Happy Friday all. We hope this weekend brings fireworks for you!
This week, good news for first time buyers as Help to Buy extends it tenure, a focus on the differences between payment protection insurance and income protection, tips on buying homes this winter, and a few words from Dean Smith, our man in the know when it comes to equity release.
Help to Buy extended to 2023 for first-time buyers – Source: What Mortgage UK
The Help to Buy Equity scheme, which provides loans to help people purchase new build properties, has been extended for first-time buyers to 2023.
The Government scheme was launched in April 2013 and provides a 20% loan towards the deposit which is interest-free for five years. It was due to end in 2021.
However, as part of this week’s Budget it was announced the scheme would be extended for an additional two years to allow more first-time buyers to benefit.
So far Help to Buy has enabled thousands of first-time buyers realise their dream of homeownership. Indeed, UK Finance, the trade body for the mortgage and banking industry, said schemes such as this had helped boost first-time buyer figures to their highest level in a decade.
But it has not been without its critics, either. Daniel Hegarty, CEO and founder of leading digital mortgage broker, Habito, said although originally tipped as a ‘solve-all’ scheme to fix the housing crisis, it’s actually been a mixed success at best.
He explained: “Despite the scheme helping many would be homeowners get on the ladder and contributing to the building of more new homes, those using Help to Buy have been found to be paying almost 10% more on average for their homes than those who don’t.”
However, he said the fact it had been extended for first-time buyers only meant it would have a greater impact for those who really needed help.
He added: “The scheme hasn’t quite worked as intended with over a third of households using it found to be earning over £50,000 and data showing it has been used by movers to upsize.
“The new restrictions making it for first-time buyers only with regional price caps should provide a more targeted benefit to those who need it most.”
Meanwhile Gemma Harle, managing director of Intrinsic mortgage network, said some would see the extension of the scheme as a positive but others would be unhappy it had not been scrapped.
She added: “The scheme has had mixed reviews with some accusing it of simply serving to massively inflate housebuilder share prices alongside the unintended consequence that some first-time buyers have been left as mortgage prisoners.”
Support for future homeowners
Those who welcomed the extension, however, said it would not only support first-time buyers but also provide more certainty for housebuilders, developers and buyers which would enable them to plan more effectively for the future.
Craig McKinlay, new business director at Kensington Mortgages, said: “It isn’t the only solution to solving the housing crisis, but it has supported many people on the path to homeownership.
“A guarantee of its extension to 2023 is much needed news for both developers and buyers to help with their long-term plans.”
In Focus – MPPI vs Income Protection
We recently carried out a protection review with a client who wanted to ensure that if she was unable to work as a result of accident or sickness, she could still make her mortgage payments and meet her monthly commitments.
She had received previous advice that an accident and sickness PPI policy would be best for her, and had been quoted £27 per month for this policy. When researching the market, we discussed the option of income protection as oppose the policy she had been previously advised on. Why?
In short, an MPPI policy has its place with some customers, particularly if they are unable to obtain an income protection policy because of their job, for example, HGV drivers. However, if you are able to obtain an income protection policy, it is often a much better value policy. The table below illustrates this:
As you can see from the table above, income protection does provide far more cover than the MPPI policy in general.
So back to our client – She may have cause for concern that this type of policy may have been excessively priced compared to the MPPI contract she had been looking at. In this instance, our client ended up with an income protection policy that cost her just £29 per month. £2 more but a whole lot more cover for the money.
Don’t hesitate to get in touch for a full review of your own protection requirements, where we will search the whole of market for the best products to meet your needs. And don’t forget, you can get a no obligation home insurance quote from Foursquare Financial Ltd here!
* Source: Association of British Insurers (ABI)
Now that the clocks have gone back, Halloween is done and the kids have had the academic years first half term, we really are in to the best time of year for buying houses.
In all likelihood, buying a house now means you won’t “be in for Christmas” as the legal process usually takes 8 weeks when buying with a mortgage. So many less serious buyers put their search on hold for a property until after the new year. That means we enter a buyers market – Where there is less competition for property and thus, you are often able to get a really good deal on a purchase at this time of year, as oppose in January, when there are many more buyers in the market place and it becomes a sellers market. The property market really is as simple as supply and demand. We’ve already seen this happen at Foursquare HQ, where a buyer we are dealing with managed to negotiate more that 5% off the asking price of the home they were buying.
Also, remortgage rates are very keen at this time of year. One last push from lenders to get business through the door before Christmas. So if you are due to come out of a fixed rate product in early 2019, it is worth getting in touch now to secure a product. You may save money in the long run!
From Our Network – Dean Smith, The Right Equity Release
Looking to Pay Off Your Interest-Only Mortgage?
Are you one of the approx. 1 million home owners who still have an existing interest-only mortgage which will need to be repaid at some time?
Could equity release be the answer to paying off your interest-only mortgage?
Whilst downsizing is one of several options, many homeowners don’t want to leave the house that they call home and they love. For people in this situation, one alternative solution could be equity release. Homeowners could clear their interest-only mortgage by releasing some of the equity tied up in their home.
Paying off your interest-only mortgage could be the start of a less anxious retirement. Depending on the value of your home, you could even raise extra funds for home improvements, holidays, or any other expenses to help you enjoy your later years to their fullest.
We at The Right Equity Release offer clients an Independent Whole of Market Equity Release Advice Service. With a free consultation and no obligation. Why not contact us on 07955 746733 to see if we can help you with a solution for your interest only mortgage
The Right Equity Release Ltd is authorised and regulated by the Financial Conduct Authority
More from us next week! 😊