Cash, Cars and Babes

We have all seen the price of property plummet over the past year, but just how affordable does that make them - particularly to first time buyers? Halifax have reported that the price drops have made property significantly more affordable for the first time buyer, after tracking the affordability over 406 local authorities.

The house price to earnings ratio was found to have improved signifiacntly over the past 18 months, with the most affordable homes being found in Scotland, Yorkshire and the Humber.

This data predicts that, alongside the falling mortgage rates, people may be tempted to buy their first home and get away from the rental market...if they have enough deposit that is...

The number of available mortagges seems to be dwindling, especially tracker mortgages and the like. The majority of mortgages on the lending market are now fixed-rate ones, with reserach finding that they account for 69% of the total market - up from 51% of the market in December 2007.

The average two year fixed-rate mortgage has fallen by 0.71%, despite the two-year swap rate falling by 2.61%.

Fixed rate mortgages can be good though - they can give you a piece of mind each month, knowing exactly how much outgoings you have and could help towards debt management and budgetting. But, at the moment, people on tracker mortgages could be benefiting moreso, with the slash in interest rates saving them a lot of cash.

More and more parents with kids over 25 are helping them when it comes to paying for their mortgages. New research by Engage Mutual Assurance found that nearly half of parents, who do provide financial support, help with the cost of moving or buying a new home – and that includes keeping on top of mortgage repayments.

It found that more than a quarter if parents with over-25s were helping – 31% were still giving pocket money.  

As the property market dwindles, we are seeing more and more homes being added to the rental market until they can be sold. This has resulted in massive pressure on rental yields and pushed rental income lower and lower - a potentially serious problem if buy-to-let owners are relying on rental income to remain financially stable.

There is also concern that more homes will be added to the rental market for the short to medium term, placing even more pressure on a market that will suffer further.

UK mortgage lenders have recently been reshuffling their deals, as news of the Bank of England cutting rates to 3%, hits home.

Three major lenders are re-launching their tracker deals, but are widening the margin between the rate they offer and the Bank's rate.

Lloyds TSB, Cheltenham & Gloucester and Abbey & Alliance & Leicester have all started to market new tracker deals for new customers. However, buyers will have to face biger deposit requirements for some of the deals.

Abbey are offering a 2-year tracker deal for those borrowers with a 25% deposit at a rate of 4.99% - 1.99% above the Bank's rate.

Getting your foot on the property ladder can be a huge problem, especially in the current economic climate.

FindaProperty have said that borrowers must make sacrifices, if they wish to own their own home at the moment, with most lenders being highly unlikely to grant a mortgage to anyone unless they have a deposit of at least £17,000. It's not even as though you can raise the extra cash through secured loans until you have a home to secure it on.

So, until you get your first home by saving like crazy, you're just going to have to give up the luxuries in life - holidays, posh meals, expensive shopping trips - they all need to be curbed if you want to own, and not rent.

Fairinvestment.co.uk have found that it could take first time buyers 15 years to save the deposit for their first home. As the criteria tightens, and first time buyers struggle to get their foot on the first rung of the property ladder, the recent survery of 2000 people found that the average amount saved each month is £139 - an annual total of £1,668. Considering the average deposit for a FTB is 15%, no wonder it takes so long to save for it.

The research also found that women would take longer to save the amount than men, as on average, women save just £121 a month in comparison to men saving an average £185.

The number of Brits with overseas properties can change depending on who you are talking to, but it is thought across the board that there are in excess of 2m overseas homes owned by us and this figure is set to rise sharply over the next few years due to high living costs, high inflation and the general delapidated state of the UK at the moment.

A survey by Cater Allen Private Banking has found that over 17% of the over 45s were looking into acquiring a property abroad within the next 2 years.

Homebuyers won't have to pay stamp duty on properties costing £175,000 or less, for the next 12 months. The current £125K threshold will be raised from Wednesday, in a move to try and kick start the housing market. This means that someone buying a home for £175,000 will save £1,750 under the scheme, which is likely to cost the Treasury £600m.

Other housing moves announced by the government include:

• "Free" five year loans of up to 30% of a property's value for FTBs of new homes in England - HomeBuy Direct is the system, and will offer loans free of charge for 5 years, to households with an annual income of £60,000 or less.
  
• Extension of powers for councils and housing associations to be able to pay off debt for homeowners who can no longer afford mortgage payments and then charge rent
  
• Shortening from 39 weeks to 13 weeks the period before Income Support for Mortgage Interest is paid
• Bringing forward spending from future years, to encourage more social housing to be built
  

Hopefully moves like these will help to bring back the housing market from the slump it's in now - Just looking at the figures shows it needs a drastic injection.

Potential house buyers are staying in rented accomodation for longer, despite the increase in monthly rent.

Paragon said that some rents have risen by a third and have also claimed that long term renting will bemore  favourable. It's believed that the reason for this is the lack of mortgages available for first time buyers and also  the lack of confidence in the current housing market.

Rents are rising as prices are falling, where rental incomes have risen 3.8% between January and April and average property values have fallen more than £1,000 in one month. Since April 2007, the average rental income increased by 13.8%.

The falling house prices could make it easier for first time buyers to buy a property, but because they are paying more for their rent, savings are sparse, which could still prove difficult for them to save a sufficient amount for a deposit.

The Mortgage Crisis. The Fall in House Prices. Can this fall be an advantage to the First Time Buyer? The fall in prices may mean that thousands of young working households can buy a home this year. Hometrack say a 10% fall in proces will allow a fifth of buyers currently priced out of the market can afford to buy a 2 or 3 bedroomed home. The report says 28% of young people in the UK are unable to buy even the cheapest of local properties, London and the South West being the most problematic. The most affordable part of the country is North East England, where only 17% are priced out of the market.

