Home owning cheaper than renting

Some eye watering statistics from The Money Charity this week.  The Charity has reported that total mortgage lending stood at £1.35 trillion at the end of September.  This is up from £1.275 trillion in 2015.  Averaged over the 11.1m households with a mortgage equates to £118,693 in September.

The average interest rate was 2.74% and according to The Council of Mortgage Lenders, the average for new loans was 2.27%.  They also suggested that the average First Time Buyer deposit was 15% (£28k in July) and the average house price amounted to £184k (August) for first timers.  Yet First Time Buyers borrowed on average just 3.45 times their income! 

There were 40,533 loans approved for house purchase in September, according to the British Bankers Association, similar numbers to a year earlier.  The average loan approved was circa £176k. 

This is interesting as it is a common knowledge that owning a home can be cheaper than renting.  The report goes on to suggest that inclusive of all benefits, private renters spent an average of 43% of their income on rental payments.  In comparison, owner occupiers spent on average 19% of income.

And as we enter the run up to Christmas, it's also useful to note that the average interest rate on credit card lending in September was 18.49%, which is 18.24% above the Bank of England Base Rate of 0.25%!   Remember, doesn't matter which type of credit you use to fund seasonal spends, at some point they all need to be repaid!

And finally, a number of lenders including Platform (Part of Co-op), Virgin Money, Nationwide, Coventry Building Society, Barclays, Halifax and TSB have all changed rates in the last ten days.  The majority with rate cuts and attractive options for new customers including cash back for purchases and free valuation and free legals on remortgages.  There are certainly some fantastic deals available in the current climates.  So if you are thinking of reviewing your mortgage options, now might just be a good time to find that paperwork!

The average Mortgage interest rate was 3.22% at the end of May.

I've been very positive and buoyant in most of my recent columns.  The mortgage market is awash with business and has more product offerings than for some years.  Local Estate Agents confirm properties are selling quickly and there's a general shortage of stock and local builders have advised that bricks are in such high demand across the country that there are some weeks delay in supply.  However, we do sometimes need to take a step back and look at the reality of our market and economy.

The Money Charity (the UK’s financial capability charity), report that:

- The average amount owed per UK adult (including mortgages) was £28,610 in May. This was

around 115% of average earnings

- The estimated average outstanding mortgage for the 11.2m households that carry mortgage

debt stood at £115,006 in May

- The Financial Conduct Authority estimates that at the end of Q1 2014 there were 255,561 mortgage loan accounts in reportable arrears (i.e. arrears of over 1.5% of current loan balance), a drop of 3.5% from the previous quarter, and the lowest figure since Q1 2007.

- One in every 400 mortgages was 10% or more in arrears.

- 71 properties are repossessed every day (based on Q1 2014 trends).

- 1,910 Consumer County Court Judgments (CCJs) are issued every day (based on Q1 2014

trends). The average value of a Consumer CCJ in Q1 2014 was £2,360.

Ok, so a little disheartening, but reality.  It's not all bad though as the UK economy grew by 0.8% in the first quarter of 2014, according to latest estimates from the Office of National Statistics and The Bank of England Base Rate has been held at 0.5% for 63 months.  Whilst the average Mortgage interest rate was 3.22% at the end of May.

Finally, according to the Council of Mortgage Lenders (CML), the typical first-time buyer deposit in April was 17% (around £29,260). The average first-time buyer borrowed 3.42 times their income and the average first-time buyer loan was an estimated £142,857.

Your payment profile is part of your application for finance

The Council of Mortgage Lenders (CML) has released figures reporting that the remortgage market had its best month for five months in April.  Gross lending was boosted by 5% from remortgage finance.  Signs that the low rates are attracting new customers and homeowners are keen to make use of the great deals currently around.

It was also good news for First Time Buyers.  46% of all house purchase loans advance in April were to those purchasing their first property.  The market is still incredibly tough, but these are signs that things are slowly improving.

With this in mind and so many rate changes and reductions, lenders will look closely at an individual’s recent payment profile, how many recent credit searches have been incurred by financial institutions and more.   So don’t give them any excuses not to lend to you!  The more credit searches you have on your profile, over a recent amount of time, the more likely your credit score will be lower as a result.  Try and ensure there’s no missed or late payments as these will also decrease your credit score.  In short, your credit search / score are the basis on which most lenders will initially decide whether to lend to you or not.  The best rates will almost definitely go to those with the best credit scores.  If you’ve not checked your credit file before, it is well worth a review.  Experian and Equifax tend to be the main two providers used in our market with both offering free initial trials and you can find links to these on the AToM website.

Finally, so you’ve done all the hard work and gone through the whole mortgage process with the lender providing you with a mortgage offer and you can now sit back and relax.  Wrong!  Although the mortgage offer has been issued, until you have completed on your new mortgage, the lender can still decline to proceed with their offering.   If you take out any finance, have lots of credit searches done or miss any payments before completion, it could be that the lender will re-credit score you before completion and uncover something that might not be to their liking.  If in doubt, seek advice.