UPDATED: Competitive mortgage deals tempt borrowers

Mortgage approvals bounced back during February as confidence returned to the housing market, figures showed today.

A total of 37,305 home loans were approved for people buying a property during the month, the highest level since September last year, according to the British Bankers’ Association.

There was also a jump in the number of people remortgaging as the highly competitive deals on offer tempted homeowners to switch loans.

Overall, 18,357 mortgages were approved for people remortgaging, up from 17,055 in January.

Richard Woolhouse, chief economist at the BBA, said: “The increase in mortgage approvals is welcome news and a sign that the housing market is beginning to improve.

“We’re seeing stronger demand for mortgages as consumers take advantage of some of the very competitive deals currently available.”

But despite the improvement in approvals levels, the total of 61,361 pipeline loans for all purposes, including equity release, was still 20 per cent lower than in February last year.

There was also a pick up in advances during the month, with net lending, which strips out redemptions and repayments, rising to £508m, up from £402m in January.

The BBA figures come as mortgage lender Halifax reported a surge in optimism in the housing market.

The group’s Confidence Tracker rebounded from an 18-month low of +52 in January to +60 in February.

Both buyers and sellers were upbeat about the market’s prospects, with both measures reaching record highs.

Buying sentiment increased to +35, while selling sentiment stood at +27.

But despite the increase in confidence, consumers still remain cautious, with 57 per cent predicting house prices will remain flat or rise by just 5 per cent during the coming 12 months.

At the same time, 43 per cent of people think mortgage rates will be higher in a year’s time than they are now, despite the fact that the Bank of England’s Monetary Policy Committee has signalled that a hike to the Bank Rate remains some way off.

Craig McKinlay, mortgages director at Halifax, said: “With inflation now at its lowest level since records began and the chances of the next interest rates change reportedly just as likely to be down as up, consumers are feeling more optimistic about the housing market again.

“The traditional slow start to the year for the housing market has already begun to give way to increased activity, but consumers remain relatively cautious.

“For sustainable long-term growth we need a period of stable growth and a more comprehensive house-building programme.”

Meanwhile, a combination of Government schemes means first-time buyers can now buy a £200,000 property after saving just £8,000 towards a deposit.

The Government’s Help to Buy scheme enables people to purchase a new build property with a deposit of just 5 per cent, with the Government providing a five-year interest free loan for 20 per cent.

At the same time, under the new Help to Buy Isa, announced in the Budget, the Government will top up savings of £200 a month with a £50 bonus.

As a result, first-time buyers would only need to save £8,000 to get the £10,000 deposit they needed for a £200,000 home bought through the Help to Buy scheme, the Daily Mail said.

What is the new Help-to-Buy ISA and could it help you get on the housing ladder?

At this week’s Budget, the big news for anyone hoping to buy a house for the first time was the announcement of a Help-to-Buy ISA. So what is it?

What is it?
In many ways, the Help-to-Buy ISA will be like any other ISA as you can earn tax-free interest on any money you save there. 

The big difference is that the government will also give you a 25% bonus when you buy a house. This bonus is capped at £3,000, which means you’d need to save £12,000 to get the max amount.

How much can you save?
The initial deposit is capped at £1,000. Then you can pay in a maximum of £200 a month. That means the quickest you’d be able to get to the magic £12,000 is four and a half years – though you can claim the bonus on a balance of £1,600, gaining you an extra £400. 

There’s a cap on the value of properties you can use the ISA for. In London they can’t cost more than £450,000. Elsewhere it’s a max of £250,000.

Who’s it for?
It’s only for first-time buyers in the UK and you can only ever have one in your lifetime, although it’s not limited to one ISA per property. That means more than one person can combine their Buy-to-Let ISAs and bonuses when buying together. 

You’ll also have to be over 16 years old.

When do they start?
These new ISAs will be available from the Autumn this year, and they should be around for new customers for four years. 

First-time buyers given £50 for every £200 they save for a deposit with the new Help to Buy Isa.

First-time buyers have been given a generous boost by the Chancellor in the Budget with a Help to Buy Isa.

The scheme announced by George Osborne - which will see first-time buyers given £50 for every £200 they save for a deposit - has widely been welcomed as an incentive to save.

