WHY IT’S A SHAME THAT MANY UK ADULTS DON’T HAVE LIFE COVER

Life insurance may not be at the top of many people’s ‘to do’ list, but arguably it’s one of the most important financial products anyone can take out, and one of the best ways of leaving loved ones provided for financially.

Life insurance doesn’t just pay a lump sum on death or (with a combined policy) the diagnosis of a critical illness, it can (with other add-ons or in ‘whole of life’ form) help provide an income for families hit by an accident, sickness and unemployment, help parents pass their wealth on to future generations and play a major role in inheritance tax planning too.

A recent study1 has shown that only around 26% of UK adults have any form of life insurance. What this figure means is that too many UK families are risking the consequences of life’s unexpected or unwelcome events. In the event of a death, diagnosis of a serious illness, accident or unemployment there would be no lump sum pay out or income payment from an insurance policy to fall back on.

WHY THIS IS SO

One reason given was a belief that insurance companies don’t pay up in the event of a claim. However, the most recent industry figures show that insurers pay out 97.2%2 of all claims. UK companies pay out over £10m every day on protection policies, including income protection, critical illness and life insurance. When they don’t pay out, it’s usually because of incorrect information having been provided by the policyholder when the policy was taken out.

Cost is often cited as a reason for not taking a policy. However, an analysis of premiums paid by respondents in the research shows an average life insurance policy premium of £21.28 per month for over £120,000 of cover. The average critical illness cover premium reported was £30.58 per month for over £71,500 of cover. This represents a relatively small outlay that could mean real peace of mind.

1Royal London, 2017 
2Association of British Insurers, 2016

Some of the most competitive deals on the market can be found through a mortgage adviser.

If you are looking to move house, remortgage or buy an additional property as a landlord, some of the most competitive deals on the market can be found through a mortgage adviser.

Advisers may be able to access mortgages that you would not find when searching independently.  Brokers have regular contact with a wide variety of lenders, some of whom you may not even know about. The alternative to working with a broker is to call up dozens of lenders and compare their mortgage terms and rates on your own, taking up your valuable time.

Clear Fees

There are several different types of fees involved when taking on a new mortgage or working with a new lender, including arrangement, booking fees, and valuation fees.  A mortgage broker can explain all of these to you and take them into account when finding the right product for you.

Knowledge

The knowledge of different lenders’ criteria can be invaluable, especially in the current environment where the mortgage application process is more complicated than ever due to recent regulatory changes. For example, by working with a mortgage adviser they can go through your expenditure. This will be beneficial to you when completing the affordability test as part of your mortgage application.

Duty of Care

Brokers have a duty of care to the borrower.  They must take their individual circumstances into account and ensure they find the right mortgage for them. One size does not fit all and it is vital the borrower and adviser have honest and thorough conversations in the run up to finding and applying for a mortgage.

Experience

Getting a mortgage can seem like one of the most daunting tasks that you can face in your life, but it doesn’t need to be.  The important thing to remember is that every lender is different in what they view as the ‘perfect candidate’ to lend to. Just because you don’t fit one’s criteria, doesn’t mean you won’t fit another lender’s criteria.  There is no better time to be seeking suitable mortgage advice from a mortgage adviser.

 

Is it Time to Remortgage?

Recent figures from Moneyfacts show that the motivation to remortgage has hit its highest level since 2008, and many market watchers think that this trend looks likely to increase over the coming year.

WHY REMORTGAGING CAN MAKE SENSE

When your mortgage deal ends, your lender may automatically move your mortgage to their Standard Variable Rate (SVR), which normally rises and falls in line with the Bank of England base rate.

The average SVR in February of this year stood at 4.56%. Back in February 2015, the average two-year fixed deal was 3.14%. So, this means that borrowers who have reached the end of their deal would see a rise of 1.42% if they reverted to the typical SVR. This is the highest increase recorded since November 2008. By contrast, the average two-year fixed mortgage rate is now around 2.33%, so by remortgaging, the same borrowers could enjoy a reduction of 0.81%, which could represent a welcome drop in outgoings.

