FIRST-TIME BUYERS KEEPING THE MARKET BUOYANT

The recent slowdown in the market has been good news for those who want to get into the housing market and make that all-important first purchase.

Whilst the number of current owners moving home has come to a virtual standstill, due in part to the uncertainties surrounding Brexit, the number of first-timers has increased. Analysis by Lloyds Bank2 shows that 372,100 first-time buyers entered the market in 2018, up by 3% on the figure for 2017.

STAMP DUTY STIMULUS

Changes in Stamp Duty provided much-needed help. First-time buyers in England and Northern Ireland now pay no Stamp Duty on properties worth up to £300,000. This means that they save up to £5,000. For properties costing up to £500,000 they pay no Stamp Duty on the first £300,000 but will pay duty on the remaining £200,000. (If they buy a property worth over £500,000, then they pay the standard rate and won’t qualify for first-time buyer’s relief). In Scotland, first-time buyers enjoy Land and Buildings Transaction Tax relief that saves them up to £600, whilst in Wales they get no special Land Transaction Tax concessions.

As of October 2018, first-time buyers under Shared Ownership schemes can now claim First-Time Buyer’s Stamp Duty relief on homes worth up to £500,000. This change applies to homes purchased on or after 22 November 2017. Those purchasers who chose to pay Stamp Duty in stages and were previously not eligible for the relief can now claim this tax back.

TIME TO MAKE YOUR MOVE?

As well as being able to take advantage of what has become a buyer’s market, first-time buyers can also benefit from historically-low interest rates on mortgages. The mortgage market remains very competitive and lenders are currently offering a range of attractive deals specifically designed to help young people get on the housing ladder.

In the current market conditions, it’s worth checking out recent sold prices in the area in which you’re looking to buy, as you may be able to secure a property with an offer lower than the asking price, especially if the owners are keen to move as soon as possible.

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.

2Lloyds, 2019

It is important to take professional advice before making any decision relating to your personal finances.

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 different 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.

Information is based on our understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation are subject to change.

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.

Tax treatment is based on individual circumstances and may be subject to change in the future.

RESIDENTIAL PROPERTY REVIEW – March 2019

Our monthly residential 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.

Average residential sales times longer

Recent research from property portal, Rightmove, indicates that across the UK, the average time taken from when a property is first listed, until it is marked as under offer, has increased from 72 days in January 2018 to 77 days currently.

The data also shows that Runcorn, in Cheshire, has the fastest moving housing market outside of London. Runcorn has an average asking price of £132,653 and has seen a reduction in selling time from 69 days in 2018 to just 48 days currently, 29 days quicker than the national average. This appears to have largely been driven by the opening of the Mersey Gateway Bridge, alleviating major traffic problems, to allow a journey time of 20 minutes by car, from Runcorn to Liverpool City Centre.

In Scotland, homes are selling quickest in Livingston, where on average it takes just 35 days for properties to get snapped up. Redditch in the West Midlands takes top spot as the fastest selling market in England, with properties in the Worcestershire town selling in 45 days, on average.

Targets may not be met despite more homes being built

A recent survey of more than 400 housebuilding companies in England, by property and construction consultancy McBains, reveals that 57% of respondents reported increasing the rate at which they built new homes during 2018 and are also predicting a further rise over the next 12 months.

However, less than half of those surveyed (48%) think that the Government target of building 300,000 homes a year, on average, by the mid-2020s is achievable, with worries over land availability, slow planning permission and skills shortages being cited as barriers to prevent them building more homes.

Of the homes to be built over the next 12 months, house builders expect 22% of these new homes to be classed as affordable homes for rent or sale. Clive Docwra, Managing Director of McBains, commented: “For those people struggling to get a foot on the property ladder, the finding that only arou nd one in five of new homes to be built over the next year will fal l into the affordable category will be disappointing.”

Uncertainty continues

The Royal Institute of Chartered Surveyors (RICS) February 2019 UK Residential Survey, indicated that the residential property market continues to struggle for momentum. The survey posed an additional question this time, aimed at identifying the most significant factor holding back activity, and in response to this, 77% of respondents cited Brexit uncertainty as the biggest challenge facing the housing market at present. The survey also indicated that 71% felt it was impacting both buyers and sellers, while only 8% were of the view that Brexit was not having an effect on either.

