Posted on 9 December 2011 by
Guest Blog, Alistair Hargreaves, Mortgage Consultant.
Is everything really going wrong? Looking at the response to the budget, especially around housing and you would certainly think so. Don’t get me wrong; it’s tough out there for almost everyone. But the budget brought back into focus the plight of the beleaguered and battered first time buyer. Ever since the start of the bust inducing boom first time buyers have been steadily and firmly pushed out of the market - firstly by a sudden surge in London and South East property process, then by a glut of landlords looking, and then by the crash that effectively stopped all but the most standard lending for the banks – and certainly not first time buyers.
Of course there have been innovations put in place by this Government, and the last. Some have worked, some may still work, and others have, in the end, been worse than useless. I draw your attention to the stamp duty freeze and the various shared ownership and shared equity schemes. Clearly the stamp duty holiday has made a difference to some first time buyers; equally the two low cost housing schemes have worked for a number of people. However we have seen some unfortunate buyers who are trapped in a poor quality new build, where their share is just 25% of their home (the bank will typically hold 85% of that) and the balance is still with the housing association or the local authority. They cannot "staircase up" (buy more of their home) due to restriction on mortgage lending. Nor can they sell as the flat needs to stay with that housing association and the market for hastily built, poorly maintained near new builds is, as you can imagine, hardly buoyant.
At face value lenders are trying to entice FTB’s into their branches with promises of 90% lending at reasonable rates – and compared to this time last year these rates are very competitive. For example, Cambridge BS and Manchester BS are both offering 4.99% at 90% for a 2 year fixed – HSBC an even better 4.69%. This time last year the best value 2 year fixed deal at 90% was 6.29% with Scottish Widows – and that was only open to so called professionals.
So a drop of 1.80% in 12 months is certainly going in the right direction. However the issue remains that at 90% lenders are very cautious - and the decline rate is far higher than at 85%.
The good news is that some of the more "bespoke" lenders will take a view on an individual’s circumstance – no more computer says no. These smaller banks and building societies look at a client’s whole situation, and apply common sense to the situation. Common sense, you have been missed. These smaller lenders are not for everyone, but for the right person they can be a lifesaver. Look at Saffron BS, who are offering a 95% (yes 95%!) mortgage based on affordability. So there are no arbitrary income multiples to fit around. They look at your income and your outgoings, and, for example, if you have been paying rent at £1,500 per month and that has been comfortable for you, they will allow you to borrow an overall amount that equates to payments of £1,500 or less. Simple, obvious, and not available on the high street.
Quite simply, unlike what you hear most nights on the news, all is not lost. Time might be tough but there are opportunities (and innovation) everywhere. You just have to know someone who knows where to look..
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