1st Choice Properties logo

January News 2018

Search for properties

To buy or to rent?

Property type

Minimum price

Maximum price

Minimum bedrooms

Mon 08 Jan 2018

January News 2018

3% Rise in House Prices Predicted



Homeowners have reason to be optimistic as Hometrack, a well-known property analytics company, predicts house price growth of 3% in 2018. Those in the UK's top 20 cities have even more reason to cheer, as they have been forecast 5% growth.


This is in line with Hometrack's projection for 2017 of 4% growth due to a pick-up in regional housing markets offsetting weak price growth in London. Richard Donnell, Insight director at Hometrack, said: "Large regional cities could register house price rises of up to 25% over the next two to three years. The likes of Manchester, Birmingham and Glasgow have seen market activity increase and this has delivered above average price growth of 6-8% for the last 12 months."


In contrast, while London has seen a 70% increase in house prices since 2009, Richard points out that it "is facing a drawn-out period where house prices and earnings need to re-align - we expect the rate of house price inflation to remain in low single digits over the course of 2018 with prices falling in real terms."


Hometrack further predicts that housing sales will remain at around 1.2 million in 2018, unchanged from the last three years, but that first-time buyers will be making up the largest proportion of this. Currently, existing homeowners make up the largest group, but first-time buyers are expected to overtake them, at 35% of sales compared to homeowners' predicted 34%.


Meanwhile, investors buying with a mortgage are forecast to see a fall in sales of 6% due to tax changes and low yields impacting buying power in southern England. Lastly, rents are predicted to rise by 2%, down slightly from the 3% growth seen over the last three years.






Bank of Mum and Dad UK's 9th Largest Lender


Despite the removal of stamp duty for (most) first-time buyers, affording that all-important first home remains a challenge. This explains why parents are set to lend a staggering £6.5 billion in 2017 - effectively making the Bank of Mum and Dad the UK's 9th largest mortgage lender.

Help still wanted.


The estate agents Douglas & Gordon, by combining their own research with figures from various other sources, have found that there were 654,000 first-time buyers between 2015 and 2016, 69% of which wouldn't have managed a deposit without their parents stepping in to offer financial aid. That's a whopping 451,260 people who had to rely on their parents!


Unfortunately, this number is only likely to go up, with property prices continuing to outstrip average wage growth, at 5.1% year-on-year compared to 0.4%. As a result of this continued house price growth, the average house deposit stands at £48,831 - quite a steep figure for anyone eyeing up their first step onto the property ladder.


The research found that 22% of parents plan to release the equity from their home to help their kids get on the property ladder. If you're over the age of 55, own your own home and don't want to move, this may be the easiest way to access cash - just remember that it will affect the inheritance your children will be able to receive later on.

Some parents prefer to downsize instead, with 48% of pensioners considering moving to a smaller home. This could be quite lucrative, with an estimated £877 billion available via downsizing by 2036.


What's more, 56% of parents are so generous that they gift the money outright, with 21% providing it as an interest-free loan and 2% offering it as a loan with interest. In the latter two cases, this may affect the affordability of buying a home, which is why parents and their children should clearly state what the terms of the loan are, to help the mortgage provider determine if it's a risk or not.







Mortgage Activity Dips in November


Activity in the mortgage market took a slight dip in November, no doubt fuelled by the base rate rise which has forced homeowners to take stock of their current position and hold off on making key financial decisions. This saw house purchase activity fall to a 15-month low, but remortgaging activity continues to hold its own - and could increase further in the months ahead.


The figures, from UK Finance, show that the number of house purchase approvals fell to 39,507 in November, down 2% from October's total of 40,417 and the lowest seen since August 2016 (38,308). It also marks a drop of 5% over the last year, down from 41,702 in November 2016.


This marked decline in activity is largely the result of the base rate rise that took place during the month, which had a knock-on effect on mortgage rates. Indeed, averages had already begun rising in anticipation of the Bank of England's decision - November seeing the largest rise in two-year mortgage rate on our records - so it's little wonder that buyers took a step back from the market.


Remortgaging activity also took a slight downturn, albeit to a lesser extent, with 33,670 remortgages approved during the month, down 1% from October (34,006). Nonetheless, this marks a significant improvement on an annual basis, with November 2016's approval total being 23% lower at just 27,268, highlighting the strength of the remortgage market over the last year.


It's likely that the drop in approvals is merely temporary, at least where remortgaging is concerned, as borrowers adjust to the new base rate environment. Indeed, our own figures suggest that remortgaging activity could ramp up in the months ahead, as although fixed mortgage rates have started to rise, so have standard variable rates (SVRs), which means borrowers now have plenty of incentive to switch to a better deal.


This is because the average SVR has jumped up this month to stand at 4.74%, up from 4.60% in September and the highest seen since September 2016 (4.75%). Meanwhile, the average two-year fixed mortgage rate of two years ago stood at 2.56%, which means those who are coming to the end of that two-year term are now faced with a 2.18% rate hike if they choose to revert, the highest variance seen since April 2008 (2.39%). 







One in Three Fail To Repay Interest Only Mortgages

One in three borrowers with interest-only loans failed to repay the mortgage at the end of the term, according to new data.

The S&P Global Ratings report looked at interest-only mortgages due to mature over an 18-month period, to June 2017.


It found that a 36 per cent of these were still outstanding at the end of this period.

A break down by mortgage type shows that approximately 27.5 per cent of residential interest-only mortgages are still outstanding at the end of the term, and around 8.5 per cent of buy-to-let loans are.


This research looked at the interest-only mortgage loans in 84 residential mortgage backed securities - representing some £15.2bn. There are concerns that failure to repay these debt could cause difficulties in the housing market, and create credit issues for the banks issuing these securities.


This report identified borrowers who were at higher risk of failing to repay these loans.

This included those who were aged 55 or over, those who were self-employed and those who had self-certified their income when taking out the loan.


This research shows that 73 per cent of those failing to redeem these mortgages were aged 55 or over.


Most of these mortgage deals were taken out in the period leading up to 2008. The report points out that despite these homeowners benefiting from lower mortgage repayments  - in some cases borrowers have seen repayments fall by 65 per cent over this period - many have failed to save into a suitable repayment vehicle.


However, where borrowers live can have a huge impact on their ability to redeem these mortgages. Increases in house prices in the South East mean borrowers in this region may have the option of downsizing and repaying this debt.

The opposite is true for borrowers in the North West of England, Northern Ireland and Scotland, where there has been little house price growth since the origination of these loans.


S&P points out that these interest-only loans were often advanced to borrowers who could not afford a repayment loan, so affordability tends to be lower than the market as a whole.