There hasn’t been much good news to shout about in the housing market recently, but a glimmer of hope has crept in after the CML announced that mortgage lending increased in November.

The number of people taking out a fixed rate contractor mortgage in November was the highest seen for more than two years. 65% of the 47,000 mortgages taken out were fixed rate deals as borrowers took advantage of the good deals available. The Post Office and Nationwide are amongst the providers to have slashed the rates on their fixes as the Bank of England base rate remains at 0.5%.

Despite November’s increase, Howard Archer from HIS Global Insight explained that the UK’s housing market is still low and will probably come under further pressure this year. He expects house prices to fall by as much as 5% as the market is weighed down by rising unemployment, weakened economic activity and low consumer confidence.

First time buyers took out 17,300 mortgages worth a total of £2.1 billion in November. In November 2010, the typical first timer spent 13% of their income on mortgage interest payments. By November 2011, this had decreased to 12.2%.

The CML remarked that although we have seen a significant decrease in the number of first time buyers since the start of the recession, the proportion of mortgages granted to them has stayed reasonably steady. Last November, 37% of all mortgages went to first timers. There was also a 2% year on year increase in the number of mortgages granted to people moving home.

Paul Smee, the director general of the CML, expects to see first time buyer activity increase in the short term as purchasers rush to complete before the stamp duty holiday ends in March.

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In the last 12 months, the number of available contractor mortgages has increased from 2,527 to 3,180. We’ve even seen some 95% LTV loans creeping into the market, but there are still not enough of them to satisfy first time buyer demand.

New mortgage deals are now only around for about 27 days before they become fully subscribed, according to the website Moneyfacts. The historic average was 30 days. This would suggest that demand is higher than supply.

Moneyfacts discovered that there are currently 49 mortgages requiring just 5% deposit. This compares favourably with the 24 products that were available this time last year. Furthermore, there are 280 home loans with people with a 10% deposit, up from 199 last January.

People moving home with a deposit of at least 40% have 393 mortgage products to choose from.

First time buyers have been having a hard time saving for a deposit over recent years and they will need to find more money this spring when the stamp duty holiday comes to an end.

Despite an increase in the number of products, there are concerns that mortgage lending criteria will be tightened this year and a lot of borrowers could struggle to meet the conditions. Current global economic concerns are weighing heavy on providers and they prefer the assurance that comes with a proven track record. This is reflected in the incentives, such as cash back and free legal fees, offered to those looking to remortgage.

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Bellway homes, the UK house builder, has reminded first time buyers that the stamp duty holiday on new homes is about to end.

Homes costing less than £125,000 do not attract stamp duty but people buying a property costing £125,000 or above have to the tax at a rate of 1% of the purchase price.

In March 2010, the government increased the threshold for first time buyers to £250,000 to make it easier for them to enter the housing market. However, on March 24th that relaxation comes to an end.

Steve Rose, the sales director at Bellway, explained that thousands of first time buyers have taken advantage of the stamp duty holiday, but time is running out.

Bellway was also pleased to learn that contractor mortgages for people with only a 5% deposit were to return. The government announced that a 95% mortgage would be available from leading lenders as past of its National Housing Strategy.

Maria Seed said that first time buyers only spend about one eighth of their monthly income on mortgage interest repayments. However, the average rent is now £720 a month and this means first time buyers struggle to save enough for a deposit.

Data from the CML showed that just 36% buyers bought their first home without financial assistance from friends and family in Q3 last year. Average deposits stand at more than £26,000, double the requirement in 2007, when 63% of first timers were able to buy without turning to others for assistance.

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People looking for a contractor mortgage may like to know that the National Association of Estate Agents has predicted that the UK housing market will begin a gradual recovery this year.

Peter Bolton King, the Chief executive of the NAEA, said that although their will be a gradual recovery, we should not expect to see a major upturn from the conditions of 2011.

He does not think that house prices will fall significantly in 2012, rather they will remain similar to those seen last year.

The lack of finance will still be the biggest barrier to house purchase and first time buyers will find it particularly hard to secure a mortgage from the major institutions as they continue to adhere to strict lending criteria. The abolition of the stamp duty holiday in Q2 will be an added burden for first timers, he added.

He also expects to see an increase in micro housing markets where demand in some areas creates a healthy market whilst less desirable areas get left behind. The demand for housing in the South East and London will increase during 2012 and this will push up prices in those areas. But, on the whole, he expects average house prices across the UK to remain reasonably unchanged this year.

Mr Bolton King finished off by saying that confidence would be a key factor this year and to some extent this would be driven by the media.

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A lot of contractor mortgage experts are questioning why the Chancellor did not extend the stamp duty exemption when he delivered his Autumn Statement at the end of November.

George Osborne was keen to say that the government wanted to help first time buyers and yet he missed a golden opportunity to extend the stamp duty holiday, which is due to finish on the 24th of March next year.

