Buying is 16% more cost-effective than renting in London
Renting a home in Britain is currently 9.7% more expensive than owning on average. And it is cheaper to buy instead of rent in four in five of the 50 largest towns and cities across the country, according to the latest research from leading property website Zoopla.co.uk.
The research looks at the current asking prices and rents of two-bedroom flats around the country and assumes interest-only mortgage payments of 5% p.a. to provide a comparison to the cost of renting.
Even in London, which has by far the highest property prices in the country and where the average 2 bedroom flat is going for £431,366, buying is still 16% more cost-effective than renting. With average rents at £2,137 per month in the capital versus an average cost of a 5% interest-only mortgage at £1,797 per month, renters pay an extra £4,080 annually compared to owners.
Nicholas Leeming, business development director of Zoopla.co.uk, commented: “The relative cost of renting as opposed to buying has increased over the past 12 months as rents have risen and house prices and interest rates have remained flat. Almost 750,000 would-be first-time buyers have reluctantly ended up as renters over the past 3 years as a result of being unable to get a mortgage. With current house prices and interest rates where they are and with rents on the rise, for those who can get a mortgage, there may never have been a better time to buy.”
With rental prices increasing all over the city, it appears to be more cost effective to look into getting a mortgage again. Check out properties for sale in the area you are currently renting in - buying your next home might be cheaper than you think.
Source: www.zoopla.co.uk
Experts view - What next for house prices?
Confidence in the housing market has strengthened from its record low at the end of last year, according to research by Zoopla.co.uk. The Telegraph asked a panel of economists and industry experts if they agree.
Simon Rubinsohn, chief economist at Royal Institution of Chartered Surveyors (RICS)
“I think that confidence has improved since the end of the year but it remains fragile and has a strong regional dimension. Confidence in London and the South East is more upbeat than in many other parts of the country, in particular parts of the Midlands and the North.
“Our headline forecast remain unchanged with prices projected to be 2pc lower in the last quarter of 2011 compared with the same period in 2010. However, there will be significant regional variation with London the only area to be slightly up.
“May still seems highly likely [for an interest rate rise] unless the activity takes a marked turn for the worse – with the ECB set to move this month and inflation continuing to push upwards it will prove difficult for the BOE to stick with its current position – however we only expect one more move this year taking the base rate to 1pc at end 2011 – there will be further tightening in 2012.”
Martin Ellis, head of housing economics at Halifax
“There are signs that both house prices and the level of sales have stabilised in the early part of 2011. This would be consistent with the evidence of improved confidence.
“Overall, we expect a modest 2pc decrease in house prices in 2011. Uncertainty over the economic outlook is likely to weigh down on housing demand this year.
“There is considerable uncertainty over the timing of the first interest rate rise. We expect it to be around the middle of the year but do not expect it to be followed quickly by further increases.”
Melanie Bien, director of independent mortgage broker Private Finance
“I find it surprising that confidence in the housing market has significantly risen since the end of last year. On the contrary, the soaring cost of living, fears over job losses and rising interest rates, seem to be making buyers and sellers sit on their hands and adopt a ‘wait and see’ attitude. The number of transactions is extremely low as a consequence.
“House prices are likely to remain flat at best this year but this national average will conceal significant regional differences. The north-south divide is set to become increasingly pronounced with prices rising in London and the south-east, particularly in the prime markets, while falling in the north, Scotland, Wales and Northern Ireland.
“Interest rates will start rising in the next few months but I believe this will now happen at the end of the summer – September, rather than May. The economy is simply too fragile and the impact would be so devastating for many home owners already struggling to make ends meet that I think a move will be delayed for as long as possible.”
Opinions are conflicting, but the general consensus seems to be that confidence in the market has strengthened since last year. Greene & Co. have experienced a positive end to the first quarter of the year and feel good about the year ahead.
All time low for Bank of England interest rates
There has now been no change to the Bank rate for two years, despite the fact that inflation is currently twice the Bank’s target rate.
Bank of England interest rates staying at all time lows is great news for existing borrowers with loans outside of their initial rate as it keeps Standard Variable Rate low (this is the rate mortgages automatically move to after their initial period).
Unfortunately, mortgage companies are predicting rate rise this year and have therefore increased the rate for new borrowers and will continue to do so. If an individual is thinking of purchasing a property it is (purely from a mortgage point of view) beneficial to do it sooner rather than later.
