Housing Demand Soaring - Surveyors

This article by Cambridge News on November 12th, 2013 tells us the increase of price houses surge to an 11 year high.

The number of surveyors reporting house prices lifting across the country has surged to an 11-year high as the Government's new Help to Buy scheme fuels "soaring" demand from buyers.

The Royal Institution of Chartered Surveyors (Rics), which released the findings for October, said urgent action must be taken to tackle the problem of demand outstripping the supply of homes for sale, which is "nowhere near" the levels needed to cope. 

Sales volumes are running at their highest levels in more than five and a half years as more people flood into the market to snap up properties, its latest UK survey found.

Rics said that nearly three-fifths (57%) of surveyors reported price rises during the month, the highest percentage since June 2002, reflecting the imbalance between supply and demand.

Over the three months to October, surveyors sold just over 20 homes typically, the highest average since February 2008.

Looking ahead, surveyors said they expect house prices and sales volumes to edge higher in the next three months.

Meanwhile, demand for rented property is increasing at its slowest pace in over a decade as more people make the jump on or up the property ladder, Rics reported.

A balance of 11% of those surveyed reported rises in interest from potential tenants in October, the lowest proportion in more than 10 years.

But Rics said that while the new phase of Help to Buy - to give borrowers with deposits as low as 5% a helping hand to buy a new-build or existing home - is "widening the net" of people who can get mortgage access, surveyors across the UK are reporting a "problematic" lack of new instructions from sellers.

Rics said that as "soaring demand" pushes prices higher, almost every region is reporting an increase in sales, demonstrating that recovery is "spreading beyond the traditional economic powerhouses of London and the South East".

The new phase of the Government's Help to Buy scheme, which offers state-backed mortgages to people with deposits as low as 5%, was fired into action last month after the start date was brought forward from January.

State-backed lenders Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland are already offering mortgages under the scheme and other major lenders including HSBC and Santander have confirmed plans to come on board at a later date.

Simon Rubinsohn, Rics chief economist, said: "A greater willingness by lenders to increase loan to values on mortgage products allied to the Help to Buy scheme has meant that more and more first-time buyers are in a position to enter the market.

"In spite of this, the amount of homes currently up for sale is still nowhere near enough to keep up with demand and, in order for the market to function correctly, this imbalance urgently needs to be addressed.

"House building starts have picked up recently but we are still well behind in terms of the amount of properties needed."

Fears have been raised that the upward pressure on house prices could lead to a "bubble", with borrowers over-stretching themselves. Ultra-low interest rates and a string of Government schemes are currently helping to keep mortgage payments relatively affordable.

Rics recently suggested that the Bank of England should use its powers to limit house price increases to 5% a year to remove the "froth" from price booms.

It said that an annual increase of around 5% could trigger caps on how much people could borrow relative to their incomes or the value of the property.

Recent figures from the Department for Communities and Local Government (DCLG) showed that house builders in England are starting more new properties than at any other time in the past three years.

But housing charity Shelter has previously warned that the country is still building less than half the number of new houses it needs each year to tackle the ''chronic shortage''.

Council of Mortgage Lenders chairman Nigel Terrington warned last week that the housing market risks becoming "addicted" to the Help to Buy scheme unless a clear exit strategy is set out. Mr Terrington said that Help to Buy must not "morph" into the UK's version of United States mortgage giant Fannie Mae.

Mr Terrington said of Help to Buy: "It should be a time-limited intervention to correct what is seen by the Government as a temporary failure in the market to provide high loan-to-value mortgages in quantity. It must be a temporary fix - not a permanent feature."

Housing minister Kris Hopkins said: "We are pulling out all the stops to get Britain building."

He continued: "Already, we're well on track to deliver 170,000 new affordable homes by 2015, and our plans to invest £19.5 billion public and private funding over this spending review, and £23 billion in the three years after that, will help towards the fastest rate of affordable house building for two decades.

"Housing starts are now a third higher than at the same time last year and it is clear house building will remain a critical part of our economic recovery.

"In addition, our Help to Buy schemes will help thousands of aspiring homeowners buy new homes with a fraction of the deposit they would normally require - helping to boost the housebuilding industry even further as well as supporting responsible lending.

"On average households have asked to borrow around £155,000 for houses worth about £163,000, which is below the UK average price of £247,000."