However, the current mortgage situation could still prove to be an obstacle; saving a huge deposit is crucial.

Is it still worth renting instead of trying for a mortgage? In 2006, the average rent was two-thirds the cost of buying a 2 or 3 bedroomed house with a 100% mortgage. In 2007, this ratio was 68%. It may still be worth renting until the crunch eases.

After ceasing the grant of new mortgages a few weeks ago, it seems First Direct (a division of HSBC) have joined in with getting the ball rolling once again, by enabling new mortgage applications to be made.

It seems like mortgage rates are appeasing, slowly but surely, and time will tell just how much the situation improves.

Sounds like a dream offer for someone who is looking into buying a very pricey home... And some people are getting that sort of discount, due to the current credit crunch. Buyers are getting these opportunities, particularly in London, snapping up homes for up to £1million less than the asking price.

One financial trader bought their 5 bedroom Kensington home for £3.91million, 22% less than the asking price of £5million. If you have the money, thats one heck of a deal. It shows how the shortage of buyers, as a result of the credit crunch, are forcing vendors to agree to massive price cuts. Savills, a London estate agent, said that homes in central London had fallen in price by 1.5% in the first quarter of this year, following a 2% fall in the last quarter of 2007.

A spokesperson from Assetz, a property investment firm, said that they expect prices to be down 7% in London this year, giving a major buying opportunity for those considering that area of the UK. The only risk being if mortgage rates go too high, but the mortgage market is gradually improving. The spokesperson believed it will take until September for the market to be normal, so summer is an ideal time to snap up a bargain.

Thats if properties over £1million are classed as bargains...

According to a recent housing report by Halifax, the average price of a property fell by 2.5% during March, being noted as the highest rate of decline since 1992, when prices were slashed by 3%.

in February, prices fell by 0.4% and these declines look set to continue in the coming months.

However, some places are seeing a continued rise in asking prices, despite the slump that is happening elsewhere. Parts of London, the East Midlands and East Anglia are seeing an increase in prices, with 1.6%, 2.2% and 1.4% increases respectively.

The report also said that due to the housing crisis, the average price of a UK property has fallen to £197,000, with a total drop of 0.3% in their latest index.

Being faced with a lack of funds, lenders are making it more difficult to get a mortgage, or even a remortgage. Halifax, our largest mortgage provider, increased its rates in April for borrowers who have less than 25% deposit available to place on their desired home. This was after Nationwide had done the same back in February. The number of mortgages on the market has fallen by 11,000 since the beginning of the credit crisis and members are running out of cash.

So how do you improve your chances of getting a mortgage?

• If you are a FTB or home mover, don't rush into things. Remember, its more difficult to secure a loan at the moment, and house prices are forecast to fall.
  
• If you are planning to remortgage, plan in advance.
  
• If possible, have a good deposit ready. Many lenders are only offering their best rates to borrowers who have 25% deposit stashed away. However, places like the Post Office are still offering top deal mortgages to those who have 10% available. So shop around. The more deposit the better.
  
• Check your credit history - get on the electoral register and make sure there are no missed payments. You dont want anything to pop up and put off the lender.
  
• Seek out the best deals. Fixed Rate mortgages offer security. And finally, don't over-stretch!

It seems the credit crunch is seriously affecting the number of remortgage applications as well as the number of declined mortgage applications. Data from the Mortgage Advice Bureau shows that over the past year, the number of remortgage loans taken out has risen by a massive 27%; the opposite being apparent of home buyer mortgages, which, due to the credit crunch, have decreased during the last year. A spokesman for the MAB said "With less people choosing to buy, increasing levels of business now comes from remortgage clients." Commenting on the current home owner situation, he added "...the demise of the 100 per cent mortgage also indicates a relatively bleak outlook for first-time buyers" First time buyers appear to have little choice in the matter, as mortgage lenders including the Bank of Scotland and Abbey had to pull the plug on their 100% mortgages.

According to a recent study the amount of stamp duty first time buyers are paying has almost doubled since 2002, paying £960 five years back and an average of £1,750 nowadays. Thats an increase of 82%.

The increase has been said to be due to "the period of sustained house growth during the period which has meant that more and more novice homebuyers are liable for the charge"

Its first time buyers in London that were the most susceptible to paying stamp duty, with two thirds of them paynig the 3-4% rate. Ouch.

People who are finding the current mortgage market a bit of a struggle may want to consider a fixed rate mortgage. As opposed to their alternative, the tracker mortgage, they may offer homeowners a greater peace of mind, particularly first time buyers. This is because homeowners, in the first few years of their homebuying lives, may have to stretch to the top end of their income to afford their new home. A fixed rate mortgage would be a good option in this scenario, as the rate doesn't change in accordance with national base rate of interest; whereas tracker mortgages do.

Only 23% of consumers in the UK would opt for a tracker mortgage, in comparison with 57% who would opt for the fixed rate alternative, according to a survey done by the Fair Investment Company.

For 2008, the Royal Institute of Chartered Surveyors have predicted 45,000 British families would lose their homes due to the increased cost of mortgage repayments. This estimation was tallied with a similar claim by the Council of Mortgage Lenders.

The Financial Services Authority raised the alarm on 840,000 mortgages whose holders were deemed risky.

Buying home was the easiest in 1996. If the cost to buy a house now is compared to 12 years ago, RICS said the bill has increased by 351%. If, for example, a British couple jointly earn £26,600 a year after taxes, they must save 104% of it (£27,700) to be able to afford the down-payment, duties and fees required to buy a house.

A RICS economist also said that First Time Buyers will find it hard this year to secure their own property, and the situation isn't set to improve any time soon.