Blog

Could Corona virus effect house prices.

Could Corona virus effect house prices.

Can the housing market be made to unstable with the recent Corona Virus outbreak?

Splattered across every piece of news media is some story of the how the Corona Virus has spread further in the UK, or that huge swathes of Italy is being isolated, or panic buying of loo roll at your local spar. And it’s a scary thought, a new illness spreading through your community, and anything of the unknown is a frightening thought. So what repercussions could this be having on the housing market.

The housing market is always closely tied with two elements, the financial sector and peoples ability to spend, or what’s sometimes called consumer confidence. If people who want to buy things, they need to be confident that they can afford it. Factors that can effect consumer confidence are job security, the economy in general, average pay, elections, and general news. And of course consumer confidence is very closely linked to the financial industry.

So when the Guardian reported a story about the sale of a house not going through because of the corona virus. It was alarming that something involving our health could give people cold feet when buying a house. The issue in the story was that the individual worked for an events company, and because of the virus, events are getting cancelled left, right and centre and his confidence in spending was reduced. This was an isolated case. But it’s cant be the only one.

See full story here

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

Will this effect house prices?

If it blows over, then I feel it will be no harm done. So far this year has been good, gradually growth throughout, we wrote a blog about how the housing market has grown here.

But if it continues, more and more industries in the UK and across the world will be more effected. For instance, if more imports are delayed from China, this could hugely effect manufacturing, people in those industries may lose confidence in their job security and ultimately in their ability to spend.

It’s not just going to be the events industry, if other industries are struggling it will have a knock on effect on other industries. With all this, if people are not looking at buying houses, then the housing market will slow and this could have an adverse effect on house prices.  It’s not amazing news, but it could be something you look at if your are thinking of selling.

As always speak to someone you trust and make sure you make the right decision for you and your family.

Buy now and really pay later….. Managing your credit score

Buy now and really pay later….. Managing your credit score

Managing your credit score needs to be something you do on a day to day basis. And it is about performing lots of little things right. Doing those little things will help make sure your score is maintained.

There are many ways to improve your credit score – but the best thing to do is to sign up to the many credit score companies that will look at what you are doing well and what you are not doing well and how to improve them.

This blog is about a particular trap that can occur when shopping for your most needed goods. Well maybe not your most needed goods but possibly something you fancy. But there are schemes that a lot of online retailers offer and it may not necessarily be clear what effect it will have on your credit score.

One of these schemes is a buy now, pay later offer. Bear in mind in financial terms, this offer is a loan. You are effectively taking an item for free and the retailer is loaning you the money for the item. And you pay for the item later, effectively paying off the loan. Now please bear in mind this may not be the case for every pay now, buy later scheme.

So how does this effect your credit score. Well in multiple ways.

Credit Checks

Every time you take out a credit agreement, or a loan you will most likely have a credit check. This is where the company looks at your credit report and makes a decision on whether they feel you can take out the loan. Now a credit check on its own is not necessarily a disastrous thing. But if you have a lot of checks over a short period of time, even if they are successful, it doesn’t look good to other potential lenders who may look closer at your report. When looking at serious borrowing, like a mortgage, the lender will really scrutinise your report and if they see a lot of credit checks, they will see this as irresponsible lending or applications to lend and deny you that mortgage you truly need.

 

Missed Payments

Your credit report stores all sorts of information, one of those is every time you miss a payment, that could be for your mobile phone, loans, mortgages, rentals etc. So if you get a buy now and pay later and miss payments this could be something that damages your credit score. Buy now and Pay later schemes, are just that, they are schemes to make you buy. You still need to consider, whether you can afford it.

So our advice, is not to necessarily not go for these, but truly look into the affordability of it for your self. Get an understanding of how the scheme works, are they doing a credit check. How do the payments work, is it something you pay over time? If unsure, speak to their customer service, or ring an independent body.

 

Housing Market in 2020 continues to grow.

Housing Market in 2020 continues to grow.

I mentioned two weeks ago that with the recent general election and seemingly political calm in the UK, that no matter which way you voted or how pleased/disappointed you were, it would probably mean a positive upward climb for the economy in 2020. And with an nice uplift of the economy, that means a good growth of the housing market. We did talk about our predictions in the first blog here.

