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Paying for a mortgage is still more affordable than renting in the United States but saving enough money for a down payment has become increasingly difficult for first time buyers.

According to the latest analysis report from real estate firm Zillow this is particularly the case in markets where home values are rising rapidly. 

With the majority of renters in the largest metros putting about 30% of their monthly income toward a rental payment, saving money for a 20% or 10% down payment is extremely difficult.

The report suggests that first time buyers and millennials are left trying to find other ways to break into the housing market, turning to friends and family for financial help. In 2014 alone, 13% of home purchases were bought using a loan or gift from friends or family for the down payment.

Rental affordability has worsened in 28 of the 35 largest metros over the past year, and mortgage affordability worsened in just 18 of them, according to the report covering the third quarter of 2015.

Residents of the Denver metro can expect to spend about 21% of their income on a mortgage, compared to 34% on rent. In the US as a whole home owners can expect to spend 15% of their income on a mortgage and 30% on rent.

But getting that mortgage payment requires a home buyer to have saved $62,760 for a 20% down payment, the industry standard, on a median valued Denver home, which is $313,800.
In the Boston and Miami markets, the median monthly mortgage payment requires just 22% and 20% of monthly income, respectively.

Renting is substantially more expensive, influencing many renters to start thinking about purchasing a home. Some 35% of the median income pays the median rent in Boston and 44% in Miami. However, to purchase a home in Boston a 20% down payment is $76,220 while in Miami, buyers need to have saved $44,680.

The report also shows that breaking into the housing market is less of a challenge in more affordable markets, like Cleveland. A 20 % down payment on a median home there is $25,000, or $12,500 for a 10% deposit. Residents of Cleveland can expect to spend 11% of their monthly income on a mortgage while for renters it is 27% of their monthly income.

‘In general, paying a mortgage is more affordable than renting, and has been for some time. Unfortunately, many current renters aren’t able to realize the savings that come with homeownership because as home values and rents keep rising, it’s getting increasingly difficult to clear the down payment hurdle,’ said Zillow chief economist Svenja Gudell.

‘It’s not uncommon for a 20% down payment on even a modest home to represent savings of $50,000 or more in some areas. And that number itself is a moving target, rising as home values escalate and harder to achieve as more money goes to landlords and less goes to savings,’ she explained.

‘Using a smaller down payment is an option, but often comes with the added cost of mortgage insurance. Knowing this, it’s no wonder that many current renters are waiting longer to buy a home and are turning to alternate sources, including friends and family, to help them scrape together a down payment,’ she added.

The research report also shows that in 34 of the largest 35 metros, rental affordability is worse than the historical average. Pittsburgh is the only housing market where residents pay less than the historical average for rent, about 25% of income while historically renters in Pittsburgh spent 27%.

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Mortgage lending to first time buyers in the UK increased by volume month on month and on an annual basis in September, the latest data from the Council of Mortgage Lenders shows.

However, in contrast, lending to people moving home saw a dip in September compared to August, but grew by volume and by value compared to a year ago while home owner remortgage activity rebounded after a dip in August to increased levels in September both compared to a month ago and the same time last year.

The buy to let sector continues to grow and saw year on year increases by volume and by value in both buy to let house purchase and buy to let remortgage sectors.

The CML data also shows that first time buyers increased in number of loans advanced and amount borrowed both in comparison to quarter two and the third quarter last year and home mover lending saw a similar trend to first time buyers but the percentage increases by volume and by value were higher.

Home owner remortgage activity saw an increase compared to the second quarter of the year, but a more substantial increase compared to the third quarter 2014 while buy to let saw large quarter on quarter and year on year increases by number of loans and amount borrowed.

Paul Smee, director general of the CML, pointed out that the mortgage market had a slow start to the year. ‘This quarter shows it is now firmly on an upward trajectory. With competitive rates and high levels of product choice currently available, alongside generally improving economic conditions, we expect this to continue as we head into the New Year,’ he explained.

‘Buy to let continues its growth this period, but at 18% of new lending in September remains the fourth largest lending type behind first time buyers, home movers and remortgage. There were five times as many house purchase loans to home-owners as buy to let landlords in September, and the growth in buy to let lending largely continues to reflect its more belated recovery from recession,’ he added.