There are strong indications that BBR will rise in May but no indication of by how much for now.
Source: Saul Conway – AS Financial
Rising swap rates put pressure on fixed deals
A number of lenders have pulled their existing fixed rates as the cost of funding has gone up. Although the Base rate has today stayed at 0.5%, the conclusion that we can draw from this is that a rise will be happening sooner rather than later. For all your clients who are dithering about putting offers in, this is invaluable information as we could be coming to the end of historically cheap access to borrowing.
Rising swap rates put pressure on fixed deals
Recent increases in swap rates are starting to force up the price of fixed rate mortgages, say industry experts.
Since November 2010, two-year swap rates have increased from 1.31% to 1.72% and five-year swaps have gone from 2.18% to 2.82% in the same period.
Last week two-year swap rates were 1.62% and five-year swaps 2.75%.
David Hollingworth, director of communications at London & Country, says: “Swap rates have fluctuated over the last two years, but of late they have been on an upward trend.
“We have already seen evidence of lenders increasing their fixed rate mortgages because of swap rates and the sharper fixed deals are under threat.”
But Hollingworth adds that although swap rates play a part in lenders’ pricing they also look at other factors when setting fixed rates.
Alan Cleary, managing director of Precise Mortgages, says two-year swap rates have risen substantially in the past few months as a rise in the base rate looks more likely.
He says: “We are getting closer to a rate rise with every base rate decision and this is starting to affect the price of swap rates.
“Fixed rates, especially two-year rates, are on their way up and borrowers should look to fix now.”
Industry consultant Mehrdad Yousefi says high inflation is worrying the money markets and pushing up swap rates.
But he says: “Over the next four weeks fixed rate deals will cost more but it remains to be seen whether this will continue throughout the year.
“In the second half of the year when the base rate starts to rise, swap rates will start to predict the next base rate could start to rise and products will certainly become more expensive.”
Halifax raised the rates on its two-year fixes by 0.2% today and blamed the increased cost of funding and swap markets.
Stamp Duty – good news for first home buyers
Good news for people who are looking to buy their first home this week, with the government announcing that first home buyers who purchase property under £250,000 will be exempt from paying stamp duty. This is a great benefit for first home buyers and it will be a great saving which they could possibly now add to their deposit or it will simply allow more people who may not have previously been able to enter the market to purchase a home of their own.
David Smith from the Times commented that “Alistair Darling’s Robin Hood coup in last week’s budget was the two-year stamp-duty holiday for first-time buyers of homes up to £250,000, paid for by a permanent increase in the duty to 5% on £1m-plus properties. Clearly, there will be mixed feelings about this.
Despite the skepticism, stamp-duty holidays work, as previous experience has shown. Provided the bureaucracy can identify who is a genuine first-time buyer — a divorced wife or husband who was previously a joint owner will not count — this should give the market a boost, which is why the housing industry has welcomed it.”
Stephen Brown, Director of our Crouch End shop has said that “if we start seeing banks lend more then this will be a nice saving. Hopefully the stamp duty saving should be good for first home buyers as this will give more money to their deposit.”
Either way you look at it this will help more people purchase their first home which is a good thing!
19% leap in mortgage approvals
http://news.uk.msn.com/uk/article.aspx?cp-documentid=15538579
So, mortgage approvals are on the up…could this mean buyers are flooding back to the market? Well, I don’t think we should be too hasty, but things did take a bit of a turn for the better this February. Just having a quick look at our figures, our offer rate is up 43% in Febraury, compared to the previous month and our exchanges have increased by 10%. I think the figures speak for themselves, things are picking up.
Personally, I think it’s a really great time to buy right now and if I was in such a position I would definitely be snapping up a nifty little pad for a bargain price. Then just hold tight and watch it’s value go up again in a few years. What do you think?
Confused about mortgages?
Do you know the difference between fixed, discount and tracker 
mortgages? It’s all a bit of a mine field, especially if you’re a first time buyer!
The money saving expert is a great website that gives you plenty of tips on saving money and explains things in simple terms. Have a look at their tips on picking the right mortgage for you. It also features a calculator which can help you decide whether to ditch your fix rate mortgage.
If you’re still confused, I’m sure the friendly Financial Services team and Greene & Co, would be happy to give you some FREE advise. Visit their website. enquiries@greenefs.co.uk” target=”_blank”>Email them or give them a call on 020 7328 3280.