We are at past the end of January 2020, so has my precarious prediction bore fruit and do we have a healthier housing market?  Well according to the Independent we do.

On the first of February, The Independent reported on a growth in mortgage sales and lending across the UK:

“The number of mortgages approved for house purchase rose to 67,241 – the highest since July 2017 – from 65,514 in November. The value of mortgage lending rose by £4.55bn, compared with an average of £4.2bn over the previous six months.”

Source

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

That means it has been two and half years since we have had this number of house purchases. If people are buying houses this usually means that house prices will rise too. The article did report that house prices in January had increased to 1.9%, this is a modest increase from December, which was 1.5%. But still it is in the right direction.

So if you are selling your house or thinking of selling, then this is wonderful news, it means that you hopefully will get a good price. If people are buying and mortgages are being approved, you will not only be able to sell your house reasonably quickly but also be able to buy something too.

At Coleshill Mortgage Services we will continue to report on how this year fairs in house prices, and the market in general.

As always speak to someone your trust when looking at buying a house and getting a mortgage.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Will 2020 mean a rise in house prices?

Will 2020 mean a rise in house prices?

Politically, 2019 was a tumultuous year, and to top it all off there was a general election in December. With a landslide victory for Boris Johnson’s conservatives it could mean an answer for Brexit and a little bit of calm. Political calm, can mean economic calm, economic calm can mean growth. And please pay attention to the word “can”. It is never a foregone conclusion.

But lets look at 2019 and the price rises that we have seen. Looking at the UK house price index on the governments website. There was generally a drop from August 2019 across all regions apart for the South East, though some stayed stable.

This is the statistics of the percentage change from August 2019 to the middles of November.

East Midlands – -1.2%

East of England – -0.4%

London – -0.1%

North East – 0.0

North West – -0.3

South East – 1.0

South West – 0.0

West Midlands – -0.4

Yorkshire and Humber – -0.1

See the government website here.

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

Though these statistics are only from August to November. From January 2019 to October 2019 has seen a gradual rise with a little bit of a dip towards the end of this year as shown above.

January 2019 – Average house price was £228,393.

October 2019 – Average house price was £232,944.

See all statistics here

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

So really was a very small increase up to October with only a small decrease up to November. 2019 though not a huge year for house prices they generall didnt

And the issue is, until the government release of their housing index, it will be hard to understand the full picture of the year.

So will the political calm, stop the little decreases that often come with a general election, which will not happen this year (we hope). With 2019 being stable for house prices does that mean 2020 will bring a good housing price growth, it is still hard to tell but the future is looking brighter. The Express mentioned that since the emphatic win for the conservatives that the housing market will take a little boost in 2020, but with no real firm statistics it is a little hearsay. But political certainty does usually mean positive economic behaviours.

 

 

 

 

 

 

 

Getting your house ready to sell in Winter

Getting your house ready to sell in Winter

It is a little bit of wives tale that selling your property or home in the winter is not a good time. And while there is some real common sense thinking behind that; it is  not necessarily true. When speaking with estate agents, it is hard to tell as they have a tendency to say, anytime is a good time to sell as they want business quickly.

So is it a good time to sell in Winter? Well if we go by that a “good time” to sell is based on the the number of days it takes to sell. With less days being a good time to sell and lots of days being a bad time to say, we can have a look at statistics and get an answer.

Common negative factors of selling in the winter:

Its dark later – When it comes down to it, people can see houses after work or towards the end of the day and it’s dark then. Meaning its tough to get a feeling of the outside of the property.

Gardens don’t look great – In the winter a lot of the plants have died, its muddy, and grubby and cold. And once again the house just doesn’t look its best from the outside.

Christmas – leading into Christmas the general focus is on that, not on changing house, meaning if people are thinking of buying, they will have a tendency to do this “in the new year”.

But do the statistics back this up.

