The Scottish government's Help to Buy scheme has run out of money

The Scottish government's Help to Buy scheme has run out of money for this financial year, just three months after a new round started.

All the funds for the central area of Scotland have now been allocated - accounting for 80% of the funding. Buyers who were hoping for a Help to Buy deal there before next April will now have to find the extra money elsewhere or let their house deal fall through.

The government in April set aside enough money to fund 2,000 home deals but by the start of July there were just 600 still available.

Homes for Scotland Chief Executive Philip Hogg said:

“Having worked closely with the Scottish Government on monitoring of the Help to Buy (Scotland) scheme since its launch last September, we are frustrated but not surprised by this news. 

“Quickly aware of the high level of interest, we have consistently called for additional budget to ensure the scheme can meet the demand which clearly exists. This is demonstrated by the fact that it has already generated some 3500 sales and reservations.

“Without a doubt, the Help to Buy (Scotland) scheme has proved a huge boost, not only in terms of stimulating the building of much needed new homes but also in supporting jobs and wider economic recovery. 

“Whilst the scheme will remain in operation with £100m allocated for 2015/16 to support buyers across Scotland, any interruption now will obviously be hugely frustrating for both buyers and builders alike.  With Westminster having pledged support for the English scheme until 2020, we will continue to work closely with the Scottish Government on the development of a longer-term strategy here.”

Nationwide has withdrawn shared equity mortgages for home movers

Nationwide has withdrawn shared equity mortgages for home movers, including applications which qualified under the Help to Buy shared equity loan scheme.

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Nationwide will continue to lend to first-time buyers under the Help to Buy scheme.

The building society said this was a direct response to an earlier move by Halifax to withdraw the availabilty of homemover shared equity and shared ownership mortgages through intermediaries.

A spokeswoman said: "First-time buyers make up the majority of all shared equity demand and Nationwide and other lenders continue to participate in this market.

"Nationwide supports around one in five of all first-time buyer mortgages in the UK and we will continue to help those buyers to take their initial steps on the housing ladder."

Nationwide said the market for shared-equity mortgages for homemovers continued to served by a number of other lenders.

Sterling has fallen back below $1.70 after Bank of England Governor Mark Carney sounded a more dovish tone on base rate rises.

Speaking to the Treasury Select Committee this morning, 12 days after saying the base rate could rise "sooner than markets currently expect", Carney said stronger growth may well be offset by the fact there remains spare capacity in the UK economy.

That sent sterling down from $1.702 to $1.697, the pound having risen above $1.70 earlier this month as markets began pricing in a 2014 rate hike following Carney's Mansion House speech.

Carney said this morning that recent wage data suggests spare capacity remains a difficult hurdle for the economy to overcome.

"Taken in isolation the continuation of development on the wage front suggests to me that there has been more spare capacity in the labour market than we previously had thought," he said.

Labour MP Pat McFadden subsequently accused the Bank of inconsistent messaging, describing it as behaving like "an unreliable boyfriend: one day hot, one day cold".

Carney acknowledged he had intended to adjust market expectations with his Mansion House comments.

"We [would have liked] to see the market adjust to the [recent] data. We were surprised that it had not. There were many elements of the speech but that was one point," he said.

He repeated his assertion that the decision over the timing on any rate increase remains dependent on economic data - a point which he had also highlighted in his Mansion House speech.

"To be clear, the MPC has no pre-set course. The ultimate decision will be data-driven. At this point it is safest to conclude, as the MPC has, that there remains scope for spare capacity to be used up before policy is tightened," he said in the speech on 12 June.

Scottish housing recovery stronger than North of England

The housing recovery in Scotland is now stronger than in the North of England, the latest LSL Acadametrics data has shown.

Scottish house prices are only 2.4% below their April 2008 peak, compared to 8.1% in the North of England. Average prices in Scotland rose £6,435 in a year – the highest annual rise since October 2010. In Aberdeen City prices set a new record, having risen 17.1% over the last 12 months.

Richard Sexton, director of e.surv chartered surveyors, part of LSL Property Services, comments:

"For households all across Scotland, there is light at the end of the tunnel.  The average price in Scotland is now only 2.4% (£3,900) below its pre-recession April 2008 peak. The recovery in Scotland has now taken a stronger grip than in the northern most regions of England.  Just south of the border lies a reminder of the challenging road back from the depths of the recession, with the average price in the North of England still lingering 8.1% below their 2007/2008 pre-crisis peaks. As the independence vote looms on the near horizon and the debates become more ferocious, it will be interesting to note if this has any impact on current trends

"The Help to Buy scheme and buoyed demand from first-time buyers has been the catalyst spurring forward the Scottish market. Sustained growth is bedding down across the country and on an annual basis, average property prices have risen in 66% of all areas of Scotland. The flagship success story is Aberdeen, where average house prices have reached a new record of £219,117 in March 2014, after 17.1% annual growth.  The revived confidence at the bottom of the property ladder is rising up through the rungs, emboldening home movers to take the plunge after years of hesitation.  The highest increase in sales has been in classic family semi-detached homes, rising 28%.  As activity levels strengthen throughout the price ranges, overall sales in Scotland are up 25% in the first three months of 2014 compared to the same time last year.

