Housing market now a two-tier market, says Birmingham broker
The Government is failing to address the real problem in the housing market and has created a two-tier marketplace, a leading Birmingham mortgage broker has said.
Joyce Coakley, managing director of MCedgbaston, said that “tinkering around” with the lower end of the stamp duty threshold was not the way to stimulate the market and would have little effect, even on first-time buyers.
Ms Coakley made her comments as the Halifax announced a further fall in house prices with values dropping 1.8 per cent in August - a 10.9 per cent fall over the past year.
The broker said a reduction of stamp duty in the £250,000-plus bracket would be more effective in getting the market moving, by encouraging movement in the middle price range.
“However the biggest problem for first-time buyers and other purchasers is finding an affordable mortgage deal”, she said. “Lenders are being more selective over who they lend to and pricing their deals accordingly and that’s producing a two-tier system.
“The rate at Halifax, as a typical example, on a three-year fixed rate 95 per cent deal which now avoids stamp duty, is 8.04 per cent, some 3.04 per cent above the base rate.
“It’s a rate most would consider to be a commercial proposition and equates to a monthly cost to the borrower of £1,287.55 on a typical 25-year repayment deal. What’s more this option attracts a ‘higher lending fee’ of £2,537.50.
“If you compared this to the same purchase with a 25 per cent deposit rate, it becomes a 5.72 per cent rate and on the same three-year fixed rate deal would mean monthly repayments of £823.32.
“But a deposit of £43,750 would rule out all but a very few first-time buyers. If the same rate was applied to the first option it would reduce payments to £1,055 per month – an overall saving of £8371.80 over the three-year term.
“So, those fortunate enough to be able to afford a large deposit or who can meet payments on the higher rates will be able to buy while those less fortunate, usually at the bottom end of the salary or credit scale, are stuck and will be for some time."
