Unlock the door to a home of your own with a Help to Buy ISA

The Help to Buy scheme continues to grab the headlines, with its success rate for getting first-time buyers onto the property ladder. A recent study from the Ministry of Housing, shows that almost half a million completions have taken place since 2013, with 430,000 of these completions made by the first-time buyer market.

There was a total of 494,108 completions, which have taken place using one or more of the governments Help to Buy schemes, over 93% of which took place outside of London. The average house price purchased through the schemes, was around the £200,000 mark. First-time buyers have now opened 1.4 million Help to Buy: ISAs offering government bonuses of up to £3,000 on top of their savings.

These figures highlight how invaluable the Help to Buy scheme has become, and how it will continue to support home buyers into the next decade. It has also helped prop up the new build sector and provided housebuilders with a solid target plan for the delivery of new homes. Demand will continue to grow for new build homes even though some questions arise around the price, value and borrowing requirements and affordability. Build quality and energy efficiency standards attached to new build properties continue to be a primary focus for the property developer sector. Help to Buy has certainly created a positive pathway for the growing numbers for first time buyers, housebuilders, lenders.

So how does it actually work?

Launched on April 1st, 2013 and available until 2023, help to buy is an equity loan scheme. Under the scheme, the buyer is only required to find 5% of the property value for a deposit. The government then lends you up to 20% of the value of the property in the form of an ‘equity loan’. The remaining balance can then be topped up through a mortgage. There’s no interest to pay on the equity loan for the first 5 years, after that the interest kicks in at 1.75%.

It’s open to both first-time buyers and home movers, but it is restricted to new build homes. From April 2021 onwards only first-time buyers will be able to apply. When you come to sell your home, the government will take back its 20% share. If you don’t sell, the money is due back after 25 years. The idea with the help to Buy equity loan is that, because you’re theoretically only borrowing 75% from the mortgage lender, payments will be lower than if you had used a 95% mortgage. Help to Buy is a great route to get onto the housing ladder, or to even upsize your house if you are wanting to start now. But you must be quick, as its not going to go on forever!

Now you can get a 100% mortgage for first-time buyers

Britain’s biggest lender Lloyds is to offer 100% mortgages to first-time buyers in return to lending last seen before the financial crash, but theres a catch. The bank will grant the loan on one condition, if the buyer has family that can stand behind the loan. Under the new Lloyds Bank “Lend a Hand” deal, a first-time buyer will be able to borrow up to £500,000 for a new home, without putting down a penny of deposit. The Lloyds move marks a major expansion into the first-time buyer market, as most other mainstream lenders demand a minimum deposit worth 5% of the property purchase price, although Barclays has offered a similar “family springboard “deal. Lloyds has priced the mortgages to uncut the Barclays offer.

Saving for a deposit is usually cited by first-time buyers as the biggest hurdle to home ownership. Lloyds said the average deposit put down by first-time buyers has climbed £33,211, and a staggering £110,182 in London. The Lloyds deal requires that a member of the family, such as a parent, grandparent or close relative, helps out. The bank will only grant the 100% mortgage if the family member puts a sum equal to 10% of the value of the property into a Lloyds saving account.

The deal is structured so that “Bank of Mum and Dad” can help out their children, yet still keep control of their cash savings that they will need later in life, Lloyds will pay what it described as a market-leading interest rate of 2.5% on the money deposited. Vim Maru, group director of Lloyds Banking Group, which also controls Halifax, said: “We are committed to lending £30bn to first-time buyers by 2020 as part of our pledge to help people and communities across Britain Prosper, and ‘Lend a Hand’ is one of the ways we will do this. Vim Maru continued to say “At the heart of this market leading product is helping address the biggest challenge first-time buyers face getting on to the property ladder, whilst rewarding loyal customers in a low-rate environment.

The Lloyds’ mortgage is structured as a three-year fixed rate deal priced at 2.99%. During the three-year period, the family member who has deposited the money with Lloyds cannot access their cash. Initially the deal is available in England and Wales only. The latest mortgage offering comes hard on the heels of a surge in 10-year fixes to beat Brexit uncertainty. Lenders such as First Direct have slashed interest rates on ultra-long term dates as low as 2.44% a year pegged for a decade. But these deals require buyers to put down large deposits, often as much as 40% of the value of the home being bought or re-mortgage.

