… as Southampton first-time buyers now only need a 5% deposit for a mortgage.
Southampton landlords, sell your property portfolios, your
tenants will soon be leaving in droves as they buy their first home with the
new 5% deposit mortgages backed by the Government’s new mortgage-guarantee
scheme revealed in March’s budget! These 95% mortgages are to be supported by
the Treasury, lessening losses for mortgage lenders should the borrower be
incapable of repaying and get repossessed, as the Government want Generation
Rent to turn into Generation Buy.
This sounds like the death knell for buy-to-let
investment in Southampton as many tenants will soon be buying their first home
– or is it?
It’s true that on first impressions it might look like many Southampton
first-time buyers will now be leaving their rental properties in their droves
with this new low deposit mortgage scheme. However, these potential Southampton
first-time buyers are facing four big issues which will inhibit their ability
to take advantage of the mortgage scheme, meaning many will continue to rent.
Firstly, the mortgage rate for 95% mortgages has increased. The
lowest five-year fixed-rate mortgage with a 5% deposit today (with Barclays) is
3.45%, up from 2019’s best rate of 2.75%. That doesn’t sound a lot, yet it
makes a massive difference to the monthly mortgage payments (as you will see
below).
Secondly, due to pent-up demand post lockdown and the stamp
duty holiday, this has increased demand for Southampton property, placing
upward pressure on Southampton property prices which has made it problematic
for first-time buyers to get on the Southampton property ladder. This has meant
...
the average price of a Southampton first-time buyer
property has risen from £271,882 to £304,334 in the last 12 months …
in turn this means, Southampton first-time buyers have had
to save an additional £1,622.60 for their deposit to keep up with the house price
increase. So…..
the monthly payment on a 30-year mortgage for a Southampton
first-time buyer has jumped from £1,054.44 per month in 2019 to £1,290.21 a
month today, an increase of £235.77 per month.
The third issue is demand for Southampton first-time property
from buy-to-let landlords is surpassing supply, adding further fuel to the fire
of driving up prices. Finally, the fact that most Southampton first-time buyers
are of the younger generation and it’s the younger workers that have been most
at risk of unemployment or salary cuts during the covid crisis.
|
|
5 Year Fixed Rate - 2019 |
5 Year Fixed Rate - 2021 |
|
Purchase Price |
£271,882 |
£304,334 |
|
5% Deposit
Required |
£13,594 |
£15,217 |
|
95% Mortgage
Borrowed |
£258,288 |
£289,117 |
|
Annual Interest
Rate |
2.75% |
3.45% |
|
Mortgage Length
(in years) |
30 |
30 |
|
Mortgage Payment
per Month |
£1,054.44 |
£1,290.21 |
|
Sum of Mortgage
Payments over whole mortgage term |
£379,598 |
£464,476 |
|
Total Interest
Cost over the whole mortgage term |
£121,310 |
£175,358 |
You might say things will change in 2022 but would it
surprise you that 95% mortgages have been available to first time buyers since the
summer of 2010 and were only withdrawn during the first lockdown in 2020?
Since 2010, even with ultra-low interest rates, the number
of private rented properties in the UK has grown by 580,000 households from
3.8m households to 4.4m households and will continue to grow, let me explain
why.
The notion that buy-to-let property is a strong long-term
investment has not altered with the pandemic. Since 1930 with the all the crises
we have had with WW2, the Oil Crisis, 3 day week and hyper-inflation in the
1970’s, Southampton property has been a hedge against inflation and in
addition, delivers a decent income yield of 4% and upwards. Not bad when
compared to the 0.5% with a savings account (if you are lucky).
It is a fact that those landlords that see buy-to-let
investment
in Southampton as a long-term strategy will win.
It is certainly the case that I am starting to see an exodus
of the ‘amateur landlord’, leaving more professional landlords who see ‘landlord-ing’
as a business, not a game. Those long-term Southampton landlords can see through
the present predicament as they have a long-term buy-to-let investment mindset.
Many Southampton landlords are intensely aware that demand
for high quality private rental properties in Southampton is only going to flourish
as a consequence of the pandemic; whilst not forgetting that demand presently exceeds
supply. Also, those same Southampton landlords know that a responsible approach to
their tenants with regard to condition and repairs is a key to ensuring the
rent keeps flowing in with minimal void periods.
Finally, even though Southampton house prices are, on
average, on the up, there are still some bargains even in this market. By doing
their homework and working with an agent like myself, these savvy Southampton
landlords are paying reasonable prices, thus giving them a sturdier rental
yield and the ability for future capital growth.
If you are a Southampton landlord, as my clients all know, I
am here to help and guide landlords on their long-term investment strategy. I
therefore extend this offer to all Southampton landlords, irrespective of
whether you manage your property yourself, or use one of my excellent
competitor agents in Southampton, I am here to help.
CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH
If you would like to pick my brains on the Southampton Property Market – Just drop me a line on social media or email me @ brian.linehan@belvoir.co.uk you can also call me on 023 8001 8222.
If you are looking for an agent that is well established, professional and communicative, then contact me to find out how we can get the best out of your investment property.
Don't forget to visit the links below to view back dated deals and Southampton Property News.
Blog, http://southamptonproperty.blogspot.co.uk/
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Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan
Website, https://www.belvoir.co.uk/offices/southampton
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