The only way is up as interest rates remain low
Banks and building societies have kept a tight grip on lending, but there are signs of relaxation for 2012 – and more help from the Government, as Sharon Dale reports.
TIGHT lending criteria has been blamed for the partial paralysis of the property market over the past few years.
But what does 2012 hold for existing borrowers and those desperate to get on the first rung of the property ladder?
Peter Leadbetter of Dacre, Son and Hartley Financial Services is cautiously confident that there are better times ahead.
“The extension of the 0.5 per cent Bank of England base rate is resulting in lenders offering some of the best deals that we have seen for more than 20 years and they are pricing their products increasingly competitively.
“Plus some leading mortgage lenders have relaxed their criteria in the last 12 months. In some cases single borrowers can secure mortgages for up to four times their salary and home buyers can choose to take mortgages over longer periods than the traditional 25 year time frame which will reduce monthly repayments.”
Franz Muelthaler, mortgage advisor at Wakefield and Dewsbury-based Holroyd Miller, agrees that chances of getting a mortgage are better than four years ago when the credit crunch first bit, but adds that many first time buyers are still unable to buy their own home.
He says that although a few of the big lenders are now offering 90 per cent mortgages as opposed to their previous best offering of 85 per cent, accessing these loans is still difficult.
“While things are better they’re still not great. If you are 21, have a job and a ten per cent deposit and want to buy your first home you’re still going to struggle to get a mortgage. That’s because you’ll have very little credit history.
“If you are 25 and upwards you have more of a chance because you’ll have more of a credit profile . Most likely you’ll be in your 30s.”
The Government and developers have attempted to help first time buyers of newlybuilt homes.
They recently announced the launch of the Mortgage Indemnity Scheme, which will start in March. The Government and developers will provide a guarantee for up to 100,000 new mortgages at up to 95 per cent loan to value for new build properties in England. It will be available to everyone except investors and second home owners. However, first-time buyers will remain an endangered species for at least the next year, according to Rightmove.
The site says its research shows that only 23 per cent of people who intend to buy a home in the next 12 months will be buying for the first time – down from 26 per cent a year ago. The statistics compare with 40 per cent precredit crunch.
The first-time buyer is still daunted by the size of the deposit they expect to have to put down: 56 per cent expect to have to pay over £20,000.
Miles Shipside, director of Rightmove, says: “The first-time buyer remains an endangered species. With prospective firsttime buyers even thinner on the ground than at this stage last year, sellers and their estate agents operating at the lower end of the market will need to fully understand the DNA of this group if they are to capture a sale.”
Rightmove’s latest study shows that the average age of someone planning to be a first-time buyer in 2012 will be 32.
Miles adds: “There has been a lot of speculation about the average age of first-time buyers, and the truth is those who can are in their early 30s, while those who can’t are in their mid-30s and counting.”
He claims that many people currently renting were unable to raise the money for a deposit and face having their dream of home ownership postponed until their 40s at best. That’s because lenders are much more interested in second- and third-time buyers with plenty of equity. They are also becoming increasingly happy to lend to investors.
The number of buy-to-let mortgages plummeted in 2008 but niche and major lenders are increasingly keen to offer them. Most want a deposit of 25 per cent, though one or two will accept 20 per cent.
Franz Muelthaler says: “Most of the work I have done this past three months is for buyto-let investors. They are a mix of professional investors and novices. These mortgages are relatively easy to get as long as you have a clean credit history and a deposit because what lenders really want is to know that the rent covers the mortgage with some left over for voids and repairs.”
Lenders have also relaxed their approach to repossessions, according to Peter Leadbetter, who predicts that numbers will continue to fall. The Council of Mortgage Lenders (CML) predicted 40,000 repossessions in 2011 but the most recent total stands at 27,500.
“Anyone taking out a mortgage should remember that although interest rates are low, the only way is up.”
Franz says: “I think we’ll have another year with the base rate at 0.5 per cent but it will go up in 2013.”
FROM A BYGONE AGE: The house is full of original features, thanks to the previous owner who had not had the property modernised. The Barwicks kept these features while updating the property from the top down and turning it into a fantastic family home.
KEY TO THE FUTURE: The first-time buyer remains an endangered species, even though interest rates are low.