The Chancellor delivered his Spring Statement on 13 March and although little was expected in terms of new policy measures affecting the built environment, many policies remain dependent on the outcome of the Brexit debate, which a RICS press release expressed as ‘frustrating given how much parliamentary time has been diverted to it at the expense of pressing domestic issues such as the housing crisis, construction skills shortage and infrastructure deficit.’

It is important to take professional advice before making any decision relating to your personal finances. 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 different 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.

Credit Score Tips

Keeping your credit score high throughout your life

A good credit score will see you more likely to be accepted for various types of credit, as well as allow you to enjoy lower rates of interest. The benefits of a high score mean you’ll want to maintain it throughout your life. However, it can be easily damaged over the years. After all, keeping on top of your credit and finances can be hard as you’re dealing with all the things life throws at you.

What happens to your credit score as you age?

The older you grow, the longer your credit history will get, depending on when you took out your first form of credit. Did you know a mobile phone contract is a type of credit? So if you took one out at university, for example, even if you didn’t have a credit card, your credit history will have started building up.

Did you also know your student loan doesn’t count towards your credit report and score?

A limited history could mean a lower credit score, since there is not enough evidence of good borrowing. However, a long credit history doesn’t always necessarily mean a good credit score. This is because a high credit score is determined by a history of credit repayments made in full and on time, among other things. So, much like if you were to keep up a good diet and exercise regime you’d be more likely to be in good health as you get older, your credit history needs to be maintained in order to achieve a healthy credit score.

At certain points in your life your credit score may drop. One reason for this might be when you take out new forms of credit. Taking on a mortgage or loan could see your score drop, because of the additional debt and new credit inquiry recorded on your file. Your first mortgage, a car loan, a loan for your wedding, a joint credit card, a remortgage; there are numerous times when you might need to borrow money throughout your life and this might impact your score.

Whether you get married or not, you may choose to join your finances with your partner and open a joint account or a joint mortgage. Being financially linked to someone means their score and credit report will impact yours and you can see your credit score fluctuate depending on their financial behaviours.

How to maintain a high score

Keep credit card balances low
The higher the balances on your credit cards, the more it can negatively affect your credit score, so you should aim to keep your balance relatively low in proportion to your credit limit. Your use of credit should be under 25% of your total credit limit. For example, if your credit limit is £1,200, then you should aim to only spend no more than £300 on it. Going over this, even if you plan to pay the balance off in full, can affect your credit score.

Pay your bills on time
One of the easiest ways to maintain a good credit score and prevent it from dropping is to keep on top of your bills. This means paying them on time and not missing payment deadlines. As you get older you may have more bills to pay, so to avoid losing track set up direct debits. The payments will be made automatically from your account so there’s no risk or forgetting and being hit with missed or late-payment penalties.

Check your credit report regularly
A mistake that many people make is only checking their credit report when they need to apply for a mortgage, loan or other form of credit, which means it could go unchecked for months or even years. Checking your report can help you spot errors on your file that could affect your score. You can also pick up early signs of identity theft or fraud by examining your accounts and other information held on your report. However, unless you’re checking your credit report once a month or so, you won’t know and your score could be falling in the background without your knowledge. Get mistakes on your credit report fixed as soon as you spot them by informing the credit reference agency.

Keep old accounts
Closing down old accounts will shorten your credit history on your file and could subsequently cause your credit score to drop. Credit reporting agencies will only keep payment history on closed accounts for six years, after this it will be removed from your credit report. There are times when closing accounts can help your credit score, because it reduces the amount of available credit you have. If you are to consider this, you should still try and ensure that your total balances compared to limits, remains around the 25% mark mentioned above. However, as a rule of thumb, aim to keep accounts with a long history of good repayments.

Apply for credit in moderation
Making too many new credit applications in one go can make lenders perceive you as too risky and negatively impact your credit score. Whenever you make an application for new credit, the lenders search on your file is recorded and leaves a footprint on your credit history. Too many credit applications can imply that you’ve failed to get the credit you want.

Whether you’re a student or retired, your credit score will only be as good as your financial behaviour. It only takes a few basic habits to ensure your credit score doesn’t drop as you get older and stays as high as possible throughout your life.



