The Sunday Times - UK (2022-05-22)

The Sunday Times May 22, 2022 13

Average amount paid by irst-time buyer in the UK

220

£240k

200

180

160

140

120

Source: ONS

2012 14 16 18 20 22

don, the average rent for a two-bedroom flat is about £1,800 a month, but repayments on a £380,000 mortgage to buy a the same flat would be £1,641 a month at the average interest rate of 3.19 per cent on a 30-year term. The affordability test would probably be carried out at closer to 7 per cent, giv- ing monthly repayments of £2,525. Banks are limited to lending a maximum of 15 per cent of mortgages a year at 4.5 times someone’s salary or more, but are pushing against that limit as much as they can. In 2010, just after the financial crisis, the average first-time buyer borrowed a mortgage 3.19 times their salary, according to UK Finance. By 2021, it had increased to 3.57 times. In the southeast over the same period, it went from 3.35 times to 3.86 times. Loans have also stretched — where once a typical borrower only took a mortgage for 25 years, now they are taking them for 30 or even 40 years,meaning that they carry on making repayments beyond 65 and even 80 years of age. Andrew Montlake from Coreco, a mortgage broker, said: “Lenders are struggling to see what they can do further that satisfies risk regulations. The problem is a broken housing market.” Some will lend very large amounts. Nationwide Building Society’s Helping Hand first-time buyer scheme offers loans at 5.5 times income up to 95 per cent of a property’s value, while the broker-turned-lender Habito will lend up to seven times with a 10 per cent deposit. So first-time buyers are borrowing more and with smaller deposits. In the first three months of 2010, the average first-time buyer borrowed 67 per cent of their property’s value, according to the Office for National Statistics. By the end of last year, this was up to 76 per cent. Up to now record-low interest rates have kept repayments low, although the Bank of England base rate is rising quickly. For now availability of low-deposit mortgages is good too. At the start of May, there were 369 mortgages on the market at 95 per cent LTV, according to the data firm Moneyfacts, up from 112 a year ago. Fixed-rate mortgages of up to 40 years, once unheard of, are now available. In old Amersham, two women in their late sixties are walking a dog. One says: “People round here are not anti-develop- ment, but they question where they are going to put these homes. If they were affordable, people wouldn’t mind so much, but some of the new builds are just too expensive.” For now there is nothing to help Jake Harvey, 26, who moved to Amersham in August 2020 and rents a room in a friend’s flat. “It’s a great place to live as someone my age,” he said. “I would love to buy in Amersham, but realistically can’t afford it on my current salary, whatever my deposit is. That’s the long and short of it.”

(£450,000 in London) with a Help to Buy Isa and if you use your Lifetime Isa to buy a home worth more than £450,000 you have to pay a penalty that works out as more than the government bonus. This did not seem like much of a problem when the schemes were introduced, but as house prices have soared and the caps have been frozen, more savers have been priced out of the bonuses. Buckinghamshire’s average first-time buyer price of £345,717 is too high for a Help to Buy Isa while the two-bedroom flats in Amersham listed for £425,000 would be right on the cusp of the Lifetime Isa limit. There have been other attempts to boost affordability The Bank of England is considering loosening the rules brought in after the last financial crisis, which mean that borrowers are “stress tested” to see if they can afford a mortgage at 3 percentage points above their lender’s standard mortgage rate, which would work out at about 8 per cent today. The change could mean a stress at more like 1 percentage point above a lender’s standard rate, which would allow 30,000 people a year to borrow more money. Many first-time buyers complain that they cannot borrow enough and are turned down for loans that would have the repayments equal to their current monthly rent. In Hammersmith & Fulham, west Lon-

and you can claim it at 66, although that is being increased to 67 and then 68. When you approach state pension age, you should get a letter from the government that will tell you how to claim. You can also apply online on gov.uk if you are within four months of the state pension age. You need at least 35 years of full national insurance contributions, known as credits, to qualify for the full state pension. Helen Morrissey from the wealth manager Hargreaves Lansdown said: “Women can often struggle to meet the criteria because they spend time out of the workforce looking after families.” You automatically get national insurance credits if you claim child benefit while not working. The benefit pays £21.80 a week for your first

child and £14.45 for any others but if anyone in your household earns more than £50,000 you may have to pay some of the benefit back through a tax return. If you are under state pension age and looking after a family member under the age of 12 (and are not their parent or main carer), you could also qualify for credits. You can also buy extra national insurance credits to plug any gaps in your record. About £825 can buy a full year, and you may be entitled to buy up to six years’ worth. If you are at state pension age and on a low income, you should see if you are eligible for pension credit, which tops up your weekly income to £182.60 if you are single and £278.70 if you have a joint income. It also entitles you to a free TV licence and help with council tax.