Lloyds research found that buying their first home remains the number one life goal for people aged 18-35, but half have said that saving for a deposit is the biggest barrier. It also found that 41% of parents said they wanted to help their offspring on the property ladder, but were worried that they would need the money later in life.

Getting onto the property ladder in 2019

Buying a first home can be as daunting as it is exciting for first-time buyers but there are a number of simple steps people can take to prepare themselves and make the process as smooth as possible. 2019 could be the best year to get onto the property ladder, with some industry experts predicting that Brexit could cause house prices to drop further. So if getting onto the property ladder is your number-one new year’s resolution, read on for our step-by-step guide to the home-buying process, plus links for further information.

Saving for a deposit and other costs

Finding that all-important deposit will be the forefront in first-time buyers’ mind, so setting a savings goal to focus your efforts in the crucial first step in the process. Hopefully as a first time buyer, you’re saving into a Help to Buy ISA or Lifetime ISA, so that you can claim a government bonus of up to 25% when you buy. If you haven’t already, and you want to buy in the next few months, its worth opening a Help to Buy ISA before they’re withdrawn from the market in November 2019. Otherwise, you could opt for a lifetime ISA, but you need to have saved for a year to benefit from the bonus. As well as saving for a deposit, you need to think about the additional costs involved with buying a home, including surveying charges, moving costs and solicitor fees. There is also stamp duty to consider in some cases. First time buyers are exempt from stamp duty on properties up to £300,000 but there are still charges if properties are priced above this threshold, something which is particularly relevant to buyers in London.

Investigate mortgages

A mortgage is a home loan which you pay off gradually each month over the course of a set number of years, known as a mortgage term. Most mortgage lenders will offer you a maximum of between 3 and 4.5 times the combined annual incomes of you and any other people you’re buying with. Speaking to a mortgage broker could help as this will ensure you have access to a broad range of deals. Checking your credit score is a must before considering taking out a mortgage as this will be the deciding factor in whether you are accepted for the loan and what rate you are offered. You should always make sure all the information is accurate and up to date. You can enhance your credit score by paying off an outstanding debts and being meticulous about meeting agreed payments such as utility or mobile phone bills. Also ensue you are making more than the minimum payment on credit cards in the six months prior to your mortgage application.

Choosing the right property

According to the Post Office, three fifths of properties sold in 2018 were in areas affordable for first-time buyers. Understanding the rate at which a property sells in the area you are looking to buy could also help you negotiate on price and also help to plan for additional costs, which has created a rate of sale map to help buyers. Being prepared to compromise is also a vital quality in a successful first-time buyers and, as adjusting your expectations and having a flexible approach is important.

Research the area and start the house hunting

If you don’t already live in the area you’re thinking of buying in, try and stay there for a couple of nights to see if its definetly somewhere you want to live. Test your commute and check out what the atmosphere and noise levels are like at different times of day and night. For many people, the hunt begins with setting up search alerts on a portals such as Rightmove. But while this is a sensible place to start, it shouldn’t be where your research stops. You’ll need to register with estate agents and start going on real-life viewings to really get a feel for the types of homes available for your budget. Contacting local property developers in the area is a great way to get a first look at available property on the market, in the coming months. Buying property from developers not only cuts fees with estate agents, but also allows you to have your home finished personalised to you.

To see what developments we have to offer in 2019, head over to our website.

The Power of Prop Tech 2019: What is it and why does it matter?

Property technology will continue to transform the industry

The UK’s property industry has remained stubbornly resistant to change, even as innovation reshapes entire verticals across the wider economy. Compared with finance or retail, where e-commerce now accounts for around 20% of total UK retail sales, technology-led disruption in the property sector has been marginal. Whilst most of us bank and shop very differently today to how we did just a few a years ago, the fundamentals around buying a house, acquiring a mortgage or renting office space has remained more or less the same. But all of those things are about to change.

