Will the Brighouse Property Market Continue to Boom? All the signs are that the Brighouse housing market is sat on good foundations, yet one key hazard could still scupper the market.

‘UK Property Prices Rising at Record Levels’ is the headline of many newspapers. In the last few weeks, the Halifax reported they had grown by 6.5% in the last 12 months, whilst the Nationwide said 7.1% and not to be outdone, the Government’s own Land Registry said 8.6%. Nothing new there then you might think, don’t UK house prices always increase?

 

Actually, they don’t, as many Brighouse homeowners will remember 2009, when they dropped by 19%. Also, some more mature Brighouse homeowners will remember the early 1990’s where house prices dropped just over 40% over 4 years (after the 1989 property crash). So, the increase in UK house prices over the last 12 months has mystified all the forecasts made by most economists as…

 

house prices were forecast to drop during the pandemic because during the previous six UK recessions experienced since WW2, house prices have always fallen sharply in real terms.

 

Yet 2020 was different with house price growth increasing at its highest rate since 2014 as the substantial Government support programmes (including Bounce Back Loans, grants and furlough) has mollified the hit to household incomes. Add to that the pent-up demand from the Boris Bounce, all the people working from home wanting an extra room for an office and therefore needing to move, plus the stamp duty tax holiday, with the cherry on the cake of 0.1% Bank of England interest rates keeping borrowing affordable. This has meant…

 

Brighouse property values are 6.7% higher than a year ago.

 

Yet the affordability of property is a big issue going forward. By the time of the height of the last property boom in 2008, the national ratio of average property values to earnings had risen from 5.1 in 2000 to 8.8 (i.e. the average house price was 8.8 times the size of the UK’s average person’s annual earnings). We then had the property crash in the proceeding years, and the ratio dropped to around late six’s/early sevens. However, over the last few years, the ratio has been steadily rising and now with the recent growth in demand for property (the five reasons mentioned in the previous paragraph), the ratio has now smashed past nine. Looking locally…

 

the ratio of average property values to earnings in Brighouse as a comparison was 2.7 in 2000, rising to 5.4 in 2008, dropping to 4.7 the year later when the Credit Crunch hit, and now currently

 stands at 5.4.

 

 

 

 

So, are we heading for another house price crash? Maybe, maybe not - because the House Price to Earnings ratio only tells us part of the story. Another indicator of the property market is mortgage affordability, which measures the proportion of mortgage payments to average incomes. For all mortgage holders, in 2015, this stood at 24.13% and today it is only just above the national long-term average of 25%, demonstrating that property is still affordable.

 

Yet, the life blood of the property market are first-time buyers. The long-term average percentage of income which goes on mortgage payments for first-time buyers is 33%. Just before the 1989 property market crash, this stood at 54%. Whilst just before the 2008 property crash, it reached 49%. Today, it stands at 31.7% (and the reason it’s so low even with record high property prices is low interest rates, because when mortgage interest rates are low, this permits people to afford larger mortgages, which enables them to bid up house prices).

 

 

 

 

 

 

So why aren’t more first-time buyers buying more homes? Well in fact they are buying more homes. At the turn of the Millennium, just over half of 25yo to 35yo were homeowners and by 2014, this had dropped to just a third, although since then it has increased to 41%. Now with the reintroduction of the Government backed 95% mortgages in April, this demand will continue further.

 

Once furlough ends, unemployment will doubtless rise in the following 12 months, yet the economy is more than likely to be in a boom phase, so by the spring/summer of 2021, the unemployment rate should start to fall.

 

So, does everything look great for the Brighouse property market?

 

Before you get the Champagne out, there is a cloud on the horizon - the possibility of higher interest rates.

 

Undoubtedly, for the next few years, interest rates will not go up (and if they do – it will only be nominally). However, down the line it may be a different tale. Interest rates are used to control a number of economic factors, one being the currency and secondly inflation.