market here has been propped up by alumni of the schools, who want to move back here with their families, but we’re seeing a new breed of buyer with no pre- vious connection to the place,” said Kraig Butler from the local branch of the estate agent Hamptons. “What’s been fascinating for us is the extra focus on Amersham because of the Metropolitan Underground line. The number one priority for buyers here used to be schooling, followed by access to London, now it’s flipped. Lack of sup- ply of housing is a big problem.” It is the Tube line premium that is now pushing young people away from the area. Take Jared Gifford, 24, who grew up in Chesham, but moved out to rent in Wembley, north London last October. Gifford, who works in advertising in the City, now pays £1,000 a month to rent a one-bedroom flat with a bal- cony and access to a gym. He would have had to pay £700 to £800 a month to rent in Chesham. He felt that being that little bit closer to London meant that con- nections were more reliable, so the extra cost of renting seemed worth it. Robert Colvile, a Sunday Times colum- nist and director of the Conservative think tank the Centre for Policy Studies, said: “The problem is that while we abso- lutely need to build more houses, the

winners from that process are invisible until the houses are built, while the losers [those who oppose housebuilding in their town] are very obvious and very vocal — and often tend to be in senior positions within local Conservative Party associations or on the local council.” The Conservatives have launched six schemes to support first-time buyers since 2010. Along with the mortgage guarantee scheme, there is the Help to Buy equity loan, which offered first-time buyers with a 5 per cent deposit a loan to cover up to 20 per cent. Shared ownership allows you to buy up to 75 per cent of a property and rent the rest, with the ability to buy more in chunks called “staircasing”. The First Homes scheme, launched last year, offers discounts of between 30 per cent and 50 per cent on new homes for those earning less than £80,000 or living locally. The Help to Buy Isa, which closed to new savers in 2019, offers first-time buyers a 25 per cent government bonus on their savings, paid on com- pletion of the purchase. Its succes- sor, the Lifetime Isa, pays the same 25 per cent bonus, up to £1,000 a year, straight into the account (so it can go towards your deposit). Both Isas have caps on the price of property you can use them for. You cannot buy a home for more than £250,000

I want to

buy but

I can’t afford it,

whatever

my deposit

High street, Amersham, has 11 estate agents

Kraig Butler from Hamptons is seeing a new type of buyer

Jared Gifford is renting in Wembley, north London

The number of women who get less than £100 a week from their state pension is more than triple the number of men who receive the same, despite the state pension gender gap narrowing. About 1.5 million women were getting less than £100 a week from their state pension in November last year, down from the 1.67 million recorded in November 2020. Last year 448,082 men had a state pension of less than £100 a week down from 465,479 in 2020. Women had an average weekly state pension of £148.82 last year, 3.8 per cent more than the year before. Men received an average of £172.12 — 2 per cent more than in 2020. The state pension pays out a maximum of £185.15 a week

Imogen Tew

Liquid gold deals run dry

1.5m women on less than £100

interest over 12 months. In real terms that money would now be worth £9,175, a loss of £826. The same goes for money held in other easy-access accounts with Halifax, its stablemate Lloyds, and other high street banks, which were all paying 0.01 per cent until very recently. After three rises in the Bank of England base rate between December and March, HSBC, Lloyds, NatWest and Santander put rates up to 0.1 per cent, but Barclays still pays 0.01 per cent — a rate far off both the rate of inflation and the best savings rates available. The Bank rate went up again on

May 5 and is now 1 per cent. There are no savings deals that come close to the 9 per cent rate of CPI but the best rate is now 1.5 per cent from Chase, JP Morgan’s app-based bank. You have to open a current account but this does not take long and the bank will pay a £20 bonus to anyone who refers a friend — and the friend gets £20 too. If inflation stayed at 9 per cent over the next year your £10,000 with Chase would be worth £9,312, compared with £9,183 if it was held in an account paying 0.1 per cent. Rachel Springall from financial information site Moneyfacts said: “Many of the high-street banks have passed on very little of the base rate rises so savers may need to rethink their loyalty. “Keeping on top of the latest changes in the market is wise, especially as rate increases are prevalent as savings providers jostle for market position.”

Accounts claiming to offer savers “liquid gold” returns, “extra income” and a “reward” on their money will have lost them £826 in real terms over the past year. Halifax has given exotic names to its savings accounts, some of which are up to 40 years old, but the rates paid now work out at a less- than-exotic £1 of interest on every £10,000 of savings. Halifax’s Liquid Gold account paid up to 10 per cent in the 1980s when it was advertised by the TV character Arthur Daley from Minder. Since July 2020 it has paid 0.01 per cent. The latest consumer price index measure of inflation released on Wednesday by the Office for National Statistics put price rises at 9 per cent in the year to April — a 40-year high. If you had £10,000 in one of these accounts last April, you would have earned just £1 in

George Nixon

£20 Bonus you get from Chase per person referred

Plant the seeds,

then reap

the rewards

City cynics used to say that investing in the stock market was like growing asparagus — you should always have started five years ago. But the FTSE 100 index of Britain’s biggest shares traded 1.5 per cent lower on Friday than it did in May, 2017, so there is no need for anyone to fear they have left it too late to participate. Nor should we be baffled by Square Mile slickers, who seek to make investment sound complicated to justify their own, often grossly over- paid, existences. By contrast, the Royal Horticultural Society’s Chelsea Flower Show, which starts on Tuesday, reminds me that investing can come down to common sense; not unlike gardening. Patience is required to make plants and money grow. Diversification is a fundamental way to cope with unexpected adversity, such as bad weather and bugs or bad numbers and fraud. Each seed, or investment, can look very alike initially, but one will bloom while the other never amounts to much. Only time will tell them apart. Steady application, little and often, is far more likely to produce satisfactory results than hoping that we can catch up later. Many people spend most of their lives working for money and investing in the stock market is a simple way to make money work for you. Simple, but not easy, and it is important to beware of good stories that turn out to be bad investments — such as cryptocurrencies. Owning a stake in real businesses, whose goods and services we buy as customers, is a much better way to accumulate wealth. But it is likely to be a slow process, so the sooner we start the better.

The Sunday Times - UK (2022-05-22)

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