Technology has been continuously remapping the way we work in the industry, and we can expect to see this trend continue in 2019. Over recent weeks, we have seen the Property technology innovations make national headlines, with the worlds first AI auctioneer overseeing an online property auction using blockchain to create an electronic audit trail and google making it’s first property tech move outside of the US by investing into UK property management service AskPorter. And its not just google who think that PropTech is a good idea.

Historically the property industry has been slow to embrace technological change. However, attitudes appear to be changing now we are heading into the year of 2019. A survey carried out by Property Week underlines the steady increase in the number of businesses looking to adopt new technology, with 68% of respondents saying they reembrace tech and are ‘willing to innovate and trail new products’. With 67% of property companies saying they believe the investments they have already made in tech have given their business a USP.

Innovative property technologies in the UK Market

1. Move bubble – a collaborative site for property owners, agents and renters

The site’s aim is to champion the renter’s needs and in doing so it’s a collaborative site where owners, agents and renters can work together as individuals to streamline the rental process. There’s a huge shift going on with the younger generation coming onto the market. They’re demanding more simplistic, value adding, mobile, cloud based solutions that enable collaboration between end-users, offering far greater levels of transparency.

2. Virtual View App – the UK’s first mass-market augmented reality property platform

Founded in 2016 out of the startup accelerator Rainmaking Loft, Virtual View App combines digital and printed marketing materials to allow users to access 3D property models and floor-plans, photo galleries and videos by scanning an image. There’s the ability to look at other elements of the property process, such as unique videos to market properties or cloud services that manage rental-related documentation.

3. Splitwise – an app to make shared living simple

In the ‘hassle-free’ space, Splittable claims to “make it easy to split bills and track expenses with your housemates”. This innovative application focuses on making shared living easier by tackling the often tricky subject of bills. Claiming to stop arguments before they start, Splittable makes it simple to split bills flexibly while helping users keep track of house share expenses.

So what does the future hold for property technology?

There is a lot of excitement around property technology both locally and globally. The key for success in property technology both locally and globally. The key for success in the property industry is to continually improve visibility and transparency, and to work hard to empower investors and other stakeholders as part of the value chain. That’s why its extremely important to get comfortable with new technology to make your business flourish, times are changing, and you know what they say, “innovate or die”.

Important things to know about Help to Buy ISAs in 2019

The Help to Buy ISA was launched on the 1st December 2015 and runs until the end of November 2019, with all bonuses having to be claimed by the 1st of December 2030. With just under a year left to open and start saving, now could be a good time to consider one. They offer an alternative to taking out a loan to help fund an initial deposit for your first home along with other benefits, with the way they work and how you can take advantage of them.

How do they work?

Help to Buy ISAs work in a similar way to regular ISAs, the only difference is, the government will top up any contributions made by 25% (up to a limit of £12,000). A minimum amount of £1,6000 is required to qualify for a government bonus and you can start with a deposit of anything up to £1,000. After the initial deposit has been made you can only save up to £200 a month, so you can’t simply transfer £12,000 across, for example. Then when it comes to buying your first home with the ISA, 25% will be added to it as long as its between the minimum and maximum contributions.

Qualifying Criteria

In order to open and use a Help to Buy ISA you simply need to be a first-time buyer over the age of 16. The good news is that they are available to each first-time buyer and not each home, so if you have a partner or want to buy a property for a friend, you can combine savings and get up to £6,000 from the government towards your home. Any home worth under £250,000 (or 450,000 in London) is eligible and it can be used with any mortgage, not just a Help to Buy one.

Limitations to Help to Buy ISAs

Within all the criteria mentioned, there are a few further restrictions. Help to Buy doesn’t work if you are wanting to buy a property overseas or open more than one. Technically you can’t buy a property and rent it out with one, but if your circumstances change and you have to work away, for example, you will be able to rent it out.

Should I open one in 2019

Any first time buyers will be looking into getting a good financial position before purchasing a property by ensuring they fulfil their financial obligations. If you are considering buying a house in the years should seriously consider open one. As long as you meet the qualifying criteria and open one before the 2019 deadline then theres little reason to not open a Help to Buy ISA.