Roger Harding, director of communications, policy and campaigns for Shelter, said: "Despite Government rhetoric, Help to Buy simply isn't affordable for the vast majority of people on average incomes in large swathes of the country, while city economists are warning that it risks raising house prices further.

"Apart from high earners and those lucky enough to access hefty help from the bank of mum and dad, the chance of a home of their own continues to slip further and further out of reach for many young people and families.

"If the Government is really serious about meeting people half way and helping them to realise their aspirations, it needs to take decisive action to tackle our shortage of affordable homes."

Article Source: http://www.cambridge-news.co.uk/National-News/Housing-demand-soaring-surveyors-2-7972640.xnf

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First Time Buyers Advised To Focus On Affordability

First-time buyers are advised to make sure to look beyond the property rate even if higher loan-to-value mortgages are back as revealed in this article by TheGuradian on September 15th, 2013.

First-time buyers are flooding back to the housing market as economic conditions improve, alongside fears that low mortgage rates won't last and a fresh housing bubble will push house prices beyond reach.

Mortgage lenders reported a 41% increase in first-time buyer numbers in July, while the National Association of Estate Agents says they account for a quarter of house purchases in August, the highest proportion since July 2010.

However, getting a deposit remains a stumbling block for the majority of those keen to buy. The latest figures from LSL Property Services show that the number of first-time buyers who were able to buy without help from their parents fell to 41% in July, from 51% in April.

House price rises in some areas of the country will lead some to fear that they cannot save at the same rate as prices climb, says David Hollingworth of broker London & Country. "If prices continue to rise, the deposits they have worked hard to amass could be eroded as a percentage of the purchase price."

High loan-to-value (LTV) deals such as Northern Rock's 125% mortgage, viewed by many as fuelling the appetite for credit ahead of the financial crisis, are not back on the shelf. However, lenders have started to offer more deals at higher LTVs, and there are plenty of options for borrowers with small deposits.

According to Moneyfacts.co.uk, there are 409 deals for borrowers with 5% and 10% deposits, compared to 321 in August 2012, and some of the rates on offer at 90% LTV are very competitive.

The lowest rates are available on deals fixed for two years. On Friday, Chelsea building society launched a two-year fixed-rate mortgage at a rate of 3.54% for borrowers with a 10% deposit, with a fee of £1,675. HSBC also offers a two-year fix, at 3.59% at 90% LTV with a £1,499 fee.

However, Hollingworth favours Skipton building society's two-year fix at 3.99% at 90% LTV with £160 cashback. "This deal is a good all round package with a low rate, no fee and cashback on top," he says. "There are lower interest rates on offer from other lenders, but the fees can be high, which will add a chunk to the overall value." Borrowers who can stretch to a 15% deposit could consider the two-year fix from Market Harborough building society at a rate of 2.79% and with a £995 fee. Chelsea also offers a two-year fix at 2.94% at 85% LTV.

A two-year fixed rate could appeal if you want to keep your monthly repayments down, but bear in mind that when that period ends you will move on to your lender's standard variable rate, which is likely to be higher. By that point interest rates may also have risen.

To cement your repayments for longer, there are several five-year fixes, although rates are higher. Nottingham building society offers one at 4.39% at 90% LTV with a £299 fee, while Chelsea offers one at 3.84% with a £1,545 fee. Tesco Bank has a deal at 3.69% with a £1,495 fee, and the Post Office has a rate of 3.75% with a £995 fee, both at 85% LTV.

There is still very little for borrowers who can only stretch to a 5% deposit, Hollingworth says, and rates are relatively high. Newcastle building society, for example, has a two-year fix at 5.99% at 95% LTV with a £195 fee.

Brokers warn that borrowing large amounts at record low mortgage rates may not be wise.

Adrian Anderson, director of broker Anderson Harris, says: "The important thing is not to overstretch yourself. So ask yourself: can you afford the deposit and the mortgage payments? Have you opted for a fixed rate to protect yourself against interest rate rises, if you think they are on the cards?"

Yet before buyers reach the stage of getting a mortgage, a lack of housing supply could cause problems. David Newnes, director of LSL Property Services, says: "Pressure is growing on the government's plans to lend a helping hand to the house building sector, as it needs a bigger lift. There's a lack of new homes being built, and as the number of buyers rises in line with the growing population, competition is getting stronger for the supply of properties."

Article Source: http://www.theguardian.com/money/2013/sep/15/first-time-buyers-focus-affordability