A CHANGE OF ATTITUDE IS NEEDED

Interestingly, a study conducted by YouGov, shows that just 28% of those with a mortgage have switched provider to secure a more favourable deal at the end of their fixed-rate deal. By comparison, 50% of people have switched their energy provider to save money. Whilst the saving to be made by switching to a different gas and electricity supplier can be hundreds of pounds, the savings to be made from switching mortgage lenders could amount to thousands of pounds over the term of a typical loan.

There are currently estimated to be around three million people paying their lender’s SVR on their mortgages. So, if you’re one of them, this could be a good time to get some professional help and advice from a mortgage adviser to see if you could switch to a more suitable mortgage deal.

For further information on remortgaging click – Here

You may have to pay an early repayment charge to your existing lender if you remortgage. Think carefully before securing other debts against your home.

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Sluggish house prices ‘will deliver a buyers’ market’ as Nationwide tips growth of just 2% this year

 Average UK house price reaches £211,671 in July, according to Nationwide

2017 house price growth expected to be just 2% down from 5.2% last year

‘Balance in the market is shifting a little further towards buyers’, says Nationwide

House prices will rise by just 2 per cent this year to fall behind inflation and deliver a buyers’ market, building society Nationwide forecast today.

In a further sign of the sluggish property market, Nationwide said that while house prices had continued to grow throughout 2017, it had been at a slower pace than in previous years, with prices up just 2.9 per cent on a year ago in July. 

Robert Gardner, chief economist at Nationwide suggested that a buyers’ market could be around the corner though a lack of homes for sale is helping prop up current house price growth.+4

Enough for sale? Relatively few properties are coming onto the market, bolstering prices

The 2 per cent forecast for 2017 revises down earlier expectations and compares to 5.2 per cent property inflation in 2017. 

Gardner said: ‘Survey data point to relatively sluggish levels of new buyer inquiries, but at the same time surveyors report that relatively few properties are coming on to the market.’

He added: ‘While employment growth has remained relatively robust, household budgets are coming under pressure as wage growth is failing to keep up with the rising cost of living.’ 

‘This suggests that housing market activity is likely to remain subdued, with the balance in the market shifting a little further towards buyers in the quarters ahead.’

Nationwide’s index showed house prices rose by 0.3 per cent in July, up just £370 to £211,671 on average.

House price rises continue to outstrip wages, however, with the struggle for buyers to afford increasingly expensive homes weighing on the market.

The buyer of the average home needs to find some some £5,956 more than a year ago, according to Nationwide. Its data shows that homes have only been more expensive compared to wages at the peak of the 2000’s boom.

Higher and higher: Despite a slowdown, UK house prices continue to hit record levels, according to Nationwide’s index

Nationwide’s chart shows that homes have only been more expensive compared to wages at the peak of the 2000’s boom

Jeremy Leaf, a north London estate agent and a former Royal Institution of Chartered Surveyors chairman, said: ‘Although these figures on the face of it look quite encouraging, when one considers the fall in transactions, it is clear that prices are being supported by a lack of property on the market.‘

Despite high prices, first-time buyer numbers have been on the rise over the past 18 months, as they take advantage of lower mortgage rates and a decline in buy-to-let purchases after the 3 per cent stamp duty surcharge was added for anyone buying a second or additional property, in April 2016.

Shifting demographics of buyers and sellers could present an opportunity for first-time buyers to get on the property ladder, with landlords making fewer transactions.

Record lows: Fewer properties for sale is keeping prices ticking upwards, says Nationwide

The very best and cheapest mortgage deals on offer remain for those with big deposits or substantial equity in their homes, but there are competitive rates across the board even for those with just 10 or 5 per cent deposit.

Brian Murphy, head of lending at Mortgage Advice Bureau said: ‘The mix appears to be changing with landlords transacting less frequently – or indeed divesting their portfolios in some cases – due to the tax changes.’

This has left an opportunity for first time buyers who would normally be competing for the same type of property with an investor. 

He added: ‘Now we’re seeing more first time buyers getting on the ladder, which is of course great news as they underpin the rest of the market, so it’s possible to suggest that this particular trend, which has been emerging since the beginning of this year, could ripple through to the rest of the market in months to come.’ 

