Our November edition of the Convey Law newsletter has been distributed today. A PDF version of the newsletter can be ‘found here‘
New research from Santander Mortgages suggests that the vast majority of potential first-time buyers would be better off buying a property than continuing to rent. In every part of the country other than London, average monthly rental prices now exceed those for the average mortgage repayment.
According to the bank’s research, would-be buyers currently renting outside of London could save themselves an average of £1,040 a year if they were able to own their own property. The average monthly rent in the UK (excluding London) is currently just over £420 compared to monthly repayments of £334 for the average first-time buyer – equating to an average saving for homeowners of £86 a month.
Only those in the capital will be better off if they continue renting. Despite rental prices in London being roughly 56% higher than the average across the UK, at £701 a month, exceptionally high house prices mean it would, on average, cost potential first-time buyers an additional £359 a month to buy.
The research into typical first time buyer flats and terraced properties found the average price across the country to be £115,657. This means that a first-time buyer, applying for a 75% loan-to-value mortgage (the average LTV for first-time buyers according to the Council of Mortgage Lenders) would require a deposit of £28,914.
Phil Cliff, director of mortgage marketing at Santander UK said: “People have been justifiably cautious in approaching the housing market in recent months but this research strongly supports the idea that in the majority of cases owning can be less expensive than renting.
“The now ‘average’ LTV of 75% for first-time-buyers has provided an obstacle in some cases but saving for a deposit is clearly a wise move. Lenders are also looking to offer higher LTV products while the Government’s announcement that it will help boost the number of new homes is all positive news for those wishing to take their first steps on the property ladder. As the ‘Home of UK mortgages’ we were the first lender to increase our maximum first-time-buyer LTVs on apartments and houses to 80% and 90% respectively, demonstrating our continued commitment to the first time buyer market.”
Choosing a solicitor or property lawyer
Choose your conveyancing solicitor or property lawyer wisely and make them aware from the outset that you are purchasing a repossessed property and that you are likely to be under a very strict deadline. The estate agent should make it very clear to you the deadline, which may be imposed. In many circumstances you may well have as little as 21 days to exchange contracts.
Mortgage in place and with conveyancing solicitor
Ensure that you have your mortgage agreed in principle. As mentioned above your conveyancing lawyer is going to be under a tight deadline to exchange contracts. You certainly do not want to be held up because of your proposed lenders.
Be prepared to take a view
Be prepared for some pessimistic advice from your conveyancing lawyer. You have to remember that the bank that repossesses a property is not going to have any personal knowledge of the property. In the circumstances, the mortgage company’s conveyancing lawyers are unlikely to provide your conveyancing lawyer with comprehensive information relating to the property. Your conveyancing solicitor is going to probably advise you that there is a distinct lack of information relating to any number of issues including maintenance of boundaries, disputes with neighbours, parking arrangements, etc. In situations where you are purchasing a leasehold property there may well be limited management information available although it is crucial that your conveyancing lawyer ensures that you have clear receipts for service charge and ground rent or alternatively that a retention is held back until such time as receipts are available. In the case of leasehold properties it is important to remember that as a buyer of the property you will inherit the liabilities such as service charge and ground rent as well as being responsible for any breaches of the lease generally.
Leasehold repossessed property
In the case of a leasehold property it is unlikely that the average lender will be able to provide your conveyancing lawyer with any clarification as to whether or not alterations have been carried out to the property. It is therefore critical that you check that the lease plan accurately reflects the current layout of the property. Your conveyancing lawyer has not seen the property do you will need to guide him or her on this. Please note that most leases do contain restrictions on carrying out any alterations to the property without the landlord’s consent or changing the internal layout of the property without consent.
Check the contract
It is of course the responsibility of your conveyancing solicitor to ensure that the contract is accurate and not too weighted in favor of the lender in possession.
Please check that the contract provides that vacant possession will be handed over on completion. As is to the point above, you will be forgiven for thinking that your conveyancing lawyer should ensure that this is the case but it is worth you double checking the position (unless of course you are purchasing subject to an existing tenancy). The reason why this is particularly critical is that many properties are boarded up and therefore are susceptible to squatters getting into the property prior to completion.
Building Insurance on exchange of contracts
In the case of a purchase of a freehold property, the likelihood is that the contract provides for you to insure the property from exchange of contracts. Please make sure that you double-check the position with your conveyancing lawyer. If the onus is on you to insure then please check with the insurers that they are not going to have any problem with insuring the property especially bearing in mind that the property is probably vacant in between exchange and completion. In the case of a leasehold property, this is less of an issue because with most leasehold properties the onus to insure is placed on the part of the freeholder.