 

As many suggest, if we get an economic boom in the next 12 to 18 months, as we come out of lockdown, this will put upward pressure on the price of goods and services. Normally, when prices go up (inflation), to ensure that inflation doesn’t get out of control, interest rates are normally increased to dampen down the inflation.

 

So, will interest rates rise? Undoubtably they will. Brighouse homeowners and buy-to-let landlords should seriously consider protecting themselves with fixed rate mortgages (yet 3 in 10 mortgagees are still on variable rate mortgages!). I believe we will see some inflation in the order of 3% to 5% in the coming 24 to 36 months, yet the interest rates won’t be enabled to bring it down. We had a similar case in the early 2010’s when we had a mis-match of demand and supply of goods, and inflation spiked to 5%, before returning back to its long term 2% average quite quickly thereafter.

 

The Chancellor will also encourage some inflation to reduce the ‘real’ cost of the Billions he has borrowed because of the pandemic, yet won’t want to see interest rates increase to take the cost of the borrowing upwards.

 

If you are considering moving home or buying/selling a buy-to-let property in Brighouse in the next 12 to 18 months, and want a chat about your options, don’t hesitate to drop me a line.

 

Finally, these are interesting times ahead – I would love your thoughts on this matter. Please do share them in the comments.

 

 

 

 

Huddersfield Buy-to-Let Property Market Going into Crisis? …as Huddersfield first-time buyers now only need a 5% deposit for a mortgage.

Huddersfield landlords, sell your property portfolios, your tenants will soon be leaving in droves as they buy their first home with the new 5% deposit mortgages backed by the Government’s new mortgage-guarantee scheme revealed in March’s budget! These 95% mortgages are to be supported by the Treasury, lessening losses for mortgage lenders should the borrower be incapable of repaying and get repossessed, as the Government want Generation Rent to turn into Generation Buy.

 

This sounds like the death knell for buy-to-let investment in Huddersfield as many tenants will soon be buying their first home – or is it?

 

It’s true that on first impressions it might look like many Huddersfield first-time buyers will now be leaving their rental properties in their droves with this new low deposit mortgage scheme. However, these potential Huddersfield first-time buyers are facing four big issues which will inhibit their ability to take advantage of the mortgage scheme, meaning many will continue to rent.

 

Firstly, the mortgage rate for 95% mortgages has increased. The lowest five-year fixed-rate mortgage with a 5% deposit today (with Barclays) is 3.45%, up from 2019’s best rate of 2.75%. That doesn’t sound a lot, yet it makes a massive difference to the monthly mortgage payments (as you will see below).

 

Secondly, due to pent-up demand post lockdown and the stamp duty holiday, this has increased demand for Huddersfield property, placing upward pressure on Huddersfield property prices which has made it problematic for first-time buyers to get on the Huddersfield property ladder. This has meant…

 

the average price of a Huddersfield first-time buyer property has risen from £152,008 to £173,619 in the last 12 months…

 

and in turn this means, Huddersfield first-time buyers have had to save an additional £1,080.55 for their deposit to keep up with the house price increase. That means…

 

the monthly payment on a 30-year mortgage for a Huddersfield first-time buyer has jumped from £589.53 per month in 2019 to £736.05 a month today, an increase of £146.52 per month.

 

The third issue is demand for Huddersfield first-time property from buy-to-let landlords is surpassing supply, adding further fuel to the fire of driving up prices. Finally, the fact that most Huddersfield first-time buyers are of the younger generation and it’s the younger workers that have been most at risk of unemployment or salary cuts during the economic crisis.

