20 things

20 things you should know about...

17 February 2007

• Nationwide Building Society has reported that rising house prices have added £75 to a typical mortgage for a first-time buyer (FTB) mortgage from last year, with increasing interest rates bringing this figure nearer to £120 extra per month on mortgage payments.
• Nationwide indicated that the average FTB house price had increased by £14,000 over the past year.
• The research showed that more FTBs were opting for long-term interest only deals, which the lender revealed could cut up to £300 off monthly payments.
• The majority of FTBs opted for a loan between 21-25 years, but the research showed that the proportion of FTBs taking out a mortgage for 26 years plus had rose to 34 per cent by Q3 2006.
• Locking into a fixed rate in February 2006 would have saved a typical FTB £170 to date, Nationwide suggested.
• Further monthly savings of £50 at current mortgage rates would also have been experienced.
• In Northern Ireland, FTBs would need to save on average an extra £2,000 for a deposit, with borrowing costs almost £230 per month higher than at the end of 2005, even without the rate rises, Nationwide revealed.
• The lender also indicated that property prices in Northern Ireland rose by 41 per cent in 2006.
• FTBs in the East Midlands would have to find an extra £372 for a deposit.
• However, they would face an extra £77 per month in borrowing costs.
• The study admitted that FTBs now faced a ‘double whammy’ of rising house prices and rate rises.
• On average, monthly mortgage repayments in the UK reduced by £63, but in London this figure rose to £103.
• This time last year, 20 per cent of FTBs took out interest-only loans, compared with 25 per cent now. At current rates an interest only loan on an average property would cut mortgage payments by £214.
• In London, the saving would be around £350.
• Commenting on the findings, Fionnuala Earley, chief economist at Nationwide, said: “Compared to a FTB entering the housing market in December 2005, a FTB today would have to borrow more money, raise a larger deposit and pay higher rates than at this time last year.”
• She added: “A typical FTB entering would face monthly payments around £120 higher than if they entered this time last year. On top of this they would have had to find £700 to make up their deposit of 5 per cent of the property price.”
• Nationwide indicated that market developments had resulted in a large impact on the differences between fixed and tracker rates. Taking out a tracker at the end of 2005 would have saved an average of £4 more per month than a fixed rate, but with the rise in interest rates this rose to a saving of £107 in total, with a further £50 expected if a further rate rise takes effect.
• Earley added: “One way borrowers can try to keep their payments down is to increase the term of the loan. 25 years is the traditional length of the loan, but increasingly FTBs have been taking out longer-term mortgages. The majority of FTBs still take out a loan of between 21 and 25 years, but the proportion taking out a loan of 26 or more years increased from 28 per cent in Q3 2005 up to 34 per cent in Q3 2006.”
• The report revealed that in spite of price changes, London has seen little change in the proportion of FTBs taking out longer-term mortgages.
• The overall proportion of Londoners taking out a loan of 26 years or more was also only 19 per cent, according to the study.