According to Rishi Passi, chief executive officer of Oblix Capital, on the one hand Help to Buy has driven up borrowing by first time buyers both in volume and value and on the other, there is little sign that impending buy to let tax restrictions are dissuading landlords from expanding their portfolios.

‘Meanwhile cheap money is allowing lenders to offer historically attractive rates to the market and as a consequence lenders are enjoying their best spell since 2008, enticing first time buyers and developers alike to move and borrow,’ he said.

Also with any periods of unoccupancy there is always the need to insure adequately Dan Towner of PropertytoInsure.co.uk advised.

Rob Weaver, director of investments at property crowdfunding platform Property Partner, the growth in buy to let lending underlines the continued confidence UK investors have in this asset class. ‘As an asset class buy to let is also benefiting from the growing concern about the state of the global economy. It is seen as safe,’ he added.

Myles Williams, chief executive at Fast Property Finance, said that buy to let is the stand out trend in the current mortgage market. ‘Buy to let has come into its own in recent years and is being driven by people’s understanding that house price levels and supply problems are creating a significant investment opportunity. The relaxation of the pension rules and economic turbulence around the world have also resulted in greater demand for buy to let,’ he pointed out.

‘Buy to let is an …

The UK’s country house market has seen a marked recovery in the £2 million plus sector in the third quarter of 2015 compared to the previous two quarters, according to the latest research.

The analysis report from Strutt & Parker also shows that sales levels are now not far off where they were in the fourth quarter of 2014, suggesting that the market uncertainty from the general election has perhaps filtered out.
 
Strutt & Parker’s UK outlook for the remainder of 2015 looks positive and it predicts that there will be sufficient growth in the final quarter of the year to hit the forecast of 5.0% for 2015.

Growth over the next few years is also forecast as positive with 5% per annum anticipated. There are, however, uncertainties for the UK market and the upcoming European Union referendum and potential interest rate rises adds further pressures. Despite this, sensibly priced and good quality properties, both regionally and in prime central London, will continue to do well, the firm believes.
 
‘There remains some uncertainty over the near term outlook for the national housing market. The gradual strengthening in growth within the UK economy is still being met by some caution against risk and interest rates are expected to begin rising early to mid 2016,’ said Stephanie McMahon, head of research at Strutt & Parker.

‘Once rates do begin to rise they may have a dampening effect on the national housing market, most specifically in the mainstream markets where the majority of purchases are dependent upon mortgages,’ she explained.

‘However, two factors should cushion this impact. First, interest rate rises are likely to be gradual, estimated to reach circa 2% to 2.5% over the next five years. Secondly, the majority, 75% to 80%, f recent mortgages have been at fixed rates. Both of these factors should mean that any adjustments in purchasers’ behaviour should also be gradual,’ she added.

Her colleague, James Mackenzie, head of the country house department at Strutt & Parker, also agrees that the prime country house market is showing signs of improvement with a lack of high value property on the market and growth in demand over the quarter.

‘However, buyers are incredibly price sensitive as the cost of stamp duty is still a major hurdle. We are hopeful for a normalised autumn and winter,’ he added.

Guy Robinson, head of regional residential agency at Strutt & Parker, pointed out that activity in the summer and early autumn months has shown encouraging signs of an improving market.

‘Last quarter, there was strong demand from buyers which has translated into agreed sales. The number of new instructions has remained static, consistent with the previous period,’ he said.

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The annual rate of house price growth across England and Wales increased to 5.2% in October, the fastest increase for six months, according to the latest property index.

Average property prices increased 0.9% or £2,500 last month, equal to £80 a day, to £288,421 and it is the tenth record high recorded this year, the data from the Your Move Reed Rains index shows.

The price growth is once again being driven by London, as values in the city increased £24,636 in the last year, the index also shows. Excluding London and the South East of England takes the annual price growth to 3.9%.

As far as sales are concerned it was the strongest October since 2007, with the north seeing biggest sales boost due to better levels of supply on the market. But sales of homes worth over £1.5 million were down 35% year on year with this sector still being affected by the Stamp Duty change from almost a year ago.

East Anglia saw the strongest year on year rise of any region, with growth of 6.2%, taking the average price for a property in the area to £241,284, Richard Sexton, director of e.surv chartered surveyors pointed out.
 
