Mortgage availability to become scarce for these buyers as house prices rise by 1.6%

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Mortgage products have been affected by coronavirus over the last year or so with lenders both pulling deals and tightening criteria. Despite this, house prices have risen in recent months which will be relieving to some but may hinder other consumers.

According to Halifax’s most recent House Price Index, which is the UK’s longest running monthly house price series covering the whole country, house prices grew by 1.6 percent from August to September.

Additionally, house prices in September were 7.3 percent higher than in the same month in 2019, which is the strongest growth seen since June 2016.

Mortgage approvals also rose to the highest level seen since October 2007.

According to the Bank of England, the number of mortgages approved to finance house purchases was 84,715 in August 2020, a rise of 28 percent when compared to July.

Russell Galley, the Managing Director of Halifax, commented on how consumers may be affected going forward: “It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic.

“The release of pent up demand and indeed the stamp duty holiday can only be temporary fillips and their impact will inevitably start to wane.

“And as employment support measures are gradually scaled back beyond the end of October, the spectre of increased unemployment over the winter will come into sharper relief.

“Therefore while it may come later than initially anticipated, we continue to believe that significant downward pressure on house prices should be expected at some point in the months ahead as the realities of an economic recession are felt ever more keenly.”

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Trussle, the online mortgage broker, analysed these figures and correlated it with their own research.

As Miles Robinson, the Head of Mortgages at Trussle, explained, first-time buyers may continue to struggle to get on the housing ladder even with new plans from Boris Johnson: “It’s not a surprise to see a reported 1.6 percent increase in house prices from August to September.

“It’s clear the housing market is relatively buoyant at the moment, and with nearly six months still left of the stamp duty holiday we expect this trend to continue until the end of the year.

“However, let’s not be fooled, a sharp fall could be on the way.

According to our own data, existing home buyers are the ones propping up the market with an increase of 23 percent in mortgage approvals for next-time buyers from August to September.

“With rising house prices and so few high loan-to-value mortgage products available to first time buyers, it’s those that have a deposit of 15 percent and higher who are able to take advantage of the current incentives.

“In fact, for those with greater equity in their homes, some may be buying before having sold to ensure they don’t miss out. By doing so, there’s less on the market for first-time buyers and competition is fierce – both in terms of housing availability and mortgage lending.

“Whilst we welcome the Government’s plans for the “Generation Buy” scheme, in reality the issue with lenders has very much been about operational capacity, which we expect to ease as we head into the New Year.

“First-time buyers are really bearing the brunt of 2020 housing challenges and we hope that the Government and lenders come together to offer a potential solution.

“We saw a 21 percent increase overall on mortgage approvals from August to September and very much hope this figure continues to rise.”

The “Generation Buy” scheme is a government project that will allow first time buyers to get on the property ladder with a deposit of five percent.

Details on how this will work in practice are yet to emerge but the plans are expected to be funded with public money.

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