 

	5 Year Fixed Rate - 2019	5 Year Fixed Rate - 2021
Purchase Price	£152,008	£173,619
5% Deposit Required	£7,600	£8,681
95% Mortgage Borrowed	£144,408	£164,938
Annual Interest Rate	2.75%	3.45%
Mortgage Length (in years)	30	30
Mortgage Payment per Month	£589.53	£736.05
Sum of Mortgage Payments over whole mortgage term	£212,231	£264,978
Total Interest Cost over the whole mortgage term	£67,824	£100,040

 

 

You might say things will change in 2022 but would it surprise you that 95% mortgages have been available to first-time buyers since the summer of 2010 and were only withdrawn during the first lockdown in 2020?

 

Since 2010, even with ultra-low interest rates, the number of private rented properties in the UK has grown by 580,000 households from 3.8m households to 4.4m households and will continue to grow, let me explain why.

 

The notion that buy-to-let property is a strong long-term investment has not altered with the pandemic. Since 1930 with the all the crises we have had with WW2, the Oil Crisis, 3-day week and hyper-inflation in the 1970’s, Huddersfield property has been a hedge against inflation and in addition, delivers a decent income yield of 6% and upwards. Not bad when compared to the 0.5% with a savings account (if you are lucky).

 

It is a fact that those landlords that see buy-to-let investment in Huddersfield as a long-term strategy will win.

 

It is certainly the case that I am starting to see an exodus of the ‘amateur landlord’, leaving more professional landlords who see ‘landlord-ing’ as a business, not a game. Those long-term Huddersfield landlords can see through the present predicament as they have a long-term buy-to-let investment mindset.

 

Many Huddersfield landlords are intensely aware that demand for high quality private rental properties in Huddersfield is only going to flourish as a consequence of the pandemic; whilst not forgetting that demand presently exceeds supply. Also, those same Huddersfield landlords know that a responsible approach to their tenants with regard to condition and repairs, is a key to ensuring the rent keeps flowing in with minimal void periods.

 

Finally, even though Huddersfield house prices are, on average, on the up, there are still some bargains even in this market. By doing their homework and working with an agent like myself, these savvy Huddersfield landlords are paying reasonable prices, thus giving them a sturdier rental yield and the ability for future capital growth.

 

If you are a Huddersfield landlord, as my clients all know, I am here to help and guide landlords on their long-term investment strategy. I therefore extend this offer to all Huddersfield landlords, irrespective of whether you manage your property yourself or use one of my excellent competitor agents in Huddersfield, I am here to help.  

 

Will Huddersfield House Prices Fall in 2022? As 1 in 6 Huddersfield homes are selling within a fortnight of coming to market.

One of the most astounding things that has happened in the last 12 months was something that did not happen. Even after the country saw the deepest recession since the Great Freeze of 1709 with GDP dropping 28% in one quarter, one would have expected a large fall in Huddersfield house prices would follow. Yet…

 

Huddersfield house prices are 13.4% higher than 12 months ago.

 

Even though buying and selling Huddersfield property was put on ice for the first time in the history of the Huddersfield property market last spring due to the Covid 19 outbreak, as the Huddersfield property market wobbled on the edge of deep recession, it stepped back in early summer and now it is rocketing upwards as…

 

15.1% of Huddersfield homes are selling within a fortnight of coming to market.

 

Some commentators have suggested the end of the Stamp Duty holiday together with the ending of the furlough scheme on the 30^th September 2021 could be the catalyst for a drop in house prices. Even the Government’s own regulator of finances expects UK house prices to fall around a couple of percentage points in 2022 whilst some others have predicted around a 5% drop as unemployment levels increase post furlough.

 

However, other property market forecasters believe that property values in 2022 won’t drop against the background of robust British economic recovery in Q3 and Q4 of 2021.

 

What do I think will happen to the Huddersfield property market in the next 12 months?

 

On the positive side, what I do know is the Stamp Duty holiday enabled Huddersfield homebuyers to spend those tax savings on the price paid for their Huddersfield home and that certainly accounts for some of the uplift in house prices mentioned above.