He also pointed out that in London house prices are recovering from the more subdued growth seen during the second half of 2014. Annually, there has been a 4.4% price increase in the capital, with property values rising by an average of £24,636.

However, most of the recent price increases have emanated from the lower rungs of the market with Harrow, Newham and Barking and Dagenham showing the strongest annual growth.

‘These rapid rises are currently outweighing the decline at the top of the market, carrying average values higher. While many commentators are forecasting significant house price growth in London and the UK in the coming years, these need to be viewed in historical context and we’re unlikely to see a return to the unsustainable rises of the past decade,’ said Sexton.

‘Most current predictions are still a slowdown from the past five years of growth, and overall since September 2005 average prices across the country have soared 43.5%, while average property values in London have more than doubled, jumping 104%,’ he added.
 
He also explained that properties worth over £1.5 million have been hit with a stamp duty increase, currently set at 12% of the portion of the property’s value above £1.5 million, up from 5% previously.

‘As a result, sales of homes worth more than £1.5 million have fallen by 35% in the third quarter compared to a year ago. This tax has really put the shackles on the prime market in the capital, as three quarters of these sales since January 2014 took place in London,’ said Sexton.

‘The implications can be seen in the 12.6% annual drop in prices in Kensington and Chelsea, while prices in the City of Westminster have also fallen, 5.5% year on year. Stamp duty has had strong implications for the South East too, with prices dropping in other typically more expensive areas, such as Windsor and Maidenhead,’ he added.
 
Regionally, the pattern of property sales is the reverse of what has been happening with house prices, with activity increasing fastest in the North, Yorkshire and Humber and North West, but falling in the southern half of the country.

‘Supply of properties on the market seems to be the sticking point for sales growth, and activity in the northern most regions of England is also being facilitated by more affordable prices,’ Sexton explained.

‘With low interest rates now likely …

Building Societies in the UK are being urged to review the maximum age limits for mortgage borrowers to support home owners needing finance into and in retirement as life expectancy rises.

This is one of nine recommendations contained in an interim report entitled Lending into Retirement, from the Building Societies Association (BSA) which points out that the UK already has 11.6 million people over the age of 65.

By 2034 it is estimated that around a quarter of the population will be 65 plus and lifestyle changes, including divorce, mean that people are tending to buy later and go for longer repayment terms.

BSA research shows that around half of 25 to 34 year olds think they will need a mortgage that lasts into retirement and the average age of an unassisted first time buyer has already hit 31.

The report also calls for more availability of suitable housing options for older home owners who want to move to a property that meets their changing needs and better cross departmental co-ordination to rationalise Government policy on the treatment of older borrower’s housing wealth.

It would also like to see the delivery of regulation that encourages innovation along with the provision of clear information that empowers older consumers and points out that working with insurers would develop policies that enable lenders to mitigate the different risks involved in lending to older borrowers.

Other areas for improvement include make holistic financial planning in retirement available, the formation of a cross-industry alliance with other bodies focused on the needs of older consumers and the creation of a mortgage product that adapts to the different stages of a person’s life.

‘We have been working together as a sector to look at this issue and we are making some early recommendations for change. Some put the ball firmly in our court, others can only be delivered in partnership and a few may require regulatory change,’ said Dick Jenkins, chair of the BSA.

He explained that the Financial conduct Authority has been involved in preparatory work. ‘We have also sought the views of many others and these will now contribute to the next stage of the project, to deliver progress for those who want, need and deserve to buy a home of their own into and in retirement,’ he added.

According to BSA head of mortgage policy, Paul Broadhead, it is natural for the building society sector to kick-start and lead this work. ‘We already tend to have a more flexible approach to lending with higher and sometimes no age limits and a willingness to assess applications considering an individual’s circumstances,’ he said.

‘As the average age of a first time buyer continues to increase, borrowing into retirement is becoming increasingly commonplace, rather than a niche form of lending. This report identifies a number of areas that need further attention if we are going to meet the inevitable growth in demand for borrowing into, and in, retirement,’ he added.

‘The time is right to review lending policies, examine how advice is provided and to work closely with a range of organisations across different sectors to ensure that lenders are equipped with the appropriate tools to respond to the rapidly changing demographics across the UK,’ he concluded.

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