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Haggle your way to a more affordable home

Haggle your way to a more affordable home

If you don’t like the term “haggling”, think of it as “negotiation”. That’s essentially what it is. In simple terms, the seller (or their agent), is trying to achieve the highest possible price for their home. You are trying to achieve the lowest possible price for the property. This is not about “win/lose”. It’s about reaching an agreement. Here are some tips to help.

Prepare thoroughly

Guide prices are a guide to what a seller (or their agent) wants for the property. You should therefore regard them as sources of information rather than as instructions. What you really need to know is the state of the local market and the seller’s situation. You can find out a lot about the first point with some thorough digging around the internet.

The key point to understand is that you need recent, local data. Recent data tells you what the market is doing now, not what it did in the past. Local data tells you how the market is performing in the locations which interest you. To take an extreme example, there’s no real point in looking up data from London if you want to buy property in Aberdeen.

In fact, if you’re looking at buying in a city, then you want data at local-authority level if not postcode level. Be aware that there can be significant differences in property prices in different areas of a city. You need to be sure that you’re comparing like with like.

Get preapproved for a mortgage

If you need a mortgage, then get preapproved for one. This marks you out as a serious buyer and reassures sellers. Think about whether or not there are any other steps you could take to make a seller’s life easier. For example, can you be flexible with your move date?

Understand the seller

It’s always safer to deal with a seller who has a clear reason to move. This reduces the chances of them pulling out of the sale, leaving you high and dry (and possibly out of pocket). The more motivated a seller is to move, the more chance there is that they will be willing to accept a lower price in return for a quick and convenient sale.

There are, however, a couple of caveats here. Firstly, a seller may have a baseline price below which they cannot, or just will not, go. For example, they may need (or just want) enough to clear their mortgage. Secondly, the more competition there is for a property, the more likely it is that someone else will offer both a higher price and a quick and convenient sale.

Keep a clear head

Until the sale is complete, in fact, arguably until you’ve moved in, you’re buying a property. It may be someone else’s home, but it is not yours. Keep that in mind at all times.

Obviously, you should only be looking at properties where you would be happy to live. You must, however, avoid getting emotionally attached to them. Your attitude needs to be that you want a good deal for your money and will go on looking until you get one.

If any given property is out of your budget (or just overpriced) and the seller is not prepared to reduce the price, then just move on. If you really liked the property, then keep an eye on the listing. If the seller does not get a sale, they might become more flexible on price further down the line.

By the same token, however, be careful about focussing so much on getting a bargain that you lose out on a great property you could have afforded.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage

Please contact us for any more information.

Will Spring Refresh The Property Market?

Will Spring Refresh The Property Market?

Vaccines are being rolled out and spring is rolling in. That’s two reasons for there to be good cheer throughout the UK. Will this mean good cheer for the property market? Here are some factors to consider.

The economy should be reopening

All four parts of the UK have mapped out plans to exit lockdown. Admittedly those plans will depend on circumstances. In principle, there could be halts and even backwards steps before the UK emerges from the pandemic. Overall, however, the general direction of travel should be very clearly towards a post-lockdown “new normal”.

Reopening the economy should have the very practical benefit of improving housing affordability. Of course, it would be unrealistic to expect too much too soon. It’s reasonable to assume that some sectors and job areas will recover more quickly than others. In blunt terms, the less a sector has been hurt, the quicker it will recover.

That said, as sectors recover, the benefits of recovery should begin to spread. For example, as people get their jobs back they will have more disposable income. This can then be spent at other businesses.

People will have clarity on remote working

Companies are going to have to decide whether or not they’re going to support remote working over the long term. This doesn’t necessarily have to mean full-time remote working. Even companies deciding to offer flexible/hybrid working could have a meaningful impact on the housing market.

In simple terms, if remote working goes mainstream, cities and traditional commuter-belt areas could lose their appeal. They could be overtaken by areas where people can afford more space (inside and outside). These areas could have longer commutes, but if people are making them less often this could be an acceptable trade-off.

The Stamp Duty holiday is still on

New buyers might have to more very quickly indeed if they want to get the full benefit of the Stamp Duty holiday. That said, it’s not entirely impossible. If sellers are prepared and conveyancers are available and everything goes smoothly it could be done.

