Scotland's housing market's performance has been dominated by ‘events’ over the past 15 years or so, beginning with the collapse of Northern Rock at the end of 2007, which signalled the end of the mortgage credit boom across the UK. It was followed by a deep economic recession that dragged the housing market down with it - in Scotland, the total market value of residential sales fell by 76 per cent from Q3 2007 to Q1 2009.
During the succeeding years of bank bailouts, stimulus packages and rising unemployment, the housing market remained in a deep slumber. It only really awakened from the middle of 2013 thanks to a recovery in economic growth and stimulus packages, such as Help to Buy. The years since 2013 have seen modest recovery, particularly in the post-pandemic year of 2021, but total market value remains 24% down on its 2007 peak. Ongoing events such as European wars, interest and mortgage rate rises, and the cost-of-living crisis continue to impact on market sentiment and activity. The market has fallen over 5% in H1 2023 compared to the same period last year.
Some areas have performed better than others. Whereas the Edinburgh market is now 29% off peak levels, Aberdeen, Dundee and Glasgow remain around 40-50% down on where they were in 2007.
A tougher lending environment as well as a wider cost-of-living crisis, has been the main cause of a contracting market since Autumn 2022. The recent RICS Residential Market Survey paints a picture of tighter lending environment weighing down on buyer activity in Scotland as well as the wider UK.
According to UK Finance, new mortgage advances to first-time buyers in Scotland have decreased by 14.9% over a year (on a 4-quarter rolling basis) and for home movers they decreased by 7.4%. This is also down close to 10% on both measures on pre-pandemic levels.
The impact of the increase in interest rates can be seen in measures of mortgage affordability. The average share of income taken up by mortgage payments for new loans for home purchase has increased by 2.5 percentage points for home movers, to stand at 18.4%, and by a larger 3.4 percentage points for first-time buyers, to stand at 19.6%.
While a significant downturn in transactions from 2022 levels over 2023-24, perhaps this time of 15 to 20%, is on the cards, unless there is another significant move in interest rates, house prices would be expected to reduce modestly (perhaps around 5%) than decline more drastically, as was broadly the experience in the 2007-09 recession.
Your Questions Answered
- Who is classed as First Time Buyer?
This does vary by lender, but anyone who has not been named on a mortgage in the last 3 years.
- I’m a First Time Buyer (FTB) but my partner had a mortgage a couple of years ago; can we still get a FTB product?
Depending on when you bought, you may be classed as a First Time Buyer. However if you are not, this won't impact you getting a mortgage.
- What are the mortgage options for young adults under 20 years old?
Anyone over the age of 18 can apply for a mortgage, this will be subject to deposit and credit score. For those with little or no credit, having a broker to secure the right lender will help you on your journey to being able to borrow what is needed.
- Is 10% the absolute necessary deposit for a home?
10% is not the minimum, there are a number of 100% mortgages in the UK market, with most lenders offering mortgages with a deposit as small as 5%.
- We are first time buyers in the UK, but we own a flat in France where we used to live, and that we're currently renting out. Would that change anything to our chances of getting a mortgage? What would that mean in term of taxes?
With you owning a property abroad, this will impact the UK taxes that will apply. The amount of Additional Dwelling Supplement you pay (ADS) will depend on where you are buying, Scotland or England.
- With the prices of properties in Glasgow consistently going in excess of 10% over home report value, how can lenders help ease the burden for first time buyers? Currently no lender offers a product that accounts for this situation, which is common here
As a FTB, it can seem daunting with properties going for over Home Report on a regular basis. There are a number of UK lenders that will re-instrcut a valuation. This does have it pros and cons, and is worth talking to a mortgage broker to dicsuss in more detail.
- How to get on the property ladder when you’re self employed
Being self employed you are treated differently, as most lenders will want you to have at least 2 years full trading, along with your TYO and SA302. I would strongly suggest if you are self employed to get advice from a broker, as they will be best placed to ensure they can help you secure the level of borrowing you need based on your current situation. I say this, as there are a number of lenders who will work with 1 full years acccounts, or where you have two and it's an upward trend use the latest, rather than averaging out your income.