Don’t be forced into exchange of contracts
Do not be bullied into exchanging contracts before you, your lender and your conveyancing solicitors are ready. The likelihood is that given the time constraints involved that the agents are going to apply considerable pressure to exchange contracts. Be guided by your conveyancing lawyer. Remember that putting yourself in a position where you cannot complete the transaction is not to be underestimated. The penalties are draconian and bearing in mind that the seller in this case is likely to be a bank or building society they will have deep enough pockets to take this all the way to the Courts.
Be quick, as there is no exclusivity
In most cases please bear in mind that the lender in possession of the property and selling it does have a duty to achieve the best possible price for the property and therefore cannot grant you exclusivity. Should another purchaser place a higher offer on the property before you have exchanged contracts then the said bank will be duty bound to accept that offer.
Watching property prices in Britain is like riding a rollercoaster, one moment you are at the top, the next flying right down to the bottom. Since 1975 prices have increased approximately 3% per year. There were periods of ‘dipping’ such as the early 1990’s and 2008. The prices fell dramatically in this year, leading into a recession caused by the cataclysmic credit crunch.
During the ten year period between 1997 and 2007, property prices rose and fell slightly. What makes these small and sometimes quite dramatic fluctuations?
The main factors which influence property prices are:
Property supply and demand
There are literally thousands of property markets within the UK; they all contribute to the overall ‘average’ house price surveys. All average house prices are ‘statistically’ average and not based on a specific property that actually exists.
The effect of supply and demand has quite a profound effect upon the market, for example, if we have three potential buyers all looking for a semi- detached Victorian house, and we have only one on the market, the buyers are likely to compete to secure that property. This will in turn increase the property price. On the other end of the scale, a developer down the road may have twelve new properties to sell and only six potential purchasers. He will keep lowering the price until they are sold.
Prices will always rise in the long term, due to the fact that we are an ever-increasing population. The population is rising faster than the number of properties already available and more than the number of homes currently being built.
Unemployment and Confidence in the market
The threat of unemployment or even unemployment itself can have a huge impact on property prices. We are constantly bombarded daily by the media on how dire the economy is. We are told wages will be frozen and homes are to be repossessed. No-one is going to feel confident enough to purchase a new home that may either lose value or if made redundant, mortgage repayments that can’t be met. During this period prices tend to fall.
The reverse is true in a booming economy, falling unemployment and rising property prices, boosts confidence. At this time property prices tend to increase, sometimes quite dramatically.
In times gone by (prior 2000) lenders would let you borrow between two and half times a joint salary or three and a half times a single salary to purchase a home.
Then came so called ‘Irresponsible lending’, where you were lent more money to buy that even more expensive property, one that may have previously been out of your league.
In the previous recession when house prices fell, people couldn’t afford a mortgage due to interest rates being high, raising as much as 15%.
This recession, rates have been at an all time low, lending has not been as readily available, but there has been some movement in the property market.
Throughout the good times, the economy blossoms, financial confidence grows and house prices rise. If a first time buyer couldn’t afford a deposit, there would always be a parent or relative to either lend or give them the money required.
Affordability has a major impact on allowing property prices to rise; low cost money available has meant that property prices have kept rising, where as normally they would have fallen.
To summarise, prices are affected by the actual number of purchasers and sellers, the type of property being sold matching the type desired. This is then all affected by whether people can actually afford to purchase, overall confidence about the economy and job security.
Before you start the application process, you’ll need a thorough understanding of the mortgage market.
1. Do your research
Reading up on key mortgage terms might not sound like much fun but you’re unlikely to get the best if you don’t know the difference between a fixed rate mortgage and a tracker.
If you’re a first-time buyer, you might want to get informal advice from friends and family who have bought their own homes. Bear in mind, however, these people are unlikely to be qualified financial advisers and you shouldn’t rely too heavily on their advice.
2. Consult an independent mortgage broker
A specialist broker can answer any questions about the mortgage process, help you hunt down the best deal and warn you about hidden loopholes.
3. Put money in the bank
The credit crunch brought an end to the carefree days of 100% mortgages when people didn’t even need to put down a deposit to buy their property. These days, potential homeowners will need a sizeable lump sum before they can buy.
It is vital that you scrimp and save as much as you can to build a deposit nest egg. You could set up a direct debit to make sure that a portion of your salary goes into a separate savings account each month. Remember to choose an account with a competitive interest rate to make the most of your money.