 

Residential Property Review – July 2017

Our monthly property market review is intended to provide background to recent developments in property markets as well as to give an indication of how some key issues could impact in the future.

 

Remortgage approvals steady

The Bank of England (BoE) reports that mortgage lending in the UK recorded an annual increase of 2.9% to May 2017.

The BoE also records 65,202 house purchases for May, up marginally from the 65,051 seen in April, but still below the sixmonth average of 66,990.

Remortgage approvals rose to 42,955, again higher than the last month’s figure of 40,437, but below the average of 44,069.

It is likely that this gentle decline can probably be put at the door of rising inflation and the subsequent squeeze on disposable incomes.

Each new house built adds £316,000 to the economy

Research from the consultancy group Arcadis, entitled ‘Building Homes – Making Places’, shows that each new house built in the UK generates £316,000 for the economy.

Their calculations state that £250,000 is created via taxes and job creation for each build, £53,000 into businesses through direct spending, with £13,000 going to local communities through the rise in investment into local services.

Regeneration spokesperson for Arcadis, Peter Hogg, said: “The benefits of building more homes are much greater than previously thought.” He went on to add that: “Following the shock election result, government must now work closely in cross-party cooperation to genuinely deliver on housing promises, along with devolved administrations up and down the country needing to take the lead around starting to build…“.

More potential ‘Downsizers’ are looking at equity release

As many as 17% of potential downsizers are now looking at switching to lifetime mortgages, a popular type of equity release, as an alternative option to raise funds. This has been prompted for many by the cost involved with moving house and the subsequent emotional upheaval caused by moving, combined with the possibility of having to relocate away from close family and friends.

Bower Retirement reports this in their latest ‘Adviser Tracker Research’, which also details that 55% of their canvassed advisers recounted clients changing their minds about downsizing because of the costs involved, choosing to investigate what equity release options are available instead.

Where now for the housing market?

PwC’s latest UK Economic Outlook expects house price inflation to be 3.7% this year, down from 7% last year. London’s housing market will slow, with 2.8% and 3.8% growth on average in 2017 and 2018 respectively. With above average growth continuing in the east and southern regions of England.

Market analysts have different perspectives following the election result. The Head of Residential Research at JLL commented: “It will be crucial that the new champions of housing market policy in government can reaffirm commitments to the current policy direction.” He continued: “…the housing crisis deserves greater ambition and bold action from the new government. This requires cross-party support to de-politicise solutions and to provide longerterm backing for new solutions.

The Sales Director of Seven Capital held the view that residential property “…will remain robust and resilient, delivering capital growth for investors.

 

House Prices Headline statistics

HOUSE PRICE INDEX (MAY 2017)*   115.8*
Average House Price                                 £220,713
Monthly Change                                         0.5%
Annual Change                                            4.7%
*(Jan 2015= 100)

·         Average house price stands at £220,713

·         UK house prices grew by 4.7% in the year to May 2017, 0.6 percentage points lower than in the year to April 2017.

·         East of England showed the highest annual growth, with prices increasing by 7.5% in the year to May 2017

 

House Prices Price change by region

Region   Monthly Change (%) Annual Change (%) Average Price (£)
England 0.5 5.0 £237,662
Northern Ireland
(Quarter 1 – 2017)
  -0.8 4.3 £124,007
Scotland   0.7 3.5 £143,106
Wales 0.6 3.8 £149,817
East Midlands   1.3 7.2 £180,903
East of England   0.7 7.5 £284,097
London   -0.3 3.0 £481,345
North East   1.8 1.6 £126,738
North West   0.7 3.8 £153,297
South East   -0.3 4.8 £315,807
South West   0.4 5.5 £243,969
West Midlands Region   0.8 5.3 £183,942
Yorkshire & The Humber   1.1 4.4 £155,268

 

Source: The Land Registry
Release date: 18/07/2017 Next date release: 15/08/2017

 

UK Unemployment Figures

·         The unemployment rate is 4.5%, down from 4.9% a year earlier

·         There were 8.83 million people aged from 16 to 64 who were economically inactive

Jobless total                  1.49m
Unemployment rate    4.5%
Source: Office for National Statistics
Release Date: 12/07/2017

 

Mortgage Activity

·         Gross mortgage lending reached £20.1 billion in May

·         CML says: “Buy-to-let had a weak start to 2017, and the sector’s contribution to overall net mortgage lending has fallen considerably over the last year.

