50 years ago, in 1967,
the first human heart transplant was performed by Dr Christian Barnard in South
Africa. In the same year Sweden switched from driving on
the left-hand side to the right-hand side of the road.
The average value of a Southampton property was £3,770, interest rates were at 5.5% and The Beatles released one of my
favourite albums – their Sgt Peppers album ... but what the hell has that to do
with the Southampton property market today?? Quite a lot actually ... so with
my CD Player turned up loud - let me explain my friends!
I have been doing some research on the current attitude
of Southampton first-time buyers. First-time
buyers are so important for both landlords and homeowners. If first-time buyers
aren’t buying, they still need a roof over their heads, so they rent (good news
for landlords). If they buy, demand for Southampton property goes up for
starter homes and that enables other Southampton homeowners to move up the
property ladder.
First-time buyers are the lifeblood
of the property market. They are, however the most susceptible to interest rate
rises and the affordability of mortgages. With that in mind, let us see what is
happening to them…
The average value of a Southampton property is currently standing
at £284,297 and UK interest rates at 0.25%. As each year goes by, it appears the
age of the everlasting mortgage has started to emerge, prompted by these first-time
buyers, eager to get a foot on the housing ladder. I was reading a report a few
days ago where some mortgage companies confessed that the battle to gain big
returns from the property market has led to mortgages that will take considerably
longer than the customary 25 years to pay off.
Over the
last few years, it has been commonplace for first-time buyer mortgages to be 30
and 35 years in length as the ‘Bank of Mum and Dad’ have been helping with the
deposit (Beatles Sgt Pepper song - “With a Little Help from My Friends”).
Now, some high street banks are offering mortgage terms of 40 years. This means
first-time buyers could be paying until their mid 60’s - I can hear that other
great track from the same album "When I'm Sixty-Four"
ringing in my ears! So, a 50-year mortgage does not seem as far-fetched now as
it would have been back in the 1970’s. After all life expectancy for a male
then was exactly 69 years and today its 79 years and 5 months!
Over the last ten years, Southampton property prices have
continued to rise more than wages, therefore, first-time buyers are looking for
bigger loans. If this development continues, the only way repayments can remain
reasonable is by increasing the term of the loan.
However, some commenters have said there are worries the
mortgage companies are lending money over such a long term, they threaten leaving
some first-time buyers with a generation of debt if the house price bubble
bursts. Interestingly, when I looked at
what had happened to average property values in Southampton over the last 50
years, there have been bubbles. First-time buyers should take heart,
since as a county we have always recovered from it a few years later.
What if interest rates rise? Well looking at historic UK interest rates, the current rate of 0.25% is at a 300-year low. Mortgages will never be cheaper. I would however, seriously consider fixing the rate to cushion any future potential interest rate rises (since they can only go in one direction when they do change). If Southampton first-time buyers see buying a home as a long-term decision, based on the last 50 years, they should be just fine!
Before I go,
a final thought for property buyers in Sweden, the land of Volvo and Abba. As
Swedish property prices are so high, Swedish Regulators announced last year
limits on the length of Swedish mortgage terms. They don’t bother with 50-year
mortgages (On and On and On – Abba).
No, our
Volvo-loving Swedish friend’s average mortgage length is 140 years (this is not
a typo). Although such mortgages have had their Waterloo (Abba), regulators have significantly
reduced the maximum term of a Swedish mortgage to 105 years. Either
way, that’s a lot of Money, Money, Money
(Abba again – Sorry!) to pay back!
Now I will leave you in peace as I listen to the 1980’s Madness
song ‘Our House’. My apologies to all the Beatles and Abba fans in Southampton
- a bit of light hearted fun albeit on a serious topic.
For more information on the Southampton property market, visit the Southampton Property Market Blog If you are looking for an agent that is well established, professional andcommunicative, then contact us to find out how we can get the best out of your investment property.
Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.
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