The economic benefit of development to the local community

Some people call us greedy and some call us ruthless, but really developers helps communities grow which fuels economic growth. A lot of people fail to recognise how far the economic benefit stretches with the creation of new developments. Many people just assume that it is merely a percentage of housing that is allocated to the council for social housing, under the section 106 affordable housing act, but really it’s so much more than that. For many property developers it is very frustrating, as they are penalised for being greedy and bringing too much change into a community, but people do not see the bigger picture and the economic growth we create.

The house building industry is a massive driver of the UK economy and makes a huge
contribution to communities across the country. While delivering much needed new homes of all tenures, house builders are quietly creating and sustaining jobs, boosting investment in infrastructure and amenities in village, towns, and cities. As well as becoming ever more reliant on private builders to deliver affordable housing through planning agreements, vast sums are ploughed into new roads, schools and community facilities each year. Below we talk about the economic footprint provided in the UK of the property development industry.

1. Before a site has even been acquired, a company has many employees working in
house, depending how large the company is. As you can see already there are jobs
created and business rates paid even before the development takes place, this could be
anything from graduate to apprenticeship jobs helping the community grow.

2. Acquiring a development site is a key stage and the beginning of the property
development process, there are many systems in place to help to source a site, which is
normally done in house. Once this is found, each party has to have a legal
representative which they will outsource to a local law firm.

3. Development appraisal forms the backbone of the financial side of property
development and is arguable the most important step within the property development
process. A developer will know their appraisals inside and out and be able to quickly and efficiently put together an initial site appraisal and cash flow. This will be done in house, and is the deciding factor as to whether the site is worth purchasing, where many different considerations will be taken into account. This is the start of outsourcing the project to different expertise in the field. This could be a planning consultant, architect, solicitor, engineer. This changes from site to site, but there is always lots of jobs to go around in the local community.

4. A development cannot happen or go ahead without funding. Money is one of the 3
pillars of property development and is an area new and inexperienced developers struggle with the most. For each site that you look at, you need to understand how you
will fund it and how to structure the financial side. Each site is different and will require
a different set of funding criteria, and because it’s become increasingly difficult for
developers to get funding, they have to sometimes work with different funding
partners, this can lead to inefficiency and become very expensive.

5. One of the 3 pillars of property development is planning, and the required permissions to actually be able to start and finish a development project. As a property developer, we need to manage the process to ensure all the permissions are in place and that we have a scheme designed that is viable. A developer will know how to optimise and maximise every single square foot on a site to achieve the maximum amount of profit the sit can yield, which in fact means more affordable housing due to being a percentage measurement. There are many other permissions required, not just
planning. For example, building control and party walls. These all need to be managed
along the process to ensure that a development can actually go ahead and happen.

6. Reaching the construction step along the property development process is a major
milestone and there will have been some serious work, effort tune and money invested
into the project. There are many ways to contract with a builder, and this will also
depend on the role you are taking during the construction process.

7. Once the development is finished, it will then be sent off to different estate agents
around the area, but also the development company itself may choose to market the
properties. Sometimes they may hire private marketing companies around the area to
give it that extra push, or work with local newspapers and PR companies.

As you can see from the above, no matter what angle the development is going there is always a need for outsourcing jobs in certain expertise. What people do not understand is the idea of job creation for so many local businesses from development companies. It being a major boost for the local economy, providing modern and attractive spaces for businesses, creating new jobs and encouraging more visitor numbers into the town throughout the year. Below you can see some statistics put together from Litchfield’s of the economic footprint of developers around the UK.

• A total of £38 billion for the economy is generated by house building each year.

• A total of £4.2 billion is either given from developers to help provide affordable housing
in the local area.

• There are over 698,000 jobs created each year from a variety of fields of expertise.

• There is an around £2.7 billion in tax paid each year, which comes from a Council tax, Stamp Duty tax, Corporation tax, National Insurance, Pay As You Earn tax.

• A total of £5.9 billion spent in local shops and services by residents of new homes.

