Q: Where do you see house prices heading in London and the South-East?
A: We are certainly in the middle of a house price boom, however, I do not think boom will turn to bust any time soon. The reason for this is because there is much more demand than supply in the capital at the moment. As long as demand outstrips supply, house prices will remain buoyant. The interesting thing about this mini-boom is that it is linked to a particular market. One and two bedroom flats are in high demand, the demand for houses appears to be less intense. These increases are reasonable as long as price rises remain at below 10% per annum. Any more could see the government tinker with interest rates to curb the boom.
Q: What kind of deposit does a first time buyer need nowadays to secure a mortgage?
A: The help to buy scheme will help first time buyers onto the property market with as low a deposit as 5%. Currently, this is limited to new build properties. The scheme could however be extended to older properties in 2014 – however many commentators are calling for the scheme to be scrapped for fear of a house price bubble. Outside of that scheme, 10% deposits are possible for houses but limited to special deals lenders have with builders such as Berkeley Homes. The best deposit to have is 15% or more – the bigger your deposit, the better your mortgage deal is likely to be.
Q: Post credit crunch, are you finding that the banks and building societies are more willing to lend?
A: Yes. Annoyingly, there are still some lenders (ironically, it tends to be those with exceptionally keen rates) who are reluctant to lend but the market is certainly opening up, for example, for the first time since the credit crunch, we are getting phone calls from lenders asking us whether we have any new cases for them! That is a very encouraging sign!
Q: What impact do you think a rise in interest rates would have on the property market?
A: I don’t think the Bank of England is currently under any pressure to increase interest rates, so the status quo should remain for the foreseeable future. In any event, any increase would be subtle – I would imagine that the first increase would be around 0.25%. In my opinion, this wouldn’t make the slightest difference to house prices. The reason house prices are rising is because demand outstrips supply – especially in the capital, and this has little to do with interest rates. Existing borrowers who have stretched themselves are more likely to suffer if rates go up.
Q: How much can a first time buyer borrow in today’s market?
A: When you’re looking at a mortgage, it’s important that you think about more than just whether you can afford the monthly repayments. You need to factor in all of your other monthly outgoings – and be sure that you could still meet your payments if interest rates rise or your circumstances change. In the old days, lenders would work out how much you could borrow by using income multiples, such as 4 x your salary. These days, the formula is much more sophisticated and takes into account your existing commitments such as loans, credit card and how many children you have. They will also take into account monthly bills such as council tax, gas and electricity and insurance. Most lenders websites have “affordability calculators”, which can give you a near accurate reflection off what you can borrow.