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Helping hand for first-time buyers

October 7th, 2013

LIFE finally looks to be getting a little easier for people looking to buy their first home in Scotland, as evidence begins to emerge that activity among first-time buyers is increasing.

The new £220 million Help To Buy shared-equity scheme launched last week in Scotland adds to the growing feeling among estate agents, housebuilders and analysts that mortgage prospects are improving for those aiming to reach the first rung of the property ladder, alongside low interest rates and the easing of deposit demands from some lenders.

Ian McGrail, managing director of broker FirstMortgage, said: “The introduction of Help To Buy in Scotland comes as a great relief to us as we will now be able to deal with the escalating demand from first-time buyers, which has rapidly increased in recent months.”

Figures from the Council of Mortgage Lenders showed an increase in the number of mortgages being taken out by first-time buyers across the UK, rising to 25,300 in July. The figure was up 5% on June and 40% ahead of July 2012.

The improving prospects come amid evidence the broader housing market is recovering to health after being badly affected by the recession.

Estate agents have been reporting increases in transaction levels, with more sales going to closing dates, while profits have been rebounding at listed housebuilders in recent weeks.

This year has seen the ­successful stock market flotation of ­Countrywide, the property firm behind the Slater Hogg & Howison brand in Scotland, and Foxtons, the London-based estate agent.

Sharon Donaldson, sales director at Slater Hogg & Howison, said property sales in Scotland had rebounded after a slow start to the year, and noted the improving outlook for first-time buyers.

“The market is definitely lifting and giving people more confidence to come into the market,” she said.

“You have two sets of first-time buyers, I suppose. One where they can afford to come into the market but have chosen not to do it yet because they see where the market is going. They are starting to recognise this might be the right time to start to invest their money … to get on to the property ladder.

“There is a second set of first-time buyers who have difficulty getting to the starting gates.

“From that perspective, the difficulties that surround the savings are still there. But the banks and lending institutions appear to be more open to funds that are supporting first-time buyers moving forward.”

In Scotland, MI New Home, under which builders and lenders provide 95% mortgages on newbuild homes priced up to £250,000, is believed to be having a positive effect on the market.

This has augmented the work of the Low-cost Initiative for First-time Buyers north of the Border.

The Help To Buy (Scotland) scheme gives buyers the opportunity to purchase a majority share in a newbuild home up to the value of £400,000.

Meanwhile, Prime Minister David Cameron has promised to bring forward Help To Buy 2, a UK-wide scheme between lenders and the Government, due to launch in January.

It will see the Government guarantee 15% of the borrowing on 95% loan-to-value mortgages, easing the burden on house buyers by asking them to come up with a 5% of the deposit.

This contrasts with deposits of up to 20% that some lenders have demanded since the financial crash of 2008-09. However, details such as the cost of entering the scheme on the level of interest charged have still to be clarified.

Meanwhile, prices are rising so fast in London (up 9.7% in the year to July, according to the Office for National Statistics) that there has been recent debate over what the Bank of England should do to prevent the market from overheating, but in Scotland prices are still falling.

The 2% decrease recorded by the ONS for the year to July followed a 0.9% fall for the 12 months to June.

A slightly different picture was painted by the last House Price Index by LSL Property Services, in association with Acadametrics. It found activity among first-time buyers had been behind a 0.3% increase in house prices in July – the first increase seen in Scotland in four months.

Dr Peter Williams, housing marketing specialist and chairman of Acadametrics, said July’s figures could mark the start of a “prolonged period of house price increases”.

Sharon Donaldson agreed that sentiment broadly was improving, but dismissed any idea of overheating or a bubble. “I don’t think we are anywhere close to that,” she said.

“There are other issues holding us back, for example in the economy and the number of employees in the public sector.

“There is a lot of confidence to come back before we are anywhere near that.”

CASE STUDY

Chris Peacock, 24, a quantity surveyor, and his partner Debby Bruce, 23, a nurse at Royal Alexandra Hospital, Paisley had saved up a deposit when they heard about the MI New Home scheme.

He said: “I wanted to be able to pay a deposit and then know what my monthly mortgage payment would be.”

The couple bought the show flat at Taylor Wimpey’s Ferry Village at Braehead.

Peacock added: “Getting access to a 95% mortgage has allowed us to move six-12 months earlier than we thought we would be able to.”

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