Even if they miss out on the full discount, however, there is still the “consolation prize” of a lower discount available for three months after the main holiday ends. What’s more, if the Chancellor then puts Stamp Duty back as it was, then first-time buyers will still benefit from reduced Stamp Duty after the end of the temporary tax break.

Help to Buy has been extended

This isn’t exactly news, but it’s still relevant. The initial Help to Buy scheme has been extended to counterbalance delays caused by COVID19. The new Help to Buy scheme will be implemented as planned. The government has also outlined an initiative to provide guarantees for 95% mortgages. This is, however, still in the pipeline.

Interest rates remain an open question

The Bank of England advised banks to prepare for the possibility of negative interest rates. Of course, that’s not at all the same as saying that they will actually happen. It is, however, making the point that they cannot be ruled out. Although negative interest rates are not at all a new concept, they would be new to the UK. Hence it’s anyone’s guess what their impact would be.

At the same time, interest-rate increases cannot be ruled out either. Obviously, if interest rates go up, then this could reduce affordability. That said, if interest rates were going up as a result of strong economic growth, the end result could still be positive.

The housing supply is unclear

Buyers need there to be sellers. Currently, it’s unclear how much new-build and existing property will be on the market this spring. Lack of supply could put a damper on the housing market. It could, however, alternatively lead to fewer transactions of higher value.

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

For more mortgage information please contact us

The March 2021 Budget And The Mortgage Market

The March 2021 Budget And The Mortgage Market

The latest budget was, unsurprisingly, a lot more focussed on COVID19 than on the housing market. It is, however, also important for property professionals. Here’s a round-up of the key points.

An extension to the Stamp Duty holiday

Arguably it was almost inevitable that the chancellor would need to grant some sort of extension to the Stamp Duty holiday. After all, the logic behind this is, fundamentally, exactly the same as the logic behind the recent extension of the current Help to Buy scheme. The construction industry has been badly hit by COVID19 and now also has to deal with the full impact of Brexit.

This has resulted in delays both to the construction of new-build properties and to the legal completion process. Rather ironically, the Stamp Duty holiday may have exacerbated the latter problem by stimulating activity in the housing market.

With buyers facing the prospect of losing out on the Stamp Duty holiday through no fault of their own, arguably, the government had to act. If it hadn’t then, at best, it could have had a lot of upset buyers on its hands come election time. At worst, it could have led to buyers pulling out of sales due to being unable, or unwilling to pay the increased Stamp Duty.

What is interesting is that Rishi Sunak chose to extend the holiday until the end of June. Then there will be a further three months where the threshold is set at £250K. This means that even new entrants to the market could potentially benefit from it. It also means that there could be another “cliff-hanger” in three and then six months time.

Help for “Generation Buy”.

Back in October 2020, at the (virtual) Conservative party conference, Boris Johnson announced his intention to turn “generation rent” into “generation buy”. He indicated that the government would achieve this by introducing a scheme to guarantee mortgages of up to 95% of the property price.

Fast forward to March 2021 and the chancellor has now indicated what this means in practice. Essentially, the government is bringing back David Cameron’s Mortgage Guarantee scheme. Like the old scheme, it will be available to onward movers as well as first-time buyers. It will also be available on purchases of existing property. The current limit is set at £600K.

ISAs stay untouched

Given that the adult ISA limits have been the same since 2017, it was always highly unlikely that the chancellor was going to feel under any obligation to increase them. The one change was that the penalty for making irregular withdrawals from the Lifetime ISA will be going back up to 25% in April. It was temporarily reduced to 20% to help those affected by the pandemic.

The chancellor did announce the introduction of new NS&I “green bonds”. These are intended to help the UK meet its target of becoming carbon neutral by 2050. At present, it’s unclear whether or not these will have any direct impact on the housing market.

It is, however, worth noting that the government’s commitment to its “net-zero” target requires a switch to electric vehicles. This in turn requires the development of mass-scale charging infrastructure. Areas that get ahead of the curve here could see local house prices rise accordingly.

Widespread tax adjustments

The chancellor’s largesse on Stamp Duty has not extended to other personal taxes. Capital Gains Tax exemptions, Inheritance Tax and the Pensions Lifetime allowance all stay at 2020/2021 levels. The tax-free personal allowance and the higher-rate income tax threshold both stay at 2021/2022 levels.

