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House deposit | Tips for saving a house deposit

admin — Thu, 29 Sep 2011 05:47:09 +0000

Tips for saving a house deposit

The monthly forecast of falling house prices has done little to endear brick and mortar investment to those that bought their house before the market started to plummet. If you’ve read reports such as the research from property website Zoopla in March of this year that claimed a massive £45,000 has been wiped off the average house price since the credit crisis began and thought that meant you’d have an easier time as a first time buyer putting a deposit together, you’d be very much mistaken.

While existing householders are left to gnash their teeth month after month as the value of their property nosedives, those saving for a deposit are sailing even stormier seas – new research published today by first direct shows that the average house deposit is now £66,000. This is an increase of £60,000 since 1990. The bank stated in its report that a typical UK home costs around 6 times more than an average household income and the deposit, 1.7 times the average income.

With just 30 95% mortgage products [link to post when published] to be found on the British high street and unemployment figures once again creeping up, what can those saving for a deposit do?

1. Reduce unnecessary spending

Although it’s boring, the best way to save money is to cut back on non-essentials and luxuries. Buying lunch at work each day or enjoying a morning latte may only amount to £4 or £5 a day but over the course of a year, those morning coffees and café sandwiches could all add up to hundreds if not thousands of pounds wasted. Buying a thermos and taking a coffee from home to drink on the commute or preparing a salad or sandwich for lunch before leaving the house may not seem overly glamorous but is a small sacrifice to make in the long term and could land you your dream house much sooner.

2. Switch to cheaper brands

Many of us will do the weakly supermarket shop on auto-pilot, throwing in the same items week after week. Sometimes this can mean buying more expensive products when cheaper versions are available – switching to supermarket own brand cleaning products for example won’t have any discernable impact on the cleanliness of the house but will reduce the weekly bill if you’re accustomed to buying brand name products. These savings can be put towards the house deposit and will mount up month on month.

3. Shop around for better deals on bigger purchases

Saving for a house deposit doesn’t mean having to forsake holidays and other occasional treats until the target amount is reached but, it does mean that more shopping around is required. If you’re adventurous, leaving booking the holiday till a few days before can cut hundreds of pounds of the cost of the break as last minute getaways are significantly discounted. Booking a week or so before can see savings of as much as £400 or £500 per person – and if two of you are going that means an extra £1000 towards the house deposit. Similarly, getting into the habit of pre-booking airport parking can save £40 and using an online travel money service rather than exchanging at the airport has been shown to save at least £30 or £40 on larger currency transactions- making another £100 in that month’s deposit savings.

4. Consider how much rent you pay currently

If you’re renting a property while also saving for a deposit, it can seem like the goal post moves further and further away with each rental payment you make. The frustration of knowing your rent could pay a mortgage is also hard to take. If your serious about saving, consider moving to a less expensive area on a temporary basis and put the difference in a savings account or club together with friends and family to form a house share, splitting the rent between two or three to reduce the cost.

5. Find a good savings account

Every high street bank in the UK offers some form of saving account. Many will even set one up when you open a current account. Don’t be afraid to shop around to find an account with a better rate of interest. Set up a standing order to this account to come out on the same day your salary hits and you’ll start to see the house deposit saving’s account as just another bill rather than money you can dip into.

6. Go online

Auction site eBay recently announced that there were more eBay millionaires than ever before. The site has frequent free listing weekends where there’s no charge for adding items so add those things you no longer need or want and make a profit out of things that are just left lying around or stuck in boxes in the attic. For those who are creative, it’s also easy to set up an eBay shop if you have more than a few of one item to sell or are good at making things.

UK housing market 2011 | Is the UK housing market in 2011 a cause for optimism?

admin — Thu, 29 Sep 2011 05:42:42 +0000

Is the UK housing market in 2011 a cause for optimism?