• A total of £1.2 billion is spent on tenants making their houses feel like home
i.e. furniture

 

 

New homes developers say higher interest rates and Brexit isn’t a threat for first-time buyers

This year has left much uncertainty in the housing market, with not only the interest rates being pushed up by the Bank of England but also the countries uncertainty around the Brexit ‘no deal’. In turn, this has led to mortgages rates sky high and UK wage development low, this is thought to of made it increasingly difficult for aspiring homeowners.

The increase in borrowing will have an immediate impact on households and is expected to dampen economic activity over the coming months. However, with scarcity at risk, there has been a high growth of first-time buyers, cashing in on the governments Help-to-Buy governments scheme. Estate agents across the UK, have not only seen a significant increase in new build homes being sold, compared to last year. But also housing asking prices across the market have also fallen by 2.3 pc this month according to Rightmove.

Mortgage approval rates for July showed another month of growth, which shows first-time buyers are still finding their way onto the property ladder. On the other hand, re-mortgage approvals fell by 7.3% July, showing that it’s becoming difficult to upgrade your home, rather than buy your first home.

Richard Carr chief executive of Fortitudo says this is a positive direction for the housing market for first-time buyers and Fortitudo will continue to help the housing market to grow, with our new build developments continuing to be associated with the Help-to-Buy Government schemes.

Richard Carr talks about 3 things you need to know about the UK housing market in 2018

Since the Brexit referendum has happened, the UK housing market has been experiencing some instability in certain areas. It has been facing major difficulties in the recent months in properties at the higher end of the spectrum and in certain geological areas. This, in turn, has resulted in uncertainty from buyers. Since 2016 the average price in the UK has gone up to over £220,000 per dwelling. Although this pricing has gone up between 2012 and 2017, the earnings growth hasn’t corresponded to this, making it extremely difficult for people to buy houses. Richard talks to us about 3 important aspects of the housing market that you could take advantage off.

A fixed rate mortgage might be the best option for you

• You remain stable for consecutive years.
• Can be used with buy-to-let properties too.
• More properties are being built and are expected to come to the market this year.
• First-time buyers can take advantage of schemes like Help to Buy to further augment choices.

Buy-to-let is still a viable option for investors

• Tax reforms left uncertainty for buy-to-let investors.
• Liverpool has increased in rents at 6.2% PA.
• Nottingham increased in rents at 6.2% PA.
• Cardiff increased in rents at 6% PA.
• Southampton increased in rents at 5.9% PA.
• Greater Manchester increased in rents at 5.9% PA.
• University towns remain a good place to invest in buy-to-let.

Affordable homes are available
• Local councils are working with private developers to make housing assessible for all.
• Shared ownership allows you to part-own or rent part of a home.
• Government schemes including Help to Buy.
• Areas such as the west of the UK are cheaper to live.
• Stamp duty has been abolished for first-time buyers if the property they are buying is less than £300,00.

 

 

 

Richard Carr talks about Fortitudo’s investment into Poole

For the first time in 12 months, it looks as though House prices are on the rise down south, especially in Poole, rising by 8.3% in the last 12 months. According to the National Statistics, the average property in the area sold for £317,561, which is nearly 50% higher than the UK average of £226,906. This is, however, making it increasingly difficult for first-time buyers to get themselves onto the property ladder.

Throughout the whole of the UK, there is an increase in house prices. However, the strongest growth regionally has shifted from London to the south west of England. Christchurch houses have risen by 5.9% in the last 12 months and April saw a 3.1% leap, selling their average property for £350,696. Whereas Bournemouth houses have risen by 3.6% since June last year and 0.2% in April. Although these properties will increase in value for current owners, it makes it even harder for first-time buyers to even think about saving for a deposit, not to mention all the other fees and extra’s that come with owning a home.

At Fortitudo we try to make property assessable for everyone and create property ownership possible for first-time buyers. There are a number of developments currently under construction in Poole and Bournemouth which will all be associated with Help-to-Buy. The government scheme allows first-time buyers to purchase a new home with just a 5% deposit, the scheme also recommends mortgages that would work with them to get everything done efficiently and less costly as possible. Most of our sites are associated with Help-to-Buy, you can find which development is most suitable to you below!