At present, these freezes are scheduled to stay in place until 2025. This effectively means that people could find their take-home earnings eroded over time. In itself, this does not augur well for affordability. On the other hand, much will depend on how well the economy performs overall.

How Can The Self Employed Get Mortgages?

How Can The Self Employed Get Mortgages?

As anybody who has tried it will know, being your own boss isn’t always easy. In the early days, you may have to do just about everything yourself. This can really limit your personal life. Even once your business matures, you still have to deal with unique challenges. In particular, you have to face up to the fact that lenders may be very wary of dealing with you.

Business owners versus mortgage lenders

According to a survey from specialist mortgage broker Haysto, approximately one in six people reported having their mortgage application rejected because they were their own boss. More specifically 14% of company directors and 15% of sole traders reported being turned down for a mortgage due to their employment status.

Looking at this from a “glass-half-full” perspective, however, five in six people are having mortgage applications accepted even though they are their own boss. This clearly shows that it is possible.

Understanding mortgage lenders

The key point to remember is that mortgage lenders now have to act in accordance with the terms of the Mortgage Market Review. In simple terms, this means that they cannot just look at multiples of income. They must look at the applicant’s personal circumstances and assess their ability to afford the loan over the long term.

Keep in mind that lenders can be sanctioned if they are found to have made an improper loan. The safest approach for them, therefore, is to err on the side of caution. Then add in the fact that lenders have to think about their own finances. Nobody will be happy if a bank winds up in the sort of trouble the world saw in 2008.

In short, therefore, if anyone wants to get a mortgage, they’re going to need to make sure that they satisfy a lender on all counts. This can be a particular challenge for the self-employed. That said, the challenge is not unique to them. Zero-hours contract workers and those on variable incomes are both in much the same situation. Here are some tips on how to address it.

Look after your credit records

Make periodic checks with the credit bureaux to ensure that your credit record is up-to-date and accurate. Keep it healthy by always making the minimum payments in full and on time. Pay extra if you can.

Reducing the balance on loans lowers your debt-to-income ratio. Reducing your balance on lines of credit (e.g. credit cards) doesn’t have quite the same effect. This is because you still have access to the credit. That said, staying comfortably below your credit limit is an indicator that you can manage your money.

Build up your deposit

Deposits protect your lender from house-price falls and from borrower defaults. Given that COVID19 and Brexit are both still running their course, it’s understandable that lenders will probably be particularly wary of these possibilities.

It can be hard to build up a deposit, especially when you’re renting. It may, however, be possible for you to get some help with it. For example, the Lifetime ISA is designed to help either with the purchase of your first property or in your retirement. It benefits from government bonuses.

Choose your lender with care

Lenders may all work to the same basic set of rules, but they still have some scope for individual decision-making. They may also have varying degrees of understanding about the realities of being self-employed.

Going to a mortgage broker may be a convenient way of getting guidance on which lenders are most likely to give you a yes. If you don’t want to go down this route, then at least do your research carefully. Check which lenders have the best track record of dealing with people in your situation.

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

 

Dealing With Deposits

Dealing With Deposits

According to data from Halifax, first-time buyers now have to put up an average deposit of £57,278 to buy their own home. That’s £10,829 (23%) more than the previous year. First-time buyers in London have to pay over double this with an average deposit of £130,357. Here is a quick look at the drivers behind these figures and what can be done about them.

House price inflation

The most obvious reason for larger deposits is rising house prices. Despite COVID19 and Brexit, the UK has recently seen intense house-price inflation. While coincidence does not necessarily mean causality, it’s certainly interesting that this growth spurt started at the same time as the Stamp Duty holiday.

The Stamp Duty Holiday

The Stamp Duty holiday may have made a lot of people very happy. It is, however, unlikely that first-time buyers were amongst those rejoicing. They already benefited from a Stamp Duty discount. The Stamp Duty holiday effectively negated this. It put them back on the same footing as onward movers and made them only slightly better off than investment buyers.

In principle, the effect of the Stamp Duty holiday should already be starting to wear off. The closer it gets to the end of March deadline, the harder it will be for buyers to get from offer to completion by the deadline. In practice, there are two reasons why the impact of the Stamp Duty holiday might be felt for more than the next couple of months.

Firstly, the government may choose to extend the Stamp Duty holiday. It may choose to extend the overall deadline. Alternatively, it may choose to extend the holiday to anyone who has an offer accepted before the current deadline, thus giving them more time to complete. Even if it does neither, it might choose to alter Stamp Duty banding to bring in some revenue without creating a major shock in the housing market.