But concerns have been raised about the need for it to be “robustly policed” amid fears savers could end up spending the cash elsewhere.

One Indusryy pundit said, "More first-time buyers say finding the deposit is a bigger problem than finding the monthly payments and so the Help to Buy Isa will bring forward the dream of home ownership for many. It will act as an incentive to save, just as when an employer at least matches any personal pension contributions it incentivises employee pension contributions.It will need to be robustly policed to make sure the savings are not used for other purposes.”

While the scheme addresses the issue of saving for a deposit, it fails to help those struggling to get a mortgage.

The first-time buyer bonus is limited to £3,000 on £12,000 of savings and a person can only open one account. But the scheme is limited to one per person rather than per home and so those buying together can both receive a bonus.

There is also a cap on the price of properties that the bonus can be used to buy - £450,000 in London and £250,000 outside of the capital.

Each bank or building society offering a Help to Buy Isa will offer their own interest rate. The scheme will be available from this autumn.

House prices to rise as seven potential buyers chase every available property

House prices look set to enjoy their traditional spring bounce as buyers return to the market, research showed today.

There was a 12 per cent jump in the number of people looking to buy a home in February, which was matched by an 11 per cent rise in new instructions.

The increase meant there are currently around seven potential buyers chasing every available property.

House prices across Britain were 9 per cent higher year-on-year, standing at an average of £210,955.

The recovery in market activity was most pronounced in London, where new buyer numbers soared by 17 per cent compared with January, while instructions were up 16 per cent.

House prices in the capital were 2 per cent lower in February than they had been in January, although they were up 5 per cent year-on-year at an average of £435,110.

The slowdown in growth is likely to encourage both buyers and sellers to come to the market, as vendors look to cash in on recent price gains, while buyers will be buoyed by the return to more sustainable growth.

Transactions across the whole of Britain remained subdued, dropping by 11 per cent year-on-year, while they were 6 per cent lower than in January.

But low interest rates and improving levels of stock are expected to lead to more homes changing hands in the months ahead.London bucked the trend with sales levels soaring by 11 per cent month-on-month. 

Mortgage demand is also bouncing back, with an 11 per cent jump in applications during the month, including a 12 per cent rise in first-time buyer numbers.

Today’s research comes after the Royal Institution of Chartered Surveyors said a shortage of homes on the market had reignited price growth.

Potential buyers are not confident their mortgage application will be approved first time.

Nearly a third of potential buyers are worried their mortgage application will be rejected but most are failing to take steps to boost their chances, research showed today.

Around 28 per cent of people who hope to buy a property are not confident that their mortgage application will be approved first time, according to adviser search website unbiased.co.uk.

Concern is greatest among first-time buyers, with 38 per cent of people taking their first step on the property ladder worrying that their mortgage application will not be successful.

Overall, the group’s new Mortgage Approval Confidence Index currently sits at just 5.7 points out of a possible 10 points, reflecting how uncertain most consumers are about the mortgage application process.

But despite their concerns the majority of would-be buyers are failing to take any steps to boost their chances.

Only 28 per cent of people have checked their credit rating in preparation for submitting a mortgage application, while 25 per cent of potential buyers have taken steps to boost their credit rating.

Just one in four people have made a detailed analysis of all of their outgoings, something lenders are likely to want to do following new affordability criteria introduced as part of the Mortgage Market Review.

Around 23 per cent of people have carried out research on different mortgage providers to try to learn about their lending criteria, while 22 per cent have reduced their spending to cut down on their outgoings.

However, a third of prospective borrowers admitted they had not taken any steps to boost their chances of having their application accepted.

Just 19 per cent of prospective mortgage applicants had consulted a professional financial adviser about their application, although 27 per cent said they planned to do so.

But there are significant benefits in seeking advice, with 81 per cent of people who sought help having their application approved first time, despite the fact that one in five people using mortgage advisers had had their initial, non-advised application rejected.

Karen Barrett, chief executive of unbiased.co.uk, said: “It’s great that so many people are looking to get on the property ladder, and the recent spate of good deals from mortgage providers means this figure is likely to rise even higher.