- ]What is the complication for firstime buyers if they decide to purchase a buy to let property while they do not have a property in their names, they rent their place to live?
There aren't a huge number of lenders who would consider this, but with any Buy To Let it's based on the rental income and this must meet the individual lenders ICR calculation, along with the property being suitable for them to lend. If you did buy this as a Buy To Let, you would not be able to stay in the property, as this would be a breach of your mortgage contract.
- Do you have any products that cater to non-resident applicants?
There are a number of UK lenders who would consider providing a mortgage to a foreign national, typically these mortgages are subject to a minumum income and deposit. i.e 25% deposit and a minimum salary of £75,000 when converted in to GBP after 25% deduction for currency fluctuation.
- Cash buy or mortgage, which is better for investment in property for renting?
This is really customer specific, and depends on your short, medium and long term goals. The impact of the property being in your perosnal name and Ltd along with your tax status all plays a part. The first step would be to get advice from a tax specialist and have them work with your broker to ensure your property/portfolio is set up right from day one.
- How to negotiate house price and advice to save deposit?
Speak with your broker and your solicitor, these are the two best people who can guide you. Ultimately the decision is yours, ask yourself how much do you want the property and how long do you plan to stay in the property.
- If I previously owned a house abroad but now sold it, can I be considered a first-time buyer in the UK? Can my husband? Who never owned any house but was already married to me while I owned a house abroad?
Yes you can be classed as a First Time Buyer as long as the mortgage was redeemed more than 3 years ago. Even if you're not classed as First Time Buyer, this won't really impact the mortgage rate you can secure.
- I am new in UK so can I buy?
This will be dependant on how long you have been in the UK, how much deposit you have and your basic salary. Where you don’t meet the salary requirements and or deposit, then you may need to wait until you have been in the UK for 12 months.
- Where should i start for buying my first flat?
I would speak with a mortgage broker, they will be able to help you find the right property budget, and ensure the mortgage payments are affordable, from there they can help you review the Home Report and discuss.
- With interest rates at the level they are at currently, would it be advisable for first time buyers to wait until mortgages are more affordable or should they proceed as soon as they have sufficient funds?
There are two parts to this, the first being mortgage rates. Rates are coming down slowly but I think its also worth while noting that rates of sub 2% are a thing of the past and we are unlikley to see these again. Should you wait, well this depends, is the mortgage afforable, do you have the right deposit, what's your short and long term plans for the property. In this instance, I would sit down and talk it over with a mortgage broker, everyone is different and its about being confident in your self this is the right choice.
- Can an individual who is on skilled worker visa of five years in the UK be granted a mortgage facility of 20 years or 25 years?
Yes, anyone who has been in the UK for more than 12 months may apply for a mortgage. This will be usualy subject to deposit which is linked to your credit score.
- Can a first time buyer buy a Buy To Let property?
Yes, but there aren't a huge number of lenders who would consider this. In all instances you will need at least a 25% deposit, and the rent must meet the lenders stress test.
- Can overseas (EU country) income / assets remited to UK, qualify for deposit? Any specific requirements on AML check?
Yes, there are a number of lenders who can and will use oveseas income to support a mortgage application. Typical income that can be accepted is USD, Euro and HKD to name a few. You will also find that most lenders who would consider a mortgage application will have a strict deposit and minmum sole income criteria.
- Is being aged 44 too risky for a first time buyer situation?
Not at all, applying at 44 simply reduces the length of your mortgage. If we consider Nationwide and Skipton they would allow a mortgage to run for 31 years or until you turn 75. This of course is always subject to affordabilty and passing a credit search.
- Roughly what percentage of one's monthly income should a first time buyer aim to have a mortgage repayment take? 30%? 40%?
This does vary, however most people will be in and around 30%. This is really down to the individual and their personal situation whilst also ensuring the lenders deem this as affordable.
- What if I end up needing to make an offer over the agreement in principle for the dream home? Is that possible and is there and way to increase the agreement?
This is where having a mortgage broker is important as they will be able to review the UK market to find you the lender who would consider the maximum sized loan. Sadly unless your income has changed i.e gone up you are unlikley to see a lender increase this.
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