Weekly Round-Up: 23rd March 2018

On Debt Row

weekly round up 1According to the Royal Society for Public Health, Vision, Voice and Practice, two thirds (67%) of smokers said that the stress and worry associated with their debt caused them to smoke more. Nearly half (49%) of people who drink alcohol said that they drank more as a result of the stress of having debts. This rose to 62% of people who had used at least one payday loan. The survey titled Life on Debt Row highlights the impact of Debt on behaviour.

Just under half (47%) of respondents (57% of payday loan users) said they did less exercise because owing money meant that they couldn’t afford the costs involved and 65% (80% of payday loan users) said that they were less physically active because they felt too depressed. Over half (60%) of participants – 70% of payday loan users – said they ate less healthily because they couldn’t afford healthy food and two thirds (65%) – 76% of payday loan users – said that feeling depressed led them to eat less healthily while in debt. Over half (53%) of those surveyed skipped meals and three quarters (76%) said that their sleep quality declined. Both of these rose when looking solely at individuals who had used at least one payday loan over the previous 24 months (67% and 87% respectively). Seven percent of respondents said that being in debt led them to take illegal substances for the first time or to increase their usage of illegal substances.

All findings were worse for those who said they had struggled to make their repayments. Eighty percent of smokers smoked more; 61% of alcohol drinkers drank more; 81% did less physical activity because they felt too depressed; 92% said their sleep quality decreased and 81% ate less healthily because they felt distressed about their debt.

Affordable payments

weekly round up 2Research by Halifax suggests the typical mortgage payment accounted for less than a third (29%) of homeowners’ disposable income in the fourth quarter of 2017 compared to almost half (48%) in 2007 (Quarter 3). This means mortgage affordability levels for first-time buyers and homemovers have dropped by 40% since the 2007 peak. This means mortgage affordability levels for first-time buyers and homemovers have dropped by 40% since the 2007 peak.

The significant improvement in affordability since 2007 has been driven predominantly by historically low mortgage rates, despite the first base rate rise in a decade last November. With average house prices rising by 3% in the past year, mortgage affordability marginally improved in the last quarter of 2017, edging down from 29.6% in 2016.This is comfortably below the long-term average of 35%,, remaining low due to a further dip in mortgage rates during 2017 from an average of 2.09% in Q1 to 1.98% in Q4.

There have been substantial improvements in affordability in almost all local authority districts (LADs) since 2007, with mortgage payments falling by at least 30% as a proportion of average earnings in 35 areas. Three-quarters (74%) of all districts have seen an improvement of at least 15 percentage points over the period.

The 10 most affordable local areas are all in northern Britain, whilst the 10 least affordable areas are all in the South. Whilst the comparison of mortgage affordability over the last 10 years shows a vast improvement, when looking only over a five-year period, affordability – on this measure – has actually deteriorated. Whilst the average mortgage rate has fallen from 3.7% in 2012 to 1.98% at the end of 2017, average house prices have grown by 40% in the same period.

Greater probability

weekly rouind up 3Nearly three quarters (74%) of first-time buyers’ mortgage applications via intermediaries resulted in a completion during Q4 2017, according to the latest Mortgage Market Tracker from the Intermediary Mortgage Lenders Association (IMLA). This compares with just over half (53%) a year earlier, as first-time buyers benefitted more than any other customer group from improving access to mortgage finance during 2017.

The quarterly IMLA report – which uses data from BDRC – examines consumers’ success rate in securing a mortgage via the intermediary channel, by tracking their progress from initial expression of interest (seeking a ‘decision in principle’) through to completion. In doing so, it compares the fortunes of intermediaries dealing with first-time buyers, homemovers, remortgagors, buy-to-let (BTL) borrowers and applicants for specialist loans.

UK Finance data recently showed that first-time buyer numbers reached a ten-year high in 2017 . IMLA’s report suggests that this was helped by nearly nine in ten (88%) applicants securing a mortgage offer in Q4 2017 for the third successive quarter, up from 73% a year earlier. More than four in five (84%) of those offers in Q4 2017 went on to complete, compared to 72% twelve months before.

Across 2017 as a whole, 87% of first-time buyer applications resulted in an offer and 81% of those went on to complete: both noticeable improvements on 2016. Overall, it meant that 71% of first-time buyer applicants achieved their aim of securing a mortgage in 2017, compared with just half (50%) in 2016.

On hold for housing

housePeople are putting their lives on hold as they struggle to save towards their ‘dream home’, new research reveals. Almost nine in ten (86%) people living in their first home think it is harder now than a decade ago to make the jump to their second home, according to the Nationwide Building Society poll. The top barriers to moving home by potential second time buyers include finding a home within budget (38%), finding a home in the right location (25%), having a large enough deposit (18%), not being able to cover moving costs (15%) and being in negative equity (8%). One in five (21%) said they have found themselves stuck in a house that is too small for their family or in an area they don’t like due to housing affordability (16%).

The survey of more than 1,000 people in the UK living in their first home found that the average cost of the next property is £370,539, which leaves many buyers still finding themselves in need of a financial helping hand to move. When asked what they would be willing to give up to move up the housing ladder, more than half (55%) said they would forego nights out, followed by eating out (48%) and holidays or weekends away (33%). One in seven (14%) said they would even give up a spouse or partner if it meant they could move up the property ladder, although men (22%) were more likely to choose this option than women (7%). The poll reveals that when it comes to compromising on the next property, a conservatory would be the first item second time buyers would be willing to forgo (35%), followed by a garage (29%), a driveway (22%), and ideal schools (20%). By contrast, the size of the bathroom (11%) the size of the kitchen (11%) and the number of bedrooms (13%) were the least likely items to be struck off the wish list. Just under nine in ten (88%) also said they would consider buying a property that needed renovating if it was significantly cheaper to buy.

Despite the struggles experienced by potential second time movers, one in five (21%) of those surveyed said they weren’t willing to forgo anything at all on the next property they bought. More than half (55%) want their next home to be detached, and more than a quarter (26%) want it to be their forever home (26%). Just over a third (35%) said they were holding out for their dream home.

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