Rishi Sunak Launches 95 per cent Mortgage Scheme

Today sees the launch of the UK government’s new 95% mortgage scheme in a bid to make homeownership more affordable for UK first-time buyers and current homeowners. The 95% mortgage scheme was first announced by UK Chancellor of the Exchequer, Rishi Sunak, during the Spring Budget in March 2021 and will allow aspiring homeowners to secure a mortgage with a 5% deposit of a home up to the value of GBP 600,000.

The new mortgage scheme is now available from various mortgage lenders this week, including Lloyds, Santander, Barclays, HSBC, NatWest and Virgin Money from May, with applicants being subject to the standard affordability checks.

UK Prime Minister Boris Johnson previously made clear that a crucial aim of the UK Government was to tackle inequality within the UK property market. In 2019 the Government pledged to build 300,000 new homes each year in the UK, as well as a promise to invest over GBP 12 billion in affordable properties over the next five years.

UK Government property schemes have helped over 687,000 households across the UK secure homeownership since 2010, such as Help to Buy and Right to Buy, highlighting the value of financial assistance when looking to buy a property. Despite the mortgage schemes available, 63% of individuals living at home could not find a low-deposit mortgage when conducting mortgage research for their first house purchase.

UK Secretary of State for Housing, Robert Jenrick, “ “for too many people, no matter how hard they work, homeownership can seem out of reach. One of the biggest divides in our country has been between those who can afford their own home and those who cannot.”

The 95% mortgage scheme is not proposed to be a permanent solution and is currently scheduled to run from April 2021 to December 2022. The UK Government believes the current lack of high loan to value options results from the coronavirus pandemic rather than a long-term change in the mortgage market. The Government confirmed that they would review the scheme as the targeted end date approaches to decipher if they should extend it.

Surging demand from UK property buyers

The UK’s 95% mortgage scheme has been welcomed by the public and the property industry following a surge in UK property demand. In addition to the other government-backed property schemes, the launch of the 95% mortgage gives UK buyers an even greater chance of securing a mortgage, supporting both families and young buyers.

Nick Barnes, Head of Research at Chestertons, stated that the new mortgage scheme would likely provide a further boost to the UK’s property market. “With 46 per cent more properties available to buy at the end of March than a year ago, buyers will have a greater chance of finding their ideal property,” Mr Barnes said.

The launch of the new mortgage scheme follows data from Rightmove, stating average UK house prices have hit an all-time high of GBP 327,797. In a bid to generate further activity in the UK property market, Chancellor Rishi Sunak also announced an extension to the stamp duty holiday. Initially, due to end in March, the stamp duty holiday has now been extended until the end of June, which will help further UK buyers secure their dream home.

UK property prices will likely continue to rise this year due to the UK’s efficient coronavirus vaccination programme, which has brightened the UK’s economic outlook. UK property prices increased by 2.1% this month alone, which is a rise of GBP 6,733 as it’s reported that 2-3-bedroom semi-detached homes are the most popular purchases across the UK. Tim Bannister from Rightmove identified that property prices increasing by more than 2% in one month has only happened twice within the last five years, highlighting the significance of the price jump.

Additionally, the number of days taken to sell a property in the UK has dropped to a record low of 45 days, indicating the urgency of UK property buyers who are desperate to secure a deal. Around 145,000 properties were added to the market this month, though this is still not enough to meet the rising demand of UK buyers.

It’s thought that the surge in demand is a result of the coronavirus pandemic and many families wanting to move away from large, busy cities for more remote and spacious properties. Many buyers have recently struggled to find their ideal property as more sellers wait until they have received their vaccination against coronavirus before listing. As a result, it’s thought that there will be a much more significant increase in houses up for sale as 2021 advances.

With the coronavirus pandemic confining people to their homes globally, it’s unsurprising that finding the perfect property has become an even greater priority to many. As a result, international property markets are also seeing increases in both price and demand.

US property prices up 17%

A recent report conducted by real estate brokerage, Redfin, has found average US house prices are up 17% to USD 341,250 year on year during the four weeks ending 11th April.

Similar to the UK, US properties are also not remaining on the market for long, as the report confirms US properties are advertised for 23 days on average. US homes are being snapped up quickly due to low inventory, with there being 13% fewer new listings on the market compared to the same period in 2019.

Currently, US property buyers must make offers above the asking price to secure a deal, with more than 50% of Redfin property offers subject to bidding wars.

According to realtor.com, New Hampshire is currently the most popular property in the US, with Manchester-Nashua and Concord metro areas claiming the top two spots on the list. Manchester-Nashua has claimed a top spot on the list for many years as new data reveals that properties within the area sold in less than 19 days during March, which is 35 days faster than the rest of the US. Median property prices in the area stood at USD 420,000 during March, which is an 8.4% increase year on year.

Dubai property demand increases during Q1

Following the dwindling demand experienced in 2020, the Dubai property market finally appears to be on the up. According to the ValuStrat Price Index, residential property purchases in Dubai rose 0.8% during Q1 compared to the previous quarter.

Haider Tuaima from ValuStrat attributed the increase in demand to the rollout of coronavirus vaccinations, which are helping to improve Dubai’s economic outlook.

Dubai villas proved to be more popular than apartments during Q1 as buyers continuously seek more spacious properties during the coronavirus pandemic. Quarterly price growth for Dubai villas rose by as much as 5.4% in sought after locations, with popular areas also subject to bidding wars.

ValuStrat’s report indicates that Dubai will deliver around 6,316 apartments and 10,563 villas and townhouses this year.

Property driving Australia’s economic growth

Australia has seen a sharp economic recovery this year, with very few coronavirus infections and strong fiscal policies from the Australian Government. A driving force behind the economic recovery, however, can be attributed to the surging property demand.

Whilst high property prices are excellent for business, Australian cities, particularly, Sydney has become one of the most unaffordable property markets in the world. The Commonwealth Bank of Australia (CBA) has forecast that Australian property prices will grow by 10% in 2021.

Currently, industry professionals do not appear to be concerned regarding rising house prices in Australia. Peter King, Westpac chief executive, stated that it would be unnecessary to curtail Australia’s property price growth at this stage as market conditions are less risky than in previous years.

New Zealand property prices have also surged to record highs this year, with average house prices increasing 24.4% year on year during March. Wendy Alexander from The Real Estate Institute of New Zealand (REINZ) noted the desperate need for further supply within the New Zealand property market.

Last month saw New Zealand Prime Minister Jacinda Ardern implement changes to the country’s housing policies, such as increased grants to first-time buyers and cracking down on tax loopholes for property investors. The cooling measures have been met with criticism from economists, believing the strategies will not fix the issue of rising property prices in the long term as housing shortage remains the heart of the matter.