Taylor Scott International News
Falling mortgage rates in recent months mean that the average mortgage interest payments for a UK first time buyer mortgage over two years has fallen. It is down from £11,327 in the first quarter of 2015 to £10,019 in the first quarter of 2016, a saving of £1,308, according to research from AmTrust International, Mortgage and Special Risks. Record low interest rates in the first three months of 2016 mean it hasn’t been this cheap to service the interest on a 95% loan to value (LTV) mortgage since lending at this level was reinvigorated in 2013 following the financial crisis and recession. Some 95% LTV mortgages are commonly used by first time buyers who are unable to save a substantial deposit, enabling them to step onto the property ladder. The savings of more than £1,300 in interest payments over two years when compared to the first quarter 2015 is good news for a group of buyers who have been caught by rising house prices and expensive rents. As the interest costs of paying off a mortgage have fallen, this means the amount spent by high LTV borrowers, those with a 5% deposit, on capital repayments has increased, the research also shows. The amount first time buyers spend on capital repayments that help them build the equity in their home has risen 18% year on year from £5,407 in the first quarter of 2015 to £6,391 in the same period in 2016. This means first time buyers can pay off the capital of their mortgage faster, reducing the total amount of interest paid over the lifetime of their mortgage. While the costs of servicing the interest on a high LTV mortgage have decreased sharply, the cost of renting has risen in a further blow to hopeful buyers who will find it hard to save for a deposit while covering the cost of rent. Over the last year, the cost of a year’s rent has increased by £300 or 3% from an average of £9,188 in the first quarter of 2015 to £9,488 in the first quarter of 2016. When you compare the cost of renting to the interest cost of a mortgage, which is the part of the mortgage payment that does not go towards the owner building up their equity share in the property, akin to a form of saving, renting is £4,415, or 87%, more expensive. The current difference is £111 more than the £4,305 extra it cost to rent compared to paying mortgage interest in the fourth quarter of 2015, and £1,900 more than in the third quarter of 2014 when the gap was at its smallest at £2,515. The total cost of servicing a 95% LTV mortgage, interest and capital repayments, is also cheaper than it has been at any point since the Help to Buy mortgage guarantee was… Taylor Scott International
Taylor Scott International, Taylor Scott