RESIDENTIAL PROPERTY REVIEW FEBRUARY 2019

Our monthly residential 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.

January sees increase in residential property listings

The start of 2019 has seen a strong revival in the number of properties being listed for sale on the market, according to an index compiled by online estate agents, HouseSimple.

This index analyses the numbers of new properties listed by estate agents each month, across more than 100 major cities and towns across the UK. The data revealed that new property listings in the UK increased by 64% in January compared with December 2018, from 31,825 to 52,207.

The data also revealed that new residential stock in London increased by 70.6% compared with December. This represented 21,677 properties, compared with December’s 12,709.

The CEO of HouseSimple, Sam Mitchell, said: “We would normally expect to see activity pick up in the New Year, but no one was quite sure how sellers and buyers would react to the amplified Brexit uncertainty in January. In the end, it proved to be a busy month for sellers in particular, and even with the distraction of the Commons vote mid-month, home owners were keen to make up for lost time.

Buy-to-let landlords seen to exit the marketplace

Recent research from the Association of Residential Letting Agents (ARLA), in their December 2018 ‘Private Rented Sector’ report, has shown that letting agents in London saw an average of six landlords sell their properties and exit the market in December 2018.

ARLA reported that fewer landlords are exiting the market outside of the capital. The national average is four landlords, with an average of three landlords leaving the market in the West Midlands, North East, East Midlands, South West, and East of England.

The Chief Executive of ARLA Propertymark, David Cox, commented: “Over the last few years, landlords across the country have been pushed out of the market by increasing costs and legislation, and new investors have been deterred from entering.

He went on to add: “The issue has particularly intensified in the capital which may be a result of landlords starting to receive their first tax bill incorporating the increase in taxes from the Mortgage Interest Relief changes . . . 

Prime Scottish property outperforms

Savills recent ‘Market in Minutes’, covering prime residential property in Scotland, has reported that the Scottish prime market outperformed the rest of the UK in Q4 2018. Market growth was led by Glasgow and Edinburgh, where values increased by 3% and 7% respectively.

With thriving financial and technology sectors, Edinburgh is one of the quickest growing prime residential markets in the UK, fast closing the gap with leading UK university cities. Data shows that in 2018, sales volumes in excess of £1 million were 12% higher than at the same point in 2017.

In Glasgow, growth was supported by a lack of supply, specifically for high-end properties worth £1 million and above.

Rural locations in Scotland have seen a spike in international viewers. Although growth is modest, the market continues to perform well.

How to Pay Your Mortgage Off Early

Making plans to pay off your mortgage early is a great idea. It will mean that you can put the money you no longer pay out each month to good use, but how practical is it when people are overwhelmed with day-to-day expenses? Here are a few ideas to help you consider the options.

PAY MORE THAN YOUR SET MONTHLY PAYMENT

If you increase your mortgage direct debit so that you pay back more than your normal payment, it will have the effect of shortening your mortgage term and reducing the amount you pay back in total. Common sense, yes, but you would be surprised at how small amounts here and there really do add up. It doesn’t have to be every month, but if you get in the habit of using any extra cash here and there, over time you will be thrilled you made the effort.

SHORTEN THE REPAYMENT TERM

While lenders tend to use a term of 25 years when illustrating repayment terms, this isn’t set in stone. If you can demonstrate that you can afford the higher monthly repayments, you can ask for a loan for a shorter number of years. The shorter the term, the cheaper the loan will be overall as you will pay less interest.

USE A BONUS, WINDFALL OR INHERITANCE

If you find yourself in the lucky position of coming into money, then consider using some or all of it to repay some of your mortgage as a lump sum payment.

THINK ABOUT OFFSETTING

With an offset mortgage, although your mortgage won’t be paid off earlier, the total savings balance that you hold with your lending bank or building society effectively reduces the amount of the outstanding loan on which interest is charged. So, if you have savings of £20,000 with them and a £200,000 mortgage, you’d only be charged interest on £180,000.

POINTS TO NOTE

If you have loans or credit card debts, it may make sense to pay these off first. Also, some mortgage lenders impose early redemption penalties or stipulate a minimum you can over pay.