Source: Council of Mortgage lenders
Release date:
22/06/2017

BUY-TO-LET – WHERE ARE WE NOW?

The buy-to-let market looks set to change in the coming years as April’s tax changes start to bite. Buy-to-let landlords have already faced changes in Stamp Duty Land Tax in England and Wales, and Land and Buildings Transaction Tax in Scotland. New landlords, or those wanting to take on new loans, will also find themselves subjected to tougher underwriting standards operated by lenders.

The Council of Mortgage Lenders believes that the size of the buy-to-let market will fall in the next couple of years from the £40bn level seen in 2015 and 2016. Some commentators are suggesting that the contraction could be to around the £30bn mark.

ALTERNATIVE STRATEGIES

Landlords are relying more on cash in the face of tougher lending criteria. According to estate agents Countrywide, the proportion of landlords purchasing properties with 100% cash has steadily increased from 41% in 2007 to 61% today.

In the face of the tax changes, some landlords have decided to set up limited companies. By doing so, they can borrow through the company and still offset their finance costs against their rental income. However, this solution doesn’t suit every buy-to-let landlord’s investment strategy, and some commentators have suggested that the government might make this subject to tougher taxes too. The limited company route can also give rise to potential stamp duty charges and capital gains tax liabilities.

Landlords are also turning their attention to commercial property, with the number of residential landlords diversifying into commercial property tripling in the past three years. They are now opting for shops, restaurants and offices as alternatives, with retail units and small offices proving particularly popular.

A DIFFERENT MARKET

Landlords opting for commercial property will need to be able to evaluate a business and the quality of a tenant when considering offering a commercial tenancy. With businesses like cafes and small shops, it’s important to know the local area and be able to gauge if the business is likely to succeed.

Commercial property landlords will need to familiarise themselves with the rules surrounding commercial leases, the rights a landlord has and the responsibilities of the tenant. Commercial property can offer various benefits. The yields are generally higher and many of the costs that a landlord should deal with under a residential tenancy are the responsibility of the tenant under a commercial let.

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

May – Property Market News

foreign-investors-dominating-Britain-property-market-789228

 

Our monthly property market review is intended to provide background to recent developments in property markets as well as to give an indication of how some key issues could impact in the future.

Brexit has little impact on property lending

Although lower than the previous year, 2016 saw lending into the commercial property sector remain steady, according to the Commercial Property Lending Report from De Montford.

It reported that whilst new lending was down 17% on 2015, the UK’s decision to vote for Brexit had a minimal effect on new lending activity, as £21.4bn (€25.3bn) was generated in the first half of the year and £23.1bn in the second half (i.e. after the June 2016 UK referendum).

61% of 2016 new lending was refinancing of existing loans, a shift from the previous year where 55.6% of debt issued was for new acquisitions. The year-end saw the value of loan books growing by 0.5% to £191.5bn.

Middle Eastern investors bullish on UK commercial property

Following the recent announcement from Qatar, on their £5bn investment plans in the UK over the next five years, Sidra Capital a Saudi Arabian family office, have announced they too will be investing £1bn in UK commercial real estate.

To put this in perspective, 2016 saw £1.4bn invested by Middle Eastern investors in this market, as they increased their property weighting to 15% of the overall investment portfolios of general investors and large family offices. This is an increase from the 13% weighting seen in 2015, according to the Global Family Office report from the Swiss bank UBS.

 London’s second airport attracts interest

Gatwick, located south of the capital and the home of London’s second major international airport, has seen strong investor interest as the Gatwick Gate site, is now fully occupied. The site is a 140,000 sq. ft. industrial estate owned by UK Commercial Property Trust, adjacent to the airport.

Four deals completed the closures, providing a rental income of £776,000 per annum. The new lettings included plane interior specialists Airbus Interiors, together with International Logistics, who have both taken on two ten-year leases. This confirms the ongoing demand for logistics space in the UK.

