In this article I will discuss the boom of the housing market and the rollercoaster ride through the mortgage market during 2020 and 2021. As a mortgage broker in Hitchin I have first-hand knowledge of the local mortgage market. Why did mortgage deposits hit 15% or higher? What are the benefits of the new 5% deposit Mortgage scheme for home buyers in and around Hitchin?
The desire to move remains on the agenda for many this year as the housing market is proving one of the bright sparks of the economy during 2021.
2020, a year in which the housing market defied expectations. At 7.6%, annual price growth across the UK is at its strongest since summer 2016. Over 129,000 plus homes are believed to have changed hands in December, 32% more than in December 2019. House sales in 2020 were 11% lower than in 2019 (HMRC). The mortgage market has recovered. Mortgage approvals in 2020 were up 3.7% on the previous year (Bank of England) and with an estimated 9–10% more sales agreed in 2020 than in 2019.
So, what is happening in 2021? Well, it has been a positive start. The newest national lockdown has created a buzz for active house movers wanting to sell and buy around the Hitchin area. Rightmove reported its busiest ever start to a year, with demand up 12% and sales agreed in January up 9% year on year. However, new supply to the market has fallen by 12% and the number of homes for sale by 6% as new sellers remain cautious while restrictions remain. Many sales are currently in the conveyancing process, the flexibility to negotiate on price crucial to avoid fall throughs if the current stamp duty deadline of 30th June is missed.
Hertfordshire, Bedfordshire & Cambridgeshire
At 4.8%, average annual price growth in the South-East of England is lower than the UK average. However, growth is currently stronger than at any point since January 2018 and considerably higher than the 1.5% fall recorded this time a year ago. Price growth across five areas currently exceeds 5%. Rightmove report average asking prices fell by just 0.1% month on month across the region in January, with properties selling more quickly than a year ago. We feel the speed of sales is once again due to the stamp duty exemption and with the extension now until the end of June 2021 there’s no reason for this to slow. Annual price growth has strengthened across Hitchin and the surrounding area to date this year.
What has changed in the mortgage market during 2021?
New 5% mortgage scheme launches
Many lenders had fears around high loan to value mortgages during 2020, for example home mover mortgages at 95% using just a 5% deposit were pulled from the market. Mortgage lenders reverted to requiring a minimum 10% deposit with the majority at 15% due to risks of property prices falling. Sliding home owners into negative equity would leave mortgage lenders with very little or no security should a customer default on their payments.
A new government guarantee scheme has now enabled high street mortgage lenders to come back to market with 95% loan to value products during 2021. Many other lenders are likely to be following suit soon. For local mortgage customers, in and around Hitchin, it is important to know this scheme is for the lenders guarantee only. A home buyer would see no real difference in the mortgage product, just the ability to now use a 5% deposit once again. At Fortune Financial we have already had a large demand for these products whether for first time buyers or home movers.
Help to Buy – What is changing?
From the 1st of April 2021, Help to Buy will only be available to first-time buyers seeking mortgages and new regional price caps will set the maximum value for property purchases eligible under the scheme, with the south-east at £437,600. Purchasers require a minimum 5% deposit and are eligible for a low interest government-backed loan of between 5% and 20% of the value of a new-build home (up to 40% of the value if purchasing in London). Buyers require a mortgage (75% or less) to cover the remaining amount and the home must be purchased from a homebuilder registered for a Help to Buy: Equity Loan.
At Fortune we love the scheme, it offers the ability to raise a larger deposit from outset, resulting in the ability to obtain a more competitive mortgage rate when compared to lower deposit purchases due to the loan to value being below or at 75%. The loan is interest-free for five years; buyers are required to start paying interest on the loan after this period. As repayment is interest only, it does not reduce the amount owed. It is possible to repay all or part of the loan at any time, although a part payment must be at least 10% of the value of the home at the time of repayment.
If you live in or near Hitchin and are interested in hearing more about the Help to Buy mortgage scheme, please do not hesitate to reach out to our team. We will arrange an appointment to discuss your options and the criteria of the Help to Buy scheme at your convenience.
Central Bedfordshire is the most active housing market in the region!
Yes, ranked no. 1 with an average house price at over £309,535 Central Bedfordshire is the most active housing market in the region. Fortune Financial work with many local Estate Agents providing mortgage advice for their clients. Their feedback has been that demand remains to be high, with offers on properties at close to asking price or sometimes above due to the risk of losing their dream home to other buyers.
New build homes registered in 2020 across the South-East reached nearly £15,000 which is great news for first time buyers looking to use the schemes available such as Shared Ownership or the earlier discussed Help to Buy scheme.
Buy to Let investors turn to Limited Company Mortgages
We have seen a large increase in new and existing landlords purchasing investment properties through Limited companies. We would strongly advise seeking professional tax advice from a local accountant or tax specialist on the potential benefits, whilst we have many lenders offering Buy to Let mortgage products for new and existing limited companies with the relevant SPV codes for property purchase. At Fortune Financial we have a specialist in house adviser that can talk you through the products and lenders criteria you need to meet for obtaining a Buy to Let mortgage offer, examples would be minimum income, SPV code requirements, portfolio landlords and much more.
Free Will for all new and existing clients
Over the past 12 months Fortune Financial Planning has arranged over 300 Wills for local families in and around Hitchin, Letchworth, Stotfold, Shefford and Baldock for FREE.
There has been no catch, it simply been and continues to be a way of speaking to new families in the local area. We pride ourselves on our service, which shines through during the Will process. Many clients have agreed to be contacted in the future for other needs such as mortgage advice at point of remortgage or review of their related insurances that offer their families security throughout their life.
Mystic Mark – My 2021 predictions
Whether you are a first-time buyer or experienced property investor, 2020 was largely a year to forget – as discussed, with mortgage deals disappearing and millions of homeowners needing to take out payment holidays in the wake of the COVID-19 outbreak. The outlook for 2021 may largely depend on what happens with the pandemic and the economy as a whole, but there are a few promising signs in the mortgage market for those of a more optimistic persuasion.
Firstly, mortgage rates on 95% may begin to drop. These products are fresh to the market and there is not a huge number available. I feel once we get more high street lenders on board, along with specialist mortgage lenders, these lenders will be competitive driving the rates lower.
Remortgages could become easier in late 2021. Currently lenders require much more evidence of income and are not keen at all on furlough payments. With the scheme ending it’ll be interesting to see lenders get back to standard payslip affordability checks, whilst self employed customers will likely still need to provide evidence of sustainability of income.
Last but not least, mortgage rates will remain low, especially for borrowers with greater levels of equity in their home. If you are remortgaging at 60% loan to value, you can still secure a two-year fix with a rate of just over 1%, or 1.2% at 75% loan-to-value (subject to acceptance). With the base rate unlikely to rise in the next few months, mortgage rates will remain very attractive – for those who can get them. My advice is speaking to a broker like ourselves and check your options backed up with professional advice. Our aim to solve your mortgage riddle and ensure you have the most cost-effective mortgage product that meets your needs.
Director of Fortune Financial and Mortgage Broker & Protection Adviser in Hitchin
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Fortune Financial Planning Ltd is an appointed representative of PRIMIS Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority.
Registered Office: Alexander House, 40A Wilbury Way, Hitchin, Hertfordshire, SG4 0AP. Registered in England. Company number 07737045.