First time buyers will have to find up to £2,500 extra to buy a property and in these uncertain economic times, that could make all the difference between buying their first home or staying in rented accommodation.

High deposit requirements have meant first timers have been struggling to buy over the last few years. Now, they have only a small window in which to secure a property before the stamp duty exemption disappears.

The National Association of Estate Agents’ former president, Trevor Kent, said the Autumn Statement was the ideal time for the Chancellor to rethink stamp duty across the board. A £50,000 bill on a £1 million property is a lot of money and is the primary reason why the high-level housing market is stumbling.

70% of residential property sales involve a long chain that usually begins with the first time buyer and after various transactions ends up with a million pound buyer. If the sale at the top end falls through due to the 5% stamp duty levy, the entire chain collapses. Meanwhile, the first time buyer could be left with limited funds after paying expenses on the now aborted deal.

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First time buyers may be interested to know that the Chancellor is expected to reveal that the Government is to back contractor mortgage indemnity guarantees for those struggling to raise a deposit.

In order to get a good mortgage rate, first time buyers need a decent sized deposit and this has been a major problem of late. A mortgage indemnity guarantee would reduce to risk to lenders and protect them if a homeowner went into negative equity.

The aim of the scheme is to help buyers with only a 5% deposit gain access to a good mortgage rate. Currently, the average first time buyer needs a deposit of 20%, or £26,000.

Prior to the global credit crisis in 2008, the average LTV for a first timer was 92% and in the 1980s and 90s it was 94%.

The CML is calling on the Government to maintain the stamp duty relief on properties valued at less than £250,000. Although there is no evidence to suggest that more people are buying since the introduction of this relief, the CML says it would be a mistake to withdraw it while the housing market is still in such a fragile state.

Construction firms and the CBI have championed the idea of mortgage guarantee schemes and some builders are already offering incentives to first time buyers. It is still possible to get a 95% LTV mortgage but they command much higher interest rates and therefore have little appeal.

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Countrywide, the biggest property services group in the UK, says there was a 4% increase in the number of new properties entering the housing market in March, marking the third successive monthly increase.

March’s residential market was relatively stable and although the number of sales dropped by 0.8%, buyers rushed to complete high-value purchases to beat the increase in stamp duty land tax. The number of agreed sales in London and the South East through Countrywide’s premier agents rose by 41% compared to February.

Countrywide’s 650 mortgage consultants revealed that mortgage applications in March increased by 9%. Remortgage applications fell by 2% during the month and made up for just 26% of all the applications received for a mortgage.

The Top 10 most popular list of Countrywide mortgages were all fixed rate contractor mortgages and in the first quarter of this year, 87% of all applications were for fixed rate deals.

As further proof that first time buyers are being denied access to the market, there was an increase in the number of people registering for rental properties.

The chief executive of Countrywide, Grenville Turner, said the housing market has had a challenging start this year but the increase in high value sales has helped and sellers with realistic prices have been successful.

The surprise drop in inflation might encourage the Bank of England to hold back on raising interest rates for the next few months giving further respite to customers. The overall outlook for the economy will have a big impact on the housing market’s ability to grow for the rest of the year, he concluded.

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Freelancers considering taking out a contractor mortgage may be interested to learn about a ‘no-mortgage’ scheme due to be launched in the autumn.

Mill Group, a UK property and finance group, have come up with the scheme in a bid to help first-time buyers in London. The idea is being marketed to investors and the Group hopes to raise a property investment fund worth £100m.

Under the ‘no-mortgage’ scheme, a first-time buyer would team up with an institutional investor to co-buy a property. The consumer would be required to buy a minimum 5% share and the investor the remainder. They would own the home as tenants in common, but the first-time buyer would have exclusive occupancy rights and full property entitlement.

The investor would pay any stamp duty owed and the consumer could purchase a larger share of the property as and when they choose. After two years, they would also be allowed to take out a mortgage and buy out the investor.

There is a drawback in that the consumer will hardly benefit from an increase in the property value, but neither will they suffer negative equity.

Mill Group thinks investors will show an interest in the scheme because occupants will regard the property as their own and therefore it should not suffer the wear and tear that occurs in buy-to-let properties.

This is new unique concept as far as the UK housing market goes and could prove quite popular as very few mortgage lending companies currently grant a home loan with as little as a 5% deposit.

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Last week the Halifax published data showing that house prices rose by 0.1% in March. This news was quickly followed by another set of figures, this time from LSL Property Services and Acadametrics, showing that prices dropped by 0.1% last month. Which set of figures should we believe?

The LSL/Acadametrics index shows the average price for a home in the UK is now £222,146. There was a 6% rise in seasonally-adjusted transactions as buyers tried to beat the higher band stamp duty increase which came into effect on April 6th.

