House market 'delays family plans'

11/03/13

By Steven Birch

Many homeowners are having to delay plans to start a family because of the difficult conditions in the housing market, research has shown.

Property search website Rightmove revealed that around one in 14 people are in this predicament, despite them already taking the important step of getting on to the property ladder for the first time.

Around 7 per cent of "second steppers" are putting plans for children on hold because of fears that their current home is too small to raise children.

This problem was highlighted by around 40% of those looking to buy their second home that were questioned for the study.

Rightmove revealed that the average age of those buying their second properties in the current climate is 41.

Just over one in ten (11 per cent) second steppers are prepared to sell their home for less than they originally paid for it to move on, which emphasises how desperate some are to get a new home.

Slightly more than a quarter (29 per cent) of those who are set to buy a home this year will be second steppers, according to the research, which is three per cent higher than results from a similar study in the previous quarter.

Miles Shipside, director of Rightmove, labelled second steppers as the forgotten "ugly ducklings" of the housing market.

He explained how many of them are trapped in negative equity after buying their home when the market was at its peak.

Mr Shipside said that since the credit crunch more than five years ago many homeowners have had to shelve family plans and home-moving aspirations.

"Typical first-time buyer properties such as flats and smaller houses serve a purpose in getting a foot on the housing ladder, but don't tend to be suitable family homes in the long-term," he added.

Since the Government's Funding for Lending scheme sparked a mortgage price war when it was launched last August there have been contrasting reports about its benefits for second steppers.

Lenders and estate agents have reported an upturn in the market's fortunes, but a separate Lloyds TSB study revealed that most (57 per cent) second steppers do not believe it has has a significant impact.

An overwhelming majority of 86 per cent want more help from their mortgage lender.

The study, which questioned around 20,000 people hoping to move in 2013, also revealed that six out of 10 UK regions are "blackspots" for second steppers.

Yorkshire, the South West, East Anglia, East Midlands, Wales, Scotland are labelled like this because their target market of potential first-time buyers is less than 20 per cent.

The only region that has "healthy" first-time buyer market of more than 40 per cent is London.

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How the government plans to help you buy a house

One of the most significant announcements in this week's Budget involved plans for the government to help people purchase property.

George Osborne said that the Help to Buy scheme would be for people who wanted to buy their first home or move but only had a small deposit.

Following the credit crunch, banks have become much more reluctant to offer mortgages to buyers with deposits of less than 20 per cent, given the increased risk they represent.

So the government has decided to step in.

Help to Buy comes in two parts. The first, which starts in April, will make it easier for people buy new-build homes.

The second, details of which are still being worked out, will provide guarantees to lenders who offer loans to those with deposits as small as 5 per cent of their property's value.

This will not be restricted to new-build homes, and is due to come into effect next January.

Under the new-build element, buyers will put down a 5 per cent deposit, and take out a government-backed, low-interest loan for a further 20 per cent.

The balance of 75 per cent will take the form of a normal bank or building society mortgage.

This is essentially an expanded version of the current FirstBuy scheme.

FirstBuy is only available to first-time buyers with moderate incomes, whereas anyone can take advantage of Help to Buy.

The loan part is interest-free for the first five years, after which interest rises annually. It can be repaid at any time, or when the home is sold.

The government is also planning to offer lenders a guarantee when they give mortgages to customers with small deposits.

At the moment, these higher-risk buyers are either turned down for finance or face much higher interest rates.

But if banks were reassured that the government would step in if the homeowner could no longer make repayments, they would be able to lend more freely.

The coalition has earmarked £12 billion to pay for these guarantees, which should deliver £130 billion of loans. Properties can be worth up to £600,000.

There have been a number of government schemes introduced over recent years aimed at propping up the housing market and helping first-time and low-income homebuyers.

But their impact has been fairly insubstantial.

David Hollingworth from mortgage broker London & Country says: "Many of the schemes have been helpful for a certain niche of borrower, and it has definitely been better to have them than not.

"However some of the schemes like FirstBuy have tended only to really help the market around the edges."

But Hollingworth believes that Osborne’s plans could go much further.

"The proposed extension of equity loans beyond first-time buyers will help more homebuyers.

"However the mortgage guarantee is likely to be more significant and could stimulate more lending at high loan-to-value and at better interest rates."

He adds that mortgages for those with low deposits are in desperate short supply at the moment.

"So even an increase in product availability would be a start. But improved interest rates in the open market could prove to be a real shot in the arm."

For borrowers, the risks of signing up for either part of the scheme should be no greater than taking out a standard mortgage, as it is the government that will be stepping in to provide cheap loans and guarantees.

But this does mean the taxpayer will be exposed to potential problems in the property market.

Another issue is whether encouraging house buying will lead to higher property prices.

If banks start to lend more freely but there is no great increase in the number of new homes built, this will simply push up the price of the UK’s existing housing stock.

However, the coalition hopes that a more buoyant property market will encourage homebuilders to increase their activity.

There has also been speculation that the government’s guarantee could be used to fund second-home purchases as well as remortgages for people who don’t actually move house.

