Mortgage Maze for First-Time Buyers But Buy-to-Let Investors Enjoy a Bounty

First-time buyers face tough task as mortgage product availability dwindles, but buy-to-let investors spoilt for choice.

The latest research by specialist property lending experts, Octane Capital, has shown that first-time buyers face the toughest task when it comes to securing a mortgage in the current market, with the number of products available to them reducing by -3.4% in the last three months. However, landlords are currently spoilt for choice, having seen the number of buy-to-let mortgage products increase by 8.8% over the same period. 

Octane Capital analysed the number of mortgage products currently available across the market* and how the level of product availability has changed for each type of mortgage.

The research shows that first-time buyers face the toughest challenge securing a mortgage in the current market. Octane Capital found that there were just 595 mortgage products currently available (Jan 2024) to first-time buyers, accounting for just 7% of total mortgage products on the market. 

What’s more, this number has reduced by -3.4% in the last three months alone, the largest reduction of all mortgage product types. 

Home movers have also seen the number of mortgage products available to them fall over the last three months, down 1%, accounting for 35% of all mortgage products. While this is the second smallest proportion of total products available, they are benefitting from a significantly higher level of choice compared to first-time buyers, with some 3,000 mortgage products available to them. 

Those looking to remortgage are benefitting from the greatest level of choice at present, with this number having increased by 1% since October, accounting for 37% of total products. 

However, it’s landlords who have seen the biggest boost to mortgage product availability. In the last three months, the number of buy-to-let mortgage products has climbed by 8.8% to a current total of 1,889.

Source: Property Notify

The 99% Mortgage Explained

The UK government is reportedly considering backing home loans that would only need a one per cent deposit.

Prime minister Rishi Sunak is reportedly considering a new Government-backed 99 per cent mortgage scheme, according to the Independent.

Details on the scheme are scant, but the idea is that it would remove one of the major hurdles — saving for a deposit — for would-be first-time buyers trying to get a foot on the ladder by allowing them to do so with just a one per cent deposit.

The news comes ahead of the Spring Budget, which is due to be delivered by Chancellor Jeremy Hunt on March 6.

Housing is set to be a major issue in the 2024 UK election, and the Budget is expected to deliver some sweeteners for buyers and builders following disappointment that the property industry was largely ignored in the 2023 Autumn Statement.

But while some have welcomed the proposal as a much-needed boost for first-time buyers, others have warned it could inflate house prices and put homeowners at risk of negative equity.

The government currently underwrites a different scheme for 95 per cent mortgages, where buyers need to save five per cent for a deposit.

Outside of this scheme, most lenders expect a deposit of at least 10 per cent to secure a mortgage, and rates are becoming increasingly competitive the lower loan to value needed to buy.

The best rates currently available – around four per cent interest ­­– are available to those with a deposit of at least 40 per cent.

Source: The Standard

Housing Market Gains Momentum at Start of 2024

Average asking prices for British homes made the strongest start to the year since 2020, according to a Rightmove survey on Monday that added to signs that the slowdown in the sector could be easing as demand picked up in January.

House prices in Britain typically pick up at the start of January after a lull in the run-up to Christmas.

“For now the data at the start of 2024 points to building momentum, and reasons for growing market optimism,” Tim Bannister, director of property science at Rightmove, said.

Rightmove said the number of agreed sales was 20% higher in the first week of January compared to the same period last year, and buyer demand was up 5%. The number of homes coming to the market rose by 15%.

British house prices, like those in many other rich countries, surged during the COVID-19 pandemic, rising by more than 25% according to official data.

But transactions slowed sharply in late 2022 after then-Prime Minister Liz Truss’ budget plans caused turmoil in bond markets, which pushed up the cost of mortgages, while rising Bank of England rates acted as a brake through 2023.

Asking prices in Rightmove’s January period are still 0.7% lower than the year before.

Average mortgage rates have fallen, however, from a peak of 6.11% for a five-year fixed term in July 2023 to 4.86% now, Rightmove said.

Financial markets expect the Bank of England to start cutting rates from their current 15-year high of 5.25% in May.

Other indicators have also shows a rise in house prices. Britain’s biggest mortgage lender Halifax earlier this month reported a 1.1% monthly increase in prices in December and the first annual rise in eight months. That said, buyers were still likely to feel the squeeze from elevated mortgage rates and the cost-of-living crisis this year, Bannister said.

And while the housing market appears to be gaining momentum, Bannister said activity was likely to slow in the weeks leading up to the national election which Prime Minister Rishi Sunak has suggested will be held in the second half of this year.

Source: Reuters

Is Now a Good Time to Buy a House?

It’s tricky to know the ideal time to buy a house, and it’s unlikely you’ll time the market perfectly. In an ideal world, you’d buy at the point in time that both house prices and mortgage rates reach their lowest point.

Unfortunately, there’s no way to know exactly when this will be without a crystal ball. These low points are also unlikely to coincide exactly.

However, you can use forecasts and existing data to inform your decision. Both house prices and mortgage rates have fallen during the past six months. The current average two-year fixed rate mortgage rate is now below 6%. In July, this figure reached as high as 6.86%.

The average house price is currently £258,557, according to Nationwide data. In May, it was £260,736. Almost a year prior, in August, 2022, this figure was £273,751.

Pinpointing the ideal moment to buy a house is a real challenge. Various factors such as market trends, economic fluctuations, and personal circumstances contribute to the complexity. In this ever-evolving environment, flexibility and adaptability become key, allowing potential buyers to seize opportunities as they arise rather than waiting for an elusive perfect time.

Source: The Times

Peak of Market Turmoil has Passed

Nathan Emerson, CEO of Propertymark, said his organisation is “optimistic” that the “peak of turmoil” in the property market has passed.

However, he added that the industry “must remain vigilant” because “recovery does take time”.

Reflecting on Nationwide figures showing house prices fell 1.8% over the course of last year, Emerson acknowledged that the last 12 months had been “challenging” for the housing market.

He said: “We have seen high inflation and elevated interest rates. This harsh mix without doubt has translated into people approaching the market with a more cautious mind.

“That said, over the last few months we have seen initial positivity starting to return, with inflation steadily coming back down and interest rates holding steady.”

However, Emerson also expressed some concerns for the market in 2024. “It’s important to remember aspects such as almost 1.4 million households across the UK have a fixed-rate mortgage deal which will come to an end across the next 12 months,” he said.

With chancellor Jeremy Hunt’s Spring Budget now set for 6 March 2024, Emerson wants to see housing play a “pivotal role”.

He said: “Beyond all else, a robust housing plan is the underpinning of every community across the entire UK.

“It is vital momentum remains switched on to ensuring the supply of quality homes always matches demand.”

According to Emerson, the government needs to announce “forward-thinking strategies” that support “all sectors of society, from first-time buyers all the way to long-term renters”.

While acknowledging that there can never be a “one size fits all” solution to housing issues, the Propertymark CEO said he hopes the Spring Budget will recognise “a need for an accelerated level of support, innovation, and incentives to encourage a diverse mix of housing in order to keep pace”.

Source: Property Industry Eye