The UK housing market in 2011 is a real mixed bag with just as many positive news reports and research figures abounding as negative. Since the recession started and job losses began to take their toll, the housing market has been subject to almost constant scrutiny with every bank, building society, estate agent and financial pundits voicing their opinion and expounding their predictions.

With so many conflicting reports it’s almost impossible for the casual observer or would be first time homeowner or buy to let landlord to get an accurate picture of the UK housing market in 2011.

The Good

1. The Return of 95% Mortgages

All but disappeared at the height of the economic downturn, the 95% mortgage is slowly making a return to the high street with a number of lenders cautiously extending a glimmer of hope to those with only a 5% deposit. Out of the 10,000 plus mortgage products on offer, only 32 of them are given with a 95% Loan to Value (LTV) but this is still significantly higher than the six that were on offer in June 2009, according to The Guardian Newspaper.

2. The Increase In Mortgage Products

Although much has been made of the fact that it’s now more difficult to get a mortgage – particularly for those who are buying a house for the first time – there are actually now more mortgage products to choose from than at any other time since 2008. This increase in types of mortgages available can only be good news for the state of the UK housing market in 2011 as it points to increased competition and a wider range of choices for those looking to take out a home loan.

3. Lower Interest Rates

The website Moneyfacts has reported that interest rates on new mortgage deals have fallen to their lowest rates in 23 years – a fact that more than any other suggests the UK housing market in 2011 can be a more favourable landscape than it has been made out to be. According to Moneyfacts the drop is interest rates has been seen across all types of mortgages, from 95% mortgages down to 80% mortgages.

4. The Buy To Let Market Has Been Reborn

Swept aside at one point, a number of banks and building societies are welcoming the buy to let applicant back into the fold with more mortgage products and more mortgage approvals for those buying a home with the sole purpose of renting it out. The resurgence of buy to let in the UK housing market in 2011 is a positive for those able to take advantage of lower house prices and real estate bargains, as well as those looking to start a new career as a property landlord.

The Bad

1. The North South Divide Has Increased

While prices have dropped across almost all of the country, there is still one place on the British Isles where the average house price rises month on month – London. While figures relating to house sales from The Land Registry in July showed an average of an 8.8% decline in house prices in the North, house prices in London were rising by 1.9% monthly. Prices in the capital continue to flourish and homes in and around London’s commuter belt tend to spend less time on the market than those for sale further North.

2. House Deposits Have Increased Substantially

While the UK housing market in 2011 can boast that it has borne witness to the return of 95% mortgages – something unthinkable in 2009 – this disguises the massive increase in the average deposit required. Data from First Direct reveals a tenfold increase in the amount of deposit required over the last two decades and now stands at a massive £65,000.

3. Rental Property Has Increased In Value

Property rental is a hallmark of the 2011 UK housing market with the majority of non-homeowners believing they’ll never be able to buy a home, according to the ‘Generation Rent’ report. Those in this position and saving for a deposit will find it harder than ever as a survey of 18,000 rental properties conducted this summer by a national letting agent has revealed a record rise in rent. This increase has left many struggling to pay their monthly lease, without considering other bills and the desire to save money for a house deposit.

The Definitive First Time Buyer Guide to Buying a House

admin — Tue, 27 Sep 2011 20:35:35 +0000

The Definitive First Time Buyer Guide to Buying a House

Up there with getting married and having a child as one of life’s most stressful experiences, making the decision to buy a house is often the start of a long, frustrating and exhilarating process. A first time buyer guide to buying a house can make the task less confusing and much more straightforward, regardless of how many viewings and mortgage applications it takes before the ‘For Sale’ sign can be switched to ‘Sold’.

First Time Buyer Guide To Buying a House: Step One

Working out how much deposit you need for a house and finding a house you want to buy presents something of a chicken and an egg conundrum – do you save for a deposit first without really knowing the exact amount you need or view properties first and risk finding a house you love but can’t afford?