Strong demand for UK property

The Royal Institute of Chartered Surveyors (RICS), have just released their UK Commercial Property Market Survey, which shows that investor demand for UK commercial property has strengthened across all sectors. Industrial space was in favour in Q1 2017, outperforming both retail and office space.

The Chief Economist of the RICS, Simon Rubinsohn, was reported to have said: “The forward-looking indicators are also proving relatively resilient, although it would not be a surprise if activity slows somewhat ahead of the forthcoming general election.”

It is important to take professional advice before making any decision relating to your personal fi nances. Information within this

document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of

the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules

may vary in diff erent parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of,

and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual

circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

Government unveils plans to ‘fix broken housing market’

13E5594E000005DC-0-image-m-2_1423593514358

Download – Fixing_our_broken_housing_market_-_accessible_version

Affordable homes

The Government also says it will expand its 2016-21 affordable homes programme – originally set up to promote shared ownership properties – to include rent to buy homes.

A statement from the Department for Communities and Local Government says: “Now we have opened up the programme, relaxing restrictions on funding so providers can build a range of homes including for affordable rent.”

The DCLG statement adds that the Government will consult on letting developers offer cheaper rental properties alongside other affordable housing.

The Government also says it will change planning rules to let councils  “proactively plan for more long-term build to rent homes”.

Longer tenancies

The housing white paper will also include plans to encourage longer-term tenancies.

A DCLG statement says: “We are working closely with the British Property Federation and National Housing Federation to ensure that these longer-tenancies become widely available.”

The statement adds that councils and developers must avoid “building homes at low density” and should build high-rises where there is a land shortage or in places close to public transport links.

The Government also wants more building on brownfield land.

The white paper will include plans to change planning policy to favour brownfield developments, as well as plans to increase population density in high-demand areas.

Homes in the right places

It will also point out that the Government will try to build the right homes in the right places by consulting on setting up a system to calculate housing demand.

This will involve every local authority drawing up a plan and reviewing it every five years.

The DCLG statement says: “Currently 40 per cent of Local Planning Authorities do not have an up to date plan that meets the projected growth in households in their area.

“Fixing this will help make sure enough land is released for new homes to be built in the parts of the country where people want to live and work and ensure developments take heed of local people’s wishes, while continuing with maximum protections for the green belt.”

The DCLG will also speed up the house building process by making it easier for councils to issue completion notices.

This is intended to shorten the timescales to require developers to start building within two years, not three, when planning permission is granted.

Developer transparency

The Government is also demanding more transparency from developers on how quickly they can build new homes to “help address the serious and growing gap between the number of planning permissions granted and the number of new homes completed”.

The housing white paper will also include plans to support smaller independent builders.

Communities secretary Sajid Javid says: “The housing market in this country is broken and the solution means building many more houses in the places that people want to live.

“Today we are setting out ambitious proposals to help fix the housing market so that more ordinary working people from across the country can have the security of a decent place to live.  The only way to halt the decline in affordability and help more people onto the housing ladder is to build more homes.”

The Government says it will introduce its lifetime Isa in April this year, providing borrowers a 25 per cent top-up on up to £4,000 of savings a year, which can be used for house deposits or withdrawn at 60.

Hope at last for first-time buyers?

Will the chancellor’s promised investment in new homes bring the first rung of the housing ladder within reach for FTBs?

house-in-the-sky

The struggles of first-time buyers are well known and, seemingly, enduring. The latest projections for the potential class of 2017 straining for a foothold on that precious first rung are pessimistic.

That outlook has been brought into focus by the imminent closure of the Help to Buy mortgage guarantee scheme – that encourages lenders to offer high loan-to-value mortgages via a state-backed insurance scheme – which is scheduled for the end of this month.

On top of soaring house-price-to-earnings ratios and what some call a ‘chronic shortage’ of afford-able housing, it makes depressing reading for many 20- and 30-somethings who dream of owning a home.

That said, there are signs that the first rung of the housing ladder is coming within reach of more borrowers. Latest data from the Council of Mortgage Lenders shows a rise in lending to this group, albeit from a relatively low base.

Interest rates are at record lows and the availability of high-LTV mortgages is at an eight-year high – although, if a property price is simply unaffordable, these facts are irrelevant.