 

Also, the historically low interest rates that have supported Huddersfield homebuyers’ affordability for the last 13 years since the Credit Crunch has continued. Secondly, with people spending many months working from home, this has seemed to have polarised people’s inclination to make lifestyle changes. Finally, the Government has recently introduced 5% deposit mortgages for first-time buyers. All these factors will fuel demand and hence may cause house prices to rise.

 

On a more cautious note, I do not believe these very sturdy Huddersfield house value rises of the past year will persist at these levels for the next 12 months. With buyers having to use many thousands of pounds on Stamp Duty, the price they pay for their Huddersfield home will be curtailed, meaning property values by definition will ease. 

 

The simple fact is the British economy has yet to feel the full effect of its largest recession since 1709, and we must remain considerate about the long-term effects of the economy (and unemployment levels) on the property market.

 

These are interesting times for the Huddersfield property market. If the price you want to achieve for your Huddersfield home is the most important thing, now as opposed to 2022 might be a good time to consider placing your property on the market.

 

Don’t forget, you can still put your Huddersfield property on the market, find a buyer and then go and see what is available to buy. Many buyers will wait for you to find a property, yet if they can’t/won’t – you won’t be made homeless. English property law means you can still come away from the sale and you won’t be forced to sell. If you would like to know a bit more about that or any aspect of buying or selling property in Huddersfield, drop me a message or call me.

 

 

 

Panic Buying in the Brighouse Property Market?

 Would it surprise you that there are 85% fewer properties for sale today in Brighouse than a decade ago? Property values are much higher than a decade ago and the property market at the moment in Brighouse is on fire. In all my years as an agent, I have never seen it like it is at the moment. Many people are saying it’s reminiscent of 1988 when dual-MIRAS relief was abolished by Nigel Lawson, as people are paying top dollar for property, because they are buying property like there is no tomorrow.

 

69.8% of properties on the market in Brighouse are sold stc

 

In a ‘normal property market’, that figure would be between 30% to 40%. There is no rhyme or reason behind it because it’s not as if we are going to run out of property to sell (unlike the panic buying of loo rolls last year in the supermarkets). With such a buoyant Brighouse property market, being adept to state what your Brighouse property is worth is exceptionally problematic.

 

This is further exacerbated by the lower-than-average properties on the market at the moment. To give you an idea of the issue…

 

there are 65 properties for sale in Brighouse today,

compared to 433 a decade ago.

 

When there aren’t many properties on the market, some estate agents, to gain your instruction, will value your Brighouse property by giving you an over inflated suggestion for the asking price. Why do they do that when the considered wisdom is estate agents only get paid once they sell it?

 

Well would it surprise you that many (not all) estate agents pay their employees a bonus to put your property onto the market and then pay a further bonus when they get you to reduce the asking price? Some estate agents know the fastest way to get your property to market is to be optimistic on the asking price to secure your property for sale, then work on you to reduce your asking price after it has been sitting on the market for a few months.

 

Nothing wrong with that you might say, I want to get the most for my Brighouse home (and it is indeed the job of the estate agent to get the best price for their client). If I believe it is worth testing the market at a slightly higher asking price, I will suggest that, yet will always explain my thinking and if we have over cooked the asking price, we can swiftly realign it after a couple of weeks.  

 

Yet because many estate agents are disposed to suggest over inflated asking prices to the house seller just to secure their business (i.e. overvaluing) but not manage the property for month and months ... this in turn causes Brighouse properties to sit on the market and not sell.

 

In the best property market for 20 years, 13 of properties for sale in Brighouse have been on the market for 4 months or more. Overvaluing is widespread among Brighouse estate agents.

 

Most Brighouse homeowners will ask three or four estate agents to value their Brighouse home and take the middle figure when they want to sell. Yet, if all (or most) of your Brighouse estate agents are over optimistic and they all give you a ‘gilded lily’ price to secure your instruction to sell your home (i.e. overvalue), then that middle figure will be too much.  Most Brighouse estate agents know they don’t win the business (i.e. secure the listing) if they tell the homeowner what they don’t want to hear.