When you first start thinking about buying a house, it’s impossible to know how much of a deposit you’ll need and therefore, how much and for how long you’ll need to save, without first getting an idea of the kind of house or flat you like, what typical houses you like are selling for and which areas you can afford to live in. Invariably you’ll need to compromise on one or two aspects of your first home. It may be that you can afford a house with the number of bedrooms you want and a large garden and garage but not in your first choice of area for example, so looking around will allow you to figure out a savings strategy.

First Time Buyer Guide to Buying a House: Step Two

Having saved for the deposit, comes the fun step of conducting viewings and searching for a house that ticks all of your boxes. Before you set out to view properties, it’s worth having an idea of the kind of features you want – do you need a certain number of bedrooms, is a garage a deal breaker? Would you like a large or small garden? Are you looking for a house that doesn’t need anything doing or, are you willing to consider a property that needs work but would allow you to put your own stamp on each room? Does the house need to be near good public transport links or schools? Discussing these points before you start looking at houses for sale can result in less wasted time, with fewer unsuitable properties.

First Time Buyer Guide to Buying a House: Step Three

When you’ve found a house you like, putting in an offer and finding a mortgage should top your To Do list. Some first time buyer guides to buyig a house differ on whether you should start the ball rolling on your mortgage application process before or after you place an offer but, the two can be done more or less at the same time. Finding a home loan is one of the most difficult parts of the process simply because of the level of choice available and amount of nervous energy expended!

There are a number of 95% mortgages now available on the market, although lenders typically set very stringent requirements on those with a 5% deposit. A 90% mortgage or even 80% mortgage are easier to come by and make sounder economic sense in the long term as interest rates are usually lower. Most first time buyers purchasing homes this year have done so with an 80% LTV, so be prepared for this when applying to lenders.

Applicants will typically be asked for pay slips and proof of incomes as well as other financial information such as amount of outgoings, credit card debts etc. Having all of this information handy before you go to the bank can speed up the application process.

First Time Buyer Guide to Buying a House: Step Four

With the mortgage application done, the next step is to arrange conveyancing. This is a series of searches carried out by a conveyancer – many solicitors offer this service so a suitable person will be easy to find. While the conveyance checks local records for things like subsidence and conducts water and mining searches, the bank will arrange for a property valuation to be carried out for mortgage purposes.

Provided the property is found to be worth the asking price by the bank and the searches carried out by the conveyance have not unearthed any problems, the legal process of transferring ownership of the property will continue. Contracts will be signed and exchanged and a completion date finalised. The completion date is the date when the money to purchase the property will be transferred to the vendor and the keys given to the buyer.

90% Mortgage | Pros and Cons of a 90% Mortgage

admin — Tue, 27 Sep 2011 20:32:48 +0000

Pros and Cons of a 90% Mortgage

While the return of buy to let mortgages and the proliferation of renters has hogged the headlines of late, the 90% mortgage has quietly made a return to market. All but impossible to find during the height of the recession and property market slump, a number of lenders have recently increased their 90% mortgage product offerings, giving a subtle indication that first time buyers are once again in favour.

While anyone can apply for a 90% mortgage – from first time buyers to seasoned property magnates – they have historically been popular with those eager to invest savings in bricks and mortar for the first time. But, what are the pros and cons of 90% LTV mortgages?

The Pros

The biggest and most obvious advantage of a 90% mortgage is the fact that only a 10% deposit is required. Historically, first time buyers struggle to gather a deposit together while also paying rent and dealing with other bills so a 90% mortgage is a great compromise between the bank’s preferred 80% LTV products and what a buyer can realistically afford as a deposit.

A smaller deposit also means more cash is available for other essentials such as new furniture and to pay associated costs such as conveyancing fees.

Fortunately, as 90% mortgage products become ever more popular, there is a wide choice of terms and types for would-be buyers to choose from. This gives those applying for a 90% mortgage a much stronger bargaining position and the flexibility to choose a term, interest rate and type of mortgage that suits rather than be tied to a few set choices as is the case with 95% mortgages.

