of its latest mortgage survey, claiming that mortgages in 2011 were the most affordable since records began 10 years ago.

The survey, based on data from more than one million customers’ accounts, found that homeowners spent an average of 15.4% of their take-home pay on their monthly mortgage payments last year compared with 20.5% in 2008.

In September 2011, the typical monthly mortgage payment fell to £488 a month, representing 15.2% of take-home pay.

Head of mortgages at Barclays, Andy Gray, said: “With the cheapest ever mortgage deals offered to homeowners last year and the fiercely competitive mortgage market, it stands to reason that the average monthly mortgage payment was at its most affordable level in a decade.”

Although more new houses were put up for sale in December, transactions were hampered by sellers asking too high a price for their properties, according to the Royal Institution of Chartered Surveyors (RICS).

December saw the number of houses put up for sale increase for the third month in a row, especially in London where new instructions reached their highest level since January 2005.

There was also a slight increase in new buyer inquiries but in view of the unrealistically high prices, surveyors’ sales expectations declined in comparison with November and are now flat.

RICS housing spokesman Ian Perry said: “The increasing number of prospective sellers who placed their homes on the market in December is a positive development, as a lack of stock has been a big issue in some parts of the country.

“But with sales expectations remaining flat, it is important that vendors are realistic in their pricing if they wish the sale to go through in good time.”

The recent fall in property prices continued in December, but it slowed to its lowest level since June 2010.

London was the only area where property prices increased.

A lack of mortgage finance is still holding back the market, with many prospective first time buyers unable to raise the high deposits needed to take their first step on the property ladder.

However, house-builder Persimmon reported a more positive outlook for the first-time buyer market.

The company said it expects its 2011 profits to rise by half and the improvement is expected to continue into 2012, helped by an increase in first time buyer interest.

“Whilst the general economic backdrop to the U.K. housing market remains challenging, we have experienced encouraging levels of visitors, resilient sales reservations, low cancellation rates and stable prices,” Persimmon said in the statement.

The FSA’s report into lending, due to be published next week, is expected to include proposals to help home owners in negative equity.

The Council of Mortgage Lenders estimates that one in 12 homeowners are in negative equity, with their home now worth less than the price they paid for it, making it impossible for them to move house.

This can be a serious problem for growing families or for people who need to move because they have secured a new job outside their area.

Under the FSA’s new guidelines, homeowners would be able to remortgage to buy another property without having to immediately pay off the balance they owe on their current home.

In effect, this would mean they could move their negative equity to their new mortgage.

However, it is believed that this option may only be open to homeowners who have kept up to date with their mortgage payments.

It is hoped that relaxing the rules would ease the current shortage of first-time buyer properties and help to get the housing market moving again.

The FSA’s report, which follows a two-year inquiry, is also expected to include some tougher regulations on lending, designed to stop a repeat of the lending practices that led to the credit crunch in 2007.

Before the financial crisis, it was easy for house purchasers to borrow up to 125 per cent of the price of the property; in contrast buyers now usually face a minimum mortgage deposit of 5 per cent, while deposits of up to 20 per cent are not unusual.

In related news, Datamonitor’s latest research suggests that gross annual mortgage lending will fall from an estimated £138.5 billion in 2011 to just £127 billion in 2012.

However, gross mortgage lending is expected to increase in 2015 to £182 billion.

The research also suggests that more people will consider building their own properties, with mortgage advances for self-build properties expected to increase by 141 per cent, from £790 million in 2011 to £1.9 billion by 2015.

October was a difficult month for first-time buyers according to the latest figures from the Council of Mortgage Lenders (CML).

Ten per cent fewer home loans were offered to first-time buyers compared with September and the average deposit they had to find was a hefty 20 per cent.

In the current economic climate and with many prospective house purchasers living in expensive rental properties, finding this level of deposit is out of reach.

Just 16,400 first-time buyer loans were approved in October.

The total number of home loans approved for all groups fell 8 per cent compared with September, to 44,500.

On a year-on-year basis, home loans were down 5 per cent overall in October, and down 1 per cent for first time buyers.

The CML expects the number of first-time buyers seeking mortgages to increase early next year, as they rush to avoid having to pay stamp duty.

Until 25 March 2012 first-time buyers of residential property can apply for exemption from stamp duty on properties valued at £250,000 or less.

Paul Smee, CML director general, said: “Despite the fall in lending in October, it is possible that we will see signs of increased activity by first-time buyers in the early months of next year, as we approach the end of the government’s stamp duty concession at the end of March.”

The CML also delivered some good news for house purchasers with its figures showing that mortgages are at their most affordable level since 2004.

Although mortgage deposits remain high, monthly interest payments have shown a downward trend.

Mortgage interest accounted for 12 per cent of income in October, its lowest level since January 2004.

The government is trying to help first-time buyers struggling to find high deposits, through a proposed mortgage indemnity scheme.

This aims to encourage lenders to offer mortgages of up to 95% of a property’s value by guaranteeing that they will not lose money if the house-buyer defaults on their mortgage payments.

The government and participating house builders will contribute a certain percentage of a new-build property’s value into a loan guarantee fund through which lenders will be able to recover losses if a property falls into negative equity and is repossessed.