Housing & mortgage round up: The ‘bank of mum and dad’, repossessions fall and mortgage overpayments


The ‘bank of mum and dad’ repossessions and mortgage overpaymentsWe are delighted to bring you a wide range of stories this week, with not a single house price survey in sight!

We look at new research which shows just how vital the ‘bank of mum and dad’ is to first time buyers, predictions for the housing market in 2013, the latest repossession figures and an increase in the number of people overpaying on their mortgages

‘Bank of mum and dad’ grows in popularity

We’ve written many times about how hard first time buyers have been hit by the credit crunch and the unwillingness of mortgage lenders to engage with this group of would-be homebuyers. However, the extent to which first time buyers rely on the ‘bank of mum and dad’ has been revealed by figures from the Equity Release Council.

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The figures show that nearly a quarter of a million first time buyers have received over £1.3 billion in help from their parents. The research goes on to show that around 30% of first time buyers are receiving help from their parents, with the average amount being given or lent, running at 20% of the purchase price.

Andrea Rozario, of the Equity Release Council, said: “With the average first time buyer putting down a deposit of £27,000 to buy their home, it is unsurprising that people are looking to their parents for help.”

She continues: “It is concerning that some people are delaying giving up work, using retirement savings or even remortgaging their homes to help their children financially.”

House sales expected to rise, but prices to remain static

A new survey, by the Royal Institution of Chartered Surveyors (RICS) has shown that its members expect a rise in the number of house sales after Christmas, but that house prices themselves are expected to remain flat.

Slightly more surveyors in November reported falls in house prices, compared to October, but overall RICS said the housing market is “fairly stable.”

It seems that the number of enquiries from would-be homebuyers has increased steadily; giving rise to hope of a mini boom in house sales after Christmas. There are also signs that the government’s Funding for Lending Scheme (FLS) is starting to help the housing market, with the number of mortgage approvals rising.

The scheme, which has seen billions of pounds being made available, at cheap rates, to banks and building societies, is designed to encourage lending to groups who were previously struggling to get a mortgage. However, it has in fact pushed down interest rates for people who could already get a loan and created a mortgage price war.

Despite not necessarily meeting its aims, the FLS certainly seems to be having a positive effect on the number of mortgage applications and consequently the wider housing market.

Peter Bolton King, Global Residential Director at RICS, said: “There is certainly some optimism creeping back into the housing market, and it is encouraging to see an increase in potential buyers across parts of the country where the market has particularly suffered in recent years.

“That said, there is still a long way to go and the long-standing barriers to home ownership are still very much a problem for the likes of first-time buyers.”

Repossessions fall but the north-south divide widens

New research by e-surv has revealed that the rate of repossessions is falling.

In the first half of 2012 the number of repossessions fell by 16%, with 1.6 homes per 1,000 being repossessed, compared to 1.9% over the same period in 2011.

The fall in repossessions is down to a number of factors, including a more lenient approach by many mortgage lenders to borrowers falling into arrears, an improving employment outlook and of course continued low interest rates, pushed even lower by the introduction of the Funding for Lending Scheme.

However, the national figures mask a worrying trend, with a greater number of repossessions in the north of the country, compared to the south.

The research revealed that over the past six years the gap between repossessions in the north and south has increased alarmingly, from 6% to 32%; in the first six months of 2012 there were 1.4 repossessions for 1,000 homes in the south, in the north the figure was 1.8.

Analysts believe the gap is due to a slower economic recovery in the north, which is also experiencing more severe unemployment and greater wage deflation.

Commenting on the figures, Richard Sexton, of e.surv, said: “This is more evidence that the recession has hit the north much harder than the south. Monthly budgets have been ransacked since the financial crisis, which is making it harder for borrowers to keep up with mortgage repayments.”

Mr Sexton continued: “Although there is a big disparity between repossessions rates in the north and south, the good news is that nationally repossessions are falling. Banks are doing the best they can to keep people in their homes.

More people overpaying their mortgages

New figures from the Council of Mortgage lenders (CML) have shown that many new mortgage borrowers are taking steps to overpay their borrowing, either through their monthly payments or by making one off lump sum repayments.

Of the 6,941,000 new borrowers since 2005 a third have overpaid their mortgage, reducing the outstanding debt by around £31 billion.

The average over payment was £13,400, although the range was wide, with over 50% of the additional repayments being less than £5,000.

Mortgage experts believe there could be a number of reasons for the rise in over payments. Firstly, as interest rates have fallen, many borrowers will have left their monthly payment unchanged, meaning money, which was going in interest payments, is now paid off the capital. Secondly, when people become more nervous about their financial situation, for example during a recession, they tend to repay debt and finally, as the best savings interest rates have fallen many people will have preferred to reduce their debt.

The CML said: “The slashing of interest rates to their current historic low point has helped many borrowers make additional capital repayments. In doing so, they have built up a bigger equity stake in their property and reduced the impact on their finances of any subsequent rate increases.”

“They will also have increased the likelihood of being mortgage-free sooner than anticipated, all of which increases their options should their financial circumstances deteriorate.”

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

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