Housing & mortgage round up: Life gets harder for first time buyers, whilst sellers reduce asking prices


Housing & mortgage round upA glut of stories this week emphasising how hard it is for would-be house buyers, especially first time buyers, to get on the housing ladder.

House prices are rising faster than wages, new house building is falling and rents are rising, all making it harder for first time buyers. Whilst at the same time sellers are having to reduce asking prices by record amounts.

Are you looking for mortgage advice?

Linda Wood, Investment Sense mortgage adviser in Nottingham

Contact Linda Wood today:

0115 933 8433


Online enquiry form

House prices rise three times faster than wages

Despite the recent falls, a new report argues that house price rises have massively outstripped increases in wages over the past 10 years.

The report by the National Housing Federation (NHF) shows that house prices have risen at three times the rate of average salaries, meaning that many people are finding it hard to get on the housing ladder.

The report shows that in 2001 the average home in the UK was worth £121,769 whilst the average salary was £16,557. By 2011, the NHF figures show that the average house price has risen to £236,518, but over the same period the average wage has only risen to £21,330; that equates to a 94% increase in house prices but only a 29% rise in wages.

Some mortgage experts have questioned the NHF’s figures. In compiling the report the NHF used data from the Office for National Statistics (ONS) and Land Registry; however the figure given by the NHF for the average house price is some way off the major house price surveys.

The latest figures from the Halifax, Nationwide and Land Registry show the average UK home to be worth £161,094, £164,389 and £161,777 respectively; the NHF clearly believe that the average UK home is worth significantly more.

Other factors of course play a part in making it harder than ever before for people to get on the housing ladder. First time buyers need to come up with ever larger deposits, with mortgage deals above 90% loan to value few and far between. Whilst mortgage criteria has tightened for all, particularly though for the self employed.

The report argues that in 2001 the average deposit needed to get a 90% loan to value mortgage was £12,177, equivalent to less than a year’s salary. However, the NHF now believe that a buyer can now expect to need a 25% deposit, equating to nearly £60,000, or around three year’s salary.

David Orr, Chief Executive of the NHF, said: “With the gap between income and house prices growing ever wider, people can often feel like they have to win the lottery to be able to buy in their local area.”

He continued: “A shortage of homes means the price to buy them is being pushed ever higher by the market, and out of reach of millions of hard working families. Unless we start building more homes people can truly afford to match the demand, this will only get worse.”

Responding to the report, Grant Shapps, Housing Minister, said: “We are pulling out all the stops to help people across the country realise their dream of homeownership. We’ve introduced the NewBuy Guarantee, enabling aspiring homeowners to buy with just a fraction of the deposit they would normally require; the FirstBuy scheme, offering a valuable alternative to the bank of mum and dad; and Funding for Lending, to make mortgages cheaper and easier to get.”

House building falls

Evidence has emerged that the number of new builds is falling.

Government figures show that the number of homes started by builders fell to 21,540 in the three months to June 2012, a drop of 24% on this time last year and 10% lower than three years ago.

The news will come as a disappointment to the government who have been trying to kick start house building in the UK with initiatives such as the NewBuy scheme.

Average rents rise to record levels

Home buyers need to save ever larger deposits to obtain a mortgage, not easy to do at a time of rising rental costs.

The latest figures from LSL, which owns a number of letting agents, show that the average rent has risen to a new record of £725 per month.

Rents are now on average 2.9% higher than a year ago, with experts putting the increase down to the larger number of people finding it impossible to get a mortgage and who are therefore having to rent.

The rising cost of renting a property seems to be down to two main factors. Firstly the inability of some to be able to get a mortgage, either through a lack of deposit or not fitting with ever tightening mortgage lending criteria, and secondly, the lack of affordable housing.

Commenting on the figures, David Newnes of LSL, said: “The backlog of frustrated first-time buyers in the private rented sector showed no sign of clearing in July – in fact, it is still growing.”

Newnes continued: “As lending to those without substantial deposits remains depressed, demand for rented accommodation can only go one way in the long-term – providing further upward momentum for rents.

“The rental market is also entering its summer peak, as recent graduates and those with new jobs begin to look for new accommodation.”

HSBC withdraw record breaking fixed rate

HSBC has withdrawn its’ all time low five year fixed rate mortgage deal of 2.99%.

The deal was launched a month ago to universal surprise that a five year fixed rate could be priced so low; however the bank has now run out of funds for the product and has replaced it with a new five year fixed rate product at a higher interest rate.

Whilst the product was only available for borrowers with a 40% deposit and who were prepared to pay the £1,495 arrangement fee, a spokesperson for HSBC said that it had been a “popular product” although refused to say how much money the bank had lent on it.

Sellers forced to cut asking prices

New figures from Zoopla, a property website, show that 37% of sellers have been forced to cut their asking price over the past three months, up from the previous level of 34%.

The average reduction in asking price is now £19,000, but with significant regional variations.

It seems that sellers are being forced to reduce asking prices further than usual to stimulate interest in their property. Whilst the summer is always a quieter time for property sales, this year has also seen one off events such as the Jubilee celebrations and of course the Olympics. The bad weather is also thought to have had a negative effect on the number of home buyers.

Our mortgage adviser, Linda Wood, is here to help you. If you would like advice on your options or you are affected by any of the stories in this week’s housing round up please call  Linda today on 0115 933 8433, alternatively enquire online or email linda.wood@investmentsense.co.uk

Your property may be repossessed if you do not keep up repayments on your mortgage.

For providing mortgage advice we will charge an application fee of £299 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.