How was 2012 for you? If you were expecting things to get a lot easier in the housing market, you'll no doubt have been disappointed. However, it is possible to find some positive developments from the past 12 months.
Mortgage availability improved and average deposits required by lenders, while still high, fell below 20% for the first time in four years.
But what are the experts predicting for 2013? Will there be any reason for optimism? House prices For the most part, UK house prices remained stable in 2012 with any small falls negated by small rises. In 2013, the experts are predicting more of the same.
"House prices generally will be subject to wider economic concerns and consumer sentiment," says Jane Harrison, a director at London & Country mortgage brokers. "Falling inflation and some growth in the economy - even if weak - should help that, so we'd expect prices to be flat or see modest growth in 2013, but with significant regional variation." Adrian Anderson, director of property finance specialist Anderson Harris, also expects the North/South divide to become more apparent. "It looks set to deepen," he says. "London and the South East seem to be completely detached from the rest of the country." Mortgages The Bank of England base rate has now been at 0.5% since March 2009 and it's showing no sign of moving. However, while the base rate may be going nowhere fast, mortgage rates could be a different story, thanks to the government's Funding for Lending Scheme, which sees banks given the opportunity to borrow money at cheaper rates on the condition that they lend more to individuals and businesses.
"As the Funding for Lending scheme really gets into gear, we expect mortgage rates to fall further, particularly for borrowers requiring higher loan-to-values (LTVs) who until now have had to pay a significant premium on their mortgage rate compared to those with larger deposits," says Mark Harris, chief executive of mortgage broker SPF Private Clients.
When the economic crisis hit in 2008, mortgage finance all but dried up, meaning getting a home loan was a challenge. In 2012, it did improve slightly - there were 3,169 residential mortgage products on offer in November 2012, compared with 2,853 a year earlier.
But an investigation into the mortgage market (the Mortgage Market Review or MMR) has led the Financial Services Authority to impose tougher regulation, further tightening lenders' criteria. Whether or not mortgage availability will change in 2013 divides opinion. "Most banks have pre-empted the MMR and tightened their criteria already, so we don't expect it to become any easier to get a mortgage; if anything, it might become slightly harder," says Anderson.
"The problem is that property prices are still way out of kilter with income multiples. Banks are looking far more closely at how the mortgage will be repaid and are no longer happy if the borrower is relying on the sale of the property." Andrew Montlake, director of mortgage broker Coreco, is more optimistic. "As the Funding for Lending Scheme begins to have more of an effect, coupled with the fact that lenders have set targets in excess of what they have lent in 2012, we will see more mortgage products available," he says.
So what about first-time buyers? They're the 'lifeblood of the housing market', yet they've been squeezed out in recent years as LTVs have been slashed and lenders have become much more risk averse. Sadly, they shouldn't expect things to get much easier this year.
"First-timers will still be penalised with very strict criteria, so those without impeccable credit need not apply, although I envisage a slight softening in deposit levels needed," says Ashley Brown, director of independent mortgage broker Moneysprite. "Demonstrating the ability to save and manage your finances properly will continue to be the green light for your first mortgage." According to Montlake, lender innovation is key. "Lenders will continue to innovate and options such as Halifax's Lend A Hand mortgage, or family guarantee products will become more prevalent," he says. "First-timers should expect 15% deposits to be the norm, with a smattering of products at 90% LTV." What should you do? While predictions will be coming thick and fast from all corners of the market, what consumers really want to know is what it means for them. So if you're considering upsizing, debating whether or not to continue renting or simply not sure if now is a good time to move, what do our experts suggest? "If you are planning on moving, you might as well make it a significant move," says Mark Harris. "Those in a one or two-bed flat might want to jump a rung on the housing ladder and move to a four-bed house rather than a three-bed if they can afford to: this removes the need to pay two sets of fees, plus all the hassle of moving twice." He adds that it would be better to be a first-time buyer than a long-term renter as at least you are paying for a stake in something, rather than "throwing your money down the drain in expensive rent". "It all depends on whether you have access to the required deposit," he concedes.
Jane Harrison says it comes down to the individual's circumstances. "Ultimately the decision to rent, buy or move is too important to base on second-guessing the market," she says. "Potential buyers need to decide whether a purchase is affordable and whether it's the right thing for them. Having the right home in the hand will generally outweigh any number of might-have-beens in the bush." Montlake believes 2013 could be a very good year to make the move into the property market or remortgage to a better deal. "The next couple of years will prove to be a good time to move, certainly from a mortgage point of view," he says. "For example, obtaining five-year fixes below 3% may not be possible for too much longer, especially once we do finally begin to come out of the current malaise. I suspect that anyone purchasing a property in the next 12 months on a low-rate mortgage will look back in four or five years' time with a wry smile." First-time buyer solutions If you're a first-time buyer and are hoping to make the move on to the property ladder in 2013, a number of solutions could help. There are two technical terms being bandied around - 'shared equity' and 'shared ownership'.
It's important to understand these are two separate products. Shared ownership refers to part-buy, part-rent products, while with shared equity you are likely to legally own the whole property but receive an 'equity loan' to help boost your deposit.
Shared equity Two of the most popular shared equity schemes are FirstBuy and NewBuy. With FirstBuy you buy a minimum of 80% of the market value of a property. An equity loan of up to 20% is provided to assist your purchase. You will need a minimum of 5% for your mortgage deposit.
Meanwhile, NewBuy sees housing developers and the government underwrite mortgages to allow lenders to provide loans to people with smaller deposits. Developers contribute 3.5% of the purchase price of a property and the state provides 5.5%. Both schemes only apply to new builds and FirstBuy is only open to first-time buyers.
"Any scheme that helps new buyers to get on to the property ladder and supports builders by providing buyers for their stock is a good thing," says Andrew Montlake, director of mortgage broker Coreco.
Shared ownership Shared ownership is provided by housing associations and allows borrowers to part buy, part rent a home. You pay a mortgage only on the share you buy and pay subsidised rent on the remainder. You can increase your share until you own 100% of the property. "This is a tried and tested method of purchasing that has been relatively successful since its introduction," says Montlake.
One of the most recent initiatives is the Genie Home Purchase Plan, a 25-year structured payment plan that enables you to buy a home without the need for mortgage finance. Buyers choose their home from a selection of properties, pay a one-offadmin fee and then a monthly residency fee. This fee is reviewed every five years and at the end of the 25-year plan you own the property. While the scheme has not been widely available, from this month it will operate in the North East, North West and London.
What will happen to interest rates? Interest rates have now been at 0.5% for nearly four years. Will this change in 2013? "We are some way offseeing the Bank of England base rate rise, although if the recent 1% GDP growth is mirrored in the next couple of quarters there will be some pressure to begin the process," says Andrew Montlake, director of mortgage broker Coreco. "I think we'll still have a base rate of 0.5 to 0.75% by the end of the year." Barry Naisbitt, chief economist at Santander UK, agrees: "With overall economic activity still below the level before recession hit, and the consensus view that the economy is likely to grow relatively weakly next year, rates seem likely to be on hold for a good while longer." Vote in the Consumer Opinion Survey and get a free copy of Moneywise
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