4. Raid the Bank of Mum and Dad
Despite their best efforts, plenty of people are only able to get onto the property ladder by accepting help from their parents. If you are having trouble getting your deposit together, discuss your options with any family members who might be willing to help. However, you should always consider the impact this arrangement will have on your relationship.
5. Find the right property at the right price
Tennis courts and acres of land might be features of your dream house but most of us need to make compromises to find a property that suits our bank balance. You’re unlikely to get a mortgage on a home worth £500,000 if you’re earning £20,000 a year!
You should also think carefully about any other factors that affect property value. For example, being within the catchment area of a good school causes house prices to rocket. Even if you’re not planning to start a family, it’s a good idea to visit the Ofsted website to research local schools.
Alternatively, high crime rates can cause prices to plummet. To find more information on crime in your area, you should check out the Neighbourhood Statistics website.
6. Check your credit rating
Before you approach a potential lender, you will need a clear understanding of any factors that could damage your chances of getting a mortgage.
The best way to do this is by checking your credit rating with one of the UK’s three credit referencing agencies .If your credit score is low, don’t panic. There are a number of steps you can take to improve your result. You can increase your score just by registering on the electoral roll and making sure you pay your bills by the due date each month.
7. Look out for loopholes
It’s an old chestnut but if something looks too good to be true, it probably is. When applying for a mortgage deal, you need to go through the details with a fine tooth comb and make sure you’re aware of the terms and conditions.
Just imagine you take out a deal with an initial low rate of interest. It might seem like a bargain at first but what happens when the introductory rate expires? You could end up with an uncompetitive rate or having to pay a hefty penalty if you leave your lender.
Again, seeking advice from an independent mortgage broker should help you avoid these pitfalls.
8. Boost your equity
If you already have a mortgage, now could be the right time to remortgage as competition heats up on the mortgage market.
If you are considering remortgaging your property, you’ll get a more competitive deal if you have a high amount of equity in your home (the difference between the market value of your property and how much is left to pay on the mortgage).
There are simple steps you can take to build up your equity such as overpaying your mortgage each month. However, remember to make sure your lender won’t penalise you for this. Alternatively, you could increase the value of your property with home improvements.
9. Shop around
As with any financial product, you should never accept the first deal you’re offered. You’re much more likely to find a mortgage that suits you by approaching a range of lenders. One of the easiest ways to compare available deals is by using an online price comparison site.
Yet again, don’t forget to speak to an independent mortgage broker before taking any drastic action.
It may be time for a re-vamp of your property and the way it’s being marketed!
It’s hard not to feel a little downhearted if your property has been on the market for a while and you don’t seem to have the same influx of potential viewers. More people are using the internet to view properties’ than ever before and your property may be being discounted before potential purchasers even venture through your door. Just visually changing the look of a few rooms could generate some new interest or make a previous viewer see your home in a new light. Your estate agent will be more than happy to come and snap a few new photos and update your properties profile, never forget that your estate agent wants to sell your property just as much as you do.
Make sure your estate agents photographs and details really sell your property. Imagine you are a potential purchaser and you are searching on a property portal website – there are two properties in a similar price band and area to your own – but the other properties estate agents have taken fantastic, bright, clear, flattering photographs and given the properties a great write up? Which would you look at first? Have a good look then at your properties details – compare the way your estate agent has marketing your property and ask the questions?
1. Have all the great selling points of my property been photographed and shown? Are the photos clear and bright?
2. Have all the great selling points of my property been written out?
You have a newly fitted kitchen with fantastic gadgets that you’re leaving behind but you only have one kitchen photograph and there are no details of the kitchen or the gadgets in the details. You have working fireplaces – you can see the fireplaces in the photographs but it isn’t in the details that they are working. You have a family bathroom and an en-suite but the photograph shown is only of the en-suite, which a viewer could mistakenly be assume is a ‘very’ small family bathroom.
Here are a few tips:
Firstly – walk around your property or better still get an ‘honest’ friend to walk around and make a note of things that catch the eye – scuff marks, peeling paint, overflowing cupboards or grubby grouting. A room full of furniture – you use six dining chairs which makes the room look cluttered but for the estate agent photographs and viewings take out two chairs and instantly the space looks larger. You’ll be amazed at the things you overlook that a viewer could be put off by.
