2013 – Lucky For Some?
The housing market has most definitely shown positive signs of recovery during the first six months of 2013 with latest figures supporting this. The Building Society Index shows that prices for residential property have increased every month since October last year, although this must be balanced by exceptional growth in London and the South East. According to Land Registry data, there is no such inflation in North Yorkshire or the North East. However, on a more positive note property transactions in the first four months of this year are up 5% on the monthly average for the same time last year and the number of home repossessions fell by 17%. Transactions in North Yorkshire are certainly at their highest level since 2007.
Critically, mortgage lending rose to £0.9 billion in April, compared to an average of £0.6 billion over the previous six months. Unfortunately, those with only a 5-10% deposit still make up just 14% of the market, which is unchanged from a year ago, while those with a medium sized deposit of 15-20% now make up 37% of the market which is up on last year. If you are fortunate enough to have a 20% deposit the chances are you will be offered a loan at a rate of 3.73%, compared with 4.36% last July. Of particular significance is that those with larger deposits of 25-40% now make up 48% of the market albeit this is slightly down on a year ago in terms of market share.
Mortgage availability has increased sharply and lenders have been slashing their rates since the Government launched its Funding for Lending scheme last August which gives lenders access to cheaper finance to help borrowers. The Government’s flagship Help to Buy scheme which is to be fully launched in January 2014, and likely to run for three years, involves the Government making guarantees to lenders who will be able to support £130 billion worth of low deposit mortgages to help home owners as well as first time buyers.
The 2013 market is without doubt much stronger than it was twelve months ago with lenders more confident that they will get their money back and house purchase lending is at its highest level since the crash of 2008.
Many lenders are now offering five year fixed rates under 3% (with some below 2.5%); there can never have been a better time to apply for a home loan. Reports suggest that house prices will start to rise in the near future and some are already suggesting that this is happening elsewhere in the UK. Those lucky enough to be in a position to purchase a house in 2013 should endeavour to do so as there are indications that the US Central Bank is starting to slow down the injection of cash as signs of recovery are promising. This will no doubt influence the Bank of England on this side of the Pond, which coupled with troubles in the Eurozone and the state of the UK economy indicates that this window of opportunity may close sooner rather than later. This cheap money provided through the Government’s Funding for Lending scheme, which is driving lower mortgage rates will not last forever, and mortgage rates are likely to start to rise just as quickly as they have fallen once lenders such as Building Societies and Banks are faced with higher wholesale borrowing costs.
2013 may well prove to be the year in which those who were lucky enough to buy a new home bought at the bottom of the market with the benefit of mortgage rates at an all-time low. They may well turn out to be ‘the lucky ones’.