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Mortgage rates for first time buyers

[ Posted April 13th, 2012 ]

Britain is a country that is certainly focused on the housing market, the decline in home prices, and the rising mortgage rates. In fact, when you consider how much air time the subject gets day to day on the news it is a surprise that anybody would actually want to become a first time home buyer.

With the stresses of the market you would think that young professionals would want to stay as far away from the housing market as possible and instead rent without half of the obligation.  Yet, they are still out there looking for great first time home buyers deals.

Of course, you have to bear in mind that most of these young professionals likely grew up in a home that their parents owned, thus owning a home seems more of a rite of passage than a business decision.

Regardless of their outlook, the tighter criterion for renting a home, lower LTVs, and larger mortgage rates mean that it is a bit harder to get up on the ladder. It used to be just income multipliers that decided if one was a good candidate for a mortgage, but now many major lenders judge mortgage applications based on ‘ability to pay.’

It used to be that first time buyers received better deals and the best mortgage rates simply based on the fact that they are not part of the mortgage chain market and therefore are fresh applicants. However, as the price of lending continues to increase and now high deposits are reasonable for keeping most out the market lenders have been forced to find other methods and schemes in order to help first time home buyers actually get back into the market.

Due to this fact, even with the poor economic conditions there is more flexibility being introduced for first time buyers into the market which is a very helpful factor. One adjustment that has been made is that many of the larger banks such as Halifax and Nationwide will extend mortgage terms for forty years instead of just 25 which will help make a loan more affordable.

Of course, in the long term borrowers will end up paying more unless they remortgage successfully, but this is a good way to at least get out into the mortgage market. Lenders also are offering new incentives to first time buyers including free valuation fees cash back, and legal fee assistance which are all great features to take advantage of.

HSBC drops mortgage rates for first time buyers

[ Posted November 25th, 2011 ]

Although the mortgage market is seeing its rates increase across the board amidst fears of the debt crisis worsening in the Eurozone HSBC announced this week that it would drop its mortgage rates down to 3.84, a ten percent decrease, for first time home buyers that can only afford a LTV of 90%.  The news should help many first time home buyers that have been kept out of the market due to the high deposits demanded by most banks in order to secure a mortgage, but the price tag may still be too high for those not willing to commit to a mortgage with so much uncertainty surrounding the economy,

HSBC announced the new deals would be aimed at those interested in two year fixed mortgages and that it would make £350m available to borrowers that take advantage of their new lowered mortgage rates before the close of 2011.  Also enticing is the fact that the deal will be available without any attached fee and according to HTC this is the only offer on the market for first time buyers with a low LTV available on the current mortgage market today that sits under 4%.

The first two years of the deal will have a mortgage rate set at 3.84% after which point buyers will be automatically switched to whatever the current standard variable rate is which is still a slight risk to some but a great way to get a foot up onto the property ladder for those who have been unable to in the past.  HSBC claims that their new deal will help prospective buyers without a deposit actually secure a mortgage that they can afford so that they can start to build equity and a secure future for themselves and their families.

However, financial analyst Andrew Hagger warned potential buyers that there is a risk in signing into the deal since it will switch to the SVR at the end of the two year term which can be altered by the bank to any term unlike a base rate tracker that is set by the base rate.  Therefore, there is not a guarantee that the mortgage will stay affordable to home owners once the two year period is over making it a risky venture to take on even with the thrill of a low deposit.

Forced First Time Lending for Fixed Mortgages Will Fail

[ Posted November 18th, 2011 ]

Mortgage rates down for first time home buyers

[ Posted May 12th, 2011 ]

May has been an excellent month for those who watch the mortgage rates in an attempt to secure an affordable deal on a home as both buy to let mortgages and first time home buyers are seeing a drop in the mortgage rates and more attractive deals being offered to them by lenders.  In fact, the typical mortgage rate for first time home buyers that can afford to put down a 10% deposit on their home has dropped by another 6% which is the first time that such a large drop has been observed in over three years.

Compared to May of last year, the drop is still notable at 4% with the average cost of a 90% mortgage for those able to pay the despoit sitting at 5.98% which is a much more affordable mortgage rate over what has been available in the past to credit worthy applicants.  The drop is due to an attempt by banks to get first time home buyers back into their doors and onto the property ladder with the amount of deals that are available to these buyers jumping by 41% overall up to 229 during the last year.

There are a number of factors that banks will have to overcome however before they can expect to see first time home owners return to the mortgage market at the same rate that did prior to the credit crunch as a higher mortgage rate is not the only factor that has kept them away. Uncertainty about employment, future prospects, and the impending increase of the interest rate are all factors that have kept potential home owners from making a purchase.  The increased lending criteria and tough lending practices have also kept many first time home buyers from securing the same mortgage that they may have back in 2007 prior to the banking and property market collapse.