 

So, what is the risk of overvaluing?

 

There is a potential massive cost to putting your Brighouse home on the market at too high an asking price. Your estate agent will tell you that your Brighouse home is worth a certain figure and then lock you in to a 16-week sole agency agreement (sometimes longer) which you cannot get out of early. If you are getting around two or three viewings a week, and the pictures and marketing material are half decent, then your pricing is about right, meaning in this market you should be sold (subject to contract) within a month to six weeks.

 

Yet, if your Brighouse home has an over optimistic asking price (i.e. it is overpriced), you might only have a handful of viewings in a month and no offers. As the weeks and months go by, your overpriced Brighouse home makes similar homes to yours (i.e. your competition) look really good value for money. That’s when you will get the price reduction call from the agent.

 

How many times have you seen a property that has been on the market a while and you have wondered what’s wrong with it? Also, to add insult to injury, the portals tell you how long a property has been on the market, adding weight to that argument. 

 

The longer your property stays on the market, the desirability

of your Brighouse home drops.

 

You will end up selling your Brighouse home but only after a handful of price reductions, yet at what cost? Firstly, in those lost months, you would have missed out on many properties that you fell in love with yet couldn’t buy because your home was languishing on the market with no interest (this is backed up by consumer champion Which, who said that if you have to reduce your asking price by 5% or more, it adds an extra 64 days to the sales process).

 

Secondly, you will end up selling your Brighouse property for less than if you had placed the property on the market at a realistic asking price from day one (again backed up by Which). This is because buyers think there is something wrong with it, so as the homeowner gets fed up, they accept a lower offer to get their property sold.

 

Finally, because you take less for your property, your choice of the next property to buy will also be curtailed, meaning your dream home move might be more of a nightmare?

 

The best advice I can give you is to search the portals, make sure you look at properties that are also sold stc (which can normally be found by clicking on the filter section of the search on the portal). Then ask a couple of straight-talking trusted friends to do the same and compare your property to the competition that is both on the market and sold (stc).

 

Compare their locations, number and size of the rooms and size of plot and ask them where they see your property against those. Carry out the same exercise yourself (of course you will be slightly biased) and take a bellwether from all those figures. Then ask a number of Brighouse agents to value your property and if you feel any are being overly optimistic challenge how they get to their figure and get them to qualify their belief in that figure – is their valuation realistically achievable in the market at the time? As we all know markets change and property prices go up and down and ultimately a property is only worth what a buyer will pay for it – this all requires careful consideration.

 

I can assure you most of the estate agents in Brighouse are decent people, who want to do the best for you. All I ask is you do your homework and look at the sale of your Brighouse property through the eyes of a cold-blooded buyer.

 

If you would like to chat about selling your Brighouse home do give me a call.

 

Over 1 in 4 Huddersfield Properties Being Sold with No Chain So is it a good idea to rent in between moving home, to be chain-free?

 Moving home is said to be the third most stressful thing you can do, so if you can do anything to reduce that stress, so much the better? When buying your next Huddersfield home, being chain-free can certainly reduce your stress and offers many advantages over other buyers (and some disadvantages).

 

So, what is a chain? A property chain is made when there is a line of home buyers and home sellers linked through their property transactions e.g. a Huddersfield first-time buyer purchases a property, the sellers of that property then buy another property, and those sellers then buy another property, so on and so forth. Each home sale and purchase are reliant upon the success of every property in the so called ‘chain’. This means if there is one hiccup on one of the properties, every sale and purchase along the whole chain would collapse. No wonder everyone is on tenterhooks when there is a long chain involved.

 

Yet Huddersfield buyers who sell their home before searching for a new Huddersfield home considerably reduce their stress levels because they are not needing all the ducks to ‘line up in a row’ on the sale of their home in order to buy their new Huddersfield home.