“The average UK home is now six times the cost of the average wage, and this gap shows no signs of shrinking,” warns Legal & General Mortgage Club director Jeremy Duncombe.

“A supply-side crisis defines the housing market. For many first-time buyers, the dream of taking that first step is moving further out of reach.

“The market cannot continue like this. We need an innovative housebuilding initiative to provide respite to this worsening crisis. Until we see some real action, our housing market will remain exclusive.”

Like Duncombe, many deem the lack of supply the chief barrier to affordable prices. But haven’t we heard all this before?

Chancellor Philip Hammond announced in the Autumn Statement his intention to invest £1.4bn to enable the delivery of 40,000 extra affordable homes. He also revealed there was to be a housing white paper to address long-term building challenges.

But Hammond is not the first government minister in recent years to pledge to build more homes. Among many examples, planning permission was granted for 216,000 new homes in England in 2013/14.

Disappointment

The latest announcement did not excite commentators as much as the chancellor may have hoped.

“Any commitment to boost supply is a welcome step but we need far more homes than were announced to even begin to address supply,” insists Mortgage Advice Bureau chief executive Peter Brodnicki.

“We need far more New Homes than were announced by the Chancellor to even begin to address the supply”

The consensus among many experts is that the UK needs 250,000 new homes a year to keep up with demand. However, government statistics for 2015/16 show that construction was begun on only 172,080 homes – a rise of a mere 200 from the previous year’s total, which itself was up by less than 10,000 from the year before.

Housebuilding totals have generally risen since 2008/09 but are far below the figure of 234,280 in 2005/06. In fact, the UK has not hit the ‘magic’ mark of 250,000 new homes since 1988/89.

Naturally, the lack of supply fuels increases in house prices. The Halifax House Price Index for October showed a 5.2 per cent annual jump, a 0.1 per cent quarterly increase and a 1.4 per cent monthly rise – with the average price at £217,411.

Although the statistics reveal a slowing of price growth in the aftermath of June’s Brexit vote, nevertheless they are up from what many had already thought were unaffordable levels for swathes of the population.

Perhaps the clearest demonstration of the challenge for first-time buyers comes from a comparison of house prices and average wages. In a report last month, property analyst firm Hometrack said in London the ratio of prices to earnings had reached 14 to 1 – more than double that for the entire UK, at 6.5 to 1. It said London house prices had risen by 86 per cent since 2009.

new-housebuild-build-stats

Using old-fashioned income multiples as a benchmark, these ratios far outstrip the three- to five-times income stipulated by most lenders, although lending decisions are far more sophisticated these days. That said, there are signs of hope in some areas; the average ratio in Glasgow, Liverpool and Newcastle is below 5 per cent.

Guarantee scheme

At first glance, the ending of the Help to Buy guarantee scheme could make matters worse for first-time buyers. However, few experts spoken to by Mortgage Strategy seemed worried by the closure, largely because they thought the scheme had done its job in reigniting lender interest in high-LTV home loans.

The guarantee encouraged lenders to offer more mortgages to people with only small deposits. In the event of a borrower default, losses were insured for up to 15 per cent of a property’s value for homes worth up to £600,000.

Trinity Financial product and communications director Aaron Strutt says: “Lots of the lenders offering 5 per cent and 10 per cent deposit mortgages do not seem worried that these rates will disappear after the guarantee scheme finishes.”

London & Country communications director David Hollingworth adds: “There is now a healthy number of lenders offering high-LTV rates as part of their core range and many do not use the Help to Buy guarantee.”

He says some lenders that previously relied on the scheme to enable their provision of high-LTV mortgages now offer those products without it.

“Some have already made the shift away, for example, Santander,” explains Hollingworth. “That suggests there is little chance of a contraction in availability.”

Data firm Moneyfacts says the Help to Buy guarantee scheme “made it acceptable to lend at higher LTVs again after the financial crisis”.

Moneyfacts statistics highlight the increase in availability of high-LTV mortgages. The number of 90 per cent LTV products is at its highest since 2008, with 594 on offer in November. This is a slight increase from 569 in November 2015.

“Until we see some real action, our housing market will remain exclusive”

The increase would have been greater had the total not fallen between March and August, which in early autumn led some to fear that the high-LTV market was about to implode.