Many experts are also warning first time home buyers that just because are more options on the mortgage market for home owners does not mean that they will qualify for them with given the fact that the CML figures show that most first time buyers still must pay at least a 20% deposit in order to secure a home.  The Financial Services Authority also reported that during the last three months of 2010 only 2.2% of mortgage buyers were able to secure mortgage lending with a 10% deposit down.

Mum and Dad the prime loan choice for first time home buyers

[ Posted February 24th, 2011 ]

With the upturn in mortgage rates and the higher credit lending criteria set before many first time home buyers instead of accepting defeat a large amount of young adults are now looking towards mum and dad for aid according to information compiled by housing minister Grant Shapps at a meeting that was held on Tuesday about the mortgage industry.  Also presented were many other ideas about how first time buyers can start to get their hands into the mortgage market given that they are the only hope for the stalling housing market.

The problem of first time buyers dwindling due to the heightened mortgage rates and lack of lending is problematic both for the housing industry and for lenders because the fewer people there are to borrow the fewer the profits for the banking industry which they earn from the interest rate kickback which prevents the banking industry from starting to stabilize as well.  With most people just holding onto their current mortgages by a string the mortgage industry is barely being supported by anyone outside of potential first time buyers, which makes the issue a fairly large one to tackle.

One interesting point brought out at the summit was the fact that with many people  under the belief that the lending agents will refuse pretty much any mortgage request, people simply are not bothering to apply which means that there are many potential buyers that have not yet attempted to purchase a home.  While it is true that it is harder to secure a mortgage then it was in the past, for those who can afford a 10% deposit there are some of the best mortgage rates on the market open to them if they simply apply.

Ten percent may sound like a daunting number, but compared to a few months ago when the deposits required for first time buyers were closer to 40% this is an improvement.  The ending result of the conference was the decision that creativity needs to be used both within the property market and within the banking industries to let potential buyers know that there opportunities out there for them so that they will stop in and apply.  Plus, as stated overall at the summit, for those with the option, mum and dad are a great way to get the initial capital you need and an overall boost to the credit profile.

New assistance to help first time buyers combat current mortgage rates

[ Posted February 16th, 2011 ]

Over the last few years as housing prices jumped up and down, the economy entered a recession, and mortgage rates soared out of control only to fall back again, first time home buyers have had a hard road ahead of them.  Add in the fact that most lending agents heightened their criteria for lending either turning down most applicants or requiring unrealistic deposits and the housing market became almost non-negotiable for most young first time home owners.  However, there are now new programs in place that may help alleviate the situation a bit.

The average house price in the UK is now sitting at around £150,000, which for first time home owners would require a deposit of at least £30,000 if not more which most cannot afford.  Grant Schapps the housing minister called a meeting to discuss this problem with lenders, leading housing community authorities, and home builders to discuss what could be done to help turn around the property market starting with the first time buyers who before the recession may have been in a position to help boost the sales within the property market.

The Council of Mortgage Lenders stated in data that with an increase in mortgage rates, credit worthy criteria, and large deposits it is now almost impossible to get a mortgage.  Previous to the housing crisis, a deposit of about £13,000 was considered normal which is well over what is considered acceptable now.  In response, parents have been hard hit up for the capital leading groups such as Lloyds TSB to launch a new type of mortgage in which the bank takes on the role of the parents in the mortgage equation.

The idea of the Lend A Hand mortgages are to allow borrows to get a mortgage that only has a 5% deposit attached to it with many other lenders offering the same types of deals although the best mortgage rates may not be as great. The program requires that a family member help secure the mortgage based on their own personal assets with a benefit given to the voluntary helper with a 3.75% savings rates on any assets that are used to secure the mortgage.

Tensions Growing Between Generations

[ Posted September 11th, 2010 ]

As the credit crisis continues to affect millions of people around the world the tension between generations throughout the UK is growing, with baby boomers and other pensioners currently enjoying many of the benefits of their age thanks to the skyrocketing house prices while their progeny are facing increased debt and other difficulties associated with one of the greatest credit crisis scenarios of all times. This is particularly true in highly urban areas such as London, where it is reported pensioners over the age of 65 maintain ownership of their homes with no debt whatsoever that now total in the area of £250 billion.

Despite continued low mortgage rates offered by lending institutions and other initiatives designed to stimulate the real estate market and encourage first-time buyers to get involved on their own many families simply cannot afford to do so. This, in turn, has led to more and more tension growing between the younger generations and their parents as without their family’s support the likelihood many individuals simply cannot even afford to even live away from home no matter what incentives may be offered.

