Taylor Scott International News
The number of first time buyers in the UK has remained flat despite mortgages becoming more affordable than ever, new research has found. Record mortgage affordability is keeping the housing market afloat, but current housing policy needs to be revised to meet home ownership targets according to a new report by the Intermediary Mortgage Lenders Association (IMLA). Overall, it forecasts a continuing recovery in mortgage lending during 2016 and 2017, with a particular pickup in lending for house purchases by owner occupiers from an estimated £142 billion in 2015 to £155 billion in 2016 and £169 billion in 2017. However, reviewing 2015 activity, the report finds that even though mortgage affordability has hit its highest level ever, with buyers spending a record low 8.6% of their income on interest by the third quarter of 2015 and even first time buyers spending only 9.7% by November. It adds that first time buyer numbers have fallen marginally year on year, suggesting the government may need to revisit housing policy to successfully increase owner occupation levels. IMLA’s research shows that as a result of this increased affordability, first time buyer mortgage repayments are lower than average rents in every region of Britain, although this is not yet being translated into the desired increase in home ownership with factors including deposit affordability issues and tighter lending criteria also having an effect. The rise in affordability over the past year has been supported by cheap mortgage deals, alongside rising incomes. Mortgage rates are at record lows. February 2015 saw the average two year fixed rate at 75% LTV fall below 2% for the first time and by October the average two year fixed rate at 90% LTV slipped below 3% for the first time. In a trend particularly benefitting first time buyers, the last year has seen high LTV loans become substantially more affordable, with those borrowers opting for higher LTV options facing a smaller marginal cost for borrowing between 75% to 90% and between 75% to 95%. IMLA’s analysis finds the implied marginal cost of borrowing between 75% and 90% LTV, which was as high as 21.3% in the middle of 2010, had fallen to 12.9% by the end of 2014 and was only 7.8% by December 2015. However, improving affordability of higher LTV loans in 2015 did not spark a rise in aggregate high LTV lending or the number of first time buyers, which fell back slightly in the year to November 2015 compared to the same period of 2014. Deposit affordability issues and tighter lending criteria mean that not all buyers can access the deals available, even though high LTV loan repayments are now more affordable than ever, the report points out. The IMLA is concerned that the government’s decision to terminate the Help to Buy mortgage guarantee scheme at the end of the year could make it harder for first time buyers, as it may reverse the recent improvements in high LTV loan pricing. Taylor Scott International
Taylor Scott International, Taylor Scott