Mortgage insurer AmTrust International’s commercial director, Simon Crone, told Mortgage Strategy in September that lenders appeared “more risk averse since the Brexit vote”.

The recovery in high-LTV products has allayed experts’ fears and Crone now says that, “as a minimum, we hope levels of high-LTV lending will be maintained next year”, partly because he expects lenders that had used the Help to Buy guarantee scheme to “transition to private-sector insurance”.

Lenders agree that the market is unlikely to be jolted by the demise of the guarantee scheme.

CML spokesman Bernard Clarke says: “It has encouraged the return of higher-LTV lending, largely outside London and predominantly to first-time buyers.

“After 2008, the number of first-time buyer mortgages above 90 per cent LTV collapsed so that, before the introduction of the guarantee, they accounted for only about 5 per cent of the total. Within a short period, the proportion had bounced back to more than 20 per cent, almost entirely as a result of the scheme.

“Unlike other interventions, it has delivered volume, with more than 80,000 mortgages advanced. It filled a gap while confidence returned to the market, and lenders are now offering many more 90 per cent LTV mortgages outside the scheme. After it’s gone, we expect little disruption.”

no-of-ftb-mortgages

Attractive rates
There are other glimmers too for first-time buyers, such as attractive rates on these deals.

Hollingworth points to best-buy two-year fixes at about 3.3 per cent at 95 per cent LTV, which only a year ago would have been half a percentage point higher. “The choice is good and, as competition has improved, so have rates,” he adds.

However, he also points out: “The step-up is still significant, especially from 90 per cent LTV to 95 per cent. Two-year fixes can be below 2 per cent for those with 10 per cent to put down, so a bigger deposit can make a big difference.”

Hollingworth warns that higher swap rates may put pressure on these deals, which could make costs rise for first-time buyers.

For now, rates are low, although those on high-LTV mortgages have not fallen as far as those on lower-LTV deals.

Analysis by Moneyfacts and AmTrust shows that the average cost of a 95 per cent LTV loan fell by 0.05 percentage points in the three months to mid-November, compared to a fall of 0.15 percentage points on 75 per cent LTV deals.

av-house-price-to-earnings-ratio

Rise in lending
Undoubtedly, the greater availability of high-LTV mortgages at lower interest rates helps to explain the rise in lending to first-time buyers.

According to CML figures, in the first nine months of this year 248,400 first-time buyer mortgages were arranged, compared to 225,300 in the same period last year – a 10 per cent rise.  Therefore 2016 may prove to be a better year overall for first-time buyers.

For the full year of 2015, 312,900 home loans were advanced to this group, up slightly from 309,400 in 2014. There has been a steady rise since the financial crisis in 2008, yet the number is still far below the total for 2006, when there were 402,800 first-time buyer mortgages. In 2001, meanwhile, the figure was 568,200.

So what can we expect in 2017? There are signs of green shoots in the recent lending figures, while the Lifetime Isa that will launch next year is another scheme that could help first-time buyers to secure a deposit. In the meantime, the Help to Buy equity loan scheme will continue.

Nevertheless, sky-high house prices mean first-time buyers will continue to face huge challenges. Although Halifax predicts a further easing in average price growth, it expects levels to remain unaffordable for many.

Inflation is expected to rise next year and the Institute for Fiscal Studies says, even by 2021, wages will not have recovered in real terms to 2008 levels. This will put pressure on household budgets, and the house-price-to-earnings ratio could increase.

The picture is not one of utter despair. Hundreds of thousands of wannabe first-time buyers will reach their goal next year, as a result of either a well-paid job, a wealthy and generous family, purchasing in a cheaper area or having other sources from which to generate equity.

Nevertheless, there is a nagging feeling that, after next year’s first Autumn Budget, we could still be asking the same question: is this the year when, as a group, first-time buyers finally feel able to achieve their dream?

Post EU Referendum Download

Leaving the EU – events since the result

After last Thursday’s referendum result and subsequent market volatility, you may have concerns and questions

The download attached has been provided by our network and provides a short and succinct document. This is a considered document reflecting on events since the result.

brexit

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