 

Being chain-free puts Huddersfield home buyers in an enhanced position to negotiate with home sellers and they in turn may be more enthusiastic to accepting a lower offer.

 

Sounds brilliant this chain-free life doesn’t it? Everyone is a chain-free buyer once … when they are a first-time buyer and if they are lucky enough to have an additional home to move into. The other option is selling your Huddersfield home and moving into rented accommodation, but that will end up costing quite a few thousand pounds (in what many perceive as wasted money) together with the added cost of employing the services of home removers twice (with all the hassle that entails doubled!). However, that is what many Huddersfield homeowners are doing.  

 

31.2 of all the properties on the market today in Huddersfield

are being sold without a chain.

 

I can’t disagree, moving home twice in a short period will be stressful and rent could be perceived as ‘wasted money’, but I have to recommend you look at the bigger picture. It is one of the sturdiest sellers’ markets in a generation, meaning you should get top dollar for your Huddersfield home, knowing that many buyers are keen to complete before the stamp duty holiday ends in the autumn.

 

Then by waiting for the return of stamp duty and for the full roll out on the immunisation programme to give more Huddersfield homeowners the peace of mind to place their Huddersfield home on to the property market, for Huddersfield house prices to cool and the number of properties for sale to increase. Then you could pounce in and buy, with more Huddersfield homes to choose from and at more realistic asking prices.

 

So, does the type of Huddersfield property that is being sold make any difference?

 

·         22.1% of detached houses in Huddersfield are being sold chain-free

·         32.5% of semi-detached houses in Huddersfield are being sold chain-free

·         35.5% of town house/terraced houses in Huddersfield are being sold chain-free

·         34.5% of apartments/flats in Huddersfield are being sold chain-free

·         36.6% of bungalows in Huddersfield are being sold chain-free

 

Of course, these aren’t all Huddersfield homeowners going into rented accommodation hoping to bag a bargain next year. Many of the bungalows are being sold because their homeowner has either moved into sheltered accommodation or sadly passed on and there are Huddersfield landlords selling their Huddersfield buy-to-let rental investments.

 

And don’t get me wrong, there are also risks involved with this type of home buying strategy. Moving into rented accommodation means you are out of the Huddersfield property market. Property values could dip in the next 12 months, yet they still could continue to rise - you are taking a gamble on a dip in the market and it could go wrong.

 

Like most things in life, it depends on your own personal circumstances, where you are in your life, your attitude to risk and your belief on what will (or won’t) happen to property values in Huddersfield in the next 12 to 18 months.

 

If you would like a chat about your potential choices for your home move, then drop me a line.

Huddersfield Property Market: 2011-2021 A look back at the Huddersfield housing market over the last decade

 With all of us completing the Census, a couple of weeks ago, it made me realise profoundly that mine and my family’s life, which from our own point of view seems unique and delightful, makes us all into a series of statistics for the Census gatherers to pore over. To digest and regurgitate facts, figures and trends for those who are interested in the ever-changing social circumstances of these islands.

 

However, the information from the Census is vital to improving our lives - Governments can plan the future with the information it provides and we in turn can wonder about the lives of our past generations with the information provided therein historically if we so wish. 

 

Whilst the information from this Census won’t be published until March 2023, let us have a look at what has been happening in the Huddersfield property market since the last time we completed the Census in 2011.

 

Just to remind you, 2011 saw the wedding of Prince William and Kate Middleton, Mr Cameron was the PM, there was the last flight of the Space Shuttle and Game of Thrones premiered.