"Housebuilding initiatives and replenished supply are also greasing the wheels on the highway of recovery.  New waterside developments and a fresh wave of housing stock in Inverclyde have helped raise average house prices in the area by 19.6% over the past year, the highest annual growth experienced in Scotland. 

"However, there’s still a note of caution and the recovery still requires nurturing. There are corners of the country where the ‘feel-good’ factor has yet to be seen.  In Midlothian, average house prices have dropped 10.8% annually and two of Scotland’s seven cities suffered monthly house price falls in March 2014.  By keeping interest rates at a historic low, the Bank of England is maintaining the steady cost of borrowing and supporting housing market growth. But whether the uncertain fiscal impact of an independent Scotland will have ramifications for the wider recovery remain to be seen."

Unfair for brokers to blame ‘slowlicitors’ - Broker Conveyancing

 

Mortgage Solutions | 08 Apr 2014 | 12:04

Harpal Singh

I've never really been interested in playing ‘the blame game' when it comes to determining who might be responsible for delays in the property purchasing process.

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Ultimately there is generally a combination of factors that all go to contribute towards the timescale for exchange and completion being lengthier than we would like. However, this doesn't appear to stop some in the industry attempting to lay the blame at the door of, quite frankly, anyone who isn't them.

Further reading

• Stamp Duty still on the agenda - Halifax

Last week I came across the word ‘slowlicitors' being used to describe a view of the conveyancing profession. It was being put out there by a group of estate agents to describe their view of conveyancing solicitors who they believe are holding up property transactions because of a perceived lack of resource which is adversely impacting on the whole process.

In effect, in this world view solicitors have not got to grips with the increase in property transactions since the middle of last year, have failed to bring in enough staff to cope with this greater workload, and therefore clients (and no doubt estate agents) are suffering as a result.

While I don't whole-heartedly subscribe to this view I do believe that many of the smaller conveyancing solicitors are struggling with the new environment and having cut their cloth accordingly when the bottom fell out of the property market five/six years ago they have not been willing or able to add resource in order to deal with any uptick. My own view is that the bigger conveyancing operators are however coping and have put in place structures, process and recruitment drives in order to solve their own resource issues.

I think therefore it is somewhat unfair to put the blame for delayed transaction times squarely at the door of conveyancing solicitors. There are of course resource issues across the board - valuers, surveyors, perhaps even advisers are in shorter supply than they were pre-credit crunch by a large amount and there were always going to be issues when the market eventually picked up.

That pick-up can probably be traced back to the middle of last year and I have some sympathy with firms taking a view in 2013 that they were going to see if this improvement was a temporary blip or something with legs. Thankfully, it appears to be the latter and therefore I see no reason why firms are not looking to up their resources if their business levels have improved and their process times have lengthened.

The big question for brokers recommending conveyancing firms of course is whether they have the knowledge about which firms are suffering resource issues and which are not. 

The last thing you want is a client going off to use a family solicitor that has one conveyancing specialist who just so happen to be on holiday at the moment with no-one else able to work on the case. Brokers need to use fully resourced solicitors otherwise they run the risk of being next in line to be blamed should the case not proceed as intended.

Harpal Singh is managing director of Broker Conveyancing

FCA promises tough action as it takes control of consumer credit

The Financial Conduct Authority has taken control of the consumer credit industry from today promising tough rules for short-term high-cost credit firms and debt management companies.

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In its 2014 risk outlook, published yesterday, the regulator said its plans to enforce a price cap on payday loans may affect some firms' appetite to remain in the sector if profits are damaged.

Further reading

• Repossessed often architects of own destruction not victims - FCA

Speaking on Radio 5 live this morning, chief executive Martin Wheatley said: "Our processes will probably force about a quarter of the firms out of the industry and that's a good thing as those are the ones that have poor practices."

The £200bn-a-year sector, previously the responsibility of the Office of Fair Trading, contains approximately 50,000 firms.

These include credit card issuers, payday-loan companies, pawnbrokers,log book lenders, peer-to-peer lenders, and debt management and secured loan providers and brokers.