GET A MORTGAGE REVIEW

If it’s been a while since you took out your current mortgage, or your existing deal is nearing its end, then it’s an ideal time to take mortgage advice to see if there’s a better, more cost-effective mortgage deal available that would be right for your circumstances. With interest rates remaining low, mortgage rates continue to be very competitive.

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.

LOOKING FOR A MORTGAGE LATER IN LIFE

With people getting on to the property ladder at all stages in life, a growing number are looking for mortgage finance in their 50s and beyond. This has created demand for greater flexibility, and lenders are now beginning to address the needs of this age group.

THE OLDER BORROWER

Following the Mortgage Market Review in 2014, banks and building societies were required to adopt stricter lending criteria and affordability checks, and as a result many lenders restricted both their maximum borrowing and repayment age.

However, we know the lenders in the marketplace who are happy to cater for specific mortgage needs such as this and we can help with the process. Older borrowers still need to go through the usual checks to ensure they can afford to make their monthly mortgage repayments and they will also need to show proof of income and declare all outgoings, including any debts.

Lenders will consider issues that could affect an older borrower’s income, such as their state of health, and in the case of joint borrowers, what would happen to their finances if one of them were to die. A lender will assess whether a loan is affordable in the case of a potential borrower in receipt of a pension, as opposed to one who is likely to retire half way through the mortgage term.

On the other side of the coin, older borrowers can often be free of other commitments that can burden younger borrowers – they are further into their careers and probably earn more, their children may have left home, and many may have already come into money through a family inheritance.

TAKE ADVICE

Getting advice can really help. We know the marketplace and so are able to ensure that your application goes to a lender who caters for your specific mortgage needs.

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.

80% OF MORTGAGE HOLDERS DON’T HAVE INCOME PROTECTION

For most of us, our mortgage is likely to be the biggest expense we have in our lifetime, so it pays to think about what would happen if you could no longer pay it. Sadly, as we all know, sometimes things don’t go according to plan, and our lives can be turned upside down.

One of the most compelling arguments for families taking out protection policies is to ensure that their families are able to carry on paying the mortgage in the event of an illness, long-term sickness, accident or death. With a policy in place, there would be an income or a lump sum available to them to keep a roof over their heads, meaning that they wouldn’t be burdened with money worries at a difficult time.

AN IMPORTANT STEP THAT SHOULDN’T BE PUT OFF

A recent survey1 amongst mortgage holders found that 42% don’t have a life insurance policy in place, 71% have no critical illness cover, and 81% don’t have any income protection in place.

Whilst many people realise that having a policy in place would provide valuable peace of mind, taking out a policy is a task that never quite gets to the top of their priority list; 20% of full-time working people questioned for the survey recognised that they would benefit from having insurance protection, but hadn’t got around to arranging it.

Getting the right policy in place needn’t be stressful or time-consuming. We will be able to review the market and recommend a policy that’s cost-effective and provides the right type and level of cover for your circumstances.

1Royal London, State of the Protection Nation, 2018

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.

STAMP DUTY – WHO PAYS?

Recent figures1 show that second home buyers and landlords head the list of those who paid the most in Stamp Duty Land Tax in 2017. Since the changes introduced in 2016, anyone buying a second home or rental property for more than £40,000 has had to pay an additional 3%.

The government raised £9.5bn from stamp duty payments last year, the highest level ever seen in the UK, and second home buyers and landlords paid almost half of that figure. A purchase of a second property worth £500,000 would now be subject to £30,000 in stamp duty; if the same property was bought as a main residence, the bill would be £15,000.

First-time buyers by contrast now pay no stamp duty on properties worth less than £300,000 and reduced tax duty on properties worth less than £500,000.

Despite the capital experiencing a cooling in its property market, London buyers accounted for 39% by value of all stamp duty payments in 2017. Figures differ for Land and Buildings Transaction Tax in Scotland and Land Transaction Tax in Wales; under both, a 3% surcharge applies on additional properties.

1London Central Portfolio, 2018

Residential Property Review – December 2018

Our monthly residential 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.

Government revenue from Stamp Duty falls by 10%

HM Revenue and Customs (HMRC) have stated that Stamp Duty revenue from residential property sales in Q3 2018 has fallen from the £2.605bn seen in the same period of 2017, to £2.347bn in 2018, as the number of properties liable to tax fell from 302,700 to 279,500.