According to The advisory statistics, during the months on September to December it takes over 70 days to complete a sale on the house of is under offer. And from March to July it takes around 50-65 days. So not a huge amount of difference. If we are talking days the biggest difference is around three weeks. In the world of house selling is not a huge amount really.

Please see full article here.

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

So by the statistics, selling your house towards Christmas is not the greatest time no. The property will not look its best, but people do understand that. With the best months coming in March, waiting from November to march seems a little superfluous when the only difference is to be around three weeks.

Always make sure you speak to someone you trust, selling a house, and then buying a house is difficult and stressful, so having good, trustworthy advice is invaluable.

 

 

 

The family mortgage. Could it become a trend?

The family mortgage. Could it become a trend?

There is a lender in Epson called “The Family Building Society”. They offer a series of options for a someone looking to get a mortgage for the first time. The idea being that younger people are struggling to afford the deposit for a mortgage. This was a lender that really pushed this idea of not being able to put together a deposit for a home and used it as a unique selling point. And unfortunately it is not a niche market anymore. Particularly in London and the South-East, where even 10% deposits can be close to £50,000. With the rates of pay for the average person this sum of money is just unimaginable.  What has become common is that the Bank of Mum and Dad has come into play. They will lend a young person or couple the money for deposit with the angle that they will get the money back.

A lot of lenders have jumped on this bandwagon and realised there is an opportunity here. They will offer a scheme for the bank of mum and dad (BOMAD). This offer goes like this: They will hold the “deposit” for the BOMAD and after a certain set period of paid mortgage payments will get their money back. So as long as the people who get the mortgage pay each month, the BOMAD will get their money back. It is a great system, and for those who want to help their family with a deposit can ensure that the money will be safe. It also helps those Mums and Dads, that cannot possible afford to lose that money, that money might be for their retirement, so a sort of safe box, where they are guaranteed their money.

Some lenders have now taken this a step further and it is being referred to as the family mortgage. It maybe that BOMAD  cannot  front up that initial hit of £50,000 or whatever the deposit may be. There is a solution for this, and that is to  offer the scheme up to multiple donations , the family mortgage. This means that many people can contribute to the deposit to accumulate to what is needed. For example if you are a young couple looking to raise £50,000 for a deposit, you could ask your Mum and Dad, Granny and Grandpa, Auntie and Uncles all to contribute. The lender will set up multiple accounts for each of the contributions and hold them just as they would a single amount.

It really is just another opportunity for people to be able to get a little bit of their foot onto the ladder. What is worrying is that a lender has seen this opportunity in the market. That a generation of people are having to rely on the wealth of those before them. What does this mean for the economic impact. And it is always to do with house prices and wages. Both need to increase mutually and evenly. Though wages are increasing it has not been enough and with the housing market recovering it means that they are at the moment affordable for a lot of couples.  Meaning different ways for people to own houses need to arise. And maybe the family mortgage is a good step forward?

Please make sure you speak to someone you trust and understands, when using one of these schemes. The point of a deposit is that it is a down payment on the house. If the lender is holding that money until a certain period of time. It needs to be questioned, how much of the home you actually own!

 

Can you expect to retire mortgage-less at 65?

Can you expect to retire mortgage-less at 65?

It used to be part of the plan; you are born, you go to school, college and university. Then you get a job, you meet someone, get married, get a house, have children and retire at 65 having paid off your mortgage. And live out your golden years, in retirement.

Problem is, it’s not working out like that anymore, people are ten years older when they get their first mortgage. With over half of mortgages taken on by people older than 34. With average house prices now above £200,000 and wages not keeping up with the cost of living, it has made it really hard for people to get on the housing market. Therefore it takes longer to get there. It is not all bad, we are living longer, have healthier lives but do we really want a mortgage past 65?

The other part of this, is that mortgages are longer, they used to 25 years (well the average was), but if you read here , in our blog we spoke about how the term of mortgages has increased, and 40 year mortgages are not uncommon. So lets do the sums. If people are generally taking mortgages at 34, and they are on average mortgage term at around 30+ years even 40. Then if all that worked out for you, you would be paying right up to 64 years old. That is cutting it fine, so if you took a 35 year mortgage, unfortunately you are 69 when your mortgage ends. So I do hope you have a good pension or those first four years could be a real struggle in your retirement.