 

Whilst in the Huddersfield property market…

 

·         The average price paid for a Huddersfield detached home in the last 12 months has been £302,000. The average value of a Huddersfield detached home has risen by 32.1% in the last 10 years or £79,600

 

·         The average price paid for a Huddersfield semi-detached home in the last 12 months has been £174,700. The average value of a Huddersfield semi-detached home has risen by 37.9% in the last 10 years or £54,300

 

·         The average price paid for a Huddersfield town house/terraced home in the last 12 months has been £127,100. The average value of a Huddersfield town house/terraced home has risen by 20.2% in the last 10 years or £28,200

 

·         The average price paid for an apartment/flat in the last 12 months has been £109,500. The average value of a Huddersfield apartment/flat has risen by 32.5% in the last 10 years or £30,500

 

 

 

 

 

New properties built in Huddersfield…

 

Irrespective of any dip in Huddersfield house prices or transactions when the Stamp Duty Holiday ends in the autumn, this is a trend that looks set to continue, with no sign that supply of new homes is anywhere near to keeping pace with demand for households.

 

There have only been 2,282 new properties built in Huddersfield in the last 10 years, that’s around 19 a month. That means the population in Huddersfield has risen by 2.41 people for every new home built over that decade.

 

Nationally, the Country has only built just over 180k homes a year over the last decade, 120k less than the national target of 300k. In the meantime, the population has grown by more than 4 million.

 

When looking locally at the size of new build property in Huddersfield, the average property is just under 950 sq. ft., which is 9% larger than a decade ago.

 

Rents in Huddersfield…

 

Whether you are a winner or loser in terms of rental values depends on whether you are a Huddersfield landlord or a Huddersfield tenant.

 

The average rent for a property in Huddersfield currently stands at £823 per month, whilst a decade ago, it was £722 per month

 

This means private rents have increased by 84p a month for the past ten years. Interesting, when compared to the national average of 98p a month whilst in London, rents have grown by £4.64 a month.

 

The next 10 years of the Huddersfield Property Market…

 

The next ten years will also be just as fascinating. To try and predict would be a fool’s game.

 

For example, who would have believed what the Huddersfield property market has done in the last 12 months since the start of Lockdown 1.0. The number of transactions (i.e. people moving) in turn with UK house prices having risen so much in the last year ... all during a worldwide pandemic and at a time of such mayhem and havoc in the UK and world economy, is nothing short of remarkable … the question is – is it sustainable?

 

Read these articles in the coming months and years and I will share with you what is happening to the value of your Huddersfield property, be you a Huddersfield homeowner or Huddersfield landlord.

 

 

Huddersfield First-time Buyers Can Now Buy Using 5% Deposit Mortgages, Yet higher mortgage rates could see Huddersfield buyers paying a lot more each month for the privilege

 Being a Huddersfield first-time buyer in the last 12 months has not been an easy thing. Just before lockdown there were 400 ‘5% deposit mortgage’ deals and first-time buyers were able shop around to get the best deal. When the first lockdown hit, 5% deposit mortgages disappeared, meaning that as many Huddersfield would-be first-time buyers were about to buy their first Huddersfield home in 2020, the rug was pulled from under their feet.

 

Today, you can count on two hands the number of mortgage deals which allow a 5% deposit. Even worse, the number of hoops one has to jump through to get a 5% deposit mortgage is very high (plus you have to pay handsomely for the privilege, with mortgage rates of at least 4.15%).

 

In putting down a 5% deposit, you borrow the remaining 95% as a mortgage. These 95% mortgages (or Loan to Value) were very popular with Huddersfield first-time buyers before the Credit Crunch. Nearly 1 in 6 mortgages were 90% to 95%+ Loan to Value mortgages in 2007 (15.5%), yet as the Global Financial Crisis hit in 2008/9 that dropped to only 1 in 63 mortgages being in 90% to 95%+ range in 2010 – meaning many Huddersfield first-time buyers were unable to buy their first Huddersfield home between 2010 and 2015.

 

 

Yet in the recent Budget, Rishi Sunak has vowed to back the building societies and banks so that they can offer more of these higher 95% Loan to Value mortgage deals.

