How Mortgages Differ Around The World – A Guide For Southampton Homeowners

  If you’re paying off a mortgage on a property in Southampton, you’ll be well aware of how the mortgage market works in the UK.

But how do they do things in the rest of the world?

Let’s look at how people in other countries get on the housing ladder.

The Netherlands

While UK lenders offer the choice of a fixed-rate or variable mortgage, the Dutch do things differently.

A Dutch-style mortgage is a long-term deal (typically 20 to 30 years) in which the interest rate automatically decreases as the loan is paid down.

This means the Dutch don’t waste time and money re-mortgaging every couple of years to get a better deal reflecting their situation; their mortgage adjusts progressively to reflect their improved loan-to-value ratio.

You may also be interested to note that in the Netherlands, the interest you pay on the mortgage of your main residence is tax deductible.

The US

If you want mortgage certainty, you’ll find it in the US, where 15, 20 and 30-year fixed rate deals are the norm.

However, securing such a deal is tougher now than 15 years ago, as regulators tightened the lending rules after the 2008 financial crisis (which was partly caused by irresponsible mortgage lending).

It’s hard to believe, but in the early 2000s, ‘no-doc’ mortgages were readily available. Many Americans could get a mortgage without documenting that they could meet the repayments (the loans were known as NINJAs – no income, no job or assets).

As history shows, lending huge sums of money to people without verifying their ability to pay it back didn’t work out well for US banks or the rest of the financial system.

South Africa

First-time buyers struggling to get a deposit together in the UK should spare a thought for South Africans. Most SA lenders will only greenlight a mortgage if customers have a 50% deposit or a property they put forward as collateral.

In SA, fixed-rate mortgages are much less common than in the UK; most mortgages are on variable rates.

If you’re looking to take your first step on the housing ladder or move to somewhere new, contact us at Belvoir Southampton today.

House Sales Up 14.8% On 2023 As Mortgage Rates Fall. Yet Is It A Sellers’ Market In Southampton?

 

The number of agreed UK property sales until the last Sunday of January (28th) is 8.35% higher than a year ago. Tumbling mortgage costs have encouraged buyers and sellers to return to the property market.

There is a more buoyant picture for the UK property market in the first four weeks of January 2024 compared with the same first four weeks in 2023.

Every UK region has seen an increase in the number of properties selling (subject to contract) in January 24 vs January 23; the most significant rise was found in Inner London, which was up 25.14% year-on-year, followed by the South East, at 20.02%, the South West at 16.18%. Most other regions (West Midlands, Outer London, North West, Yorkshire, Ulster, East Anglia, Wales, East Midlands & North East) increased by between 12% and 15%. The smallest rise was in Scotland at 4.45%.

As well as increased property sales, the supply of UK properties on the market is 13.95% higher than a year ago (592,574 for sale in January 2024 versus 519,987 for sale in January 2023)

According to Zoopla, London experienced the most significant rise in potential buyer interest, with a 21% uptick in new buyer inquiries in the capital during the initial three weeks of January compared to last year. This surge was the highest recorded across all UK regions, significantly surpassing the national average increase of 12%.

Net sales (sales agreed less sale fall throughs) paint an even better picture, with a rise of 14.8% (55,459 net UK home sales to January 28th 2024, compared to 48,325 net UK home sales to January 28th 2023)

Growing optimism is evident among prospective buyers and sellers as mortgage interest rates, which saw a significant rise in 2023, have started to fall in the last month or so. By the end of December, inflation had fallen to 4%, down sharply from a peak of 11.1% in October 2022 and considerably lower than the Bank of England's anticipated 4.6%. Additionally, the average mortgage rates have dipped to their lowest point since early June, with some banks & building societies reducing mortgage rates to below 4% (for those with large deposits).

Even with this upswing in property market activities, price levels are likely to remain stable, and the market will continue to favour buyers due to ongoing mortgage affordability issues and the still relatively high-interest rates.

The reduction in mortgage rates has undoubtedly rejuvenated buyer interest and transactions, particularly after a slowdown in the latter half of 2023, when many prospective movers paused their plans. This resurgence is expected to help increase the number of properties sold, which, at one million, were at an 11-year low in 2023. 

However, I cannot see this trend leading to a significant increase in house prices in 2024 since the market remains finely balanced with a medium-term drift towards a slightly weaker sellers’ market for Q2/Q3 in 2024 (compared to 2021, when it was an extreme sellers' market). Sellers eager to move in 2024 might find encouragement in these initial signs of increased activity. Still, the buyer's focus on value means that any undue optimism on the part of sellers could hold back the current property market recovery. 

There are also warnings that the uncertainties often associated with a general election year inhibit the property market, as buyers and sellers become more cautious in their decisions in the lead up to voting at the polls.

This is the time to be realistic with your pricing if you’re going to put your Southampton home on the market.