“One big concern from this research is that so many people aren’t confident they’ll have a mortgage approved, and yet aren’t doing anything to increase their chances.

“Getting professional mortgage advice can make a huge difference to the process, from finding the best deal for your individual circumstances to planning specific steps to make you a more attractive candidate to a lender. Merely hoping for the best isn’t enough.”

Men are more confident about getting a mortgage than women, with 66 per cent of men expecting their application to be accepted, compared with just 50 per cent of women.

But men are also more likely to have taken steps to boost their chances with 73 per cent taking action to improve their situation, compared with just 60 per cent of women.

House prices increased across Britain and Northern Ireland in February but London bucked the trend, according to RICS.

A shortage of homes for sale has reignited house price growth as buyers return to the market, research showed today.

A balance of 14 per cent of estate agents reported seeing price rises rather than falls across Britain and Northern Ireland during February, compared with just 7 per cent in January, according to the Royal Institution of Chartered Surveyors (RICS).

Northern Ireland and Scotland continued to see the strongest gains, while there were also upward shifts in price growth across the South West and South East.

But in London, property price falls were reported for the sixth consecutive month, with 28 per cent more estate agents reporting a drop in values than those who saw a rise.

RICS said the increase in prices seen across most of Britain and Northern Ireland was being driven by a fall in the number of homes being put up for sale, with a balance of 8 per cent of estate agents reporting a drop in supply during February.

The number of new homes being put on the market has now fallen in six out of the past seven months, with anecdotal evidence suggesting the drop in new instructions is worse in areas where there is political uncertainty.

At the same time, demand appears to be stabilising following seven consecutive months in which it has fallen, with new buyer inquiries rising in most areas of the country.
The mismatch between supply and demand has once again started to apply upward pressure on property values.

Price expectations for the coming three months have increased from a balance of just 3 per cent of estate agents expecting rises to 10 per cent, despite the uncertainty caused by the General Election.

London was the only region in Britain and Northern Ireland where estate agents expect there to be further price falls in the short term, although they are more upbeat about the long term.

The number of new houses coming onto the Welsh market fell in February, according to the latest RICS UK Residential Market Survey with 11% more surveyors reporting a decline in supply.

While nationally the price of new homes rose slightly (net balance 3%), house price growth in Wales remained flat from January, with 10% more surveyors seeing the price of homes in the region rise.

Price expectations over the next three months have slightly increased in Wales, and it seems that the anecdotal evidence suggesting that political uncertainty may be leading to the ‘election effect’ of vendors sitting on the fence is apparent in Wales, with the member forecast for house price growth over the next 12 months remaining stagnant at 1.6% (up from 1.4% in January); however, the five year view is for 3.5% house price growth.

Swansea named as one of the most affordable places to buy a home in the UK

SWANSEA has been named the third most affordable place to buy a house in the UK.

This is according to research by an Oxford University professor.

Swansea sits behind Liverpool and Derby in the study of most affordable locations, with Nottingham and Birmingham bringing up the rear.

In contrast, Oxford is listed as the least affordable place to buy a house, followed by London, Cambridge, Brighton and Reading.

The research considered property prices compared with average earnings

It found that house prices in Oxford were 16.1 times the local average income, compared with 15.7 times in London.

In Swansea, prices were 6.7 times average earnings, making buying property in the city far more realistic.

Danny Dorling, who carried out the research, said: “Compared with earlier decades, house prices across the UK are extremely high when compared with the average take-home pay.
“‘Fewer and fewer people are able to get a mortgage.”

He also warned that at least a third of those with mortgages would struggle if interest rates were to rise by “even a couple of percentage points”.

“The further that house prices rise, the greater that proportion will grow, leaving a growing proportion of people with no option but to rent.”

LEAST AFFORDABLE CITIES:

The city is followed by the figure for how many times greater property prices are than average earnings.

Oxford: 16.1
London: 15.7
Cambridge: 14.8
Brighton: 12.2
Reading: 10.1

MOST AFFORDABLE CITIES:
Liverpool: 5.8
Derby: 6.2
Swansea: 6.7
Nottingham: 6.8
Birmingham: 7.3