 

Many people have said this will mean there will a Huddersfield house price boom – especially as Stamp Duty is extended until September

 

This scheme is nothing new as a practically identical scheme was launched by George Osborne in the 2013 Budget with his Help to Buy Scheme. Nearly 1 in 5 houses sold in the year after that budget used this scheme, yet Osborne’s was only for first-time buyers and it was only for brand new homes (not second-hand homes). Whilst there’s no doubt this caused an increase in house purchases, many commentators said it was a backdoor method to keep the country’s new homes builders afloat.

 

The big difference with this new 2021 scheme is that it’s available for Huddersfield second-hand homes as well and is open to all Huddersfield owner occupiers moving home

 

Yet, what will the banks mortgage interest rate charge be?

 

Although no building societies or banks have yet publicised what mortgage rates they will charge, all the High Street lenders including NatWest, Santander, HSBC, Virgin Money, Barclays and Lloyds have stated they intend to offer these 95% LTV mortgages.

 

Under the Government’s mortgage guarantee to the banks, Westminster will guarantee 20% of any mortgage offered at 95% Loan to Value. In principle, that means that building societies/banks should be able to offer the low mortgage rates as those available to people wanting to borrow 75% loan to value.

 

At the moment the average five-year fixed rate mortgage is 3.6% with

 a 10% deposit, but if you have a 25% deposit, you can fix it for

five years at 1.63%

 

However, don’t forget though that the banks will be charged a ‘still to be decided’ amount to use the Government guarantee. On the last Help to Buy Scheme, it was rumoured they were charged 0.9% of the mortgage borrowed, so this cost would have to be passed on to the first-time buyer. I would suspect the eventual rates Huddersfield first-time buyers will have to pay will be somewhere in the region of 3%.

 

This new 95% mortgage/5% deposit scheme is only going to work if the banks and building societies have sensible mortgage rates as it needs to help those Huddersfield first-time buyers it was intended to benefit, who are finding it hard work to get on the first rung of the Huddersfield housing ladder.

 

It all comes down to how anxious the banks and building societies feel about the true long-term effect of the pandemic once the furlough scheme ends in the autumn. Only time will tell.

 

Yet, to give you an idea of the difference the mortgage rates scheme will make on a typical Huddersfield terraced/town house…

 

The average price paid for a Huddersfield terraced/town house in the last 12 months was £127,100

 

Assuming a 35-year repayment mortgage and borrowing that amount on each scenario:

 

·         At the current best 95% LTV mortgage rate (i.e. 5% deposit) of 4.15% mentioned at the start of the article, that would cost £574 per month in mortgage payments

 

·         At the current average 90% LTV mortgage rate (i.e. 10% deposit) of 3.6% mentioned in the middle of the article, that would cost £533 per month in mortgage payments

 

·         At the best 75% LTV mortgage rate (i.e. 25% deposit) of 1.63% mentioned at the start of the article, that would cost £397 per month in mortgage payments

 

As you can see, quite a difference.

 

I have to applaud Rishi Sunak for this initiative, yet will it be ‘fields of clover forever’ for the Huddersfield property market with the new scheme? No, it won’t.

 

It will be a good boost to the Huddersfield (and UK as a whole) property market. Whilst the mortgage guarantee offers a small portion of security for the lenders, it does focus on the riskiest part of the housing market. Many lenders still have cold shivers of the Northern Rock 125% mortgage debacle from a decade ago and those memories still ring true today.

 

The fact is these types of mortgages will be a higher risk, even if the Government are underwriting them with their smaller deposits, which will come through in bank’s and building societies higher pricing for these mortgages. Also, the lenders are already at near full capacity trying to get hundreds of thousands existing property sales and purchase deals through because of the Stamp Duty rush over the last 9 months. I await the rates in early April and will make comment again.

 

If you are a Huddersfield homeowner, potential Huddersfield first-time buyer or anyone involved in the Huddersfield property market and you would like to chat about anything I’ve covered in this article or any of my other articles on the Huddersfield property market, please don’t hesitate to drop me a line.