Another element is that people are looking to get mortgages much older, they are working later in life, so may be looking at new houses or to change and this maybe getting a new mortgage. Mortgages for people later in life (55 years or older), has increased over the last few years.

It may be just one of those things, that the way of life has changed, this capitalist dream may be a bit different now. Working later, as our health is better (thanks NHS), and its not all bad. We stay active, we keep social contacts and stay engaged. Working beyond 65 maybe your nightmare, and all I can say is that you either need to get on the property ladder earlier, or make sure your pension is going to pay out enough to afford mortgage payments each month. We did a blog to help saving for deposit here.

Make sure whenever you are looking for a home, speak to someone you trust.

What is a normal term for a mortgage?

What is a normal term for a mortgage?

It looks like the 25 year mortgage is over!

There is no “set” term for a mortgage. In theory it can be any length, the longer a mortgage… well the longer you pay it back for. But usually a longer mortgage means cheaper monthly payments, and more interest for the lender! Generally though mortgages have been 25 years. That is the “standard” I suppose.

But recently there has been research about the different length of mortgages that have been taken on and it looks like the “standard” of 25 years, is declining. At the moment the “standard” only contributes to 2.97%. Which is hardly anything really. Then looking at the nearest as the 30 year and the 35 year mortgage, they make up around 45% of mortgages in 2019. With 40 year mortgage making up the rest, which is over 50%. Source  (you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site)

This is a huge shift in ideals, what products are on offer and shows the change in the market. And not only that but you can get mortgages when you are older now.

A part of this is the slow down in the market overall. Lenders need to lend so they have to make their products available to as many people as possible. It needs to be accessible, so allowing longer mortgages, with potentially less payments is a good start. Allowing older people to take on these longer mortgages, also opens up that market to people to get mortgages.

What are the potential downsides to a longer mortgage then. Well the issue is to do with retirement. If you say get a mortgage at 35 years old at 40 years. That means that you will not have paid off your mortgage until you are 75 years old. If all goes to plan in your life, you probably want to retire at 65. So you have an additional 10 years of mortgage payments. Can you and your pension afford that? That is the risk, and its hard to think about that at 35. You want a house, this is an option you can afford. But truly think of where you will be at 65. Can you afford those payments then.

With the market constantly changing, and what is the norm 30 years ago, is not the same as it is now. Make sure you understand what sort of mortgage you get, what ramifications there are for you. And think for the future.

Always speak to someone you trust. And someone who understands the market now!

Your home may be repossessed if you do not keep up repayments on your mortgage.

What you need for a deposit. Tips on how to save!

What you need for a deposit. Tips on how to save!

The deposit for a house is usually what you have to put down as an initial payment to apply for a mortgage. It usually sits around 10-20% of the value of the mortgage/property. So the average price of a home in the UK at the moment is £234,853. That means if you are going for 10% that comes to £23,485. Bearing in mind the average wage in the UK sits around £36,000 a year. Which means saving to £23,485 as a lump sum is quite a lot. So if you take out all your bills, rent, food and social spending; what do you have left?

If you were saving 10% a month, after tax you would have around £2583 a year (hugely depends on your personal tax code, pension contributions etc). So to get to the required deposit you need to save for around 9 years.

Wages are increasing, the average wage was £29,000 last year. This means it is getting better for people. So there is hope, 6.5 years is not too long and can be helped if you are doing it with a partner.

So tips for saving for your first home, or even your next home.