Any firm now offering some form of consumer credit will now be subject to the FCA's consumer protection rules and Principles for Business.

Payday loan and debt management firms will be the see the biggest changes to the way they operate.

The new rules include limiting the amount of times a payday loan can be rolled over to the next month to two and providing consumers with information on how to obtain free debt advice. 

Secured loan brokers and lenders are not expected to feel any major changes until the EU Mortgage Directive rules are passed into UK law at which time they are expected to be merged with first charge mortgages.

But Buster Tolfree, commercial director at Central Trust, said secured loan firms should act now to ensure they are lending responsibly.

"In the medium-term MMR-style affordability models will ensure all lenders follow a responsible approach to affordability over the term rather than simply relying on out-of-date, debt-to-income ratios," he said.

First-time buyer house prices hit record high

The average house purchased by a first-time buyer is now more expensive than ever with prices rising £5,000 in the last month alone.

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Figures from LSL found the average purchase price in January 2014 was £155,832, up on the £150,875 figure recorded in the previous month and 16.4% higher than the same point last year.
Despite the government's Help to Buy scheme aiming to help borrowers with small deposits onto the housing ladder the average loan-to-value also rose in the same period, reaching 82.3% in the first month of the year.
Compared to the start of last year the average first-time buyer deposit has risen more than £500 to reach £27,519. With real wages falling due to high inflation and stagnant pay, the average deposit represented 75.1% of a first-time buyer's income in January, up from 74.7% in the previous month.
David Newnes, director of estate agents Your Move and Reeds Rains, said the government must increase house building or the Help to Buy scheme will simply push house prices upwards.
"As first-time buyer house prices continue their upward climb, Help to Buy is needed more than ever to keep the market accessible to all. But the market needs more than that. Far more house-building must come hand-in-hand with higher LTV lending.
"More building will ensure Help to Buy doesn't become a permanent crutch to the market; we need to increase our stock of affordable homes and reduce the competition between buyers to ensure a sustainable recovery."
Separate figures from Hometrack found London and the South East dominated the first-time buyer market with 38% (28,100) of total transactions in the capital and surrounding counties.
In London the average deposit is now £64,160 By comparison, the average first-time buyer deposit was just £13,393 in Northern Ireland and just £13,814 in Wales.

65% of homeowners are not prepared for a rate rise in the next 2 years

The latest Legal & General Mortgage Mood survey reveals that two thirds of consumers (65%) are not financially preparing for an interest rate rise in the next two years.
At the same time, only 7% of those polled are considering re-mortgaging their home in the next 12 months. These findings form part of Legal & General’s latest Mortgage Mood survey, the quarterly study which looks at the attitude of homeowners across the UK on a range of mortgage related issues.

With speculation continuing as to when the base rate will rise, and many commentators suggesting it will be in 2015, lenders have already started to price in the change prior. These findings therefore suggest that borrowers may be missing an opportunity to secure a low interest rate.

Homeowners in the North West are the most financially prepared for an interest rate rise with 39% saying they are planning for one. In contrast, respondents in East Anglia are least prepared, with over three quarters (78%) saying they are not planning for an interest rate rise.

Further findings reveal that, of those who said they are considering to re-mortgaging their home, the most common reason is to reduce monthly repayments, with nearly a quarter choosing this explanation (18%). Only 9% cited financing home improvements and just 7% of homeowners said they were considering it to consolidate existing debts.

When asked whether they were considering re-mortgaging their home in the next 12 months, those in East Anglia were the most likely to do so, with 14% saying yes. Homeowners in the East Midlands are least likely to re-mortgage their home, with just 3% saying they are considering it.



Jeremy Duncombe, Director, at Legal & General Mortgage Club comments:
“It appears that borrowers have not yet woken up to the possibility of a rate rise. With rates likely to go up in the medium term, lenders are already starting to price in a change in base rate in advance. Therefore, the record low interest rates we have seen in recent times are not going to be around for long. By not preparing or re-mortgaging, homeowners might miss a good opportunity to secure a record low interest rate.”

Jeremy Duncombe, Director, at Legal & General Mortgage Club continues:
“It is also interesting to note that only a small proportion of people surveyed would re-mortgage in order to consolidate debt or to finance home improvements. Following the impact of the financial crisis, it seems fewer consumers are choosing to borrow against their housing equity to fund their spending. In line with this view, the level of housing equity withdrawal has seen a downward trend for the last few years in contrast to the boom years.”

Jeremy Duncombe, Director, at Legal & General Mortgage Club concludes:
“Although it is good to see borrowers exerting more caution, the reality is that there is only one way interest rates can go – and that is up. Now is the time for borrowers to consider their options. Speaking to a mortgage adviser is the best way to understand all the options available and to secure one of the good deals that are still around at the moment.”