Many lenders throughout the country have been toying with a number of different offers to make available to first-time buyers and other investors throughout the country in order to encourage them to become more active in the market. These are being done in the form of both tracker and fixed-rate mortgages that are affordable yet still designed to provide lenders the protection necessary should another economic downturn occur.

Unfortunately at this time the growing over-saturation of high-priced supply in many areas coupled with the fears that a double-dip is nearing has worked against the overall mindset and hopes for recovery for many people, meaning that now more than ever tensions are mounting beyond any situation that has been seen in the recent past and many families are facing the consequences of it.

Now is the Time to Buy

[ Posted June 21st, 2010 ]

According to many reports now is actually one of the best times to purchase a home in the UK – though only if you can afford to made a sizable enough deposit to successfully lock in a decent fixed mortgage for your home. The reason for this is that many experts feel that the continued low mortgage rates that have helped drive the strong housing market in the past few years coupled with the continued strong growth of housing supply may be near a tipping point in terms of shifting lending institutions away from a strong buyer-friendly scenario.

One of the leading factors of making now a strong time to buy than in the past when the real estate market first released many of its incentives to stimulate growth is that only in the past few days has the cost of a regular monthly mortgage payment actually been reduced below that of renting. In fact for first-time buyers in particular this is a great sign as the continued stamp duty holiday for first-time purchases means highly favourable conditions that allow for a strong buy now rather than in the future where these benefits may be changed.

Nevertheless the current time being seen as the best time to buy is highly dependent upon whether or not individuals can make a high enough down-payment in order to get the best interest rates possible on loans. A deposit of 25% and a total loan-to-value ratio of 75% will, for instance, yield significantly better interest rates than even a deposit of 10% and especially a low deposit of 5%. This equates to a total savings of hundreds of Pounds each month in mortgage payments or thousands over years of repayment. Unfortunately for most given the high cost of houses throughout the country making a sizable contribution at this time is difficult at best and may not be possible without help from friends or family – something that is a going concern with many economists given the need for extended debt for many pensioners looking to support their children’s purchases through re-mortgages.

A third of renters despair of ever buying

[ Posted June 6th, 2010 ]

According to a recent survey some 33% of people who are now renting properties believe that they will never be able to afford to buy their own homes. The research goes on to indicate that of the renters that are upbeat enough to feel that they will one day own their own place, some 65% are of the belief that they will not be in a position to buy for the first time in the next five years.

The survey also indicates that 77% of respondents anticipate that property prices will fall by at least 5% during the course of the next year, and 31% believe that house prices will drop by over 10% during this time.  Also, although 89% of those sharing flats currently indicated that they are doing so only due to the fact that they are unable to purchase their own homes, 52% of all renters stated that they would be content to rent for the rest of their lives if there were no pressure to purchase. The results show that those not sharing accommodation living alone or with a partner are more content with their lot than those sharing accommodation.

According to many reports the majority of young people today are becoming more and more comfortable with renting long-term, keeping watchful eyes on the market for a positive change that would allow them to become more able to secure a purchase in the near future. With the changing market and current instabilities, however, this is being seen as very much a long-term goal that, should the trend continue, may even result in long-term leases rather than purchases from many people that are unable to enter into the market for any number of reasons – even with lasting incentives for first-time buyers.

Mom and Dad Necessary for First-Time Owners

[ Posted May 15th, 2010 ]

With most lending institutions requiring buyers to have significant deposits on hand in order to secure the best mortgage rates on their loans (or to even be approved for a loan in the first place) many prospective home owners have turned to an old yet familiar source of funds: the venerable Bank of Mom and Dad.

As most mortgage companies can tell you the actual number of mortgages being approved on the market today have first-time buyers as a significant minority. In fact, of all the mortgage offers made available on the market in March, only 7% of the total out there were granted to first-time buyers seeking out homes. This means that re-mortgages and other mortgage types have taken up a considerable portion of the market share in order to provide funding for a home purchase that would otherwise be impossible.

The largest reason for most first-time buyers being able to afford a home purchase today lies in the fact that most individuals simply have not developed enough savings to afford the necessary down payment in order to become eligible for the best rates possible. This means that for a home values at roughly ?300,000 a 20% deposit, or roughly ?60,000, would be needed to ensure that a prospective home owners would be able to get the best rates possible to them. Given most young workers’ salaries, however, this sort of available equity being on hand to give to a lending institution is generally considered unfeasable and unrealistic at best.

Until the country’s economy turns around enough to make a reasonable comeback most families are simply considering sticking to the "group support" option to provide their children with the necessary funding – otherwise many prospective buyers simply will not be able to make purchases. As it stands right now the current status and regulations have effective removed an entire generation of buyers from the market. something that is far more likely to hurt rather than help the overall economic recovery in the long-run.

 
 
 
 
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