Help to Buy – Key points

– The fifth anniversary of the Help to Buy loan scheme is this year.
– You can borrow interest-free for five years.
– You can get on the housing ladder sooner.
– You could buy with a smaller deposit but get better mortgages rates.
– Your mortgage payments are likely to be less than your rent.

Fortitudo Developments that intend or currently feature Help-to-Buy

The Highlands, Fareham
Willow Park, Havant
Black and White Cars, Commercial Road
West Quay Road, Poole
Wootton Mount, Bournemouth
30 Tower Road, Branksome Park
– Canaway Court, Poole
– Poole Pottery, Poole

 

 

Richard Carr discusses unspent housing budget

It’s recently come to light that MPs are demanding an explanation from government ministers about a huge amount of money from the housing budget that hasn’t been spent.

They were informed that £817 million that was allocated for the UK’s desperately needed affordable housing schemes and other projects has ended up back at the Treasury.

Cross-party committee

News of this unspent cash has apparently astonished members of the cross-party housing, communities and local committee. It certainly seems to directly contradict the prime minister’s recent assertion that housebuilding is at the top of the Conservative’s priority list. In addition, it must have been shocking to hear for local authorities, many of which are becoming desperately mired in financial problems due to constant cost cutting measures from central government.

The committee discovered the colossal underspend for the financial year 2017-2018 and confronted both the homelessness minister (Heather Wheeler) and housing minister Dominic Raab. The government is under massive pressure from MPs and the Local Government Association (which is also controlled by conservatives) to implement some helpful measures for the local authority sector, which has endured budget cuts of 50% since 2010.

Strain on local authority budgets

Bob Blackman, Tory MP and acting chair of the committee, said: “We will be wanting to know why this very large sum has not been spent at a time of great strain on local authority budgets, and why it was not channelled to other spending projects.

“It does not help those of us who argue that more should be given to local authorities if the chancellor knows money he gave last time has not even been spent.”

MPs want to argue for more money for local authorities, given that unexpectedly high tax receipts have left the Treasury with between £7bn and £10bn extra.

Public finances

On the government’s side, the Chancellor explained that much work had gone into putting public finances back in order, and they’re now ready to pump money into services, which includes housing.

He said: “We’re making good progress on building the homes this country needs with, last year, a 20-year record high for housebuilding. This is how we build an economy that works for everyone.”

Affordable housing

However, this doesn’t fit with evidence regarding the number of affordable properties that have been built. Helen Hayes, MP for Labour said she thought it was astonishing that this amount of money is unspent when the number of affordable homes built by local authorities has plunged since 2010.

She said: “This is the biggest issue for families up and down the country. It is simply astonishing and unacceptable that there is so little urgency being shown.”

Since around 1988, local authorities have consistently cut back on social housebuilding due to the impact of increasing budget cuts. Councils have also been discouraged from building new houses by the government’s ‘right to buy’ scheme, which lets tenants buy council properties at a discount of 40%.

Council development companies

richard carr houseMany councils have implemented their own property development companies to get around the rules set by government, so that they can get on and build homes. However, progress has been limited, partly die to the threat from the government that they might extend ‘right to buy’ to the new development companies owned by the council.

While shadow housing minister John Healey said that housing and local government secretary Sajid Javid’s department is ‘selling families short by surrendering much-needed cash for new homes’, a housing ministry spokesman said:  “We are investing £9bn in affordable homes, including £2bn to help councils and housing associations build social rent homes where they are most needed.

“All of the affordable housing underspend from 2016-17, including £65m returned by the Greater London Authority, has been made available to spend on similar schemes.”

Potential council insolvency

The National Audit Office estimates that 10% of local authorities and county councils have less than three years left before they are vulnerable to insolvency. It seems many people agree that urgent action is now needed.

Some developers have always been positive about affordable housing, yet have had their hands tied. At Fortitudo, we always strive to be part of the solution for people who need affordable homes, and hope that the government will act to make it easier for their own housing goals to be met.

– Richard Carr