So, what sort of market are we in?

The measurement of whether it's a buyers', balanced or sellers' market is based on the proportion of properties marked as "Sold STC" and "Under Offer" compared with the total number of properties on the market, e.g., if there are 45 properties sold stc and 100 properties available/for sale, then 45 as a percentage of 100 is 45%.

This isn't just a numbers game; it's a gauge of market sentiment:

• Extreme Buyers' Market (0%-20%)
• Buyers' Market (21%-29%)
• Balanced Market (30%-40%)
• Sellers' Market (41%-49%)
• Hot Sellers' Market (50%-59%)
• Extreme Sellers' Market (60%+)

The weight of these brackets can’t be overstated. They directly impact everything from listing prices to negotiation leverage.

Current Southampton Property Market Snapshot

To calculate where Southampton’s property market stands now, let’s incorporate our most recent findings for January 2024. The numbers and statistics have been taken from the website 'The Advisory', which has calculated the market state stats for many years. I am sharing them from the summer of 2018 to January 2024.

What are the Statistics for the Southampton Area Since 2018?

Looking at each of the Southampton postcode districts, each tells its own story...

The average of all the Southampton postcode districts combined was quite clearly an extreme sellers’ market in the summer of 2022 at 70%. In 2023, the Southampton property market changed, and it was hovering in the mid 50%, a hot sellers’ market (albeit a weaker sellers’ market than the summer of 2022). In January 2024, it remained in a hot sellers’ market.

Consequences and Thoughts for Southampton's Property Market

This new data prompts me to take stock and ponder.

For Southampton home sellers: We are transitioning into a market where sellers must be more strategic, flexible, and patient. It would help if you braced yourself to expect your home to be on the market for longer with an extended marketing period. 

Realistic pricing is even more vital than ever. 

In 2022, for 70.4% of Southampton properties that came onto the market, the owner moved (i.e., exchanged and completed) instead of withdrawing off the market, unsold. In 2023, that figure had reduced to 57.5%, (interesting, when compared with the national picture when it was 65.33% in 2022 and 52.86% in 2023).

For Southampton home buyers: What are the challenges and opportunities? Some homes will still have bidding wars, yet you will have the luxury of choice and time with others.

External influences, from global economic trends, inflation and interest rate repercussions could all cast shadows on the Southampton property market. The pre-election Budget will no doubt affect the property market as will everything going on ice in the three or four weeks up to the election itself.

Delving Deeper: Strategies and Tactics to Sell Your Southampton Home

Given the property market's temperature, here are more granular insights:

Sellers: I've already mentioned, pricing is absolutely key to finding the right buyer. Also, the marketing to make your home stand out is vital - like video/virtual tours, specialised social media campaigns or interactive property listings—could make a difference in a cooling market. 

Buyers: Again, there is more than one market (look at the differences between the Southampton postcode districts above). The competition will heat up if you are looking for the type of property everyone wants. Having your mortgage pre-approval in place will give you an advantage over other buyers. Also, it is worth being open to widening your search radius to spot bargains others could miss. On the other hand, Southampton home buyers can exert more power in negotiations in a less competitive market, from offer price to extras (e.g. carpets or fixtures and fittings). Don’t forget -

81% of sellers are also buyers. So, what you might lose from selling in a buyers' market means you gain when buying.

Final thoughts - as we enter the second month of 2024, the Southampton property market offers both challenges and opportunities for Southampton's home buyers and sellers. Understanding the market nuances is vital if you are a Southampton first-time buyer, an existing homeowner looking to move, a seasoned property buy-to-let investor, or someone looking to relocate.

Stay adaptable, stay informed and remember that, as always, your home-moving story is as much about the journey as the destination.

What are your thoughts on Southampton's evolving property scene? Do you anticipate any other trends or shifts in the Southampton property market? What are your local insights and experiences?

Mortgage War Will Save Southampton Homeowners £3,215 A Year

 

In a recent financial turn, Southampton residents are experiencing a wave of relief as mortgage rates across the UK take a surprising dip. This reduction, led by major lenders, signals a potential opportunity for the Southampton housing market, directly affecting homeowners, landlords and first-time buyers in the city.

Let’s delve into what this means for the local market, weighing up both the opportunities and the need for realistic expectations.

The Welcome Decline In Mortgage Rates

Leading the charge, Halifax announced on the 2nd of January a significant 0.83% cut in its re-mortgage deals, a move promptly followed by other financial institutions.

These cuts are not just numbers; they translate to substantial monthly savings for homeowners. For instance, on a £200,000 mortgage, this reduction could mean savings of £138 per month. As these lower rates become the new norm, they herald a brighter outlook for those looking to re-mortgage or enter the housing market.

For Southampton homeowners eyeing the market, this is a particularly opportune moment. The lowered rates could make transitioning to a new home more feasible, easing the financial burden often accompanying such a move.