The index also stated that during the last year house prices stayed static recording growth of 0%. As we have come to expect in recent month, there were wide regional disparities. Eight out of the ten English and Welsh regions are currently witnessing falling house prices, whilst the south east and greater London are bucking the trend and propping up the average.

David Newnes, the MD of LSL Property Services’ estate agency, pointed out that although house prices are static, real property values are decreasing due to the high Retail Prices Index.

He believes this is good news for people able to secure a contractor mortgage. We won’t have high inflation forever and there are various good fixed rate deals available at the moment. He also went on to point out even though salaries are not keeping up with inflation; property values now represent a smaller proportion of income.

The LSL/Academatrics results are generally considered to be the more dependable house price barometer as they publish statistics from registered transactions whilst the Halifax derives its data from mortgage approvals.

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The budget is done and dusted for another year and George Osborne did offer a glimmer of hope to first time buyers.

He explained that it was not fair that many families could not get a foot on the housing ladder because of outlandish deposit requirements. Therefore, from the proceeds of the bank levy, the government is committing £250 million to helping first time buyers.

Aptly named First Buy, this will be in the form of a shared equity scheme for people who want to buy a newly built home but do not have enough savings to lay down a large deposit. The Chancellor said this scheme will help 10,000 families purchase their first property.

He also announced that the Support for Mortgage Interest Scheme will continue as is until the end of January 2012, a move that will reduce contractor mortgage arrears for about 100,000 unemployed homeowners.

Furthermore, the coalition is going to take action to help the beleaguered construction industry by changing the way stamp duty is levied. It will now be charged on the average value of the properties being purchased as opposed to the bulk cost. Real Estate Investment Trusts are also going to be simplified in order to encourage the construction of new homes.

The government has being saying it plans to crack down on tax avoidance and Osborne said he was going to take specific steps towards closing down open abuse. As part of those measures, three forms of Stamp Duty Land Tax avoidance will be closed down.

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First-time buyers have been struggling to get their foot on the housing ladder for some time now and the lack of finance from mortgage lending companies has been largely to blame.

But do first-time buyers actually understand how much they can borrow? This used to be a straightforward multiple of your annual salary. Things have now changed and the calculations include credit scoring and affordability tests. For example, if you don’t have a lot of personal unsecured debt, it may be possible to get a contractor mortgage of up to four times your annual income. First-time buyers can look at lenders’ websites and check their circumstances on the affordability calculators to see how large a mortgage they could raise. If you have a shortfall, it could be worth involving a parent or pooling resources with friends.

Raising the requisite deposit to get the most attractive rates is another major hurdle facing first-timers. To get the best interest rates you normally need to put down at least 30% of the purchase price as a deposit. A two-year fixed rate 70% LTV mortgage costs between 2.8% and 4.5%, whereas a 90% mortgage has rates of between 5% and 7%.

The deposit isn’t the only upfront charge that you need to budget for either. There’s stamp duty [on properties over £250,000], valuation fees, survey costs, legal fees and the removal costs. These can add thousands onto the upfront monetary requirement.

For people who have no way of accessing the large amount needed to start the buying process, there is another option; shared ownership. These schemes are run in conjunction with housing associations and let you purchase a percentage of the property and rent the rest. As your circumstances improve, you can then buy another slice of the property. The deposit requirement for shared ownership is normally around 5% of the full purchase price, making it a much more affordable option.

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Although Grant Shapps, the housing minister, has said we should not view property ownership as a long-term investment, the government is planning to make it easier for people to obtain finance to build their own home.

Self-builders currently account for 20% of all new homes built in the UK each year and yet many potential self-builders give up due to bureaucratic and complex regulations and lack of access to finance and land. Shapps now wants to remove some of the obstacles that have led to the UK sitting near the bottom of the European self-built homes league table.

About 10,000 self-build properties are completed in the UK every year, but for many the key stumbling block to the do-it-yourself approach is the lack of contractor mortgage availability.

The Norwich & Peterborough building society for example, will provide a 75% loan on the cost of the land and the same percentage towards the building costs. However, the payments are staggered and paid in arrears as the work progresses. The building society’s best buy self-build loan is a tracker mortgage currently standing at 5.3% that comes with the option to remortgage to a more standard mortgage after three years.

Self-builders can save thousands of pounds in stamp duty costs as it is only payable on the cost of land over £125,000. In March 2010, 60% of plots cost under this threshold. Stamp duty is not payable on the value of the finished property and you can reclaim the VAT on the majority of goods and materials used, provided they were purchased from a VAT registered supplier and providing you claim within 3 months of the property’s completion.

The chairman of the National Self Build Association, Ted Stevens, said it’s perfectly feasible to construct a three bedroom property for about £150,000. Data from some sources suggests that self-build homes can be worth between 25% and 30% more than they cost to construct once they are completed.

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