But ministers say they are still fine-tuning the scheme.

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Gun Plans Don’t Conflict With Justices’ ’08 Ruling

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Legal experts say the decision in the case, District of Columbia v. Heller, has been of mainly symbolic importance so far. There have been more than 500 challenges to gun laws and gun prosecutions since Heller was decided, and vanishingly few of them have succeeded.

The courts have upheld federal laws banning gun ownership by people convicted of felonies and some misdemeanors, by illegal immigrants and by drug addicts. They have upheld laws making it illegal to carry guns near schools or in post offices. They have upheld laws concerning unregistered weapons. And they have upheld laws banning machine guns and sawed-off shotguns.

Nor does Heller impose any major hurdles to many of the most common legislative proposals in the wake of the Newtown shootings, said Adam Winkler, a law professor at the University of California, Los Angeles, and the author of “Gunfight: The Battle Over the Right to Bear Arms in America.” Among the responses that Heller allows, he said, are better background checks, enhanced mental health reporting and a ban on high-capacity ammunition clips.

There is one major possible exception to the trend, and it is quite fresh. Last week, a divided three-judge panel of the United States Court of Appeals for the Seventh Circuit, in Chicago, struck down an Illinois law that banned carrying loaded guns in public. Judge Richard A. Posner, writing for the majority, said the ruling was required by the Heller decision.

The Heller case, decided by a 5-to-4 vote, struck down a ban on handguns kept in the home for self-defense, saying it violated the Second Amendment.

After the shootings on Friday in Newtown, which killed 20 children and 7 adults before the gunman took his own life, policy makers — mostly Democrats — have called for tougher gun laws. Of the 12 deadliest mass shootings in American history, six have occurred since 2007.

The proposed measures include bans on some kinds of weapons and ammunition magazines, more sharing of information among government agencies, and an expansion of the settings in which background checks are required. In California, Democratic lawmakers are seeking to regulate ammunition sales more tightly.

The main obstacle to the passage of such measures is likely to be politics, not constitutional law, scholars say.

“We are aware of the problem of handgun violence in this country,” Justice Antonin Scalia wrote for the majority in the Heller decision. “But,” he added, “the enshrinement of constitutional rights necessarily takes certain policy choices off the table.”

Still, the decision also contained a long list of laws and regulations that would, the court said, be unaffected. Among them were “laws forbidding the carrying of firearms in sensitive places such as schools.”

“Nothing in our opinion should be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons and the mentally ill,” Justice Scalia wrote. Government buildings in general could still ban guns. And the court said it had no quarrel with “laws imposing conditions and qualifications on the commercial sale of arms.”

Justice Scalia added that laws banning “dangerous and unusual weapons” are “another important limitation on the right to keep and carry arms.” He gave an example: “M-16 rifles and the like.”

When the case was argued in 2008, Justice Scalia suggested that other kinds of weapons and ammunition could be regulated. “I don’t know that a lot of people have machine guns or armor-piercing bullets,” he said. “I think that’s quite unusual.”

Jonathan E. Lowy, director of the Brady Center to Prevent Gun Violence’s Legal Action Project, said the Heller decision thus did very little to restrict possible Congressional responses to the Newtown shootings.

The Supreme Court has not yet ruled on an issue left open in Heller: whether the Second Amendment forbids blanket bans on having guns for self-defense outside the home. Last week, the Seventh Circuit said it did.

The two central words in the phrase “to keep and bear” have different meanings, Judge Posner wrote, and the second one “is unlikely to refer to the home.”

“A Chicagoan,” he wrote, “is a good deal more likely to be attacked on a sidewalk in a rough neighborhood than in his apartment on the 35th floor of the Park Tower.”

Judge Posner reviewed the empirical literature about the practical consequences for crime and safety of bans on carrying guns in public, and he found it inconclusive. Justice Stephen G. Breyer came to a similar conclusion about gun-control laws generally in his dissent in Heller.

“Anyway,” Judge Posner wrote, “the Supreme Court made clear in Heller that it wasn’t going to make the right to bear arms depend on casualty counts.”

A ban short of a blanket prohibition might be permissible, he added, and the court gave the Illinois Legislature 180 days to enact a new law. One suggestion: it could prohibit guns “merely in particular places, such as public schools.”

The decision is in tension with recent ones from federal appeals courts in New York and Virginia, which is often a sign that an issue is heading to the Supreme Court.

For now, though, there is something like consensus that the court’s existing decisions will not stand in the way of most legislative responses to the recent shootings.

In a speech to the Brady Center in October, former Justice John Paul Stevens, who dissented in Heller and retired in 2010, said the decision was wrong but limited.

“Even as generously construed in Heller,” he said, “the Second Amendment provides no obstacle to regulations prohibiting the ownership or use of the sorts of automatic weapons used in the tragic multiple killings in Virginia, Colorado and Arizona in recent years. The failure of Congress to take any action to minimize the risk of similar tragedies in the future cannot be blamed on the court’s decision in Heller.”

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