The cons

Although a 90% mortgage means that only 10% of the value of the property comes from the buyer, this can still represent a sizeable chunk of savings and in some cases, take years to achieve. Particularly in areas like London where house prices book the trend and continue to rise (to an average of 340% more than a comparable property in the north) the simple act of getting a big enough deposit together can be tough.

There is also increasingly an embarrassment of riches in the 90% mortgage category, making it hard for buyers to see the wood for the trees. With dozens of lenders, thousands of combinations and choices of fixed rate, variable, tracker, interest only and repayment to get to grips with, there is a danger of drowning in choice and making the wrong decision in the long term.

80% mortgage | How hard is it to get an 80% mortgage?

admin — Tue, 27 Sep 2011 20:31:11 +0000

How hard is it to get an 80% mortgage?

While the prospect of saving a 20% deposit may seem daunting as you itch to take possession of a brand new home, the reality of the UK property market is that 80% mortgages are the product of choice for most lenders, over and above a 90% mortgage and the resurgent 95% mortgage.

New data published by The Council of Mortgage Lenders (an industry body comprising of banks, building societies and other lenders who jointly account for 94% of all residential mortgages) shows that in June 2011, a total of 46,700 home loans were approved, of which 18,100 were for first time buyers – with the majority being 80% mortgages.

Although it’s harder to save a 20% deposit on a property, it’s actually much easier to get an 80% mortgage than a higher LTV, particularly for those who have never got on the property ladder. Mortgages with a lesser deposit, such as 90% and 95% mortgages have much more stringent lending conditions attached and in the case of 95% mortgages, will often be linked to harsher credit scoring.

In contrast, an 80% mortgage is seen as a safer bet by most lenders – as the amount being borrowed is less, repayments are typically smaller, which suggests the monthly instalments will be met much easier. For those first time buyers taking out a home loan in June with an 80% mortgage product, the monthly payment represented just 13.4% of the monthly household income. This small proportion shows a much higher likelihood of the mortgage being repaid and not falling into arrears and makes it easier for the applicant to prove to the bank that the mortgage is affordable – removing the biggest barrier to the approval process.

Every major lender in the UK offers an 80% mortgage product, making it easy to find a deal that is suitable. The affluence of this LTV ratio on the high street means most buyers will find it easy to not only get a deal that suits but also to find a lender willing to approve a loan.

95% Mortgage | Applying for a 95% Mortgage

admin — Tue, 27 Sep 2011 20:29:56 +0000

Applying for a 95% Mortgage

According to The Guardian Newspaper, there were just six 95% mortgage products available in June 2009, making it almost impossible for the cost-conscious first time buyer to grab a rung on the property ladder. While the UK housing market may still be less than stellar, there are signs that the tide is turning and those who had resigned themselves to am lifetime of renting are now seeing a glimmer of hope as 95% mortgages return to the market. Industry research suggests that there are now more than thirty 95% mortgage products on the high street.

The option to apply for for a 95% mortgage and the new willingness shown by lenders to consider this high loan to value (LTV) ratio is a bright spot in an otherwise dim property market landscape. Particularly for those under 30 who had resigned themselves to never taking possession of their very own set of keys, the emergence of 95% mortgage products is on the face of it, great news. But, is it really that simple to apply for a 95% mortgage and be successful? Unfortunately not.

There are hundreds of mortgage products available from high street lenders – there are almost 14,000 mortgage products available according to the Monthly Index with a steady stream of new deals being offered to intermediaries over the last 12 months pushing this number to its highest point in years. But of these thousands, only 32 are 95% mortgages.

Experts warn that simply hunting out a lender willing to give out a 95% mortgage application form is just the start of an uphill struggle. While it may first appear that 95% mortgages are on the increase, it soon becomes apparent that they come with many strings attached.