  1. Switch bank account. There are lots of perks for switching accounts. Some banks offer cash back for switching, or even cash for putting money in there each month, or high interest rates for a certain time. It’s not a huge amount but it is a good start.
  2. Look for deals. You don’t have to be a social pariahs, but if you look at 2 for 1 deals, coupon meals, go on special nights (curry night in the pub etc). You will find that saving is a little easier.
  3. Switch energy providers. This is a simple one, you are probably most likely paying a little bit too much if you have been with the same provider for years. Get it changed, the energy market is much more competitive than it used to be.
  4. Get rid of short term debts. Credit cards, short loans, PCP deals etc. These are all at high interest values, so if you are able to get rid of at least some of these, if not all of them, then this will save you money in the long run. Even if it means not saving for the first couple of months, if you are able to clear those debts it will help.
  5. Get rid of things you don’t need. Do you need all those computer games, all those clothes, all that furniture, all those kitchen gadgets. Anything you have not used in a year. Sell!
  6. Follow the people you like to buy from on Twitter or on their social channels. Most will advertise their deals through these channels and you can get your hands on them first.
  7. Can you get it for free? For things like white goods and furniture you might be able to get them for free. There are websites like Freecycle where people are selling all sorts for free. So if you desperately need that sofa or fridge, get if for free!
  8. Plan your meals, take food into work, it really helps. If you are getting a little meal deal every work day, is it really worth it. You genuinely could make better sandwiches at home.
  9. Get rid of the services. Netflix, Amazon Prime, Xbox game pass, Gousto… All of these services, cost money. I’m not saying get rid of all of them, but limited yourself. Set a budget – £20 a month, so what can you lose.
  10. Get into the saving spirit. This is about mind set, you need a budget for the week and then the weekend. Take that out in in cash, once it is gone, it is gone.

You cannot just do one of these things, it needs to be a multitude of little things that result in you making those savings. And that means you can put away your 10% every month.

And really they should be habits you keep for life, throw off those consumable traits and look at saving 10% every month for the rest of your life. You could even put it into a pension!

Why on earth would you go for an interest-only mortgage: Pro’s and Con’s

Why on earth would you go for an interest-only mortgage: Pro’s and Con’s

Is it worth that risk on an interest-only mortgage.

There are sort of three types of mortgages you can get for a house. There are more, but these are three of the main types. There are Fixed Rate, Variable Rate and Interest-only. We have spoke about variable rate and fixed rate mortgages in reasonable detail here. 

But we have not always spoke about interest only. Its not as common, or as risk averse as the other two types of mortgages. So what is an interest only mortgage.

What an Interest Only mortgage is.

An interest only mortgage, like any other mortgage is a loan. Its a loan to pay for a house, so typically, you place down a deposit, than the lender looks at your credit history and financials and you get the mortgage. Difference comes in what and how much you pay back. When you get a mortgage there is a percentage that is placed on top of that mortgage. You may lend £180,000 for a mortgage but you pay back more, because like every loan, there is interest placed on it. This is often where lenders can be competitive, offering you better interest rates, or a certain percentage over a set period of time.

When you get a fixed rate or variable mortgage, you pay back a portion of the mortgage plus the interest. Is the different in an interest only mortgage? Yes it is!

Very simply on an interest only mortgage, you only pay back the interest part of a mortgage. This means you are not paying back any of the actual loan, just the interest part. So in theory at the end of the term of the mortgage, you will have not paid any of the actual loan part left. You will own no more or the property of what you put down as a deposit. So I hear from the rafters “That seems like a silly idea!”

Well there are some reasons to do it, but as always there are risks attached to it.

Here is your list of Pro’s and Con’s

Pro’s

  • The repayments are low, much lower than if you were paying back another type of mortgage.
  • If your house increases in value, and you can sell it, in theory you can make money off of the sale.
  • Through inflation your debt depreciates in value over time.
  • After the general term of your mortgage, you can move onto a Fixed rate or Variable rate, but you will have increase mortgage repayments

Con’s

  • If by the end of the term of your mortgage, you may not approved for another mortgage, then you quite large debt, or which, none has been repaid.
  • Property prices may not have increased, so if you were looking to sell your property you may not be able to get what you lent back.
  • Some people who take on interest only mortgages chose to add money into an investment or endowment, with the idea that this develops and gives you a lump at the end of your mortgage. But if this has not matured how you would like then you can struggle with paying the rest of the mortgage back.

Interest only mortgages are usually used for people wanting the develop property, low repayments, have it for a short time, develop it, rent it out for a few years and sell it at a profit. But with all business ventures there is a risk.

As always speak to someone you trust, make sure you understand what you are doing and why you are doing it.