Monday's Property Market review 8th June
8th June 2015
8th June 2015
UK home owners save average of £1,400 on stamp duty
UK home owners have saved £701 million in the six months since the introduction of the Stamp Duty Land Tax reforms last December, according to new research.
The changes to how stamp duty is levied cut the tax for the 98% of people purchasing homes under £937,500 with each house buyer below this level saving an average of £1,400, says the analysis from conveyancing services firm myhomemove.
‘The stamp duty reforms have saved UK home buyers a significant amount of money since its introduction and provided an important boost to the property market, just as house transactions were starting to slow down in the run up to the general election,’ said Doug Crawford, the firm’s chief executive officer.
He pointed out that the changes have a particularly positive impact on those struggling the most to get onto the property ladder, first time-buyers, as they can now save more money towards a deposit for their purchase.
He also explained that under the previous system, there was a substantial increase in price at the stamp duty thresholds, which the reforms have reduced significantly, leading to greater movement up the property ladder and enabling home owners to aspire to own properties that would have previously been unobtainable.
‘While there are losers from the changes, these are a small minority of buyers. For them, the risk of a prospective ‘mansion tax’ was far greater than the increase in stamp duty. Early signs indicate that the election result has reassured buyers of higher value properties, with many estate agents reporting a buoyant market at the top,’ added Crawford.
First-time buyer mortgage rates at three-year low
Mortgage Solutions Emma Lunn www.mortgagesolutions.co.uk
Mortgage rates for first-time buyers are at a three-year low, market data has suggested. Would-be homeowners are also benefiting from more products being available, research from Money Supermarket said.
In the past three years the average first-time buyer mortgage rate has fallen by one percentage point to 3.26%.
During the same period the number of first-time buyer mortgages has more than doubled. Money Supermarket said there were currently 2,776 products targeted at young buyers on the market.
It said this figure had been boosted by the launch of the government's Help to Buy scheme. In April 2012, before the scheme's launch, there were only 1,324 first-time buyer products on the market.
The number of mortgages available for people with a 5% deposit has also increased, growing from 31 to 448 in the last three years.
Kevin Mountford, head of banking at Money Supermarket, said first-time buyers should be mindful of the whole cost of a mortgage and not be lured by a headline rate.
"The increase in the number of first time buyer mortgages, and the corresponding fall in interest rates, can only mean good news for those looking to get a foot on the ladder. Even better, borrowers who can scrape together a 10% or even 15% deposit will find they are able to get their hands on more competitive deals," he said.
"For anyone looking to buy their first home, it's important not to be led by interest rates alone when comparing mortgages. Expensive fees can wipe out the potential benefit of a lower rate so it's worth doing the sums first to ensure you really are getting a great deal. Whilst mortgage approvals were up 7% overall on March, this doesn't mean that lenders' criteria is becoming more relaxed.
"After the introduction of the Mortgage Market Review, borrowers not only need to have a strong credit score, they also need to prove that they can afford the mortgage they're applying for - not only at its current rate but, if rates should rise in the future."
An interest rate rise could cripple almost seven million borrowers in the UK
Almost seven million how owners could struggle to cover their mortgage repayments if interest rates rise just 1%, according to new research.
Interest rates have been at a historical low of 0.5% but some economists have predicted that they will begin to climb from Spring 2016.
They are unlikely to rise steeply, however, a rise of 1% would see borrowers with standard variable rate mortgages pay an additional £55 a month for every £100,000 owed and once rates begin to rise, some 63% of borrowers say they would have to cut back on all non-essential spending, such as weekends away or even meals out, to cover the additional cost.
The research, carried out on behalf of mortgage and loans provider Ocean Finance, also shows that while many borrowers are able to reduce spending to cover the increased mortgage cost, a further 13% are concerned they would quickly get into financial difficulty trying to make ends meet.
Almost a quarter of borrowers have already switched to fixed rate mortgages and a further 16% plan to take fixed rate mortgages to protect themselves against a rate increase. However, the firm says it is worryingly that more than a third of home owners are not taking any steps to shield themselves from an interest rate rise.
The pressure to meet increased mortgage payments would force about 10% of home owners to consider selling their home to avoid the higher cost of their mortgage, the research also suggests.
‘It’s inevitable that interest rates will rise at some point, whether that happens in Spring next year or later in the year. Whilst the rate rise is likely to be gradual and it may take a while to get to a 1% increase, every rate hike will have an impact on hard working families who are already struggling to make ends meet,’ said Gareth Shilton, Ocean’s spokesperson.
‘Many people will feel like mortgage prisoners because their circumstances have changed since they took out their loan and they’ll understandably be concerned about what a potential interest rate rise means for them,’ he pointed out.
‘It’s important to understand that in most cases there are options, so it’s important that anyone who is concerned about a rate increase should seek advice on the best deal available to them,’ he added.