A number of analysts have confirmed that although a smaller deposit is required, those applying for a 95% mortgage may actually end up paying more in the long run as the rates are typically much higher than on an 80% LTV or even 90% LTV mortgage.

Many lenders will also factor in more stringent requirements than for other mortgage products and some experts have warned that the tougher requirements will be combined with harder credit scoring, making it extremely difficult to reach an approved status.

For those unable to meet these demanding criteria, a 90% mortgage or 80% mortgage may be a smarter long term solution.

How much deposit for a house | How much deposit for a house do first time buyers need?

admin — Tue, 27 Sep 2011 20:26:52 +0000

How much deposit for a house do first time buyers need?

One of the biggest concerns of anyone looking to get onto the property ladder is ‘how much deposit for a house do I really need’? Unfortunately for those pondering this question, the short answer is – a lot!

New research into how much deposit for a house is really necessary has just been conducted by First Direct, a bank and mortgage lender that is part of HSBC. It makes for grim reading for those struggling to get a deposit together. The lender found that an average deposit of £65,924 is required for a house purchase – a massive increase on the £6000 that was typical twenty years ago.

The bank also made a bold claim stating that 2010 was the most difficult year in two decades to buy a house, as the credit crunch continued to bite leading to more stringent lending criteria from banks, fewer jobs and smaller wage increases than had previously been the case.

For those wondering how much deposit for a house they can afford, First Direct had a third sobering statistic to share – the average deposit is 1.7 times the average household income, which means it takes longer than ever to save enough money to grab the first rung on the property ladder, despite widespread concern about falling property prices.

In practical terms, the lender calculates that the amount of deposit needed for a house has risen four times as fast as the average amounts of income and double the speed of interest rates. All of which combines to shift the finish line even further and further away for would-be home owners.

Figures from The Council of Mortgage Lenders show that the first time buyer pays an average of 20% of the value of home as a deposit, making an 80% mortgage the most prolific for new homeowners. This is a full 10% over the standard 10% that those buying for the first time before the recession were able to enjoy.

What is first time buyer stamp duty

admin — Wed, 21 Sep 2011 21:47:05 +0000

What is first time buyer stamp duty?

There are many costs associated with buying a home for the first time over and above the amount needed for a house deposit. Mortgage arrangement fees, conveyancing costs and solicitor fees all add up, as do more practical considerations such as the cost of moving home and then furnishing it. One additional cost that may need to be factored in is first time buyer stamp duty.

Stamp duty for first time buyers varies according to the value of the home purchased. Stamp Duty Land Tax, or SDLT for short, is a tax that is paid when a property is transferred from one owner to the other – for example from person(s) to person(s) in the case of vendor to seller or from a developer to a buyer(s) in the case of a new build. The tax is payable above certain value thresholds, although first time buyer stamp duty is different to the SDLT amount payable by those on their second or above purchase of property or land.

The amount of stamp duty payable is calculated by HMRC using what they call a ‘chargeable consideration’ value. This value takes into amount considerations such as whether the property is residential or commercial, leasehold or freehold. In general, the amount of stamp duty payable is simply a percentage value of the amount the house was sold for. Much like income tax, the higher the amount, the higher the percentage that is due.

First time buyer stamp duty is subject to a SDLT relief, offered by HMRC. This relief applies from its introduction on 25^th March 2012, and is available for purchases completed before 25^th March 2012. Stamp duty relief for first time buyers is only available on property that is purchased for less than £250,000. It can also only be applied for a property that the buyer intends to live in themselves and declares as their main residence.

The amount of first time buyer stamp duty payable on properties over £250,000 in value is the same as for other buyers. For properties between £250,000 and £500,000, a 3% stamp duty is payable. For £500,000 to £1 million, a 4% stamp duty tax is payable. Land or property purchased for more than £1 million is subject to a 5% stamp duty land tax. No stamp tax is payable below a £125,000 value.