Rate rise to push mortgage repayments up £2.2bn by 2015

UK homeowners will have to pay £2.2bn more in mortgage repayments by December 2015 in the wake of a "moderate" rise in interest rates, according to new analysis.

 

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The report from Barclays Mortgages and the Centre for Economic and Business Research (Cebr) suggests under the scenario that interest rates rise to 1.25% over the next 23 months - currently considered the most likely outcome by their economists - the average home will have to pay an extra 3% or £252 a year on their repayments.

Further reading

• this would take total annual mortgage repayments by UK homeowners to £71.4bn by the end of 2015, up from £69.2bn today.

In the most extreme case, a scenario that Barclays Mortgages and Cebr termed "Drastic but Potential" interest rates would rise to 1.75% in December 2015 and UK mortgage holders would have to pay £5bn more than they do today at the end of 2015.
Andy Gray, Barclays managing director of mortgages said: "In the face of a rise in mortgage rates and in the cost of living, it is vital for homeowners to review their current situation and get advice as to what their next mortgage step should be - so they remain financially flexible in the face of rate rises to come. The impending rise in mortgage rates that we can see from these scenarios will undoubtedly squeeze some homeowners."
The report found Londoners will suffer most from rate rises on a monthly basis as the cost of a mortgage in the capital will rise by £384 each year per household on average - increasing from £12,384 per year to £12,768 on the "moderate" model.
Under the "Drastic but Potential" scenario Londoners will see an annual rise to £13,308.
Mortgage holders in Wales currently pay the lowest at an average of £483 monthly or £5,796 annually, and they would see payments rise by £180 each year according to the "moderate" model.
Homeowners in the South West of England who currently pay an average of £683 monthly or £8,196 across the year would see their repayments rise more greatly by £252 each year.
Monthly mortgage repayments by region for average mortgage holders (£ per month)

REGION	Dec-13	Dec-15	Dec-15
		Moderate model	Drastic model
London	£1,032	£1,064 (+£32)	£1,109 (+£77)
South East	£836	£862 (+£26)	£898 (+£62)
East	£705	£727 (+£22)	£756 (+£51)
South West	£683	£704 (+£21)	£733 (+£50)
UK Average	£666	£687 (+£21)	£714 (+£48)
Yorks & Humber	£593	£612 (+£19)	£635 (+£42)
Northern Ireland	£589	£608 (+£19)	£629 (+£40)
West Midlands	£584	£603 (+£19)	£627 (+£43)
North West	£566	£584 (+£18)	£606 (+£40)
Scotland	£556	£574 (+£18)	£595 (+£39)
East Midlands	£554	£572 (+£18)	£593 (+£39)
North East	£487	£502 (+£15)	£520 (+£33)
Wales	£483	£498 (+£15)	£517 (+£34)

Source: Barclays Mortgages

Help to Buy sees 750 completions in 12 weeks

In just 12 weeks, nearly 750 homeowners have completed their purchases and hundreds were able to spend Christmas in their new homes.
Less than 3 months on from the start of the Help to Buy mortgage guarantee scheme, over 6,000 people have put in offers on a home and applied for a mortgage, Prime Minister David Cameron announced today.

In November, ministers published figures showing that in the first month of the scheme more than 2,000 people had put in offers on homes and applied for a Help to Buy mortgage. That number has now trebled to more than 6,000.

In just 12 weeks since the scheme launched, nearly 750 homeowners have completed their purchases and hundreds were able to spend Christmas in their new homes.

The new figures on the Help to Buy mortgage guarantee scheme show that Help to Buy continues to support responsible lending; on average households are looking to buy homes worth £160,000 which remains below the UK average house price of £247,000.
Applicants will face average monthly repayments of around £900 and have an annual household income of around £45,000; this means a Help to Buy mortgage represents 23% of borrowers’ gross income.

Help to Buy mortgage applications are still coming in from across the country, and around three-quarters are from outside London and the South East, and over 80% are from first time buyers

Prime Minister David Cameron said:

"The New Year is often a time when people look to make those big life-changing decisions like moving home or taking that first step on the housing ladder.

"But too many people have found themselves frozen out of the market in recent years as a result of the size of the deposit required.

"That is why as part of our long-term economic plan we introduced the Help to Buy scheme, so hardworking people with sufficient earnings can get on, fulfil their aspirations and enjoy the security of owning their own home.

"In less than 3 months, the scheme has already helped thousands of people.

"I want to see that continue in 2014 and for Help to Buy to help thousands more realise their dream of home ownership."