Additionally, previously daunted by high entry costs, first-time buyers might find the market more welcoming, spurring a rejuvenation of property transactions in the area.

For example,

The average terraced house in Southampton in the last 12months sold for £260,716.

The mortgage on a typical 85% loan-to-value mortgage would be £221,609 (meaning a 15% deposit of £39,107).

If a Southampton first-time buyer bought their house last summer, when the average five-year fixed rate was 6.3%, the mortgage payments would be £1,308.55 per month (for the next five years).

At the time of writing this article, Halifax were offering an 85% loan-to-value, five-year fixed rate at 4.57%, yet HSBC were offering something even better, a 4.44%, 85% loan-to-value mortgage on a five-year fixed rate.

That means their mortgage payments would only be £1,040.56 per month.

The average Southampton first-time buyer purchasing a terraced house is, therefore, saving £267.99 per month or £3,215.87 over the year because of the fall in mortgage rates over the last six months.

As you can see, the drop in mortgage interest rates makes quite a difference and will be a welcome saving to most Southampton household budgets.

Economic Indications And Market Predictions

The trend of falling rates is expected to continue, fuelled by competitive market dynamics and a general anticipation of further interest rate cuts by the Bank of England. Financial experts are betting on a substantial drop in Bank of England base interest rates throughout 2024, with the money markets believing base rates will slowly reduce in small steps from the current 15-year peak of 5.25% down to 3.75% by the year’s end, making mortgages more affordable and possibly boosting the property market’s health.

However, amidst the optimism, Southampton homeowners must adopt a tempered view. While the cuts are substantial, the rates are still relatively high compared to the historically low rates in previous years. Homeowners looking to sell should be particularly mindful of this. Setting realistic pricing, reflective of the current economic conditions and buyer capabilities, will be crucial to successful transactions.

Advice For Southampton Homeowners And Buyers

For those considering a move or entering the Southampton property market, it’s an opportune time to reassess your options. Seeking financial advice and comparing the market can ensure that you benefit from the best available rates. The market is fluid, and staying informed will be vital to making financially sound and beneficial decisions in the long term.

Advice For Southampton Landlords

In Southampton, falling interest rates herald a prosperous time for landlords. As financing costs decline, the burden of mortgages and loans diminishes, enhancing profitability. Concurrently, rents are escalating at a rate outpacing inflation, often in double digits, amplifying income streams significantly. This dual boon means landlords can enjoy reduced operational costs while benefiting from increasing rental revenues, bolstering their investment returns in the vibrant Southampton property market. This positive shift in financial dynamics offers a promising outlook for existing and prospective landlords in the area.

Final Words On This Mortgage War

The recent drop in mortgage rates brings a fresh wave of optimism to Southampton’s property market. It opens doors for homeowners looking to move and incentivises first-time buyers. However, a balanced, well-informed approach will be essential, with economic indicators suggesting varied outcomes. Whether you’re planning to buy, sell or re-mortgage, understanding the market and setting realistic expectations will be crucial to making the most of this financial shift. Southampton’s property landscape is evolving and with careful consideration and strategic planning, residents can navigate this change effectively and advantageously.

If you are a Southampton homeowner, landlord or first-time buyer and you have any questions about buying or selling in Southampton in 2024, please call us on 023 8098 4041.

Southampton's Guide To Mortgage Independence: Removing A Name From A Joint Mortgage

 

In Basingstoke’s dynamic property market, understanding the nuances of changing your mortgage, such as removing a name from a joint mortgage, is essential.

This guide simplifies the process for Basingstoke homeowners looking to navigate this potentially complex situation.

The Two-Step Process For Basingstoke Homeowners

Step 1 – The Mortgage Part:

This resembles remortgaging. Review your current mortgage to see if it’s still favourable or if switching lenders could offer better terms.

The lender will reassess the remaining party’s creditworthiness and ability to afford the repayments on their own. This is often the most challenging part, as Bank’s and Building Society’s affordability criteria might have changed since you originally purchased the property.

Step 2 - The Legal Part:

If all parties agree and the lender agrees, the process is straightforward. A conveyancing solicitor in Basingstoke can manage the legalities with minimal hassle for about a couple of hundred pounds.

Disagreements complicate matters, leading to costly and time-consuming legal challenges that are best avoided if possible.

Critical Considerations for Basingstoke Residents

Before removing a name from a joint mortgage, consider the financial implications. The party removed is no longer financially responsible for the mortgage, which could strain the remaining party, mainly if the departing individual contributed significantly to the payments.

Finally, while removing a name from a joint mortgage in Basingstoke can be straightforward, it’s vital to approach it with a clear understanding of the legal and financial implications. Being informed is critical to a smooth transition, whether you’re dealing with divorce, investment changes, or a simple buyout.