How do UK house prices vary from region to region

admin — Wed, 21 Sep 2011 21:43:52 +0000

How do UK house prices vary from region to region?

There has long been talk of a North – South divide, with house prices in the UK used as a yard stick as to how much of a gulf exists between the two areas of the country. In the aftermath of the recession and in the midst of a difficult time for the UK property market, looking at house prices UK in terms of differences between the regions is a useful exercise for those keen to make their house deposit go further.

Just as you’d shop around when considering buying a new car or electrical appliance to be sure you’re getting the best deal, looking at UK house prices on a per region basis and comparing average prices for similar standards of property could lead to substantial savings for those flexible about where they choose to buy a house.

Capital cities are always more expensive points of purchase and this is truer than ever for London. While year on year, house prices UK have fallen by 2.6% (as per data from lender and bank, Halifax), house prices in and around London are soaring. The Land Registry, which tracks house prices UK on a monthly basis, says prices are rising by 1.8% a month in the capital (compared with month on month declines elsewhere). Some analysts suggest a home owner looking at a house in the north and considering a house in the south would pay around 300% more for the London house.

According to The Land Registry’s August data, an average London property is priced around £346,416, compared with just £101,143 for a typical house in the north. These average figures don’t necessarily paint the full picture of house prices UK at the present time though, as some regions in the north have been harder hit than others. In June of this year for example, house prices in the North East were found to have declined 8.8% year on year. Yorkshire and the Humber has also been hard hit, with a 4.5% year on year decline. For the same time frame, house prices in Wales declined 3.3%, while in the North West it was 3.3%. The East Midlands showed a 3.2% year on year drop.

Rating’s agency Standard and Poor’s have also revealed results of their research into 1.3 million mortgages, stating that homeowners in the north are 35% more likely to be at least one month in arrears on their mortgage repayments. What’s more, this figure is a 10% increase on last year’s research, while the number of home loan in arrears on London actually fell in the same period, showing that the gulf between North and South is still developing.

UK Housing Market Predictions

admin — Wed, 21 Sep 2011 21:35:43 +0000

UK Housing Market Predictions

It’s no secret that the UK housing market has been through the ringer in the last 24 months with prophets of doom blaring out from newspaper front pages on an almost daily basis. The poster boy of a recession that has blighted the global economy, the UK housing market has felt the impact of a national slowdown more than most. But, what is the actual state of the market and what do experts predict for the future?

According to figures from the Bank of England, a total of 46,967 mortgages were approved in February 2011, a slight fall on the monthly average of 47,275 posted in 2010. By May of 2011, the gulf had widened with a drop from 52.170 sales completed in May 2010 compared with just 46,870 in May 2011.

And what of property prices, arguably the most important metric for buyers and sellers alike? The House Price Index, issued monthly by The Land Registry, has made grim reading for much of the year. In August it reported the price of property in the North East had lost 8.8% compared with the previous year, posting a massive 2.3% drop in the four weeks between June and July.

The Index also reported a massive disparity in prices between North and South, with London the only city in the country to see prices actually climbing. Staggeringly, an average London home was pegged at an average value of 340% more than that of a similar property in the North.

Experts predict even fewer high points for the rest of the year with some suggesting the UK housing market will continue to stagnate. Professionals such as conveyancers are pointing to a stalemate between buyers and sellers with sellers unable to lower the asking price and buyers unwilling (or unable) to pay over the odds. One firm of estate agents has gone as far as to say that falling numbers of transactions will continue and completed transaction figures will be bolstered only by those who can afford to sell their property for significantly less than what the house may actually be worth.

While this is bad news for those looking to set foot on the property ladder for the first time and those looking to sell in order to buy a new place, the current state of the UK housing market is good news for one sector of the population – the buy to let entrepreneurs. With the ‘Generation Rent’ report claiming two thirds of non homeowners will never buy a house, it looks increasingly likely that rental property will form the bulk of market movement for a considerable period of time.