Several factors have been cited, including the devolution of Stamp Duty revenue to Wales and a large reduction in duty payable by first-time buyers. Additionally, there has been a dramatic fall in numbers of house purchases in the London region, where estate agents say high taxes have “suffocated” the market.

To put this in perspective, a buyer of a £1 million home in the capital – such as a relatively modest three or four-bedroom terraced home – would be paying £43,750 in tax, whilst an upmarket £3 million home would see a Stamp Duty charge of £273,750.

Top end £1 million-plus mortgages now at all-time high

The Financial Conduct Authority (FCA) have reported that £1 million-plus mortgages have reached their highest level since records began in the first quarter of 2014.

The figures show that 820 mortgages, averaging £1.6 million, were approved in the three months to September this year, bringing the total value of loans within this bracket to £1.37 billion and representing a 47% increase on the previous quarters borrowing at this level.

The residential research director of estate agents Savills, Lucian Cook, commented on these findings: “Despite taking on over £1 million of mortgage debt, families want more space for their money. If you’ve got a loan of that size, you want a house that will meet your needs over a prolonged period.

Ray Boulger, of mortgage brokers, John Charcoal commented: “I’m surprised by the figures bearing in mind the number of transactions generally has fallen this year and the top end of the London market has been soft for some time.

Yorkshire firm revolutionises house building process

Ilke Homes, a Yorkshire-based manufacturer of fully-fitted, three-bedroom, pre-fabricated houses, have started delivering their first homes across the country. They plan to produce eight homes a day, at a factory cost of between £65,000 and £79,000, depending on specifications. However, these figures do not include the cost of land, on-site assembly or the connection of services, which could double or triple the final price.

Their unique manufacturing process will reduce the construction time of a traditionally built home, from the current average of forty weeks, to just ten days. The company has plans to produce 2,000 houses a year initially, increasing output to 5,000, which would make them one of the major volume housebuilders in the country.

House Prices Headline statistics


House Prices Price change by region

AVERAGE MONTHLY PRICE BY PROPERTY TYPE – OCT 2018

Mortgage Activity

  • Jackie Bennett,
    Director of Mortgages at UK Finance

Source: UK Finance
Release date: 12/12/2018

BUY-TO-LET – WHAT DOES THE FUTURE HOLD?

Being a buy-to-let landlord is much tougher than it once was. Many landlords entered the market a few years ago, attracted by the low interest rates they were charged for borrowing money, and the tax relief that was available to them on their mortgage interest payments.

However, during George Osborne’s Chancellorship, changes in the tax rules were announced that reduced the mortgage interest tax relief available, and additional rates of Stamp Duty (and equivalent taxes in Wales and Scotland) were imposed on those buying second homes or buy-to-let properties. This means that landlords are set to find their income tax relief on mortgage interest restricted to 20% by 2020. Plus, the recent rise in interest rates has meant the cost of borrowing has gone up. More landlords are setting up as limited companies for tax reasons; 18% of private rentals in England are now owned by limited companies.

BUY-TO-LET ISN’T DEAD YET

Despite the tax changes and the potential for buy-to-let mortgage costs to rise, landlords are still entering the market. Renting remains buoyant; plenty of people prefer to rent or feel priced out of the property ownership market and need somewhere to live.

If you’re thinking of becoming a buy-to-let landlord, it makes sense to begin by working out how much it is likely to cost to buy a property, what your borrowing costs will be, and what expenses you’ll incur putting it on the rental market.

You’ll need to factor in all the associated costs, such as gas and electricity safety inspections, insurance, regular maintenance and any agent’s costs, if you intend to use a letting agent. Then you’ll need to work out how much rental income you’re likely to make, including any periods where the property might be empty, and you won’t be receiving rent. This calculation will help you assess whether this type of investment is worthwhile for you.

When looking for a property, one near good transport links and with easy access to local amenities is always likely to be attractive, so choosing the right area is important. It also pays to form a view of the type of tenant you expect to attract; that way you can opt for the right décor. If you’re aiming to attract students, clean and comfortable would work, but if you’re thinking of young professionals, something more modern and stylish might be more appropriate.

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.