Purchasing real estate requires a lot of thought, consideration, and planning.
For many people, owning a home is one of the important life goals to achieve, but many people go beyond simply finding a property and finding a willing lender to finance it. , not realizing that there are much more subtleties in the purchasing process. Approve a mortgage.
Research shows two-thirds of new homeowners don't understand mortgage terms, but only one in 10 believe their broker is capable of finding them a better deal. is. This lack of knowledge can have serious negative financial consequences, with one study finding that around 2 million people in the UK pay nearly £5,000 more each year than they should in interest alone .
At Foxtons, we are determined to ensure that buyers not only find and purchase properties they love, but also secure a mortgage deal that works for them. As coronavirus-related restrictions begin to ease, more people are venturing into property purchases and, as a result, will soon need a mortgage that suits their needs and circumstances. 
With that firmly in mind, use this article to look back at 2020, see how the pandemic has affected today's mortgage environment, and give first-time buyers a chance to consider property ownership now. Assess whether it is a good time. .
Looking back at 2020
The state of the mortgage market throughout 2020 was a very polarizing one between the haves and have-nots for homebuyers. The global lockdowns in early 2020 posed significant operational challenges for lenders, and their stance on lending risk has since become more cautious.
First-time buyers in particular have felt the brunt, with reduced product choice (most notably the removal of 5% deposit products) and tightened affordability rules, reducing the amount applicants can borrow.
The confusion and mixed messages we saw throughout the first half of 2020 affected all sectors. Most companies focused on integration, and many quickly realized that it was not possible to continue with a “business as usual” approach. For many first-time buyers, the idea of buying a property was very much on the back burner.
But things are very different in 2021. Transaction levels in the first quarter of 2021 were up 50% compared to the same period in 2019 and 2020, which not only indicates that things are returning to normal, but also that there is definitely a huge amount of real estate purchases at the moment. It shows that you are motivated.
A variety of factors have led to a surge in sales activity, especially among individuals looking to get onto the ladder for the first time. Pent-up demand post-lockdown, the introduction and eventual extension of the stamp duty holiday (which you can read about in a separate Expert Insights article), and the UK's economic outlook improving as the country begins to recover. Anything positive is important to increase interest levels.
The mortgage market is now on stronger footing and is seeing increased product availability as well as more flexible affordability criteria. Buying this year can bring significant financial benefits.
A new lender mindset
Various financial institutions are starting to take a more liberal approach to using additional income, such as bonuses, commissions, and overtime pay, in affordability calculations, which was severely limited after the onset of the pandemic.
These adjustments are particularly important for the London and South East property market, where the average house price-to-earnings ratio is around 13 times and affordability remains one of the key challenges facing first-time buyers.
The stamp duty holiday is coming to an end, but given the continuation of its own open-ended holiday, first-time buyers will continue to benefit for the time being, with the first £300,000 You are guaranteed to pay 0% tax on your transactions. The value of the property reaches £500,000.
Prospective new buyers are at the heart of the government's plans to revitalize the post-COVID-19 property sector, and the highlight of the initiative is undoubtedly the ability to make a down payment of 5%, as well as the government's undertake.
Thousands of people who would otherwise struggle to get into real estate are now able to get a foot on the property ladder, and lenders are also given security in the event that the borrower is unable to repay the property. We are encouraged by the fact that we are able to provide affordable home loans. If the value of your property declines, you are protected by a government cushion.
It certainly seems like a win-win for buyers and lenders, but is it really?
95% mortgage
The government-backed 95% Mortgage Guarantee Scheme introduced in April 2021 will be an attractive option for many first-time buyers. The scheme is designed to reduce the risk faced by lenders when offering 95% products, allowing them to 'recharge' the higher loan-to-value (LTV) end of a lender's product range. It is intended to.
This initiative immediately attracted a great response. In April of this year, a further 78 95% LTV products were introduced to the market, and 41 new 90% LTV products were launched in the same period. This is due not only to increased consumer demand, but also to a lower level of risk that lenders have to take on, making them more proactive in catering to this new group of would-be homeowners. It highlights that there is.
As mentioned earlier in this article, we also welcome improvements in the affordability criteria used by lenders in recent months. For example, Nationwide recently introduced the Helping Hand Mortgage, a scheme for first-time buyers who don't think they can borrow enough to buy a property. This will allow buyers with a 10% down payment and an annual income of at least £31,000 to borrow up to 5.5 times their salary.
Of course, the existence of such mortgages is good news for some buyers, but it is true that every mortgage has its own differences and idiosyncrasies, and when signing on the dotted line, This should not be done without understanding its strengths. Cons and everything in between.
Navigating the mortgage minefield
Many borrowers understandably believe that the best starting point when sourcing a mortgage is to look for the most competitive interest rate. But in reality, there are many variables to consider, both in terms of the mortgage itself and the lender's approach.
Many factors not only determine what type of mortgage loan is available to an individual, but also help determine which options are most beneficial. Whether you are employed or self-employed, your income structure, whether bonuses or commissions are common, your residency status, the type of property you buy (and its location), and the amount you can borrow will all be taken into account.
Lenders can vary widely in how they handle these various factors, so it's very important to speak to an advisor (for example, Alexander Hall) as soon as possible. Buyers spend time viewing properties only to be disappointed at the last minute because they don't get the guidance they need or the advice given isn't tailored to their requirements or circumstances. is common. The value of having a trusted professional advisor to support you throughout the purchasing process cannot be overstated.
final thoughts
The current situation is very favorable, especially for first-time buyers. The mortgage market is constantly evolving to help people get onto the ladder, meaning there's likely to be an ideal mortgage solution for everyone. However, as mentioned above, it is important to obtain and utilize advice from a trusted and knowledgeable advisor before entering into any long-term loan transaction.
For example, speaking with Alexander Hall will give you an overview of the entire mortgage market, giving you a solid understanding of what you qualify for and what factors play a role. , it also helps you get a mortgage. Make plans for the future.
If you would like to find out more about how a mortgage advisor can make your property purchase easier and more efficient, check out this blog written a few years ago and read Foxtons' extensive step-by-step guide to the buying process .
For anything else, contact Alexander Hall to find your perfect mortgage.
