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For the first time in a long time, there is hope for first time buyers who are seeking to pay a 5% deposit on a 95% mortgage! At no other time has so many options and deals been available to those seeking a 95% mortgage. This is despite the fact that the Government’s Help to Buy mortgage scheme ceased in January 2017. It only remains available for new build properties. There are now many more mortgage lenders offering deals with current estimates showing that there are around 276 deals with 53 different lenders. There has also been a big reduction in the cost of a mortgage. The rise and demand for these types of mortgages is contrary to the widely held belief that people are holding back as a result of rising house prices. This is partly due to the current low interest rates which mean that repayments are affordable. Recently, it was found that rates have averaged at 3.98% for a two year fixed term down from 4.26%. In the case of a 5 year fixed term the rate was reduced from 4.76% to 4.43%. These low interest rates have also meant that the number of people seeking re-mortgages has also surged by about 20% over the last year according to The Council of Mortgage lenders. All this has meant that the dream of owning your first home has come that much closer than ever before. Buying your first home is a big step and that is where your Mortgage Adviser is important in providing you with all of the best options available to you and gaining the best deal for you. Obtaining their advice is invaluable and will mean that the whole process is hassle and stress free.
If we take a step back in time, in the not so distant past of 2009, we will find ourselves at a time where there were a shocking 50,000 repossessions of home owner property! This was as a result of the dire economic situation of the time. Since that time, there has been an increasing pressure on banks, building societies and lenders to show some forbearance for those families who may be suffering from financial hardship. Overall, lenders and the courts have also come under pressure from the government to not straight away resort to re-possession, but to instead try and work with the borrower to resolve the issues before it led to re-possession. Paul Smee, the Council for Mortgage Lenders (CML) Director General has addresses the low figures when he stated: ‘Lenders continue to work very effectively to help their borrowers through periods of difficulty when they do occur and borrowers should be re-assured that most cases of arrears can be resolved and will not lead to repossession.’ This has been a key factor in ensuring that 2016 had the lowest number of re-possessions of homeowner property since 1982! Lenders were advised by regulators to look out for any signs that showed that borrowers were struggling and to then take swift action to resolve the matter before it got out of hand. This could be achieved by changing the mortgage to allow borrowers to pay their loans over a longer period or by reducing the monthly payments. The Council of Mortgage Lenders (CML) have released figures which show that around 7,700 UK homes were repossessed in 2016 compared to 10,200 in 2015. As such, the amount of mortgage holders falling into arrears also dropped in 2016. The CML has reported that at the end of 2016 there were about 94,100 mortgages with arrears of 2.5% or more compared with 101,700 at the end of 2015. Other factors that have helped to keep the number of re-possessions at an all time low include the current low interest rates and a combination of economic recovery with rising wages. The low interest rates have also led to cheaper mortgages. It is interesting to note that many people now have been looking to re-mortgage their properties in order to take advantage of and lock in the low interest rates before the Bank of England decides to increase interest rates again. This leads us to our next critical point which is that it is important not to be complacent as things can change – interest rates may go up and mortgage rates may also increase. This could lead to rise in re-possessions in 2017. Only time will tell how 2017 will unfold but there is hope that even if interest rates rise and other factors occur which may cause a mortgage borrower some hardship, lenders are still under a duty to try and assist the borrower to avoid a repossession wherever possible. Let’s just watch this space!
In April 2016, the government introduced a Stamp Duty 3% surcharge on homeowners who wish to buy a second property and this combined with future tax increases, may have led to a general reluctance of home buyers to pursue the once popular Buy to Let. Not so. Whilst, it is true that a surge of Buy to Lets went through prior to the Stamp Duty surcharge being implemented, it is also true that lenders have worked hard to maintain interest in Buy to Lets. To avoid the slump and to continue to secure business, lenders have acted quickly to reduce fixed mortgage rates to keep the Buy to Let market alive and thriving. It has been reported that the 2 and 3 year fixed rate for Buy to Let fell to 2.92% and 3.76 respectively. In addition, recent figures from Moneyfacts shows that the average 5 year fixed Buy to Let rate fell from 9.22% to 3.86% over the whole of 2016. This is good news for those who are looking for shorter term products or for those who want to lock into the record low rates. The low rates have meant that many are still looking at obtaining a Buy to Let as they see this as a safe long term investment for them. It has been widely estimated that over £ 3 billion has been paid out in cash lump sum withdrawals from pension pots following the Governments relaxation of rules regarding withdrawals from pensions. There is evidence to show that many are opting to re-invest that cash into second homes as an investment opportunity. With the current record low Buy to let fixed mortgage rates-who can blame them?