Before your estate agent comes around to take photographs of your property, make sure its clutter free, that there aren’t dirty clothes or dishes spotted about. Open all your curtains and blinds if the photos are being taken in the day and turn on the lights in all the rooms so that you get the full effect of your homes warmth. If possible make sure you are at your property when the photographs are being taken, ask to see the photos and details before they’re published on any sales material or websites – if you’re not happy with the photos and details – speak up and ask for re-takes and re-writes.
Give your property a really good spring clean and as much as possible remove personal touches and clutter. You want your potential buyer to imagine living in your home. Make your home as neutral as possible it will help the viewer to visualise his or her own family in your home. By removing clutter you’ll also make your rooms look larger, remove furniture that may be blocking the view of any features. Remember buyers are looking at the whole of your property and storage is always key, whilst it’s tempting to hide clutter in a wardrobe or spare room your viewer will want to know how large those rooms and storage areas are. Consider storing items in boxes, neatly stacked away in the garage, or even ask a friend or storage unit to temporarily store these items.
If you feel your property may have ‘gone off the boil’ it could be time to give your property a small budget makeover. There is potential in everything you own, even if you’ve been living with it for so long that you’re blind to it. That nondescript kitchen dresser that suddenly takes centre stage when you wallpaper the inside with a vibrant print or paint; what was previously viewed as a large cumbersome piece of furniture suddenly stands out after being given a lick of something colourful. Alternatively, if you hate a piece of furniture but don’t want to pay to replace it, you can hide it by painting it the same colour as the walls of your house. This will also make the room look much bigger.
Paint, wallpaper and fabric are key to unlocking a new look for every area of the home. Tester pots of paint may not cover a wall, but there is enough in those little bottles to paint old picture and photo frames and then hang them together on what was an empty white wall. A tablecloth made by stitching together clashing off-cuts of fabric can brighten even the dullest dining table. Buying new bathroom towels and rugs in a vibrant colour can instantly make a room look brighter, newer and inviting. Re-organise your books according to the colour of their spines to form bold batches of colour on your shelves. Change the focus of the living room from the TV to the fireplace; or face a sofa and chairs towards each other for a more sociable set-up. Buy a few cheap plants and pot them in bright or unusual planters for a stark corner. Any of these little touches can bring life to a room and refresh your property instantly.
And for people who still harbour concerns about whether all this is worth it, make some simple changes first and see what a difference it makes: Once you have done this you will see that it really is worth moving on to the bigger stuff. Above all, don’t be afraid to have a go – you can always change things again if you don’t like them.
Remember its all about creating or re-creating interest in your property – to sell your property and never forget that your estate agent wants to sell your property just as much as you do.
With many fixed rates cut in the election run up, fix now while stocks last. Borrowers who take advantage of this should be able to lock into some of the lowest rates of the year.
Lenders have pleasantly surprised the market by making their deals even more appealing post election.
Just as the Bank of England decided to keep rates unchanged at 0.5%, Nationwide cut 0.41% off some of its fixed mortgages. The Yorkshire and Clydesdale Banks decided to cut their application fees in half.
The Mortgage Works has increased the maximum loan to value limit on several fixes to 80% for first time buyers. This is great news for buy-to-let investors.
The Post Office has hit the news with its fixed rate cuts. Other lenders are expected to follow their lead.
In these days of economic uncertainty and with the emergency budget due in a couple of weeks, these cuts may not last.
Most of the major economic forecasters -from the Centre for Economics and Business Research to the Royal Institution of Chartered Surveyors – argue that rate rises are likely to come sooner rather than later. There are growing fears that Rates may be raised as the Government ends the temporary financial support launched post Northern Rock collapse, the banks may find themselves short and unable to lend.
It would seem to be prudent for any borrowers wishing to have a fixed rate and avoid the uncertainty, to think of the bigger picture and pick a five-year deal.
The best five-year deals are changing all the time as the markets adjust to the reality of a new government and a financial crisis in the euro-zone. But lenders worth looking at include the Co-operative Bank, Santander and Woolwich as well as Chelsea, Leeds, Nationwide and Yorkshire building societies.
It is possible to sign up for a decent fixed rate, even if your deal doesn’t expire until autumn.
Lenders will give you six months grace from sending in your application form, just be clear on the form of the exact date on which you want the transfer to take place.In most cases you will have to pay the full, non-refundable application fee at the start of the process rather than waiting until the loan actually kicks in.
The future would appear to be somewhat uncertain; will the coalition bring political unity or political checkmate? We just don’t know, your fee could be money well spent.