Secondly, what goes up does not necessarily come down again at all. Even if it does, it may not come down quickly. In other words, the end of the Stamp Duty holiday may see house prices stop rising or at least slow down their rise. It may not, however, lead to them actually falling.

Nervous lenders

At the end of the day, deposits are there to protect lenders against risk. This includes the risk of house price falls and the risk of lender default. Each lender has to decide for themselves how much of a deposit they require from each applicant. In simple terms, the more nervous a lender feels about a situation, the more likely they are to demand a high deposit.

Right now, average deposits are running between 19% in the North West to 27% in London. What’s more, they may also impose restrictions on the source of deposits. These actions may reassure anyone concerned about falling house prices triggering a rerun of 2008. They do, however, have a disproportionate impact on first-time buyers. They cannot benefit from an existing property increasing in value to help cover the cost of the deposit on a new one.

A way forward

Navigating a path through this situation could be tricky for all concerned. First-time buyers should certainly do everything they can to save for a deposit. This may include making use of the Lifetime ISA with its government-funded bonus system.

Industry, regulators and the government may, however, have to come together to organize further support measures for first-time buyers. Realistically, lenders’ hands are tied by the need to work within the framework of affordable and responsible lending. Regulators could loosen these rules, but there would be a risk to doing so.

This means that the bulk of the support is likely to need to come from the government. It could potentially come in the form of extra financial support, tax breaks, borrowing guarantees or some combination of all of these.

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

 

Are You Paying Off Your Mortgage At Top Speed?

Are You Paying Off Your Mortgage At Top Speed?

New research from mortgage broker Habito suggests a worrying lack of awareness about how mortgages work. It shows how a lack of financial education can have a serious impact on personal finances. Here are some of the key takeaways.

Ignorance is not bliss

Almost 20% of people did not know whether or not they were on their lender’s standard variable rate (SVR). In other words, they do not understand one of the most fundamental points of their mortgage.

Almost half of the respondents did not understand what remortgage was. The source of confusion varied.

  • 6% of respondents did not know the term remortgaging
  • 8% of respondents thought it was the same as taking out a second mortgage
  • 17% of respondents thought it meant taking on more debt or was only done out of need.

To be fair to the last set of respondents, remortgaging can be used as a way to cover other expenses. It can also be used as a debt consolidation tool. It may therefore be that these respondents have heard about it in that context and not really understood its wider meaning.

Inaction can be expensive

Just over a quarter of people knew that they were on their lender’s SVR. This means that either they did not understand the impact of this or they did understand the impact but were not taking action to remedy it. This could be because they did not see it as a priority or it could be because they felt they were not in a position to do so.

Interestingly 11% of people felt uncomfortable about having lenders scrutinize their finances. This is just under half of the people who knew that they were on their lender’s SVR. That could be a coincidence but it could also be cause and effect. In other words, people might grit their teeth and pay more than they needed rather than expose their financial situation to view.

There may also be a connection with the findings of separate research by another mortgage platform, Haysto. This highlighted the stress and frustration felt by people who had been turned down for a mortgage.

If people feel like their finances are too precarious for them to have a reasonable chance of being accepted for a new deal, they may not even try to apply for one. This possibility would tally with the fact that data from the Bank of England shows that between February and November 2020 remortgaging dropped 33%.

A little knowledge can be dangerous

A worrying one in ten people thought that paying their lender’s SVR would help them to clear their mortgage quicker. On the one hand, it’s great that people have grasped the general importance of paying as much as you can towards debts.

On the other hand, it’s very concerning that some people clearly do not understand the difference between capital and interest. Assuming this ignorance carries over into other areas of their lives, they could easily also be overpaying on other products such as loans and credit cards.

A possible way forward

While acknowledging the importance of personal responsibility, it is also important that businesses and governments are responsible too. As a minimum, the government/FCA could place an obligation on lenders to remind people when they are due to be switched onto the lender’s SVA.

This reminder could contain a clear explanation of the next steps, including the possibility of remortgaging. It could also have pointers to other sources of information such as the Money Advice Service.

If the government wanted to take this a step further, it could restrict the percentage of mortgages lenders could have on the SVR. This could be done either via a direct cap or by taxation.

 

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

 

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